Workers’ compensation (“WC”) costs are a significant portion of the labor costs experienced by construction companies. These costs have typically risen over time due to the “experience modification factor.” This term means the amortized cost of past claims recovered through future premiums charged by an insurer to an employer. As a company’s claims go up in both number of claims and total expense of claims over time, the experience modifier increases as a multiplier of the base WC premium. As with other general medical costs, the question is not whether the cost of claims with a medical component will go up, but rather the rate at which they will increase from year to year.
It is with these facts of life in mind that it is reported that the Colorado legislature will take up a bill concerning WC benefits in the 2014 session. This bill, if passed, will have the likely effect of dramatically increasing the cost of WC claims to the construction industry – along with allother Colorado employers.
The draft bill has three distinct changes for the current law, each of which serves to change the delicate balance of rights and obligations of employers and employees under existing law.
1. The Changed Choice of WC Primary Physician
The first change allows the injured employee to select his own attending primary doctor for the first three days after the injury occurs. Existing law gives this right of appointing the primary physician to the employer, and it is a key to (1) getting appropriate, cost-conscious care to the employee; (2) getting the employee released to light duty and/or the earliest reasonable physician-approved return to regular work; and (3) getting the doctor’s reasonable determination of when the employee has reached “maximum medical improvement,” after which medical care either ceases, or tapers to a lesser degree of “maintenance care.” In other words, it is as important to an employer to have a middle-of-the road physician to serve as the medical “umpire” of what is reasonable for the nature, extent, and duration of WC medical care.
This proposed change would alter the present procedures, and allow the employee to select a Level II accredited WC physician of the employee’s choosing within three days of the accident/injury. Note: Level II accreditation is not significantly less difficult to obtain than a driver’s license. It involves limited and brief attendance of classes held on weekends, and successful completion of a multiple-choice examination on WC procedures and benefits.
Interestingly, or coincidentally, the present law also gives the employee up to three days to report the accident/injury to the employer. Practically speaking, this means that the employee has two and a half days not to report the accident/injury, but within which to find a lawyer who will typically direct the employee to a doctor who is generously claimant-oriented. Then, both the accident and the chosen doctor will be made known to the employer by the end of the third day. If the accident/injury was not witnessed and understood for what it was (which is surprisingly often the case), the employer may not know that there is a WC situation brewing.
Odds are that the claimant-chosen physician may be significantly less of an honest broker when it comes to (1) making decisions about referrals to other medical providers for additional care; (2) deciding work restrictions during recovery from the injury; (3) allowing the employee to return to regular duty; (4) deciding when “maximum medical improvement” has been reached; and (5) determining the nature of future care and disability benefits. These are the key decisions that drive claim costs, claim duration, and overall WC benefits to the employee – which will return as later premium costs to the employer. Clearly, the proposed change which would allow the employee to make the key cost-driving decisions at the front of the WC claim.
2. The 50% Increase in Benefits if the Injury Was Due to an “Unsafe Workplace”
The second proposed legislative change involves the right of the employee to claim a 50% increase in the statutory WC benefits if the employer “willfully placed the employee in an unsafe work environment.” Little needs to be said about the vagueness of this new provision which appears to lack any objective standards.
More importantly, this potential change would create an opportunity for claimants to increase their benefits by 50%, if the Administrative Law Judge (ALJ) who decides the case as a sole fact-finder decides that the facts of any particular case meet this nebulous and potentially subjective standard. Bluntly stated, it is designed to create new, ancillary claims for a 50% increase in WC benefits in exchange for merely asking for a hearing on the matter before an ALJ.
The proposed change in override benefit liability is akin to an injured worker being given a lottery ticket at the time of the injury. Most importantly, it is philosophically contrary to the 100-year historical legislative policy that the Colorado WC system was created as a no-fault area of the law, with benefits being awarded solely on the basis of the injury, not the causal fault of the employee or the employer.
Notably, ALJ fact-finding is generally not subject to any meaningful appeal. Once an ALJ decides the facts of the case, they are presumptively written in stone.
Once again, these new 50% override benefit exposures will be translated (even prospectively and pre-emptively) into steeply climbing premium costs. This is particularly likely in construction environments, where safety can be inherently difficult to control during multi-trade activity.
3. The Change in “At Will” Employment for WC Claimant Employees
The third change proposed by next year’s draft bill is that a WC claimant’s resignation of current employment may only be “voluntary,” rather than decided by the employer in the present Colorado “at will” employment environment. While this leaves open the possibility that the employment resignation of the WC claimant will be “negotiated” by the parties for an exchange of dollars, it gives the WC claimant employee an effective right of veto over the employer’s decision to terminate that employment. In a worst case scenario, this means that a WC-injured employee who cannot do the job that they were doing before the injury is potentially an employee for life of the WC employer by statute. In the hypothetical alternative, the employer can make the employee an offer of settlement that is so lucrative that it is an “offer that cannot be refused.”
The practical and legal problem for employers is that insurers will potentially say that this termination prohibition is a non-insured employment law issue, rather than a covered WC insurance issue. The potential result may be that such settlements will not be paid – or will be only partially paid – by the WC insurer, if at all. The uninsured “resignation” balance will potentially need to be paid by the employer without the benefit of WC insurance. The alternative is that no resignation is ever negotiated, and the disabled employee must be continued on the payroll. This scenario assumes that the employee may be paid a pre-injury salary or wage that is not driven by the (diminished) ongoing value of the employee’s work for the employer.
4. Action and Communication are Needed – NOW
These proposed legislative alterations in the present fabric of WC law and employment law are problematic to say the least. That they will dramatically raise employer costs – with significant impact on construction costs, in particular, is not debatable. In fact, this assessment is probably superficial in identifying the mischief that will be done with such changes.
If action is to be taken to avoid these developments, it should be taken now. Contacting your state senator and representative is an important means to this end. Testifying before the committee with responsibility for the bill is equally important. Talking to your colleagues and even your competitors in the world of construction – now – has seldom been this important.
For additional information regarding Colorado construction litigation, please contact David M. McLain at (303) 987-9813 or by e-mail at firstname.lastname@example.org.