Michigan News And Capitol Report, Week Ending Friday, December 6th, 2024
Senate Labor To Look At Rolling Back The Power Of 'Phantom Wages' In Workers' Comp
Estimates on workers' ability to seek future employment following workplace injuries will have less authority over determining if their Workers' Compensation (WC) benefits should be cut back, under legislation being spearheaded by Senate Labor Chair John Cherry (D-Flint).
The Cherry-sponsored legislation aims to minimize the impact of "phantom wages," which is the nickname critically given to "post-injury wage-earning capacity" by advocates for WC reform.
On last week’s MIRS Monday podcast episode, Cherry said the "phantom wage" was instituted during 2011 in Michigan.
" … Which is this concept that if an employer can show, through an employment consultant, that jobs exist somewhere that the injured worker could possibly get … the compensation benefit is reduced by the amount of the salary that they could conceptually get in this job that conceptually exists somewhere," he said.
He said the bill's primary change is rolling back the "phantom wage" standards, but still permitting benefits to be lost if a worker refuses an accommodation job offer after their injury.
"It's not like they don't ever potentially have to work again, but it essentially requires that they have … real offers of employment in order for that compensation benefit to be reduced," he said.
SB 1079 deletes several parts of Michigan's "Worker's Disability Compensation Act of 1969," including a requirement that a worker has an "affirmative duty" to seek work "reasonably" available to them. Also, it scraps out how judges can now consider "good-faith" job searches while determining if those jobs were obtainable.
Moreover, the bill eliminates all uses of "partial" and "partially" when distinguishing the different kinds of disability.
According to the state, approximately 20,000 Michiganders receive WC for work-related injuries or illnesses annually – down from 27,000 in 2007 – and that $834 million was paid in 2022 both for new claims and previous claims that are still being compensated.
The state reported in August 2023 that sprains and strains, broken bones and crushes account for "most of the WC paid wage loss claims in Michigan."
In March 2023, the Senate Labor Committee hosted a public hearing dedicated to the frustrations and grievances surrounding WC in Michigan. It featured testimony from Ryan Raymond, a 41-year-old from Fenton whose right leg was crushed by a "large slab of granite" while installing countertops.
He explained how he lives with intense pain and swelling in his injured leg, requiring crutches to walk. The incident took place when he was 24, and it was about three years before the meeting that he was allowed to drive again with a 30-mile limit.
In 2021, he said a doctor reported to a vocational counselor that Raymond could perform "sedentary type work" – meaning work that needs minimal lifting and standing – although Raymond was concerned about his lack of training and experience.
"The medical report was then sent to a non-certified vocational counselor who said, based on the doctor's opinion only, ignoring my pain specialist and orthopedic doctor's advice, that I could perform jobs that were paying more than I was making in 2005," he said. "They cut my benefits off."
He said he basically received a list of job leads and want ads from the internet. He added that he volunteered three times, packaging blood bags for the American Red Cross, as a means to assist with isolation-related depression he developed, and was told by an insurance company that if he could volunteer he could work full-time.
"I need a job I can actually do, not copies of want ads from employers unwilling to hire me, but benefits should not be reduced or terminated because of phantom wages I cannot obtain," Raymond said.
He explained that his cut in WC benefits is based on a vocational counselor hired during the process who "writes a list of jobs that she finds online, (doesn't) know if they're in the area, the mileage, anything … and they just say 'according to this report, you can do these jobs, and it is what it is.'"
Monday afternoon, MIRS spoke with Dawn Drobnich, the Michigan Self-Insurers' Association's executive secretary, as well as an attorney specializing in workers' compensation trial work.
Opposing SB 1079 , she explained a worker's post-injury wage-earning capacity is not defined by "phantom" or "conceptual" wages, but by real-world jobs.
"It's not phantom wages, it's wages that they are capable of performing and should have an obligation to go out and seek work if there's work that they're able to perform," Drobnich said. "We're not talking about the catastrophic cases here. We're talking about the cases that lie in between."
She said if someone is minorly injured, SB 1079 gives them no obligation, incentive or reason to seek work, projecting that the legislation will give a worker who endured a "minor wrist sprain" access to the same benefit rate as somebody catastrophically paralyzed.
"This does not align with (Gov. Gretchen Whitmer's) platform of growing business in the state of Michigan," Drobnich said. "The first thing that would go would be the businesses and the premiums being increased, and the costs will be (astronomical) that will be handed (through) employers because of this."
When asked about the chances SB 1079 will actually be taken up by the whole Senate for lame duck, Cherry said "I think it's difficult to predict all the things that happen in lame duck."
He explained that things like unemployment benefits reform have been talked about more than workers' compensation reform in Lansing, and said he doesn't think most people have a concept of what workers' compensation is by hearing the words.
Higher Unemployment Benefits, 26 Weeks Pass Senate
The Senate approved 21-15 gradually raising maximum unemployment benefits from $362 to $614 weekly, as well as extending the maximum timeline for receiving benefits from 20 to 26 weeks.
Sen. Ed McBroom (R-Waucedah Twp.) joined Democrats in passing the bills.
The expansions under SB 40 will take place over time, reaching $446 maximum per week in 2025, $530 in 2026 and $614 in 2027. However, the 26 weeks – a restoration of the maximum number of weeks before the Snyder-era cap was installed in 2011 – will happen right away.
Senate Labor Chair John Cherry (D-Flint) said many folks are forced into unemployment, like construction workers.
"We are losing people because they go to work in other states where they have higher benefit levels that help tide them over in those periods in which they can't work," Cherry said on Thursday. "This helps make sure we have a stable population. That money goes straight back into the economy, and it's really a buffer for folks who need it."
The Senate Fiscal Agency (SFA) projected that the 26 weeks maximum of benefits alone would have a "significant fiscal impact" on Michigan's Unemployment Insurance Trust Fund. Based on $763.1 million being spent on benefits in the past year, the SFA calculates that total payouts could have been between $839.4 million and $867.6 million under a 26-week cap.
The trust fund, bankrolled by taxes paid by employers on workers' wages, had a $2.28 billion balance as of January. But at the start of 2019, before the COVID-19 pandemic, the balance was at $4.2 billion.
"We're actually gaining very large increases to the trust fund balance every year," Cherry said, noting that the balance was at $963 million in January 2022.
He believes the changes are sustainable "absent an economic collapse, but quite frankly, the trust fund balance would be in jeopardy regardless of what our maximum benefit level would be if we had an economic collapse."
SB 40 also instructs the state treasurer to adjust maximum weekly benefit rates to reflect yearly changes in the consumer price index, requiring the program to account for inflation.
According to the Michigan League for Public Policy – a vocal advocate for expanding unemployment benefits – Michigan falls behind Indiana, Iowa, Ohio and Wisconsin in terms of its highest weekly benefits, although its average weekly wages are greater than those states.
Among the four states, the average weekly wage ranges from $932 (Indiana being the lowest) to $995 (Ohio being the highest), with their maximum weekly benefits being worth 38 percent (Wisconsin) to 52 percent (Indiana) of that average. Meanwhile, for Michigan in 2021, the average weekly wage was $1,051, but the unemployment benefit was worth 34 percent of that because of the statute's current amount of $362.
According to the U.S. Department of Labor, 9,596 initial unemployment claims were filed in Michigan for the week ending on Nov. 30. Right before Thanksgiving, in the week ending on Nov. 23, Michigan had 2,528 more weekly unemployment claims than it did a year ago.
Many business voices came forward with their opposition to the reform, with the Michigan Manufacturers Association (MMA) claiming that, because the unemployment insurance system is funded by employer tax dollars, "the cost of this staggering benefits increase will be borne entirely by Michigan job providers."
"Increasing the weekly maximum benefit with an undefined cost to Michigan job providers is irresponsible and will threaten the state's competitiveness compared to neighboring states," said Dave Worthams, the MMA's employment policy director. "This large increase will threaten the solvency of Michigan's Unemployment Insurance Trust Fund, which will trigger even higher tax increases placed upon the backs of employers."
Before voting on SB 40 , the Senate approved other reforms to Michigan's Unemployment Insurance Agency (UIA) and its functions – tie-barred to the modifications in SB 40.
For example, SB 962 , SB 975 , SB 976 and SB 981 all passed 21-15. McBroom joined Democrats in supporting the four bills. They oversaw reforms like ensuring domestic violence victims can still qualify for benefits after voluntarily leaving work because of abuse, as well as allowing residents to have up to $100,000 in cash assets on-hand to be waived from repaying benefits improperly paid to them.
Senate Minority Leader Aric Nesbitt (R-Lawton) said Thursday’s reforms are "once again" Democrats not wanting to come to a consensus with Republicans. He said he believes there are a lot of reforms they could have worked together on, especially after billions were paid out to potentially fraudulent claims during the pandemic.
"I have restaurant owners who still haven't gotten a check from four years ago, so there are huge problems with the unemployment insurance agency," Nesbitt said. "What they passed today doesn't do anything, doesn't fix the problems that's there and continues to hide away from the horrendous operation that (Gov. Gretchen Whitmer) and her . . . (UIA) did under the COVID lockdowns."
Grant's Housing Package Moves Despite Opposition From Locals
Rep. Kristian C. Grant (D-Grand Rapids)'s housing package moved out of the House Economic Development and Small Business Committee on Tuesday, despite the Michigan Municipal League (MML) and other local officials arguing that the bills' "one size fits all" approach ends up fitting no one.
The bills create state government standards on parking spaces, duplexes and the studies needed for a home building project.
The MML's Jennifer Rigterink said local zoning ordinance reform is not just an issue of local control for their members. She said more than $7 million in housing readiness grants have been funded in the last two budgets, but these reforms pull the carpet out from under recipients of those grants before they can even start on reform.
Rigterink mentioned Gov. Gretchen Whitmer's announcement of a redevelopment project that will turn the second floor of Petoskey's City Park Grill into five affordable workforce housing units. In partnership with the Michigan Economic Development Corporation, this project will be funded by a $566,170 Revitalization and Placemaking (RAP) grant.
Rigterink said that the project was approved without a zoning preemption.
On Tuesday, Whitmer also announced the rehabilitation of the Baker Building in New Baltimore that will be funded by a $1.2 million RAP grant to create three housing units and hopes to generate a total capital investment of over $2.95 million.
Judy Allen, government relations director for the Michigan Townships Association, testified in opposition on the grounds that municipalities are populated differently, so they will have different needs for parking requirements and that she sees a situation coming about where a township would need a full-time staff to evaluate every study that would be needed to start a project.
Grant said local zoning ordinances have had unintended negative consequences that have hurt housing affordability and supply. And so, she set out to create legislation that would answer the following three questions: what is taking so long to provide housing that Michiganders need, what is increasing the cost of housing unnecessarily and what changes can be made at the state level to address these issues?
"I'm not saying 'do away with zoning,' but I am saying: 'there may be a chance to do a little reform,'" Grant said.
Grant's package would cap the number of parking spaces a local zoning ordinance can require at 1.5 parking spaces, require governments to be ahead of the game by communicating what studies would be needed for a home building project, allow duplexes to be built in single-family zones without special use permits and limit who can sign a protest petition against a building project to only those who live in the area.
Rep. Alabas A. Farhat (D-Dearborn) asked Rigterink and Dexter City Council member Zach Michels what they suggested as alternative solutions besides subsidizing communities, since Grant's plan wouldn't have the financial burden that subsidies would.
Rigterink said she thinks the previously mentioned housing readiness grants should be awarded with priority to areas that have made the changes that Grant's bills want to see without mandating them. She also suggested allowing municipalities to choose which reform policies they want to implement based on what would work best for them, rather than subjecting the whole state to the same reforms.
As for other reforms, Rigterink suggested using old office space for residential, which Farhat argued can be too expensive to be practical.
The bills were later reported out of committee after session when Rep. Cynthia Neeley (D-Flint) was able to attend and vote.
Also reported out of committee was SB 536 , SB 537 and SB 539, which received testimony on Nov. 12 and HB 6211 and HB 6212 , which make definitions consistent in their Senate counterparts.
Senate Panel Moves Sending 'Bottle Bill' Expansion To '26 Ballot
Legislation asking voters in 2026 if they want to expand Michigan's 10-cent "Bottle Bill" deposits – both in terms of what bottles qualify and the number of places where residents can get the refunds – moved out of the Senate Energy and Environment Committee Thursday afternoon.
On Thursday, the committee passed SB 1112 and SB 1113 by Sen. Sean McCann (D-Kalamazoo), the Senate Energy and Environment chair. SB 1112 passed by a 9-5 party-line, and SB 1113 was moved 8-4 with Sen. Sue Shink (D-Ann Arbor) not voting.
SB 1112 would ask voters during the 2026 general election about "Bottle Bill" expansion. If adopted, the new language would state that any container – metal, glass, paper or plastic – carrying up to one gallon of a beverage could be returned for a 10-cent refund.
However, containers of milk, infant formula and freezable containers would not be featured, as well as half gallons of fruit or vegetable juice.
Moreover, any dealer from across the state selling contained beverages, including those through a vending machine, would be obligated to accept returns and to offer the full refund in cash.
Meanwhile, SB 1113 , which would not go into effect unless SB 1112 is approved by a majority of voters, would dedicate $50 million of the state's income tax to a Michigan Housing and Community Development Fund beginning in Fiscal Year (FY) 2027, and if money is available, $60 million will be dedicated to a "Beverage Container Handling Fund."
According to McCann's office, his intention was for the money to go toward equipment purchases and new programs supporting the return processes, as well as to offer grants to nonprofits and colleges interested in researching the "Bottle Bill" and consumer education around it.
"This potential expansion could equate to an estimated 2 billion beverage containers a year that are not covered by the current system . . . potentially 2 billion beverage containers per year that are currently going into landfills, lakes, streams, streets and parks," McCann said. "That goal alone should be important enough to demand action. It is the core of my purpose and passion with these bills."
He added that Michiganders all experience that, if they bring their cans and bottles back, a bottle brand could be rejected in one store if it's unique to another retailer.
"Allowing consumers to return their containers to any retailer would address the most frustrating aspect of the ever-growing proliferation of branded beverages," McCann said. "The current law is not on trial today, and sometimes the greater interests of the people of Michigan must override more narrow interests."
Thursday's bills were opposed by a blend of both business and environmental organizations.
Environmental interests argue that the legislation raises the reimbursements available to industry stakeholders for unclaimed deposits that are not returned by the consumer, which is money they feel should be most invested in environmental clean-ups and clean water distribution.
Meanwhile, the business community is concerned about what the bills mean for grocery stores and other contained-beverage retailers. For example, Amy Drumm, the Michigan Retailers Association's senior vice president of government affairs, said SB 1112 will add $5 to $10 in new deposit fees to families' grocery bills.
"This will decrease the amount of fresh food that families are able to initially purchase, harming customers who cannot afford to spend more upfront, requiring families to wait in long return lines to get their money back," Drumm said. "Even the most favorable projections for reimbursements to retailers under these bills cover less than half of their current costs."
She said storage spaces will need to be doubled or tripled to meet the new volume of returns, and the volume of hazardous materials like broken glass and human saliva runoff will also be "dramatically" increased.
Meanwhile, one of the legislation's most vocal supporters is the Michigan Beer and Wine Wholesalers (MB&WWA).
"We have seen a significant drop off of consumers engaging in the bottle bill, and we believe it's because we haven't done a good job with the infrastructure. We haven't done a good job making sure people are in compliance with it. This bill addresses all of that," said Spencer Nevins, the MB&WWA's president. "We do have an obligation to make sure we have positive infrastructure that allows consumers an easy way to take these containers back."
Jason Hanselman and Steve Liedel of Dykema noted in a letter that SB 1112 attempts to amend the voter-initiated law by getting a simple majority and then having the voters affirm the vote in the Nov. 3, 2026 general election. Changing a voter-initiated law requires a three-quarters majority of support from both chambers of the Legislature. This “sidestep” is not tested, the attorneys wrote.