Advocacy News – Nov. 12, 2024
Legislation has been introduced in the Michigan Senate to make aggressive and costly changes to the workers’ compensation statute. It remains possible that this legislation could be pushed through in the lame duck session to reach the Governor’s desk before the end of 2024.
Why it matters: For decades, Michigan’s workers’ compensation system has been a model of quick and efficient provision of benefits — at reasonable rates/cost to Michigan’s employers.
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Unfortunately, Senate Bill 1079 threatens to destroy fundamental principles of the law that have made this possible. Workers’ compensation losses (and premiums for employers) would increase significantly if the legislation were to be passed, making Michigan a less competitive and desirable state in which to create or grow a business.
What the bills do: While proponents would like lawmakers to believe the bill restores the law to its status prior to the 2011 statutory changes, we fundamentally disagree. SB 1079 destroys many of the foundational principles of Michigan’s Worker’s Disability Compensation Act (“Act”) going back to its inception in 1912 by:
- Wholly redefines the cornerstone definition of disability. Senate Bill 1079 creates a wide open, unprecedented and nonsensical definition of “disability” that will lead to inappropriate and costly results. Under the bill, a person is disabled if s/he is unable to “perform or obtain 1 or more jobs suitable to the employee’s qualifications and training which the employee performed before or at the time of injury.” In practice, this means every claim where an employee has restrictions that the employer cannot accommodate essentially becomes a lifetime permanent and total claim.
- Erases all-important distinction between degrees of disability. Traditionally, the Act has specified the greater the degree of disability, the more generous the benefits — meaning a person with a severe injury who is able to do little or nothing (total disability) receives more benefits than one minimally injured and still capable of working and earning (partial disability). SB 1079 eliminates this commonsense rule by elevating partially disabled individuals — even if they are able to perform work — to the same pay level of those have a total disability (unless wages are actually earned post injury). Furthermore, benefit levels are increased by 10% in the legislation.
- Applies legislative changes retroactively to 1985. Another significant concern is the language on page 9 of SB 1079, which specifies that the changes to definition of disability would apply to all personal injuries and work-related diseases “occurring on or after June 30, 1985.” The impact of applying these new rules to almost 40 years of claims is immeasurable and wholly inappropriate.
- Guts work search obligations and wage earning capacity. SB 1079 removes language in the Act creating an “affirmative duty to seek work reasonably available to that employee, taking into consideration the limitations from the work-related personal injury of disease.” The bill also guts the “wage earning capacity” provisions that have been a term of art in workers’ compensation since 1912 — serving as the multi-factor factual inquiry to determine “disability.” SB1079 recasts the term to mean exclusively wages-actually-earned. Why is this crucial? Workers’ comp is intended to compensate wage loss attributable to a work injury and transfer that cost — and that cost alone — to employers. To not allow consideration of factors beyond wages-actually-earned means non-injury factors (e.g., a personal decision not to seek work within one’s restrictions or refuse jobs that are reasonably available, etc.) can no longer factor into measuring benefits. Removing the calculation of a wage-earning capacity leaves Michigan with no functional partial wage loss. The issue is compounded by removing the obligation that the claimants must seek and accept employment within their restrictions. This puts Michigan into outlier status and means an outsized number of claims become costly permanent total loss claims.
- Expands the types of claims that are compensable. SB 1079 creates a permanent and total claim for severe and permanent impairment of a function not responsive to treatment because of a “neurocognitive disorder” or a “traumatic or stress-related disorder.” These diagnoses are not objectively diagnosed and are very broad. Additionally, the language does not specify, unlike other injuries/diagnoses, the need to have a causal connection to the injury.
Our take: The Michigan Chamber will continue to defend the law as written, as we were a primary champion of the latest round of reforms that were made in 2011 and which found a balance between providing adequate benefits for injured workers and holding down costs for employers.
- The 2011 reforms produced a reduction in workers’ compensation pure premium rates every year since the reforms were passed, with an overall cumulative decrease of 45 percent from 2011-2018 (the most recent year for which data is available). The 2011 reforms have saved employers an estimated $446 million in workers compensation premiums. The Workers’ Compensation Agency’s former director has been quoted as saying, “These tremendous economic savings experienced by employers allows them to hire more workers, increase salaries, open new facilities and move to Michigan. Our sustained workers’ comp decreases play an important role in the state’s regulatory environment which continues to attract businesses and add jobs.”
Please contact Wendy Block, senior vice president of business advocacy, with any questions if you wish to engage in coalition efforts around this issue.