Workers’ comp hardly working

Fixing California’s broken system

By Jennifer Kolin
From the May 2004 Print Edition

Imagine that I own a business in California-hypothetically, of course, since few can afford to do that anymore. My secretary sits and types at her desk all day, which is what she is paid to do, along with answering my phone and my mail. Now my secretary begins to complain of lower back pain and severe wrist pain. She goes to her personal doctor, gets $10,000 worth of treatment, and wants me to pay for it. The reason? Ergonomics.

She contends that I did not supply her with an ergonomically correct chair and that this is the reason for her back and wrist pain. She claims that it started on the job, so now it is my problem. Regardless of whether it is my fault, she gets the insurance money as per California state law. Now she is getting temporary disability, permanent disability, return to work physical therapy treatment, training in case her job is gone if she ever decides to come back-which is impossible because state law prohibits me from hiring anyone new-and plenty of other sources of income, all of which she has extorted from the state with the help of her lawyer.

So I am now making disability payments to my former secretary, who is currently at home in front of her new entertainment center. She and I settled her case for $100,000. Under the system that has been in place for the past ninety years I am not allowed any leeway on late payments. Unfortunately, because I no longer have a secretary to answer my phone, I did not sign her $100 monthly check on time, and I am thus late with her payment. Late payments cost me fifteen percent in penalties; not fifteen percent of the $100 payment, but fifteen percent of the entire payment, totaling $1500. No wonder businesses are leaving the state faster than you can say “Utah.” I know a wall when I see one, and I am looking at one right now.

In theory, there is nothing wrong with having a system of workers’ compensation for employees in California. But in the harsh reality of the California economy, insurance premiums for businesses have become so high that nobody can afford to employ workers any more.

California’s workers’ compensation costs have soared in recent years, going from $6.4 billion in claims paid in 1997 to an estimated $17.9 billion last year. On top of the state budget crisis, local entities must cope with these unmanageable costs. Indeed, Los Angeles County has seen its workers’ compensation costs increase nearly fifty percent during the past two years, rising to $295 million in this budget year alone. This translates to about $100 million being diverted from police forces, fire protection, and other vital public service needs.

Governor Schwarzenegger has made workers’ compensation one of his priority issues in his first term as Governor. The bill that was signed into law April 20, 2004 was a bipartisan compromise aimed at fixing a severely broken system. The new law, produced as a result of the intense efforts of Republican State Senator Charles Poochigian, is an attempt to lower premiums by limiting outrageous benefits and standardizing the medical evaluations of employees according to American Medical Association criteria. In addition, the new bill reduces the timespan of temporary disability payments from five years to two years, and an employer may no longer be held liable for injuries and maladies sustained by the worker prior to employment. The absurd late payment system is also addressed.

In the end, although many legislators agree that the law is far from perfect, it fixes many of the iniquities currently hurting California businesses. Workers’ compensation remains a failing system that will take a long time to fully repair. Meanwhile, businesses are finding new and better places to locate, damaging the California economy and resulting in increased unemployment. The concrete effect of this law on insurance premiums remains to be seen, but it is a step in the right direction. A worker who cuts off his hand on the job should certainly be compensated for his injuries, but under a system of compensation so abused, it is a wonder that a company could afford to hire said worker in the first place.

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