Legislative Rollback of Temporary Disability Reforms Could Cost Millions

There are cases where extended periods of disability may be warranted, and there are things that the legislature should consider, but an across-the-board increase in the length of disability is simply the wrong answer for California.|

Michael Peabody

August 29, 2011

In the seven years since Governor Arnold Schwarzenegger signed the sweeping reforms of Senate Bill 899 (SB 899) into law, the applicant's bar has been actively lobbying to roll them back. Most recently, through Assembly Bill 947 (AB 947) introduced this spring by Assembly Member Jose Solorio (D - Anaheim, Garden Grove, and Santa Ana), applicants' attorneys have targeted SB 899's 104-week cap on total temporary disability (TTD) benefits. Before SB 899 became law, total temporary disability benefits which were intended to provide two-thirds of the average weekly wage could go on indefinitely thanks to legislation signed into law in 1978 by then- and now-Governor Jerry Brown, eliminating the previous 240-week cap. Under SB 899, applicants injured after April 19, 2004 will receive 104 weeks of temporary disability within five years of the date of injury unless they meet one of the exceptions for long-term injury such as severe burns, amputations, or chronic lung disease. Advocates for AB 947 have argued that it often takes longer than two years for an applicant to recover from surgery or obtain necessary medical treatment. AB 947 would require that applicants who need treatment that could not be medically completed within 104 weeks can receive up to 240 weeks (approximately 4.6 years) of total temporary disability benefits within five years of the date of injury. Temporary disability benefits are one of the highest cost drivers for carriers and employers and the maximum rates have expanded considerably from $490 per week in 2002 to $1,010.50 in 2012. According to the Senate Appropriations Committee, which reviewed research from the Commission on Health and Safety Workers' Compensation (CHSWC), in increasing the period of temporary disability, AB 947 could increase per-claim temporary disability benefits by up to $137,000. In total, the legislative analysts have predicted an annual increase of $188 to $238 million in total temporary disability benefits. This does not include the medical evaluation and treatment costs that will be required to justify and sustain applicants for extended periods of total temporary disability. Further, the population of workers on total temporary disability could potentially double as many remain on disability rather than cycle back into an increasingly difficult workforce. The longer injured workers remain off work for even minor injuries, the more difficult it is to go back when disability benefits end, and with California's unemployment rate continuing to hover around 12%, it may be easier to claim extended disability than to embark on a daunting job search. In 1978, the Department of Industrial Relations (DIR) recommended that Governor Brown sign SB 1851 into law removing any cap on temporary disability in order to account for the occasional case that required surgery more than five years after the date of injury. However, the courts interpreted the legislation as allowing unlimited continuous temporary disability. Instances of abuse of unlimited total temporary disability benefits brought about the reforms of SB 899 in 2004. Because of its significant projected impact on an already fragile state budget, the California Department of Finance came out in opposition to AB 947 and on August 15, 2011 the Senate Appropriations Committee placed the bill in its suspense file pending a future vote. Although the stated legislative intent of the AB 947 is to bridge the gap between 104 weeks and when an injured worker is medically eligible to return to the workforce, AB 947 is wide open to abuse by applicants and physicians who will continue to treat applicants as long as possible. Injury claims that are now resolved within 104 weeks could take over two-and-a-half years more to resolve. There are cases where extended periods of disability may be warranted, and there are things that the legislature should consider, but an across-the-board increase in the length of disability is simply the wrong answer for California.

Michael Peabody

Michael D. Peabody received his Juris Doctorate and Certificate in Alternative Dispute Resolution from Pepperdine University School of Law and was admitted to practice law in 2002. He has practiced in the fields of workers compensation and employment law, including workplace discrimination and wrongful termination.