SB 899 and Return to Work

Saturday, May 8, 2004 | 0

SB 899 and Return to Work

by Alan Leno

RTW Incentives:

Early in 2003, the Legislature created monetary incentives for employers to retain injured employees in temporary light duty, modified jobs, alternative positions. L.C. section 139.48 allowed for reimbursement of wages up to $1250, reimbursement of job modification costs up to $1250, and a combination of reimbursements for wages and the cost of job modification up to $2500. This section specified that funding for this RTW program was to come from the General Fund, meaning that the Legislature must approve a budget line item for this purpose. Considering the State's dire financial condition, no one expected the program to be funded which, unfortunately, rendered a good idea meaningless.

SB 899 makes some significant changes to the RTW program. Effective for injuries on or after 7/1/04, employers with 50 or fewer employees on the date of injury can seek reimbursement of job modification costs for job accommodations provided to employees who return to work while still temporarily disabled or to those who need, and are provided with, permanent job modifications due to permanent disability. In each case, the maximum reimbursement is $1250 and total reimbursement may not exceed $2500. Note that employers may seek reimbursement for the cost of job modifications only: the provision for reimbursement of wages was eliminated.

The Legislature "fixed" the funding dilemma by earmarking L.C. section 5814.6 ("business practice") penalties to support the 139.48 RTW program. The maximum penalty in this category is now $400,000 so this would seem to be an effective funding mechanism. However, only a half dozen or so of these penalties have been assessed by the DWC Audit Unit since inception of the penalty more than 10 years ago. At one penalty per year, there would be insufficient funds to reimburse 500 employers a single $1250 request. Unless the Audit Unit seeks these penalties more aggressively (unlikely since the intent of SB 899 was to ease the workers' comp burden for employers), the DWC Return to Work unit will have the difficult task of distributing a very limited resource to (we hope) many deserving employers.

PD Incentives for RTW:

SB 899 creates an additional financial incentive for employers who retain their injured employees in medically appropriate positions - and a disincentive for those who do not. Effective 1/1/2005, L.C. section 4658(d)(2) provides for an increase in PD payments of 15% to injured employees whose employers are unable or unwilling to provide medically appropriate work within 60 days of P&S. L.C. section 4658(d)(3) allows for a decrease of 15% in PD payments to employers who do offer medically appropriate work within 60 days of P&S. The increase/decrease in payments begins at 60 days after P&S and is not retroactive. "Medically appropriate work" includes regular duties, modified jobs, or alternative positions as dictated by the employee's work restrictions. Any work offered must last for 12 months or the employee is entitled to the 15% increase from the time the position becomes unavailable (the employee would then become eligible for a voucher as well 15% increase in PD payments). The 15% decrease applies on an employer offer of employment and is not dependent on the employee's acceptance of the offer. Since litigation can be expected on this provision, job descriptions/analyses for modified and alternative positions would be advisable to demonstrate that assigned duties are within work restrictions.

This Section could provide a significant financial incentive for employers to offer their injured employers regular duties, modified jobs, or alternative positions, as needed. The difference between a 15% increase and a 15% decrease can easily be $70 per week. An employee who is offered a medically appropriate position and is entitled to 52 weeks of PDAs after the 60th day from P&S would receive $3640 less than an employee who is not offered such work. This savings, along with the other savings realized by retaining an injured employee (reduced replacement and training costs, higher productivity, higher employee morale, reduced exposure to FEHA complaints, etc.), will have a positive impact on the employer's workers' compensation costs. Employers and insurers who want to control claim costs need to collaborate to develop and implement effective RTW programs.

RTW Definitions:

SB 899 adds L.C. section 4658.1 that includes several definitions relevant to the RTW process. Unfortunately, there is a problem with the definition of "modified work" (L.C. section 4658.1(b)). This definition indicates, among other things, that a modified position must pay the employee at least 85% of his/her pre-injury wage. The 85% criterion has always been applied (and still is) to the definition of an alternative position: it is inappropriate to include it in the definition of modified work. Both state and federal statutes require that an employee should be paid the same wage as other employees performing the same job; the fact that the injured employee performs the job in a somewhat different manner does not justify a reduction in wages. To avoid problems (i.e., litigation), employers and insurers should maintain an equivalency of wages for modified work offers to injured employees.

Contributed by vocational rehabilitation expert Allan Leno, Leno & Associates, (818) 370-8859, allanleno@leno-assoc.com.

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