The Illinois Reform; A Review

Saturday, February 25, 2006 | 0

by Michael E. Rusin

OVERVIEW

The Illinois legislature has now passed what will be known as the Workers' Compensation Reform Act of 2005. The provisions are contained in House Bill 2137 (effective date 7/20/2005) and also in Senate Bill 1283 (effective date 11/16/2005). The changes are significant. Many sections of the Act have been amended and several new sections have been added.

The changes to the Act cannot be considered as true reform as we have seen in other states. The changes do not restrict or diminish workers' rights to benefits. The revised Act is more beneficial to employees than employers. However, this should not be surprising considering the fact that Democrats control both houses of the Illinois legislature and the governorship.

In 2002, for the first time in decades, Illinois voters elected a Democratic governor and gave Democrats control of both the Illinois House and the Illinois Senate. The last time this occurred was 1974, and in 1975 there were major reforms to the Illinois Workers' Compensation Act greatly increasing and expanding workers' benefits.

We expected that labor groups and plaintiff attorneys would pressure the governor and the legislature to expand workers' compensation benefits ever since the 2002 election. Significant reform legislation was drafted and almost passed in 2004. Therefore, we expected the legislature would pass workers' compensation legislation in 2005. Democratic Governor Rod Blagojevich proposed changes in workers' compensation legislation in his State of the State address in February, 2005.

Several employer groups met with labor groups in 2005 and those meetings resulted in what has been called an "agreed" bill. However, not all employer groups participated in the discussions. Nevertheless, the new Act is a compromise bill. There are some beneficial provisions for employers in this statute. The essential compromise was that employers will benefit from the new Act by the imposition of a medical fee schedule limiting payments to doctors, hospitals, and other medical providers along with the opportunity for utilization review.

In return, employees received increased benefits for PPD and death cases. In addition, the legislature increased minimum rates for TTD and PPD; they increased the maximum wage differential benefit and they increased penalties for late payment of benefits. Further, the legislature made statutory changes to give employees greater rights to seek expedited hearings and they made additional statutory changes to legitimize some of the trial procedures already in place at the Commission which favor employees. Finally, they established a fraud unit to civilly and criminally penalize both employees and employers who commit workers' compensation fraud.

The "compromise" favored employees much more than employers. This is especially true with respect to high wage paying employers. This bill will significantly increase liabilities in the construction and trucking industries. It is also especially true for minimum wage employers because the minimum rates for TTD increased by a factor of 72% to 120% and the minimum rates for PPD increased by a factor of 114% to 168%.

However, the fact that employers received some benefit in this Act is a positive development. Employers have had the opportunity in the past to negotiate agreed bills. Republicans controlled the legislature in 1995 and 1996 along with the governorship but did not pass reform legislation. Democrats could have forced a much more expensive workers' compensation bill through the legislature this year. This compromise could lead to further reforms when employers' overall costs don't decrease and the fraud provisions prove ineffective.

SUMMARY

House Bill 2137 and Senate Bill 1283 significantly amended the Workers' Compensation Act by changing Sections 4, 7, 8, 12, 13, 13.1, 14, 16, and 19. Further it added Sections 8.2, 8.3, 8.7, and 25.5. A summary of changes to the statute are as follows:

Section 4. Insurance Requirements and Penalties - EFFECTIVE IMMEDIATELY

Section 4 requires employers to self-insure or insure their workers' compensation liability. The amendments to Section 4 give additional rights to the Commission to enforce this responsibility and impose criminal penalties on non-complying employers. The bill adds Section (d) which allows the Workers' Compensation Commission to hold a hearing to determine whether an employer has knowingly failed to provide coverage. The knowing failure to provide workers' compensation insurance coverage for employees is deemed to be an "immediate serious danger to public health, safety, and welfare." The statute enables the Workers' Compensation Commission to issue a work stop order on the employer requiring the cessation of all business operations of the employer. The work stop order can be lifted upon filing of proof of insurance.

Further, the statute provides that any employer found liable of knowingly failing to provide coverage is guilty of a Class 4 felony. Local prosecutors are entitled to bring an injunction to cease the operations of the non-complying employer. If the failure to provide coverage is only proven to be negligent, the crime is a Class A misdemeanor.

The statute provides that the criminal penalties do not apply where the employer has a good faith dispute as to the existence of an employment relationship. Employers who knowingly fail to comply with the Act are not entitled to the exclusive remedy and are subject to unlimited civil liability without the defenses of assumption of risk or co-employee negligence. In any such civil suit, proof of the injury itself constitutes prima facie evidence of negligence on the part of the employer. Moreover, the employer is barred from joining any other defendant in the same civil action. An employee is given a right to seek workers' compensation benefits, however, instead of seeking civil liability.

Any penalties and fines collected pursuant to this Section are to be deposited into a special fund known as the Injured Workers' Benefit Fund. Monies from the fund are to be used only to pay workers' compensation benefits for injured employees where the employer has failed to provide coverage. If benefits are paid from this fund, the Commission can seek reimbursement from the non-complying employer.

ANALYSIS

These changes will not affect the majority of employers or carriers. These changes are directed at non-complying employers who fail to properly cover their employees with workers' compensation policies. The new provisions are intended to discourage such employers by imposing significant civil and criminal penalties and giving the Commission the power to shut down the operations of non-complying employers.

These changes are helpful to carriers. They will encourage all employers to properly purchase WC policies rather than risk not purchasing insurance and going to jail.

Section 7. Death Benefits - EFFECTIVE DATE: Applies to accidents which occur on or after February 1, 2006.

Section 7 of the Act contains the provisions setting the benefits payable upon the death of an employee. The first change is to increase the burial expense to $8,000.00 from $4,200.00.

Rate Adjustment Fund Increases - Effective 7/15/05 and 1/15/06

The second change in Section 7 is to significantly increase employer funding to the Rate Adjustment Fund. Employers were required to pay into the Rate Adjustment Fund a fee equal to