The New Workers' Comp Disability Act: 10 Things you Should Know

Monday, January 30, 2012 | 0

The old adage “out with the old and in with the new” took on new meaning for Michigan’s workers’ compensation system this holiday season. In December 2011, the first major legislative changes to the Workers’ Disability Compensation Act (“the Act”) in twenty-five years eliminated some provisions viewed as costly for business and included other alterations, the majority of which are employer friendly. The revisions, already in effect, range from reporting requirements for the Director of the Workers’ Compensation Agency to defining entitlement for benefits. Highlighted below are ten of the noteworthy changes.

Wage Earning Capacity is Redefined.

“Wage earning capacity” is key to determining disability and entitlement to benefits under the Act. The revisions expand the term to include wages the employee earns, “or is capable of earning at a job reasonably available to that employee, whether or not wages are actually earned.” The provision also places an affirmative duty on a claimant to seek work reasonably available, taking into consideration the limitations from the work-related injury or disease.

Determining the amount of wages a claimant is capable of earning at a job reasonably available to him or her is likely to be a much litigated issue during the next few years. One potential interpretation is that a magistrate may reduce a claimant’s benefit rate if the magistrate finds the partially disabled worker has not made a good faith effort to find employment within his or her qualifications, training, and medical restrictions.

A Connection Between Wage Loss and Disability is Required.

New language in the Act requires a claimant to establish a connection between the disability and any reduction or loss of wages. Again, emphasis is placed on a partially disabled worker’s obligation to make a good faith effort to find a job. Specific guidance is given on the steps a claimant must take to establish disability. The statutory language raises a question as to whether an injured worker is entitled to benefits if he or she is released to work with restrictions but wage loss may be attributable to another factor, such as the employer going out of business.

Must Establish Medically Distinguishable Pathology.

A claimant is entitled to compensation if he or she incurs a personal injury arising out of and in the course of employment. A personal injury under the Act is compensable if work causes, contributes to, or aggravates the condition.  The Act now requires a change in pathology that is medically distinguishable from the pathology that existed prior to the injury as opposed the onset of pain or other symptoms. This alteration to the Act is consistent with the standard applied by magistrates prior to the legislative changes, but now the language is specifically incorporated into the Act.

Adds to the Definition of Mental Disability.

Previously the Act stated mental disabilities are compensable if arising out of actual events of employment, “not unfounded perceptions thereof.” The statute now states the employee’s perception of actual events needs to be reasonably grounded in fact or reality. Again, the Act now articulates the standard previously used by magistrates.

Changes the “100-Week Rule.”

Prior to December 2011, the Act stated, and the courts held, if an employee was injured and returned to favored work for less than 100 weeks and lost his or her job “for whatever reason,” the employee is entitled to receive full workers’ compensation wage loss benefits for the duration of the disability. This lead to the anomalous result of a claimant who was fired for cause, including misconduct, receiving full wage loss benefits despite the misdeed. The revised Act allows the claimant performing light-duty work for less than 100 weeks to receive workers’ compensation wage loss benefits only if he or she loses his or her job through no fault of his or her own.

Extends the Period When the Employer Controls Medical Treatment.

An employer is responsible for payment of reasonable and necessary medical costs for a work-related injury. Previously a claimant was entitled to treat with the physician of his or her choice ten days after the inception of medical care. The Act now extends employer control of treatment to twenty-eight days.

Expands Credit for Unemployment Benefits and Qualifying Pensions.

Previously an employer was entitled to reduce weekly wage loss benefits and lump sum payments by 100 percent of the amount of benefits paid or payable to the claimant under the Michigan Employment Security Act for identical periods of time if chargeable to the same employer. The revised Act eliminates the requirement that the benefits be charged to the same employer.

An employer receives credit for pension or retirement payments paid under a plan or program established and funded by the employer. The Act now applies the credit to payments that the employee is eligible to receive if he or she suffered total and permanent disability and had reached full retirement age.

Requires the Magistrate to Take Into Account the Affect of Any Internal Joint Replacement Surgery, Internal Implant, or Other Similar Medical Procedure When Determining Whether a Specific Loss has Occurred.

This language comes in response to a magistrate’s award of benefits for the specific loss of the left leg because the condition of the limb prior to the knee replacement surgery was “tantamount to amputation.”  Now a magistrate must consider the post-operative condition of the claimant. This revision will significantly decrease, if not eliminate, payment of specific loss benefits for joint replacement and implant procedures.

Restructured Redemptions.

The Act maintains specific criteria for a magistrate to approve a lump sum settlement that “redeems” the employer’s liability.  Historically, the claimant appeared for a redemption hearing confirming, on the record, his or her understanding of the rights being relinquished and the desire to proceed with the settlement. The parties may now stipulate, or agree in writing, to the statutorily required determinations. The stipulation may serve as a waiver of the redemption hearing or the magistrate may conduct a hearing based on the proposed stipulation without requiring the presence of the claimant.

Adjusts the Calculation of Interest.

Previously the Act required interest on an award issued by a magistrate, the Appellate Commission, or a court to be paid at a rate of 10 percent per annum, calculated from the date each payment was due.  Now interest rate is determined in the same manner as in a civil action under the Revised Judicature Act.  (Calculated at 6-month intervals at a rate of interest equal to 1 percent plus the average interest rate paid at auctions of 5-year U.S. Treasury notes during the six months immediately preceding July 1 and January 1.  MCL 600l.6013(8)).
    
The intent of many provisions in the bill is to limit workers’ compensation liability for Michigan employers.  Undoubtedly the changes will be subject to varying and creative interpretations.  If you have any questions about the alterations to Michigan’s Workers’ Disability Compensation Act, please contact Geri Drozdowski at 616-752-2110 or gdrozdowski@wnj.com.

Gerardyne Drozdowski is senior counsel at Warner, Norcross & Judd in Grand Rapids, representing employers in workers' compensation claims. This column was reprinted with her permission from the law firm's website, http://www.wnj.com/Publications