Calif. Gov. Reacts to Passage of Workers’ Comp Legislation Reform; Notes Victory for State

April 19, 2004

California Governor Arnold Schwarzenegger on Friday released the following statement upon passage of workers’ compensation reform legislation (SB899, Poochigian):

“Today we have another victory for California. I promised in my campaign that we would reform our state’s broken workers’ compensation system and today we have the results. After many weeks of difficult negotiations, the Legislature was able to put aside the special interests and join with me to deliver meaningful workers’ compensation reform. Just as we did with Propositions 57 and 58, both sides came together and rose above partisan politics to reach a bipartisan consensus. Working together, we have produced a huge win for California. Our bill provides strong reform that will save jobs, reduce costs for our employers and improve care for injured workers. Our state can now become once again the job-creating machine it once was. With meaningful workers’ compensation reform, California is open for business.”

Medical Network

SB 899 restructures the way medical treatment is delivered in the workers’ comp system by allowing employers and insurers to create network pools of doctors. Employees may seek second-opinions from their choice of doctor within the network. The bill establishes an independent medical review process that allows injured workers who are unsatisfied with the network doctors’ recommendation to appeal. If the IMR sides with the injured worker, the injured worker may seek the treatment from his or her own doctor. This bill also brings a rational definition to treatment standards for worker injuries.

Two-Year Temporary Disability Cap

SB 899 caps temporary disability payments two years from the first TD payments. It exempts certain injuries, which typically take more than two-years to heal, from the cap.

Return to Work

SB 899 promotes return-to-work opportunities by providing incentives in the permanent disability system for helping workers return to work. The bill would allow a 15% reduction in payments if an employer brings an employee back to the same job, at the same pay, or accommodates them with a modified job, as long as the job pays at least 85% of the previous job. Likewise it would allow injured workers who are unable to return to work, to receive a 15% increase in their award.

Permanent Disability

SB 899 provides for the creation of an objective and uniform permanent disability schedule by using the American Medical Association guides for impairment ratings. It also eliminates the highly subjective “work capacity guidelines” and replaces them with objective earning capacity ratings. It also shifts benefits to those who are more severely injured, by reducing benefits for those who receive a 15% or less disability rating and increasing benefits for those whose rating is greater than 70%.


SB 899 apportions all injuries to the actual cause of the injury and prohibits workers from receiving disability payments for injuries, or portions of injuries, which occurred outside of the workplace. The bill brings rationality to the apportionment determination, so that a person cannot continue to receive new PD awards for the same injury by creating a conclusive presumption that prior injuries exist. The bill caps multiple awards so that an individual cannot get more than 100 percent disability for any single region of the body

5814 Penalty

SB 899 amends Labor Code 5814 so that the penalty is assessed on the actual late payment rather than the entire claim – past, present, and future. The penalty will be 25 percent of the late payment, capped at $10,000. If an insurer discovered that they had failed to pay a claim on time or at the right amount, they could “self-correct” by sending it off with an additional 10 percent added. There would be a two-year statute of limitation.

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