Governor Signs Legislation
Amending Workers' Compensation Act
On November 9, 2006, Governor Rendell signed bipartisan legislation into law that makes some significant changes to the Pennsylvania Workers' Compensation Act. One of Act 147's sponsor's, State Representative Todd Eachus, D-Luzerne, released the following statement:
"This reform will benefit both employers and employees by reducing litigation costs, in workers' compensation and streamlining the process. This will free up more money for businesses to invest in expanding their operations and hiring new employees.”
We can only hope that Representative Eachus and the bill's other co-sponsors will accomplish their goal.
One of the most significant changes that will have an impact upon employers is the creation of an "Uninsured Employers Guaranty Fund." This fund will cover injured workers whose employers have failed to insure or self-insure their workers' compensation liability.
Where will the money come from? Initially, $1,000,000 will be transferred from the previously established Workmen's Compensation Administration Fund. The Act sets forth the following provisions for maintaining the fund ..on and after June 30, 2007:
"The department shall calculate the amount necessary to maintain the fund and shall assess insurers and self-insured employers as is necessary to provide an amount sufficient to pay outstanding and anticipated claims the following year in a timely manner and to meet the costs of the department to administer the fund....In no event shall any annual assessment exceed 0..1% of the total compensation paid by all insurers or self-insured employers during the previous year."
The fact remains that insurers (who will by necessity pass the expense on to their policyholders) and self-insured employers will bear the expense. of providing workers' compensation coverage for employees of those employers who break the law.
Will this new law allow employers to recoup this added expense? Perhaps.
A second important aspect of the new law is that mandatory mediation will now be required in all claims. Mediation can be a very effective tool to reduce litigation costs. In addition, workers' compensation judges will be required to set forth a mandatory trial schedule at the first hearing. The intended purpose will be to prevent delay and higher litigation costs. Compromise and Release Agreements will now be heard in an expedited manner, cutting down the period of time during which the settling claimant continues to receive benefits. Judges will now be required to issue decisions relative to Compromise and Release Agreements within five business days of the hearing, thereby allowing the carrier or self insured employer to cease paying benefits to or on behalf of the claimant in a timely fashion.
A third significant change in the law is the structure of the Workers' Compensation Appeal Board, as well as the establishment of a code of ethics for the Board to follow. The Board has recently made great strides in issuing opinions in a timely manner. The new legislation should result in the issuance of even quicker decisions.
Will Act 147 benefit Pennsylvania businesses? Will the end justify the means? Only time will tell.
Source: Pennsylvania Workers’ Compensation Bulletin, Thomson, Rhodes & Cowie, P.C., Volume X, No. 4, Winter 2007.