Legislative Action

By DIANE ROSS

Worker's compensation on the table

IT'S been going on for almost 10 years now, this fight over "reforming" the state's unemployment insurance (UI) and worker's compensation (WC) systems. Business has been fighting to limit employer liability since 1975, when labor, backed by a Democratic General Assembly, won a great boost in employee benefits. Labor, with the continued backing of the Democrats, has refused to give more than an inch here and an inch there.

Last year, however, under another Democratic General Assembly, business and labor compromised on UI. Negotiations produced an "agreed" bill representing $2 billion in reforms designed to return the state UI trust fund to solvency within three years. Business agreed to a $1.2 billion increase in employer taxes; labor agreed to a $780 million decrease in employee benefits. The reason business and labor succeeded in negotiating a UI agreement last year was that Congress had threatened to penalize Illinois and other states that continued to borrow from the federal UI fund without reforms within the state. No such threat spurred efforts to reform worker's compensation last year; business and labor failed to reach a compromise. When House Speaker Michael J. Madigan opened WC negotiations last spring the strategy was to avoid the broad liability and benefits issues by limiting the agenda to narrower administrative issues. Although business eventually pulled out of the talks, arguing that labor's demands had grown unacceptable, a WC bill was enacted making administrative changes, to be effective July 1, 1984. Not surprisingly business argued the changes were pro-labor. Labor countered that the legislation did pass with the help of Republican votes. This year Madigan reopened WC negotiations ostensibly to take another look at the administrative changes approved last year. The strategy this year, designed to keep business from pulling out of the talks again, is to throw the agenda open to liability and benefits issues as well as administrative issues.

S.B. 1070, effective July 1

The controversial administrative changes due to come into effect July 1 are in S.B. 1070/P.A. 83-1051. Its major provision is designed to expedite the process by which the Illinois Industrial Commission arbitrates the 10 to 15 percent of all employee claims that employers dispute. To put the problem in perspective, one-fourth of all disputed claims take six months to settle. Both business and labor agree that is too long. But S.B. 1070 also contains two other provisions. One will increase the interest employers pay on benefits awarded after disputes are settled (from a flat, 6 percent rate to a fluctuating rate of 1 percent above the prime interest rate). The other provision will lift the statute of limitations on the filing of claims from exposure to asbestos (from three to 25 years).

The Illinois State Chamber of Commerce (ISCC) believes the effect of the new provisions will be to lengthen, not shorten, the process of settling disputed claims; the AFL-CIO said the changes will cut the time employees are left without any benefits at all. The ISCC said the higher interest rate will lead to less appeals by employers and more by employees, who are now responsible for half. The AFL-CIO said the higher rate will not affect an employee's decision to appeal since he would still be denied benefits pending the appeal. The AFL-CIO agreed with the ISCC that lifting the statute of limitations on asbestos claims will produce a substantial increase in claims since asbestosis is not apparent until many years after exposure.

Overall, the ISCC complains that S.B. 1070 will push the state's WC system to the precipice by putting more burdens on employers, but offering no relief from the existing load. According to Steve Rosenbaum of the ISCC, the National Council on Compensation Insurance (NCCI), which sets premiums in 40 states, has estimated the interest rate and statute of limitations provisions of S.B. 1070 will cost Illinois employers another $20 million a year. "I don't care what it costs," said Dick Walsh of the AFL-CIO. "Justice delayed is justice denied." The AFL-CIO counters the ISSC cost argument with NCCI figures that show costs for WC insurance have dropped in Illinois, although Walsh admitted some of the decline is attributable to the recession. He cited the latest NCCI premium figures, which he said show the premium per $100 in payroll has dropped from $2.88 in March 1980 to $2.32 in April 1983.

At this writing in late April, WC negotiations have been underway since March 3. Rosenbaum and Walsh won't say what business and labor are talking about. Neither will representatives of Madigan, or other legislative leaders, or the governor, all of whom are sitting in on the closed-door sessions. That's the usual strategy when two interest groups are serious about producing an "agreed" bill, which is designed to reflect a compromise by legislative parties as well as the interest groups. Indeed, H.B. 2372, which has been set aside as a "vehicle" for such a compromise, carries bipartisan sponsorship. The groups negotiating on WC this year are the same as those who negotiated on UI and WC last year. Speaking for business are the ISCC, the Illinois Manufacturers' Association, the Associated Employers of Illinois and the Illinois Retail Merchants Association. Speaking for labor are the AFL-CIO, the Teamsters, the UMW and the UAW.

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Presumably they're negotiating administrative issues as well as some of the long-standing WC liability and benefit issues. One new element to consider this year is recent actions and recomendations by the Illinois Supreme Court.

Labor and business have been at odds over WC for decades. By the early 1970s, Illinois' WC law had been on the books for 60 years, and labor argued that overhaul was long overdue. When the reforms were passed in 1975, only four other states could claim a more comprehensive WC law; Illinois' was clearly pro-labor. The General Assembly had expanded employer liability from hazardous work to all work. The 1975 amendments had also raised benefits: A flat rate that set benefits at two-thirds the average weekly wage was replaced with a fluctuating rate that tied benefits to the average weekly wage. Since then business has not objected to the raise in benefits, per se, but it has demanded that some limits be put on its liability. Specifically, business has insisted that standards be set to determine the degree of disability and the corresponding extent of benefits, that work-related incidents be defined as those directly caused by conditions on the job and that preexisting disabilities be taken into account when benefits are figured. By 1980, employers' WC cost, via WC insurance, had tripled since 1975. Business blamed the increase in cost on the failure to limit liability when benefits were boosted in 1975. Labor blamed the insurance industry. The brouhaha over the climate for doing business in Illinois had begun. Further WC reforms were enacted in 1980, when negotiations produced an agreed bill that was pro-business (H.B. 3250/P.A. 81-1482). Labor agreed to limit liability by setting standards for those with hearing disabilities, including a policy for considering preexisting disabilities, and by spelling out non-work-related incidents that would no longer be covered. Labor also agreed to a three-year freeze on maximum benefits for so-called "permanent/partial" disability and a 90 percent reduction in the benefits that had automatically been awarded for the loss of organs, bones and limbs. Since this freeze expires this year, that topic is likely to be under discussion this spring.

In 1980, business got two administrative reforms it wanted: employees were allowed to choose only two treating physicians and the Illinois Industrial Commission was required to file written decisions after arbitrating disputes. Of all labor's concessions, business saw written decisions as the most promising. In the long run, business said, committing the commission's policies, trends and precedents to paper showed the greatest potential for holding down litigation, benefits and costs.

By 1983, however, labor was complaining that the arbitration process unnecessarily delayed benefits. When Madigan opened WC negotiations in 1983, business, jealously guarding the written decisions, agreed to limit the agenda to administrative issues.

Madigan introduces merit selection; Daniels recommends commission reform

WHAT HAS the General Assembly done since our last report? At this writing, May 9, lawmakers had met their deadlines for getting substantive bills out of committee and onto the floor. It was far too early for final action on the session's big issues, although bills were clearing committee to reimburse nursing homes, manage hazardous waste and finance the 1992 Chicago World's Fair. Business and labor were still negotiating worker's compensation reform.

On May 3, House Speaker Michael J. Madigan unveiled his plan to reform the state judicial system by using merit selection of judges when the Illinois Supreme Court fills vacancies. Clearing committee as H.B. 3230, Madigan's plan would create nominating commissions in each judicial district to produce two or three candidates from which the Supreme Court would choose.

The first days of May did bring a few surprises. Three pay raise bills went to the floor. Under the most significant, S.B. 1749, lawmakers' pay would rise in increments from $28,000 to $38,000 by January 1988 and effective in January 1985, the per diem allowance would rise from $36 to $45 and mileage allowance would rise from 20 cents to 25 cents. Some 70 executive agency directors and others who report directly to the governor would get pay raises of various amounts under S.B. 1931; county state's attorneys would get pay raises of $15,000 under S.B. 720. On May 8, House Minority Leader Lee A. Daniels announced his promised plan for reforming 53 legislative commissions, and the immediate reaction by Madigan seemed favorable, although he reserved final judgment until he had studied the plan in detail. Daniels recommended the House create a Bipartisan Select Committee to study his plan which was the product of his House Republican Policy Committee. Under Daniels' plan, 43 "study" commissions would be eliminated, to be absorbed by legislative standing committees and executive agencies. The remaining 11 "service" commissions would be divided into two groups (fiscal/policy analysis and legislative management) with both groups reporting to the four legislative leaders.

Of the handful of bills passed by May 4 and sent to Thompson, only one appeared significant. It was the latest attempt to produce an abortion law that would stand up in court. H.B. 1399, sponsored by Rep. Penny Pullen (R-55, Park Ridge), provides a new definition of viable fetus, prohibits the sex of the fetus from being grounds for an abortion and rewrites last year's so-called "squeal" law to meet the objections raised by the court which overturned it.

— Diane Ross

June 1984/Illinois Issues/37

Judiciary's agenda

While business was grumbling about the provisions in S.B. 1070, which was the product of the legislature and the governor (via his amendatory veto), the judiciary was about to open new WC issues. The Illinois Supreme Court made a change in the WC appeal process, recommended further WC reforms to the General Assembly and rattled business by raising a new liability issue in its decision on a third-party damage case before the court.

The high court's administrative change came in a controversial court rule, adopted by a divided court and announced in December: Justices created a special panel of five appellate judges to take over WC appeals effective February 1. Prior to the change, WC appeals automatically went from the circuit court to the Supreme Court. With WC appeals representing a quarter of the cases on the Supreme Court docket, however, it was apparent the justices wanted to unload the burden. (See "Judicial Rulings," April 1984, p. 39.)

The proposed WC reforms came in January when Chief Justice Howard C. Ryan released his annual report on the state of the judiciary.

Four of Ryan's recommendations seem to stem from liability issues. He asked the General Assembly to write guidelines for rehabilitation programs ordered under WC law, clarify penalty provisions under WC law, examine the relationship between lien provisions in wrongful death and WC laws and reconsider whether a surviving spouse with minor children should continue to receive death benefits once remarried. His fifth recommendation is designed to speed the litigation of WC cases. Ryan asked that attorneys be allowed to use an affidavit in lieu of a receipt to show they have paid the Illinois Industrial Commission for processing records.

Most controversial of the high court's recent actions related to WC is its decision raising a new liability issue in connection with third-party damage suits. The ISCC and other business interests reacted with outright indignation when the court announced its decision on January 20 in the consolidated cases of Charles L. Doyle v. Kathleen C. Rhodes and Kathleen C. Rhodes v. Rein, Schultz & Dahl. The court seemed to suggest that employers could be liable once to an employee under the Illinois Worker's Compensation Act and again to a third party under other statutes, such as the Illinois Contribution Among Joint Tortfeasors Act. The court called on the legislature to clarify the provisions of the statutes. Business, which requested a rehearing but was denied March 30, argued that even the hint of double liability effectively destroys the state WC law, which is designed to provide exclusive remedy as well as exclusive liability.

Administrative changes

As it now stands the administrative WC changes in S.B. 1070 take effect this summer. Without these changes disputed claims go to one of the Illinois Industrial Commission's 24 arbitrators, then if still not settled, to the five-member commission. Effective July 1 disputed claims will bypass arbitrators and go straight to the commission, under a new 120-day deadline for filing written decisions. In an effort to double the number of cases heard, a sixth member will be added to the commission, so it can be split into two, three-member panels. Effective January 1, 1985, the commission will have the option of switching to an alternative process that retains the 24 arbitrators as the first step but sets a 205-day deadline.

Business' chief objection and one of the reasons it pulled out of the talks last year, is that it sees the plan to bypass arbitrators as a long-range attack on the proviso for written decisions since the increase in the workload will leave the commission little time for paperwork. Labor denies any attack on the written decision, countering that the commission has already dispensed with written decisions when both sides agree to waive the right.

Since WC negotiations began again this year the ISCC has called S.B. 1070 "unsalvageable," according to Rosenbaum. Labor's view? "We're willing to listen to any viable solution," Walsh said. "We're not absolutely convinced it won't work."

Will business and labor succeed in negotiating an agreement on WC this year? Madigan wants the record to show that some progress was made under his speakership. He seems determined to keep business and labor at the bargaining table until they can reach some kind of compromise.

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