Legislative Action
By DIANE ROSS

At issue: worker's comp liability

NOBODY NEEDS TO TELL the General Assembly that the road to reforming Illinois' worker's compensation (WC) law is about as smooth as the routes Hope and Crosby took in their classic "road" comedies. Hope and Crosby were forced into one detour after another. The General Assembly, however, knows it's not that easy to dodge the roadblocks. Lawmakers set out to reform worker's comp in 1980, and they made some changes but, in the final analysis, they sidestepped the major issues. The changes produced are only the preliminaries to reform. Here is what they accomplished this session by passing House Bill 3250:

• spelling out non-work-related incidents no longer covered;
• setting standards for hearing disability and accounting for preexisting conditions when hearing benefits are figured;
• limiting employees' choice of treating physicians to two;
• freezing the maximum weekly benefit for permanent/partial disability for three years;
• reducing automatic benefits for specific loss of organs, bones and limbs by 90 percent.

Business is satisfied with these changes as preliminary moves to resolving the WC issues that have simmered since a Democratic-controlled legislature rewrote Illinois' worker's comp law in 1975. Business has blasted those 1975 amendments as blatantly pro-labor. Labor steadfastly has refused to give up benefits in the face of increasing pressure by business. The changes were possible this year because labor did not feel any major benefit reductions would result.

However, final reform of WC will not be achieved according to business until their liability has been limited by: 1.   setting standards to determine the degree of disability and the corresponding extent of benefits; 2.  defining work-related incidents as those directly caused by conditions on the job; and 3. accounting for preexisting disability when figuring all benefits. The effect of such changes would, according to business, cut their costs and restore worker's comp to its original purpose: to compensate the worker for loss of earning capacity caused by accidents or conditions at work but to still leave the incentive to return to work.

Hope and Crosby were always more interested in staying alive than reaching their destination. In an election year like 1980, lawmakers were more interested in re-election than anything else. Regardless of motives, the Democratic-controlled General Assembly did make some changes in worker's comp — enough concessions to satisfy business, but not enough to jeopardize labor's support.

Five years of bellyaching

For five years, business complained that the cost of WC insurance has become so prohibitive that Illinois is losing industry to its neighbors. Business put the blame for Illinois' stagnating business climate squarely on state government, which it saw as anti-business.

Labor argues that WC insurance is only one component of the business climate. It's not the lawmakers who are at fault, labor argues, rather the insurance companies who took advantage of the increase in benefits to raise premiums. And labor argues that business itself deserves a large part of the blame for badmouthing the business climate.

Still business said the General Assembly had only to reform worker's comp for Illinois to become competitive in the midwestern industrial market again and for state government to shed its anti-business image. Labor is not sure it is that easy.

Business groups are sure the changes approved in 1980 will have a positive effect on the business climate, but they're not sure how much. The Illinois Manufacturers' Association says the changes will only slow the increase in premiums. The Illinois State Chamber of Commerce, however, says the changes will stabilize premiums. Neither group expects any rate reduction in the near future.

Overnight reformation

But both the IMA and the ISCC predicted the changes would transform Illinois' image. Overnight, the General Assembly became "pro-business" with the eleventh-hour approval of H.B. 3250.

The business groups fully expect lawmakers in 1981-82 to make more changes — enough to decrease insurance costs. It probably won't be that easy considering the General Assembly will be entangled in reapportionment in 1981. The reform that business envisions for worker's comp may never be possible until some political crisis demands an old-fashioned deal.

It is too early to tell how effective the 1980 WC changes will be, much less predict the recovery of Illinois' ailing business climate.

With the advent of the industrial revolution in the 19th century, worker's comp developed under common law. But when the labor movement caught up with industry in the 20th century, worker's comp became a matter of statutory law. The burden of proof effectively shifted from the employee to the employer, although the blow to business was softened by

September 1980/Illinois Issues/25

the authorization of worker's comp insurance. By the 1970's, however, most worker's comp laws had been on the books for more than 50 years, and the need for uniform reform was obvious.

WC is authorized — and administered — by the state government. As a result the cost of compensation and the insurance to cover it varies widely from state to state, which explains business' claim that Illinois' WC law has crippled its business climate.

The federal Occupational Health and Safety Act (OSHA), in addition to setting safety standards for the work place, created the Nixon-appointed National Commission on State Worker's Compensation Laws (NCSWCL), which was designed to stimulate such reform by setting federal standards for WC for the first time. While many states, including Illinois, voluntarily met most of the NCSWCL standards, few produced the comprehensive reform the commission envisioned. Congress never followed through by requiring compliance or passing a federal WC law. A federal interagency task force has apparently picked up where the commission left off, completing an in-depth investigation of WC issues. But until the task force's reputed nine-volume report is released, the NCSWCL's 19 essential guidelines remain the standard by which WC laws are judged.

The NCSWCL standards covered the liability issue (who and what is covered) and the corresponding benefits issues (how compensation and medical and rehabilitation costs are computed), with one exception. The commission failed to produce standards for computing benefits for permanent/partial benefits, which is crucial since about two-thirds of all WC costs involve permanent/partial claims. And, while the commission dealt generally with the administration issue, it failed to produce specific standards.

Amendments of 1975

Before Illinois rewrote its WC law in 1975, the state met only six of the NCSWCL essential 19 standards; after the 1975 overhaul, Illinois met 14. Only four other states could claim a more comprehensive WC law by the commission's standards. Illinois' new WC law was clearly pro-labor.

Historically, WC liability had been limited to hazardous work; but Illinois followed the NCSWCL recommendation in 1975 and expanded liability to all work. Pre-1975 benefits had been based on two-thirds of the worker's average weekly wage, but in 1975 the General Assembly set a minimum (without a maximum) for weekly benefits. In effect, that change guaranteed benefits would never be less than half the worker's average weekly wage. The result was benefits far higher than the NCSWCL intended. In 1976, the legislature never did set a maximum, which limits weekly benefits to the statewide average weekly wage.

Business contends employer liability should be limited to incidents directly 'caused' by work, not merely 'aggravated' by conditions on the job

Business had agreed in the early 1970's that WC reform was long overdue in Illinois, but as the General Assembly proceeded in 1975 to adopt amendment after amendment, business argued the pendulum had swung too far. By 1980, business claimed that broadened liability had doubled claims, and increasing benefits had tripled their insurance costs.

It's what the employer is liable for, not who, that remains the issue in Illinois.

The law now covers all employers and employees, in both the private and public sectors with a few insignificant exceptions.

Prior to 1975, Illinois' covered only the private sector. The NCSWCL recommended coverage of the public sector. Since public coverage was considered inevitable, it was not an issue when the General Assembly followed the recommendation in 1975.

Prior to 1975, Illinois allowed exemptions for some farmers, small businesses and those with domestic help. The NCSWCL standard specifically called for such exemptions to be phased out. Yet exemptions failed to become an issue when Illinois refused to follow the recommendation in 1975. Labor did not object when farmers successfully blocked an attempt to phase out their exemption or when exemptions for small business and domestic help were delayed until 1977 and 1980, respectively.

When and where of liability

What the employer is liable for— and when and where — represents two of the major WC issues. The problems stem as much from the courts' interpretation of the WC law as they do from the statute itself. Since 1975 when the General Assembly expanded coverage from hazardous jobs to all jobs, the courts have interpreted liability so broadly that the employers must cover virtually all mishaps in the work place.

Illinois' WC law now covers all work-related incidents. The NCSWCL standard called for worker's comp to cover general diseases as well as specific injuries. Before 1975 Illinois WC law had covered diseases caused by hazardous jobs, but it had specifically ruled out "ordinary" diseases. In 1975, the General Assembly followed the commission's recommendation, expanding coverage to include diseases "aggravated" by any job. However, lawmakers later redefined WC coverage to include only diseases aggravated by "risks peculiar" to a job.

The 1975 changes, in effect, allowed the courts to include "ordinary" diseases among those "aggravated" by "peculiar risks," according to business. As a result, business says, employer liability under worker's comp was expanded to include any disease affected by work as well as any accident happening on the job.

Business contends employer liability should be limited to incidents directly "caused" by work, not merely "aggravated" by conditions on the job. As long as "aggravated" remains the statutory standard, business argues, the courts will rule arbitrarily on whether the "aggravation" resulted from conditions on the job or elsewhere. But if "cause" became the standard, liability could indeed be determined reasonably on the basis of the "peculiar risks" involved in a job. And, business argues, limiting employer liability to "cause" would still follow the intent of worker's

26/September 1980/Illinois Issues

comp.

Labor maintains, however, that worker's comp inherently puts employee rights above employer liability. From labor's position, liability is a question of when and where the worker is covered, not what he is covered for. Labor's position is this: the worker has the right to coverage from the time he arrives at work until the time he departs, and it is immaterial as to whether the incident happened when he was actually working. And labor apparently is confident that the courts will continue to support its position regardless of changes in statutory standards.

This year the General Assembly did define non-work related incidents for the first time. Generally, the new WC measure limits coverage to incidents in which employees are "required" to participate, and it specifically rules out coverage for athletic events and other forms of recreation, and for alcohol and drug rehabilitation programs when the employee "voluntarily" participates. Labor did not object to these changes.

Although business would rather see a redefinition of work-related incidents, the IMA and the ISCC welcomed the 1980 changes as the first step toward resolving the liability issue.

Liability for non-work-related incidents has posed the greatest threat of abuse. A single non-work-related case can prove far more costly to an employer than a dozen work-related cases, according to business. A handful of non-work-related cases have already set what business sees as dangerous precedents. The IMA and ISCC cite two classic examples. In one case, a widow collected WC death benefits when her husband was killed in a car accident on the way home from a company golf tournament. In the other, a widow collected when her husband died of a heart attack while hospitalized under the auspices of a company alcohol rehabilitation program. The IMA and the ISCC believe the 1980 changes will put an end to such horror stories, and hopefully defuse any precedents already set. However, they say the impact on WC insurance costs will be negligible since such instances are rare.

Setting voluntary participation as the standard for non-work-related cases appears to be a shaky step toward resolving the employer liability issue. Unless business officially makes recreational and rehabilitative programs voluntary, labor will continue to argue that employers pressured employees to attend at the expense of their jobs. Considering the courts' interpretation of worker's comp, employees could still collect, precedent or no precedent.

Question of pre-conditions

However, it is the coverage of preexisting conditions that apparently has turned employer liability into a Pandora's box.

Suppose an employer hires a worker with only one arm who later loses the other? Or what about a worker with glasses who later loses an eye? Should the employer be liable for the total extent of the worker's disability or only the degree that resulted from the accident?

Employers, in effect, are required to guarantee that the worker's health will be as good when he quits the job as when he was hired

Pre-existing conditions became an issue with the passage of the Illinois Fair Employment Act in 1977, which banned discrimination against the handicapped in hiring practices. This law, according to business, allowed the courts to rule that handicapped workers were discriminated against if worker's compensation awards were lower due to their handicaps.

As a result, business says, employer liability under worker's comp was expanded to include pre-existing conditions — not only for handicapped workers, but for all workers. Inclusion of any disease affected by work, coupled with the inclusion of any preexisting condition, in effect, requires employers to guarantee that the worker's health would be as good when he quit as when he was hired — despite the fact that health declines with age.

Business contends that as long as the WC law lacks standards for determining the extent of pre-exisiting conditions, the courts will rule arbitrarily on benefits. Business wants specific standards set so that the pre-existing conditions can be determined reasonably on the basis of the risks involved when the employee was hired. And business wants the statutory authority to lower benefits due to pre-existing conditions.

Labor maintains that setting such standards would totally eliminate employer liability for pre-existing conditions, and employers would automatically look for pre-existing conditions whenever a middle-aged worker filed a claim.

Labor admits that employers should not be forced to guarantee a worker's health despite his age, but argues that business has repeatedly refused labor's suggestion that compensation for preexisting conditions come from a fund similar to that for second injuries. That fund pools contributions and therefore spreads liability.

This year the General Assembly did set standards for pre-existing conditions and allowed benefits to be lowered accordingly — but only in hearing disability cases. Although business would have preferred standards and allowances overall, they see hearing standards as a step in the right direction. At the least, business and labor can reach further agreement in similar areas such as vision. However, liability for pre-existing hearing conditions has never been subject to abuse. No hearing disability cases have been decided since coverage was expanded to include partial as well as total loss five years ago, mainly because of the lack of such standards. Therefore, the 1980 changes will have little effect on WC insurance costs.

Liability is one thing, but the actual benefits paid to workers — compensation and medical and rehabilitation costs — are another. Business' demand for standards to determine the extent of disability — and the corresponding extent of benefits — remains the number one worker's comp issue. Business' proposals to set standards will be detailed in the October magazine.

Any progress toward the final reform demanded by business for worker's comp cannot really be assessed until the General Assembly's 1980 changes become law. That depends on Gov. James R. Thompson. The bill has been on his desk since July 30.

September 1980/Illinois Issues/27