Workers' Compensation in Tennessee

The following letter, from LaFollette lawyer David H. Dunaway,  has not appeared in the printed version of the Journal, but because of its timeliness it is posted here.

Re: Workers’ Compensation Reform 2013 – Closing the Gap for Rehabilitation

Giving Injured Workers a Second Chance
Common Sense Workers’ Compensation Reform
Return Injured Workers to Work With Dignity – Save The Taxpayers
Stop the Draft!

I have read with interest Governor Haslam’s draft overhaul of the workers’ compensation system in Tennessee. 

In his essay on “Compensation”, Ralph Waldo Emerson wrote that each person is compensated in like manner for that which he or she has contributed. The law of compensation is another statement of the Law of Sowing and Reaping. It says that you will always be compensated for your efforts and for your contribution, whatever it is, however much or however little. Another corollary of the Law of Sowing and Reaping is what is sometimes called the “law of overcompensation.” “It is one of the beautiful compensations of this life that no man can sincerely try to help another without helping himself.”

“When he is pushed, tormented, defeated, he has a chance to learn something; … he learns his ignorance, is cured of the insanity of conceit; has got moderation and real skill.”

Before taking a draconian approach to workers’ compensation reform, I would like to suggest that all involved consider restraint from enacting reform for the sake of reform inasmuch as “no man thoroughly understands a truth until he has contended against it.”

In view of the nature and purposes of workers’ compensation, we must remember that the Tennessee Workers’ Compensation Act was enacted as a complete substitute for all previous remedies that were available on the part of an injured employee. The general purpose of compensation law is to provide compensation for the loss of earning power or the lost capacity sustained by workers through injuries in industry. If the legislation as proposed by the Governor’s consultants is adopted, the provisions of these laws will be re-written into every contract of employment throughout the State of Tennessee.   

The draft legislation will consolidate workers’ compensation oversight, which now falls under the Department of Labor, the legislature, and the courts, into a new agency. More government and more spending will be the order of the day.  Let us stop the draft.

The costs of administration of workers’ compensation benefits are being quietly shifted from industry and workers’ compensation carriers to the taxpayers for the State of Tennessee. 

In Governor Haslam’s budget for the fiscal 2012-2013 year, $13,337,400.00 was otherwise allocated for administering workers’ compensation benefits. His consultants have suggested that the net estimated increased cost to the taxpayers is $600,000.00. This will drive up the costs of workers’ compensation administration to nearly 14 Million Dollars per year. Quite honestly, I think this is a conservative estimate, which does not take into consideration the logistics and support staff that will also have to be added to administer more government. For a period of two terms as Governor of the State of Tennessee, this would result in a net increase of expenditures in excess of 100 Million Dollars. 

The beneficiaries of this reform will be the insurance industry with no guarantee that premiums will be reduced nor does it appear that benefits will be more economically distributed, but on the other hand will only be delayed. 

In an austere economy, the insurance industry has failed to consider the forgotten man, the taxpayer of the State of Tennessee, who will now be paying the bills that were previously paid by those who were paid to insure the risks and hazards created by the nature of the employment. 

While this workers’ compensation reform is being considered, the Tennessee General Assembly is also currently considering judicial redistricting, which will reduce the number of judges in the State of Tennessee. While the Tennessee General Assembly is considering the reduction of judges, the executive branch, on the other hand, is creating a commission in the end, administering the distribution of benefits and answerable to no one except the executive branch for the State of Tennessee. If, in the finality of events, this reform is poorly administered or inept, then the proposed reform, regardless of the quality of its substantive content, will fail to accomplish or even approach the objectives of a fair workers’ compensation system. 

From 2004, until 2011, there has been a 71% reduction in the litigation of workers’ compensation claims. This also means that the Insurance Industry has saved 71% of its previous costs. One can hardly say that the Court system is awry. Additionally, since 2004, workers’ compensation disability benefits have also been reduced by 40% across the board. Now the out­of-state consultants who have recommended the current administration’s draft reform have created an unprecedented amount of rulemaking, and have quietly placed the costs of the administration of workers’ compensation benefits on the backs of the taxpayers, for the benefit of the insurance industry through which these costs were previously paid. 

This draft legislation does little to solve one of the greatest costs in the administration of workers’ compensation benefits– medical costs. 

Before these recommended measures are adopted, I would suggest that the Governor consider authorizing a new advisory committee to consider the problems as true Tennesseans know them to be and otherwise allow them to make recommendations for improvement or reform, while at the same time closing those gaps, which have not been addressed by the out-of-state consultants. 

Well-conceived measures can be distorted or lost because of a particular political situation prevailing at the moment or because of the lack of sophistication of those proposing the new legislation. A new advisory committee, if composed of conscientious persons of goodwill, who are sincerely interested in improving the effectiveness of the Workers’ Compensation Act, could otherwise accomplish a great deal. On the other hand, if those proposing the legislation or if the individuals seeking reform are afflicted with special interests or special political axes to grind, the effectiveness of the Tennessee Workers’ Compensation Act will vanish. 

The greatest concern for the proposed reform would be that the configuration of this new commission would have powers that are essentially judicial in nature, but those administering the distribution of benefits will be accountable to few but the executive branch. More government and more spending is not the answer. 

If the goal of this reform is to grow jobs, then we can grow those jobs without more government spending and certainly without any new taxes. 

If the proposed system becomes inept or one-sided, the legacy that will be left will be a legacy for which a new level of government was created at the expense of the injured worker and the taxpayer.

The current administration could leave a legacy of fairness and equality by allowing injured workers to return to work with dignity, while reducing overall expenses for disability benefits by creating incentives for injured and disabled workers to be restored to gainful employment. The draft legislation does not address the rehabilitation gap. 

I firmly believe that Tennessee can grow jobs and return injured workers to the workplace with dignity without creating more government through a simple common sense reform that restores injured workers to gainful employment by simply reallocating resources that currently are available. 

The greatest need of injured workers, particularly in a depressed economy, is for immediate cash to meet his or her emergencies. An expedited distribution of benefits can be accomplished by a reallocation of the use of the current specialists, along with reallocation in the use of the judicial system by creating incentives for returning workers to the workforce and simply reallocating the 4% premium surcharge that is being paid by every employer pursuant to the creation of the Second Injury Fund. 

Before workers’ compensation reform is considered, I think the current General Assembly needs to tackle the issue of judicial redistricting, which will then allow the current administration to determine how those judicial services could be reallocated at little expense to the forgotten man, the taxpayer of the State of Tennessee.

One of the primary purposes for workers’ compensation reform should be the restoration of an injured employee to gainful employment with preference given to returning the employee to employment with the same employer or to the same or similar employment. 

In the instant situation, reform for the sake of reform is no reform at all. Most of the injured workers with whom I have dealt, if they truly are injured, want to receive a second chance to return to the workplace. 

Insurance carriers should not be allowed to gain more profits at the expense of injured workers or the taxpayers. 

We can increase business wealth and save taxes while preserving the dignity of the disabled by simply closing the rehabilitation gap, which has existed for nearly a century. 

There are two ways to mutually attract new business and provide incentives to lure the injured and disabled to the workplace: (1) motivate the injured and disabled to return to the workplace, and (2) encourage employers to retain and/or otherwise hire an experienced workforce with new technological training and/or rehabilitation. 

You could take the money that will be saved over the next 10 years and reallocate those same resources to our schools of technology and community colleges, investing in education and retraining rather than investing in more government. 

Given the fact that there has been a 71% reduction in litigation, a simple reallocation of resources would allow Tennessee to make true reform, and the current administration could leave a legacy of fairness and equality. 

I praise the current administration for the excellent job that it has performed in the administration of the current workers’ compensation system. The current administration has selected a number of high-caliber administrators who have streamlined the current system. However, before throwing the baby out with the bath water, I would suggest a re-examination of how our current resources can be reallocated to address the gap that has long existed in rehabilitation of injured workers, none of which has been addressed by the out-of-state consultants. 

I would suggest the current administration reconsider the draft bill. Shifting cases out of the courthouse into a new commission house at the expense of the taxpayer is not necessarily the answer. 

I listened with interest to Governor Haslam’s “State of the State” address to the 108th General Assembly on January 28 when Governor Haslam announced his plan to overhaul the Tennessee Workers’ Compensation System. I also remember his reference to Senator Baker. As Senator Baker has suggested, when attempting to reach a compromise on significant issues, you also need to consider that the other side just might be right. 

Millions of dollars can be saved by keeping the present system intact, eliminating the mandatory benefit review conference, allowing the benefit review conference or mediation to be voluntary, and creating incentives to encourage our injured and disabled to be retrained.

Rehabilitation and retraining through our technology centers and community colleges is a simple reallocation of resources and is true reform. 

Governor Haslam’s amended recommendations for a more conservative approach to workers’ compensation reform could potentially save the taxpayers of this state millions of dollars. These savings can be used for training a more viable workforce and would represent a greater use of our educational facilities.

Before rushing to pass this reform for the sake of reform, a reallocation of resources should also be considered.

— David H. Dunaway, LaFollette, Tenn.