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  • InsideTrack
  • December 16, 2015

    On Workers' Compensation: Legislative Changes Should Go through Advisory Council

    In this column, attorney Michael Gillick provides a brief history of the worker’s compensation system in Wisconsin and the dangers that lurk when changes are made without input from the Worker’s Compensation Advisory Council, from his perspective.

    Michael H. Gillick

    Dec. 16, 2015 – Earlier this year, the Wisconsin Legislature passed a budget bill with provisions that restructured the worker’s compensation division of the Wisconsin Department of Workforce Development (DWD),1 transferring 18 administrative law judge positions to the Department of Administration’s Division of Hearings and Appeals.

    The practical implementation of this law is still being worked out. However, what was most significant about the change was that it was done by the Wisconsin Legislature without consultation or approval by the Worker’s Compensation Advisory Council, “created to advise the [DWD] and the Legislature on policy matters concerning the development and administration of the worker’s compensation law.”2

    Michael H. GillickMichael H. Gillick (Marquette 1973), practices worker’s compensation law at Gillick, Wicht, Gillick & Graf, Milwaukee. Reach him by email or by phone at (414) 257-2667.

    At the time of the writing of this article, one legislator has proposed a bill making various significant substantive changes in the worker’s compensation law without consulting the Advisory Council. The Advisory Council has completed its work and will be submitting its proposed bill when the legislature returns to session in the new year.

    Regardless of any future changes that are proposed, the abandonment of the traditional reliance on the Advisory Council threatens to remove the single element that has made Wisconsin’s law so attractive, namely its stability. If changes in the law become subject to the will of the particular political party in power, then it is likely that the substantive law will change with the shifts on political power. If that happens, then it is likely that both litigation and the cost of worker’s compensation insurance will increase.

    A Brief History

    Wisconsin’s worker’s compensation law became effective on Sept. 1, 1911. Prior to that time, workers injured on the job received no compensation for their loss unless they could show that the employer or some other party was guilty of negligence that caused the injury. If they did so, they met the three most common defenses to such actions:  contributory negligence, assumption of risk and the fellow servant rule, which prevented workers from recovering against the employer for negligence caused by a co-worker.

    Both labor and management found the old system both ineffective and irresponsible.3 The legislature therefore produced the law, which amounted to a legislative bargain.  Employers were to provide compensation for the basic economic loss caused by a work injury – primarily medical expenses and some compensation for loss of earnings. 

    In return, the employee gave up the right to bring a civil claim in tort against the employer,4 and therefore gave up the right to claim general damages and agreed to accept the limited benefits provided by the worker’s compensation act.

    Among the many proud moments in the history of its government, Wisconsin’s worker’s compensation system stands out as one of its most outstanding accomplishments. 

    This law is universally proclaimed as one of the finest, if not the finest workers’ compensation systems in the country. It is the oldest continually effective workers’ compensation law in the U.S. It has been repeatedly praised, by labor and management alike, as a model for the nation. It returns workers to their jobs faster than virtually any other state. Its cost, including the cost of administration and adjudication, is borne entirely by employers and insurers without the use of any tax dollars. 

    Eighty-five percent of all claims are resolved without litigation or the involvement of lawyers. The financial risks are so stable and moderate that insurers virtually flock to the state to provide coverage. It works so well that many states send delegations to Wisconsin to study how it operates.

    Worker’s Compensation Advisory Council

    What was remarkable, and may actually have been unique to Wisconsin, was that it was both a product of, and a continuing project for, both labor and management working in cooperation. Although it is commonly held that worker’s compensation was brought about by a socialist element in government, in fact management played a major role in the creation and implementation of the law in Wisconsin. 

    Companies like the Wausau Insurance Company played a major role in creating the language of the law and in getting the law enacted. This cooperation between labor and management continued on an informal basis for many years.

    Finally, in 1967, it was formalized with the passage of legislation creating the Worker’s Compensation Advisory Council.5 The structure of the council was laid out by Wis. Stat. §15.227(4). It consists of five representatives of employers and five representatives of employees and is presided over by the secretary of workforce development. 

    The Advisory Council (council) has, since its inception, operated through the “agreed bill” process. The council meets regularly and each side makes proposals.

    Public hearings are held for comment on the various proposals. The council, after negotiations, puts together a bill with whatever amendments to the law have received unanimous approval from all members of the council. That bill is then sent to the legislature, which traditionally passes the bill without change.

    Using this Advisory Council system, the law has had only modest modifications over the years. The rate for temporary disability, two-thirds of the worker’s average weekly wage, has a maximum. That maximum rate has risen gradually over the years, from a maximum, for instance, in 1977 of $189 per week to a maximum in 2015 of $911 per week. The weekly payment for permanent, partial disability rose during the same period from $57 per week to its present $322 per week.

    Wisconsin’s law has also provided a generous statute of limitations. Claim for a traumatic injury may be made any time within twelve years from the date of the injury or the date of last payment of workers’ compensation (i.e., payment of indemnity to the injured worker). There is no statute of limitations for occupational diseases, but any claims made after twelve years are paid from a fund provided for such injuries and funded by assessments placed on employers and insurers.

    Measuring the Act

    The effectiveness of the Wisconsin worker’s compensation system may be measured in several ways. In all of these ways, however, Wisconsin’s system compares very favorably with its neighboring states and with the rest of the nation.

    The insurance rates for coverage of worker’s compensation in Wisconsin averages $5.10 per $100 of payroll. By comparison, the average rate in Iowa is $6.62 per $100, in Minnesota $6.55 per $100 and in Illinois $10.95 per $100 of payroll. In the past five years, Wisconsin’s rates have risen at the average rate of 2.35 percent.

    Largely because of the stability of these rates, insurers have found Wisconsin an attractive state in which to offer insurance. As of 2013, three hundred and thirteen (313) insurance companies have been licensed to sell worker’s compensation insurance in Wisconsin. This is the largest number of worker’s compensation insurers in the country.

    The system also measures favorably from the point of view of the worker. The litigation rate is significantly lower in Wisconsin than in adjoining states. In 2013, for instances, only sixteen percent of claims went to litigation in Wisconsin as opposed to eighty percent of the cases in Illinois. The average payout to Wisconsin’s injured workers was one-third lower than neighboring states, and on average the injured worker in Wisconsin returned to work faster than most states, including Illinois, Texas and Florida.

    Proposed Changes

    In 2014, the Worker’s Compensation Advisory Council sent a bill to the legislature. That bill proposed, among other things, reducing the statute of limitations from twelve years to nine years. Its most significant change, however, was the implementation of a fee schedule on medical expenses. That schedule was intended to address the most significant problem in worker’s compensation, namely, the rapid rise in the cost of medical care for the injured worker. For the first time in the history of the Advisory Council, the Legislature did not pass the bill, and no changes will be made in the law.

    With the passage of Act 55, the Wisconsin Legislature has signaled that it is willing to make changes to the worker’s compensation system without the Advisory Council’s input. This threatens to remove stability from the system, based on political power, which could increase litigation and the cost of worker’s compensation insurance.

    Summary

    The ultimate measure of any system is the satisfaction of those who use it. Wisconsin’s reliance on the Worker’s Compensation Advisory Council has provided an unparalleled level of that satisfaction, for employer and employee alike. Time will tell whether the abandonment of that reliance will provide different results.

    Endnotes

    1 2015 Wisconsin Act 55, s. 9151.

    2 Worker’s Compensation Advisory Council.

    3 “[W]orkers’ compensation, far from being a violation of moral principle, is in fact the only morally satisfactory solution of the problem of the injured worker, once one concedes that morality as a group as well as an individual aspect….  The ultimate ‘social philosophy,’, then, behind nonfault compensation liability is the desirability of providing, in the most efficient, most dignified, and most certain form, the financial and medical benefits an enlightened community would feel obliged to provide..”  Arthur Larson, Larson’s Workers’ Compensation, Volume I, p. 1-5, §2.20.

    4 The immunity from suit was subsequently extended to co-employees. Wis. Stat. §102.03(2).

    5 Laws of 1967, Chapter 327, creating Wis. State. §102.14(2).




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