Governor Brown Signs Workers’ Compensation Reform to Cut Hundreds of Millions in Waste, Protect Injured Workers and Reduce Costs to Business


SAN DIEGO – Governor Edmund G. Brown Jr. today signed landmark legislation – backed by both Democrats and Republicans – to reduce costs to businesses and protect workers by cutting out hundreds of millions of dollars in waste from California’s workers’ compensation system.

The bill, SB 863 (De León), reverses a four-year trend of rate increases. Without reform, these costs would continue to escalate, which would mean higher costs for businesses and smaller payments for injured workers.

“These significant reforms save hundreds of millions of dollars for California’s employers while preventing an imminent crisis of skyrocketing rates that would have hurt both injured workers and businesses,” said Governor Brown. “It’s extraordinary to see Republicans and Democrats come together to solve a problem before it becomes a crisis.”

“This reform law will create greater efficiencies and accountability in the system, save major employers money that can be used to hire new workers and help our economic recovery and protect workers who have been injured on the job,” said Assembly Speaker John A. Pérez. “This is a major victory for the people of California, and I am proud to have worked with the Governor, my colleagues in both parties and both houses of the Legislature and finally the stakeholders who came together in a spirit of good faith and cooperation to make this reform proposal a reality.”

“Not only does this compromise provide business with lower rates and injured workers with increased benefits, it also addresses the plight of those workers who suffer the most serious injuries on the job,” said Senate President Pro Tem Darrell Steinberg. “We can’t forget those construction workers and other skilled employees whose injuries will end their careers. By annually setting aside $120 million in other cost savings to provide those workers their lost earning power, this reform ensures that no one is left out in our workers’ compensation system.”

Last month, Governor Brown led the effort to pass SB 863, which was approved by an overwhelming majority of lawmakers on both sides of the aisle. Representatives from both business and labor groups hailed the bill’s passage as a “win-win” for employers and employees alike.

“California businesses support this important reform led by Governor Brown which represents a balanced approach to issues within California’s workers’ compensation system,” said Allan Zaremberg, CEO of the California Chamber of Commerce. “SB 863 provides employers with cost-saving proposals that will reduce frictional costs while providing injured workers with needed benefit increases. The reforms also have the potential to reduce costs to the underlying system that will benefit employers. We appreciate the Governor’s commitment to an expeditious regulatory process that will help achieve the full extent of projected savings.”

“We commend the Governor for his leadership in providing a comprehensive solution to the growing workers’ compensation crisis,” said Art Pulaski, Executive Secretary-Treasurer and Chief Officer of the California Labor Federation. “This landmark reform provides injured workers with an increase of $860 million in benefits, while eliminating waste and inefficiencies in the system. This new law achieves a true rarity in Sacramento. It finds a way to increase benefits to those in need while reducing costs across the board.”

In the past two years, the costs of workers’ compensation insurance have risen from $14.8 billion to $19 billion, with an estimated 12.6% increase projected in the near future. By reducing systemic inefficiencies and unnecessary expenses, Senate Bill 863 will save businesses $1 billion in 2013, increase payments to disabled workers by 30% and improve the delivery of medical treatment, retraining and other benefits.

As an employer, under Senate Bill 863 the State of California is projected to save $40 million per year in insurance costs alone, as well as untold millions in litigation, claims adjustment and other frictional costs. Savings to local government, including schools, cities and counties, are estimated at $170 million annually.

Workers’ compensation insurance is designed to help all California employers and the state’s 14.4 million workers by pooling risk of workplace injury and providing predictable payments to avoid costly litigation. Today’s historic reform to this system achieves the following benefits and efficiencies:

• For workers:
– SB 863 will increase permanent disability benefits by 30 percent, with faster payment of awards;
– Provide faster, higher-quality medical treatment; and
– Improve retraining and increase awards for those with career-ending injuries.

• For business:
– SB 863 will reduce the costs of workers’ compensation losses by close to $1 billion;
– Reduce litigation, claims adjustment costs, and other frictional costs; and
– Provide a more predictable and more objective benefit delivery system.

• For California:
– SB 863 will reduce workers’ compensation rates through the allowance of a state alternative dispute resolution program;
– Save the state $40 million annually in insurance costs; and
– Help support California’s economic recovery.

The average workers’ compensation rate per $100 of payroll is currently $2.39, down from a peak of $6.29 in 2003, but rates have been slowly climbing over the past four years and were projected to skyrocket in the near future. Today’s law enacts sweeping reforms to workers’ compensation to prevent a crisis situation. This historic reform enjoyed strong bipartisan support in the Legislature and backing from workers and employers across California.

Workers’ Compensation Reform: What They’re Saying

Sean McNally, Grimmway Farms:

“This is an historic reform conceived by and for the two stakeholders in the system: employees and employers. It took leadership and experience from the governor and it took cooperation and bipartisanship from the legislature. We can make good public policy in California.”

Jill A. Dulich, Senior Director, Marriott Claims Services – Los Angeles:

“Marriott is very encouraged by the efforts of the administration to bring all parties to the table to realize meaningful workers’ compensation reform this year. SB 863 will bring more predictability and stability to the California workers’ compensation system in a time of economic challenge for all participants. We look forward to realizing the benefit to our injured associates and our company with the multi-faceted improvements contained in the bill.”

Pam Marcum, ALPHA Fund:

“We are pleased to support Senate Bill 863 This package is fair and balanced and will result in increased benefits for injured workers while at the same time creating cost savings for employers.”

Bob Balgenorth, President, State Building and Construction Trades Council, AFL-CIO:

“This historic agreement between business and labor will create a more streamlined workers’ compensation system by removing costs which do not directly benefit the interests of workers or employers. The reform will improve access to medical care for permanently disabled workers and ensures a more fair and much needed increase in compensation for their injuries. Big thanks to Governor Brown and the Legislature for making this happen.”

Bill Dombrowski, California Retailers Association:

“We applaud the various stakeholders for addressing the oncoming problems in the workers compensation system and hope that it can provide benefits for the worker and stability for the employers in the years to come.”

John Kabateck, NFIB/CA Executive Director:

“The workers’ compensation reform passed by the Legislature is a huge step toward achieving more accountability, efficiency, and cost savings in a cumbersome and expensive system. If everyone works together, the projected savings will help shield our struggling small business owners from larger rate hikes, while ensuring that injured workers receive the care that they need.”

David Liebler, Director of Public Affairs & Member Services, California State Association of Counties (CSAC):

“We applaud the joint efforts and collaborative process between labor representatives and employers in crafting reforms that will improve benefits while reducing costs.”

Bruce DD Mac Rae, Vice President, State Government Affairs, UPS:

“UPS takes pride in helping draft and support Senate Bill 863. This legislation will increase permanent disability benefits to our injured workers and provide for faster, high quality medical care while reducing overall workers’ compensation costs to businesses in the state.”

Scott Blevins, 2012 President of the California Trucking Association and President of Manteca-based Mountain Valley Express:

“Governor Brown’s leadership on workers’ compensation reform will save California trucking companies millions of dollars in insurance premiums, keep California competitive in global goods movement, and help the industry create good-paying jobs.”

Daniel D. Crowley, President and Chief Executive Officer of U.S. HealthWorks:

“This law is a major milestone for our State,” said, the largest outpatient occupational health provider in the California. It goes a long way to assure injured workers will continue to have access to the right care right away, so they can return to their lives and work quickly. We thank Gov. Brown, Speaker Perez, President pro Tem Steinberg, Sen. De Leon and Asm. Solorio for making a difference.”

Jason Schmelzer, Legislative Advocate for the California Coalition on Workers’ Compensation:

“CCWC is proud to have worked with Governor Brown to achieve comprehensive workers’ compensation reform. This legislation will help reduce costs for employers and make California more competitive.”

California Association of Joint Powers Authorities (CAJPA):

“The California Association of Joint Powers Authorities (CAJPA) believes the hallmark of a good workers’ compensation reform package is the reasonable balance between evidence-based estimates of cost savings achieved through system streamlining partnered with targeted benefit increases, also supported by independent data. CAJPA believes that SB 863 meets this critical test. SB 863 was originally introduced at the request of CAJPA to deal with the out-of-control workers’ compensation lien problem. We are grateful that the labor and employer negotiators, along with the dedicated Department of Industrial Relations Director and Administration staff were able to include that small reform in their comprehensive package.”

Associated Builders and Contractors of California:

“Our contractors and their employees have been particularly hard hit in the past few years in this tough economy. ABC California believes SB 863 provides important cost saving reforms that will help reduce premiums for California small businesses in both the short and the long term.”

Bruce Wick, California Professional Association of Specialty Contractors (CALPASC) Director of Risk Management:

“The WC reform package has tremendous value to California, employers stave off massive increases, and employees receive benefit increases they deserve. We greatly appreciate the thoroughness and professionalism of those involved in the negotiations of this bill, developing a solid compromise that truly benefits all legitimate participants in the WC system.”

Ron Fong, President & CEO, California Grocers Association:

“CGA is significantly concerned that absent corrective action, our member companies will begin to see the same double-digit increases in workers compensation premiums that plagued California a decade ago. We are pleased to support Governor Brown’s efforts this year to help address employers’ need for premium stability while also balancing the need of injured workers to receive fair compensation. We look forward to continuing to work with the Governor and his Administration in the coming years to ensure promised savings and efficiencies are realized.”

Steve Lee, President, Professional Engineers in California Government:

“The workers’ compensation reform bill is good for workers, good for employers, and will add fuel to the California economic comeback. The Governor deserves great credit — it would not have passed without his dedication and hard work.”

Tom Nassif, President and CEO, Western Growers Association:

“Rising workers’ compensation costs have been threatening farmers and the jobs they support. We applaud Governor Brown and his team for helping craft a workers’ compensation bill that helps permanently injured workers while reforming aspects of the system that have contributed to lengthy conflict, litigation, delayed benefits for workers and higher costs for employers.”

Martin Brady, Executive Director, Schools Insurance Authority:

“SB 863 is a big step forward in helping to stabilize a rapidly deteriorating work comp marketplace. This bill is a good example of how California can become more competitive for our business community by making our system more predictable and less litigious.”

Ken Tiratira, Executive Vice President, Employers Group Employers Group:

“California’s largest and oldest organization representing employers and a member of the California Coalition on Workers’ Compensation, is proud to stand with the Governor in support of much needed workers’ compensation reform. Governor Brown’s leadership was critical in fostering a collaborative partnership between business and labor to craft a legislative proposal that provides significant positive impact and benefits to business and injured workers.”

Scott Hauge, President, Small Business California:

“The SB 863 reform is aimed at reducing costs for small business and addressing some of the inequities for workers in the system. Workers compensation costs are rising and this bill will mitigate some of those costs today and reduce future increases.”

Malinda Markowitz, Co- President of the California Nurses Association:

“The California Nurses Association strongly supports California’s workers’ compensation reform SB 963. SB 963 provides increases in permanent disability benefits, minimizes delays in medical treatment, improves access to care and provides hard savings in excess of the cost benefits.”

Allan Clark, President, California School Employees Association (CSEA):

“The Workers’ Compensation reform bill increases benefits for injured workers and reduces costs for employers. This is an example what can be accomplished when unions, employers, the legislature and the Governor work cooperatively.”

Antoinette Smith, Vice President, Metro Risk Management:

“Metro Risk Management fully endorses SB 863. With workers’ compensation in California entering a crisis, these critical and substantive amendments address various important needs of both injured workers and their employers/insurers. This carefully crafted compromise merits the support of all stakeholders in California workers’ compensation.”

Suzanne Guyan, Director of Product Development, Comp Partners:

“The cornerstone of SB863 is that injured workers will receive the right treatment at the right time. The new IMR requirement enforces resolving medical treatment disputes by a certified specialty peer reviewer in an expeditious manner rather than California’s historic arduous legal process.”

James T. Hay, M.D., President, California Medical Association:

“The California Medical Association (CMA) joins the long list of coalition partners and legislators from both sides of the aisle in supporting SB 863 because the bill will ensure that physicians can continue to treat our patients. After many hours of meetings with stakeholders, we believe SB 863 represents sound policy. We look forward to working with the Division of Worker’s Compensation in providing physician input throughout the development of implementing regulations.”

Paul A. Smith, Senior Legislative Advocate, Regional Council of Rural Counties:

“RCRC believes the reforms contained in SB 863 will have the dual effect of providing worthy increases in permanent disability awards to injured workers while achieving cost-savings to employers through much-needed reforms.”

Phil Vermuelen on behalf of Engineering Contractors’ Association, the Marin Builders Association, the California Chapter of the American Fence Contractors, the California Fence Contractors and the Flasher Barricade Association:

“With 12%-18% or more of rate increases looming, the workers’ compensation reform package absolutely had to receive approval this session or many more jobs would have been lost. This was our impetus for labor and management to come together to craft this very important reform package. Thankfully, Governor Brown’s intervention made this reform package a reality. We are all deeply appreciative of his efforts on our behalf. And this important accomplishment bodes well for us to achieve many other mutual efforts in the future!”

Darrell Brown, Senior Vice President/Managing Director Sedgwick Claims Management Services, Inc.:

“Sedgwick is in support of Senate Bill 863. The legislation will bring balance to the system by ensuring equitable benefits to injured employees while controlling unnecessary and costly frictional costs that don’t benefit employees or employers.”

Gino DiCaro, California Manufacturers and Technology Association:

“CMTA supports a workers’ compensation system that provides fair compensation to injured workers while protecting California employers from excessive litigation and other expense. System costs are now too high, creating the fifth highest workers’ compensation premiums in the nation. Costs are likely to rise further, putting jobs and the economy at risk. For that reason it is vital that any benefit increases be accompanied by cost savings that will both reduce current costs and slow cost increases in the future. SB 863 is a step in the right direction, but success will depend upon regulators, labor and management working together to ensure the promised savings are realized. CMTA will closely follow its implementation in the months and years ahead and seek additional reforms, if necessary, to lower costs.”

Kevin Confetti, Director, Workers’ Compensation, University of California, Office of the President – Office of Risk Services:

“The University of California considers SB 863 an important piece of legislation that is vital to workers’ compensation reform in California. The bill provides injured Californian’s with a needed permanent disability benefit increase while alleviating many of the burdensome and inefficient processes that only lead to friction and additional expense in our workers’ compensation system. SB 863 is a step in the right direction towards making our workers’ compensation system more objective and effective which will benefit all Californians.”

Michael Prosio, Regional Vice President, State Affairs, Anthem Blue Cross:

“As an employer of thousands of Californians and a provider in the workers’ compensation system, Anthem Blue Cross understands the need for comprehensive workers’ compensation reform. We applaud the Governor’s effort to put us on course to lower costs for employers and provide much-needed benefit increases for injured workers.”

Eddie Bernacchi on behalf of the California Chapters of the National Electrical Contractors Association & the California Legislative Conference of the Plumbing, Heating and Piping Industry:

“Our construction clients strongly support SB 863 and the efforts of Governor Brown to address the escalating costs of works compensation before it becomes a crisis. This is just another example of the Governor’s leadership in getting California back to work.”

Dean E. Vogel, President, California Teachers Association:

“We commend Sen. DeLeón for pushing through SB 863 and the Governor for signing this very important piece of legislation. The fact this measure remedies key problem areas including providing quicker access to medical treatment, means California’s workers will get the attention they need when they need it—a move that benefits students whose teachers may be injured.”