New Workers’ Compensation Reform Law Improves Business Climate

Attracting new companies to Missouri is one of the major ways we grow our state’s economy and we have a number of positives we bring to the table when we enter discussions with the CEO’s of these major industries—a central location, low taxes, a good quality of life, and a highly skilled workforce. Yet previously, Missouri has been bypassed on many of these major projects once these business leaders take a look at how out of control our workers’ compensation system has become.

After all, Missouri’s workers’ compensation system originated in 1926 to protect workers without costly and lengthy lawsuits. Before that time, if workers were injured, they had to take their employers to court and prove the company was negligent. Our workers’ compensation system put an end to all of that. Employees injured on the job can now file a claim for compensation against the employer with the state, rather than filing an expensive lawsuit. The system was also set up to fairly balance the rights of both employees and employers and ensure a safe work environment for the employee.

Unfortunately, the whole original concept has become lost over the past few years as workers’ compensation costs have spiraled and the scales have tipped heavily in favor of employees, costing our state jobs and business. Today Missouri ranks 6th in the nation in workers’ compensation costs. These costs have increased 75.7 percent between 1992 and 2002. For example, the manager of one Jefferson City manufacturing company who testified before the state legislature this year said his plant’s workers’ compensation costs for 2004 were approximately $1.3 million, while two plants comparable to his company, but located in Virginia, only paid out $80,000 combined. The reason for this dramatic cost acceleration has been neither dangerous workplaces nor more injured workers in our state. In fact, just the opposite is true. Between 1992 and 2000, workplace injuries declined 42.2 percent in our state and Missouri is ranked the 9th best workplace environment in the nation when it comes to safety—better than any of our surrounding states. At the same time, the number of workers’ compensation claims by injured workers has declined as well—a 17 percent decrease since 2001.

So why have workers’ compensation costs continued to skyrocket? Because the average cost of a claim in Missouri has gone through the roof, particularly in comparison to other states. Lump sum settlements drive the costs way up and Missouri awards these more than twice as often as the national average. Statistics also show workers’ compensation costs double when an attorney gets involved in the case, and this happens very frequently in Missouri in spite of the fact that our system was initiated to avoid litigation. But is it any wonder when attorneys take 25 percent of any benefit settlement obtained right off the top before the employee gets a penny?

Obviously, Missouri’s workers’ compensation system has needed reform for many years, and Gov. Matt Blunt and I are proud that our new administration tackled that difficult task immediately, gaining legislative approval of Senate Bill 1. This new law brings common sense reform to our system and restores the balance between employee and employer. First of all, the new law strengthens the threshold for what qualifies as a workplace injury. The workplace must be “the prevailing factor” in the accident, not just a “substantial factor” as the law specified previously. People traveling to and from work in a company owned or subsidized car will no longer be eligible to receive compensation. Complaints of pain will have to be objectively verified by a doctor before they are admissible in court.

Another major reform in the new law makes the administrative law judges who have been awarding these large, liberal settlements more accountable for their actions. Previously, they served life terms and answered to no one. Under the new law, these judges receive performance audits every two years and come up for a vote to be retained every 12 years. Any judge who receives at least two no confidence votes can be removed. In addition, the number of judges will be increased from 30 to 40.

Our new law also focuses on keeping attorney involvement to a minimum. Injured workers will receive the full settlement if they do not use an attorney and the amount attorneys receive in disputed settlements will be limited. This change will ensure the injured worker receives more money, resolve claims faster and reduce the cost of conducting business in Missouri.

Fraud is another factor that has increased the cost of the previous system, so reform was necessary to crack down on abuses. According to the new law, workers can be fined up to $10,000 for lying during an investigation of fraud or noncompliance with the law. If an employee is injured at work while under the influence of drugs or alcohol, benefits are reduced by 50 percent instead of the 15 percent specified in the previous law. Employees could also see their benefits cut 25-50 percent if they fail to wear safety equipment provided by the employer at the time of their injury.

All of these reforms will go into effect Aug. 28 and they will be welcome changes. For far too long, Missouri has been at a competitive disadvantage with other states in trying to attract employers and encourage businesses to grow. We certainly want to protect Missouri workers and see that they get the best care possible when accidents happen. Our new reforms preserve the priority of worker safety but also bring common sense and balance to a workers’ compensation system that was out of kilter and costing Missouri jobs.