Major Proposed Reform to the Alabama Workers’ Compensation Act

Matt Williams, Partner, Birmingham

Holiday greetings! Below is a report from the Executive Director of a Task force formed to make recommendations regarding sweeping changes to the Workers’ Compensation Act:

Members of the Task Force were evenly divided between defense lawyers and plaintiffs’ lawyers. In addition, there were lawyers who were counsel for group funds, insurance companies, self-insured employers, hospitals and doctors on the Task Force.

Many of you recall that a Circuit Judge in Birmingham had previously declared the entire Alabama Workers Compensation Act unconstitutional for multiple reasons, but primarily because of the long-time $220 cap on permanent partial disability payments in Alabama.  In all likelihood, this issue would ultimately be decided by multiple state circuit court judges and would have made its path to the Alabama Court of Civil Appeals and the Alabama Supreme Court.

At the very beginning of the discussions by the Task Force there was considerable discussion about the $220 cap. All of the Task Force members had to have an understanding that if only the $220 cap was raised, Alabama would see its total workers’ compensation costs rise significantly. Insurance premiums would have likely increased considerably as well.

           Thus, the Task Force had to find some ways to lower other workers’ compensation costs to offset any increase in the $220 cap. An “Issues Sub-Committee,” led by long time defense lawyer Clay Clark, set about to examine all the cost-elevators in Alabama and compared our laws with all the other laws in states surrounding Alabama. One of the sub-committee members was former ASIA President Connie Cox, along with long-time Montgomery defense lawyer Pete Cobb. The committee also had a cross-section of lawyers representing all the various entities that are served by the Alabama Workers’ Compensation Act.

Actuary numbers were run and the Issues Committee and the Task Force were satisfied that in the long run, the overall costs and benefits of the reform package will produce a relatively net zero in costs to the employers of this state. The Task Force could no longer ignore the fact that the $220 cap had simply not kept up with the significant increase in wages of Alabama employees.

In the end, the Committee recommended and the entire Task Force supported a broad workers’ compensation reform package. Many will focus solely on the increase in the Permanent Partial Disability, however, let’s take a look at the positives and the negatives from the employer’s perspective.

  1. Increase of the PPD from $220 per week to a formula number that would be adjusted annually and would represent 50% of the state’s average weekly wage. Currently that amount would be $432.58. When the $220 cap was placed into the Act more than 30 years ago, it was 66 2/3 percent of the state’s average weekly wage. From now on it will be 50% of the state’s average weekly wage if this reform package is passed by the Alabama Legislature. It should also be noted that this reform may lead to a reduction in permanent total disability awards. Often, defense lawyers felt that because of the cap, many judges were pushed to award permanent total benefits because of the very low $220 cap.
  2. One of the reforms that will offset this increase is the length of permanent total disability payout. Currently that payout is lifetime. Under the proposed reform, payout for permanent total disability benefits would be the later of age 70, social security retirement age plus two years, or 500 weeks. 
  3. Lifetime medical benefits would be over in workers’ compensation in Alabama. The committee recognized that this never-ending tail produced significant problems for the actuary departments of insurers, self-insurers and group funds. Life expectancy continued to increase and files simply could never be closed until the death of the injured employee. Under reform measures recommended by the Task Force, medical benefits are payable for a maximum of 300 weeks UNLESS there is a finding (which must be by clear and convincing proof) that the medical treatment is likely to be needed beyond 300 weeks.
  4. For any claimant that doesn’t receive any medical treatment for any 3-year period, there is a presumption that if treatment is sought thereafter it is unrelated to the workers’ compensation injury.
  5. For any claimant that doesn’t receive any medical treatment for a 5-year period there is a conclusive presumption that any sought medical treatment is unrelated to the workers’ compensation injury.
  6. Pharmaceutical Charges: The proposed reform bill overturns a Court of Civil Appeals decision and gives the employer the right to designate the pharmacy that will fill physician prescriptions related to workers’ compensation injuries.
  7. The bill forbids physicians from being both the prescriber of medication and the dispenser of medication.
  8. Limitations were created in the reform measures that would limit opioid prescriptions. 
  9. Settlements with claimants represented by attorneys are presumed to be in the best interest of the employee. Many of our members will recall situations where trial judges refused to approve a settlement that had been agreed to by the employee and his/her attorney.
  10. Trial judges must rule on workers’ compensation hearings within 90 days of the hearing. Again, our members were often faced with long lag times (in a few jurisdictions) between the date of the hearing and the date of the ruling by the court.
  11. Plaintiffs’ attorneys’ fees will increase from a maximum of 15% (which is what they have been since the inception of the workers’ compensation act until today) to a maximum of 20%. However, this fee is at no cost to the employers of the state as it will be deducted from the employee’s portion of a workers’ compensation award.

There are other minor revisions recommended by the Task Force, but these provisions reflect the major changes that will be seen should the reform recommendations be adopted by the legislature.

These are significant changes that the Task Force members believe will ultimately be a “wash” insofar as costs to the employer are concerned. Yet it will remove Alabama from the list of “most onerous” states because of the outdated $220 cap. Task Force members believe that this reform is much better undertaken now than later when the appellate courts in Alabama might be more likely to declare Alabama’s Workers’ Compensation Act unconstitutional.