Michigan: The 94% Solution

By Joel Alpert and Richard Warsh [fn1]

Michigan’s Workers’ Disability Compensation system was created to speed compensation to injured workers. The process and procedures in workers’ compensation proceedings are supposed to be as summary as reasonably possible. MCL 418.853. The system was a compromise between workers and employers, whereby the workers gave up the right to sue an employer for anything short of intentional harm and, in return, were supposed to receive guaranteed medical care and lost wages. Wells v Firestone Tire & Rubber Co, 421 Mich 641, 651-651; 364 NW2d 670 (1984). Unfortunately, the Michigan Workers’ Disability Compensation system no longer provides workers with the benefit of this bargain.

In 2002, the Supreme Court created a new disability standard for workers’ compensation claims (this changed 90 years of clear precedent and practice). Sington v DaimlerChrysler Corp, 467 Mich 144; 648 NW2d 624 (2002). The court required injured workers to prove they are unable to perform any of the jobs that pay their “maximum wage” given the specific employee’s qualifications and training. The term “maximum wage” did not appear in the Workers’ Disability Compensation Act of 1969 at that time. Confusion ensued when literally hundreds of cases on appeal were remanded for a new hearing to consider this new interpretation. In 2008, the Supreme Court increased this new burden of proof by allowing discovery, instituting the need for expert vocational testimony, and consequently, increasing the cost and complexity of litigation. Stokes v Chrysler, LLC, 481 Mich 266; 750 NW2d 129 (2008). Since 2002 many cases have been remanded two, three, or more times without resolution, causing additional chaos. In December 2011, the Michigan Legislature passed HB 5002 (2011 PA 266) to cement into the statute these new Supreme Court mandated requirements.

The Michigan Compensation Appellate Commission (MCAC) has continued to add burdens to the proofs injured workers must submit (see Crockett v DaimlerChrysler Corp., 2013 Mich ACO 76; Hayes v General Motors LLC., 2013 Mich ACO 44, and others). Furthermore, as a result of the December 2011 changes to the Act, our government and private employers are allowed to make medical decisions for their injured employees for the first 28 days after an injury.

The results of all of these changes have been significant and have benefited employers at the expense of employees. From January 1, 2013 through October 31, 2013, the Magistrates at the Workers’ Compensation Agency tried a total of 87 cases. 54 of those trials (62%) resulted in a complete denial of benefits. Because of the Supreme Court decisions and legislative changes, only 15 (17%) of cases tried resulted in an award of continuing benefits to injured workers. The remaining 18 (21%) resulted in the payment of benefits for a finite period of time. See: http://mich.gov/documents/wca/wca_bom_2013_stats_412055_7.pdf

Far worse are the numbers from MCAC. From January 1, 2013 through July 17, 2013, the MCAC reversed or remanded 91 cases and only 6 injured workers were allowed to receive an award (94% are thus considered a poor result for plaintiff). In 2012, the MCAC reversed or remanded 95%. (Statistics compiled by attorney John Braden.) In 2014, 5 out of 8 Appellate Commissioners voted against injured workers 100% of the time. Of the three remaining Appellate Commissioners, the most favorable results came from one who voted against injured workers 80% of the time.

Even if an injured worker prevails, their weekly rate of compensation can be drastically reduced by theoretical wages, a legal fiction created by the Michigan Supreme Court and subsequently adopted by Michigan’s legislature by HB 5002. Under the theory, which reverses 90 years of precedent and practice (Sington and Stokes, supra), an employer is allowed to reduce weekly disability benefits by the amount of wages an injured worker could, theoretically, earn taking into consideration the post-injury wage earning capacity. Former Justice Clifford Taylor testified before the legislative committee responsible for advancing HB 5002, that this “phantom wage deduction” would never occur, and that under these new requirements, injured workers would be entitled to their full wage loss benefits. The reality that we have all witnessed does not match Justice Taylor’s testimony.

Consider people like Marko Allen, a 27-year-old husband and father of three who suffered a serious back injury at work. Allen v Belle Tire Distributors, Inc, 2013 Mich ACO 8. At the time of the accident, he was working as a laborer for a tire store, installing large semi-tractor, trailer, truck, and automobile tires. He made an average weekly wage of $431.19. His injury required surgery and created a permanent abnormal condition in his spine which prevented him from being able to engage in heavy physical labor. As a result of his work injury, he is now medically limited to lifting only up to 10 pounds and he has other physical limitations. His award of $318.42 per week was reduced to $22.90 per week on the theory that he is able to perform sedentary, unskilled work that would pay $8 per hour. This presumes that, in absence of proof to the contrary, an employer would not only hire a full-time worker with permanent medical and physical limitations, but would actually pay him or her $320 per week. As a result, an injured worker must now prove that there are no jobs reasonably available to him/her that meet their limitations from the work related injury, a difficult task, at best. Vrooman v Ford Motor Co , 2012 ACO #90, lv den 495 Mich 936; 843 NW2d 209 (2014).

It is also worth noting that it isn’t just people like Marko Allen and their families who are harmed when the workers’ compensation system fails to provide appropriate benefits to the people who work for them. The rest of us end up footing the bill for costs that the employers are supposed to pay – in Mr. Allen’s case, Medicaid paid about $30,000 for treatment of his work injury. Mr. Allen continued to receive taxpayer funded medical care for many months after the award of reduced benefits became final. Ultimately, after several more years of litigation, the insurance carrier relented and complied with the order of the agency, repaid Medicaid, funded a Medicare set aside account, and settled with Mr. Allen. This is typical of what is now happening in the workers’ compensation community across the board as we continue to see case after case with these “phantom wage” deductions and transfer of the costs for work injury related healthcare to the taxpayers.

Next, consider the case of Howard Kessler, a truck driver, who had at least two inpatient surgeries and a pulmonary embolism related to his work injury. The majority opinion of the Workers’ Compensation Appellate Commission stated, in part: “The record information raises the prospect that plaintiff may possess skills transferable to a sedentary situation which would permit occupational activity outside the cab of a truck, perhaps even while in [the] hospital or long term care.” Kessler v Dakota Leasing, Inc, 2011 Mich ACO 32, slip opinion, p. 16 (emphasis supplied). This was a hotly contested case with many issues regarding the nature and extent of the proofs. But the mere consideration of requiring injured workers to look for work while recovering from surgery while still in the hospital tells us much about how broken our workers’ compensation system is today.

This impact on the injured workers must also be considered in the context of the cost of workers' compensation for Michigan business. The Workers Compensation Research Institute (WCRI), an organization primarily funded by businesses, with only a handful of labor organizations as members, issued a study of workers' compensation costs for 2009. The total costs for a workers' compensation claim in Michigan were among the lowest of the states studied (Florida, Texas, Massachusetts, North Carolina, Minnesota, Virginia, Illinois, California, Iowa, New Jersey, Pennsylvania, Wisconsin, Arkansas, Indiana and Louisiana) before Michigan's "reform" legislation in 2011. The Compensation Advisory Organization of Michigan, a member of WCRI, estimated that the 2011 legislative changes would decrease the overall loss costs in the range of an additional 1-3 percent. The practical effect of this unfortunate sequence of events: the taxpayers of the State of Michigan are stuck subsidizing business and industry through increased Medicaid costs, increased health insurance premiums due to uncompensated emergency room visits, and a maimed work force unable to obtain compensation to support their families during the period of their disability. This has turned out to be bad for workers, bad for employers, and really bad for our State in general.

Our political leaders need to be aware that the Workers’ Disability Compensation system was designed to make sure that seriously injured workers and their families would be provided for without having to sue their employer. Now, in reality, it doesn’t work that way. The system is in need of a fix. [fn2]

Footnotes:

1. Joel Alpert and Richard Warsh are both Past Chairpersons of the State Bar of Michigan Workers’ Compensation Section, members of the College of Workers’ Compensation Lawyers, members of the Executive Board of the Michigan Association for Justice (MAJ), and Past Chairpersons of the MAJ Workers’ Compensation Committee. They have each represented injured workers for more than 36 years. Richard Warsh also is a Past-President of the Michigan Association for Justice.

2. Note that the authors acknowledge this article is a summary of a complex and expansive problem. There is insufficient time and space to specifically address every aspect of the problem. Criticism of the statistics, facts, and opinions expressed are welcome and will be addressed upon request.

© Copyright 2015 Joel Alpert and Richard Warsh. All rights reserved. Reprinted with permission.