What Maine Employers Need to Know About 2019 Workers' Compensation “Reforms”
It was inevitable that some of the 1993 reforms that stabilized Maine’s workers’ compensation market and brought Maine closer to the national average in terms of cost and benefits would be peeled back when the 129th Legislature convened with Democrats firmly in control of both houses and the governor’s mansion. However, once the dust settled, L.D. 756 (“An Act to Improve the Maine Workers’ Compensation Act of 1992”), will certainly add some cost to the system, but it won’t come close to bringing us back to 1992. In other words, it could have been far worse for Maine employers.
The new law, which will mostly affect injuries after January 1, 2020, will add some cost to workers’ compensation and will slightly offset some of the 60% in savings that employees and employers have earned since 1993. Whether it will worsen Maine’s standing as the 19th most expensive workers’ compensation system in the country remains to be seen.
Following are highlights from the bill and observations about how it may affect Maine employers starting next year.
Durational limits for partial benefits. The most important change involves durational limits for cases involving partial incapacity under section 213 (total incapacity cases still have no durational limit). Since 1993, section 213 cases have been generally capped at ten years, subject to an awkward exception whereby the most disabled 25% of employees with permanent injury would be entitled to lifetime benefits. For injuries between 1993 and 2013, benefit eligibility was extended if whole body permanent impairment exceeded 11.8% or 12% or 13.2%, or some other number that the Workers’ Compensation Board fixed. This law proved contentious to interpret, difficult to apply, and impossible to explain to employees.
In 2013, Maine’s Legislature added still more byzantine twists and turns to the rule. Although there was talk of fixing the durational cap at 12 years with no exceptions, labor interests remained concerned about employees with more serious injuries. In the end, we were left with a process by which benefits would be capped at ten years unless (we are not making this up) PI exceeded 18% and the employee was working at year ten and earning 65% or less of the pre-injury average weekly wage based on 26 weeks of documented earnings provided such earnings were consistent with the employee’s actual earning capacity as determined by a Board appointed medical examiner and provided the employee had earnings for at least 12 months out of the 24 months immediately preceding the ten-year marker.
Few people could claim to truly understand how this provision would work in practice, and it is safe to say that virtually no injured employee could understand it, let alone plan his or her finances around it.
The new law fixes the durational cap at 12 years, with no exceptions other than the existing extreme financial hardship exception. While allowing 12 years of benefits to everyone under section 213 will likely add some cost to the system, since every claim will be eligible for more benefits instead of just a few being eligible for significantly more benefits, the Legislature and stakeholders can’t be faulted for making the system easier to understand and apply.
Other cost drivers – increase in max and fringe benefit threshold and return of COLAs. In 1993, the maximum compensation rate was fixed at 90% of the state average weekly wage (SAWW). In 2013, it was increased to 100% of the SAWW, and now it rises to 125% of the SAWW. This is reminiscent of pre-1993 days when, at various times, the max was fixed at 200% or 166 2/3%, among other figures.
Also, the point at which fringe benefits must be included in the weekly benefit amount has been increased from 100% to 125% of the SAWW, tracking the new max figure. Processing partial compensation payments will be no more difficult than it has always been, but now it will be a little more costly to employers and a little more favorable to injured workers.
Finally, cost of living adjustments are now available for total incapacity cases under section 212, in an amount reflecting the increase in the SAWW or 5%, whichever is less. This is a direct albeit partial rollback to pre-1993 law.
New 60-day notice period. Before 1993, the law required employees to notify their employer within 30 days of injury, subject to some exceptions. In 1993, the period was extended to 90 days, and then reduced to 30 days in 2013. It is now fixed at 60 days, which is somewhat longer than the notice period in most states. This lack of consistency is unfortunate, but not likely to add cost to the system.
PTO offsets. Effective September 17, 2019, the law clarifies a point that has, to date, been unclear: an employer can take an offset for the after-tax amount of paid time off (PTO) unless the employer required that PTO be used or if the PTO was paid upon separation from employment. As with the new 12-year cap, this provision brings a bit more clarity and ease of operation to the system.
14-day claims. Employers, for years, have been taught that if you fail to pay or deny a claim within 14 days of the claim bad things will happen. For years, this meant having to pay the benefit claimed even if the claim was for benefits starting years before. More recently, it meant having to pay benefits starting from the date of the claim. Now, there is an exception to the penalty rule if failure was due to unavoidable circumstances, and the penalty is limited to $50 per day for late payments, capped at $1,500.
In addition, an employer now has a 45-day window to pay a claim and then deny it based on an investigation. This will encourage employers to pay promptly without fear of having to file a 21-day suspension based on a full investigation, where the suspension can be easily reversed by way of Provisional Order issued by a Board Administrative Law Judge. This law makes sense and hearkens back to pre-1993 law that afforded a prejudice-free period to pay pending investigation. It should encourage more prompt payments that are truly without prejudice.
Governor Mills has signaled that she won’t sign any more workers’ compensation bills unless they are consensus bills, so we hope that the next few years will be quiet on the workers’ compensation front as we see how these new rules affect premiums and claims.
For additional information on this new law, or for any workers’ compensation issue, please contact Employment Practice Group partner Jim Erwin.