Governor Schwarzenegger vetoes workers' comp bill

By CMTA Staff

Capitol Update, Sept. 22, 2006 Share this on FacebookTweet thisEmail this to a friend

Governor Arnold Schwarzenegger acted quickly to veto legislation that was introduced and passed during the last week of the legislative session.  SB 815 (Don Perata, D-Oakland) would have rolled back the 2004 workers’ compensation reforms implemented by Schwarzenegger immediately following the historic recall election.  Specifically, the bill would have erased savings from reductions in permanent disability (PD) benefits by doubling the amount of PD payable to all injured workers in California. 

The legislation caused the immediate formation of a massive coalition of employer organizations and individual companies to ensure that the legislation would be vetoed.  Fifty-four companies and associations signed on to the same opposition letter within one week, sending a clear message to both the legislature and Governor’s office that this would not be tolerated by employers.  Since the passage of SB 899 (Chapter 34, Statutes of 2004, Charles Poochigian, R-Fresno), employer’s premiums have dropped by nearly 50 percent.  Much of this reduction in cost has been the result of decreased PD benefits, which were artificially inflated by litigation and bought-and-paid-for medical reports.  SB 815 would have returned employers to the days of increased ratings and higher costs.

The Workers’ Compensation Insurance Rating Bureau (WCIRB), an independent organization that makes recommendations to the Insurance Commissions on premiums, predicted that SB 815 would cause an increase in cost of nearly 17 percent.  This analysis, however, only counted the actual benefit increase.  What was not considered is how higher benefits provide an incentive for litigation in the workers’ compensation system.  Increased litigation would bring higher legal costs for employers, higher medical costs, and higher administrative costs. 

Governor Schwarzenegger’s veto of SB 815 does not mean that the issue of a permanent disability increase is over.  The legislation was the result of a steady public relations campaign by trial attorneys and labor unions.  Governor Schwarzenegger has committed to review a benefit decrease through the Division of Workers’ Compensation (DWC) by the end of this year.  If the DWC determines that the reduction is not warranted, an increase in benefits could be implemented through regulations.  CMTA and others will continue to monitor the situation and ensure that any action taken is based on sound information and not political pressure.


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