Senate Bill (SB) 863 includes a program to provide supplemental payments to injured workers for whose permanent disability benefits are “disproportionately low” in comparison to their earnings loss. This program is to be funded by a $120 million per year surcharge. However, the language in the statute does not expressly define what is “disproportionately low.” The bill provided the Director of the Department of Industrial Relations (DIR) with wide leeway in the design and implementation of the program. In addition, the bill required the Director in consultation with the California Commission on Health and Safety and Workers’ Compensation (CHSWC) to determine eligibility and the amount of payments to be made based on a study.

CHSWC has released on its website for public comment and feedback the Working Paper, “Identifying Permanently Disabled Workers with Disproportionate Earnings Losses for Supplemental Payments. The paper was repared by RAND, and conducted by the Office of the Director, Department of Industrial Relations in consultation with CHSWC. The Working Paper presents one definition of how this program could be defined and implemented. The Director’s office will be using RAND’s findings in the development of the return-to-work program. The tentative working title of the program is the Special Earning Loss Supplement (SELS).

One of the topics of the RAND study included the issue of the period over which to observe the post injury loss experience of injured workers. In this regard, the study claims “a person’s actual losses can only be measured after they have been realized. That is, we can only compare pre-injury and post-injury earnings after an individual has actually accumulated their post-injury earnings.” ….”This implies that eligibility criteria based on actual earnings needs to focus on the earnings in the post-injury period for a sufficient period of time after the date of injury to allow for the effects of the injury to be realized. Past RAND work suggests it takes 3-5 years after the date of injury for earnings losses to stabilize (Reville et al. 2005). Given this time frame, this suggests that an eligibility determination based on actual earnings losses would likely need to focus on earnings that occur several years after the date of injury (or the date at which the injury is determined to have become permanent). An obvious consequence of this requirement is that if eligibility can only be determined several years after an injury, then compensation can only be paid out several years after an injury.”

The California Applicant Attorneys Association has voiced its objection to such a delay in making the SELS payment. In addition to other issues raised by the CAAA objection, the letter states “we strongly object to the suggestion in the RAND Paper that a worker’s eligibility for this program can be determined only several years after the injury. That suggestion essentially dismisses the findings of this study. As noted above, this study found that virtually all workers who do not return to their at-injury employer – regardless of their assigned disability rating – experience an almost total loss of earnings. When it is already known that certain workers will experience a total loss of earnings, requiring those workers to wait several years to prove that earnings loss would be unconscionable.”

The SELS benefit will not be administered or paid by California employers. Thus, employers theoretically would have no particular interest in this controversy.