A Broken System

Workers' compensation “reform,” in the form of SB 899, became law in California in 2004. After the bill was enacted, the Division of Workers’ Compensation (DWC) adopted regulations that drastically cut benefits paid to workers permanently injured on the job. In 2006, the Department of Industrial Relations (DIR) commissioned a comprehensive study of these workers’ compensation reforms by the Commission on Health and Safety and Workers’ Compensation (CHSWC).

That report showed that the 2004 reforms reduced permanent disability ratings – and therefore, permanent disability benefit payments made to injured workers – by 55%. As a result, this reform drastically reduced the amount of money earned by attorneys for injured workers (applicants’ attorneys), because applicants’ attorneys earn between 9% and 15% of the permanent disability benefit amount as payment for their services.

This reduction in earnings pushed large numbers of applicants’ attorneys out of the practice of workers’ compensation law. In its 2006 report, CHSWC recommended that the new permanent disability rating schedule, which cut permanent disability benefit payments by more than half, be amended, but the DWC failed to come up with an administrative fix.

The dearth of applicants’ attorneys in California impacts low-wage workers disproportionately. Because benefits are based on an injured worker's permanent disability rating and wages, low-wage workers’ claims are the least profitable and, from a financial stand-point, the most difficult for applicants’ attorneys to take. Since 2004, at least four attempts have been made at legislative reform of California’s permanent disability ratings, including SB 1717 in 2008 and SB 773 (PDF) in 2009. None has been successful.

Without representation, low-wage workers have been left to sift through an extraordinarily complicated administrative process in order to receive basic medical and financial benefits. The process of obtaining benefits is made even more difficult for low-wage workers employed by illegally uninsured employers. Thousands of low-wage workers are employed by companies that violate the law by failing to carry workers compensation insurance. When these workers are injured, they must turn to the Uninsured Employers Benefits Trust Fund (UEBTF). As is the case with other workers' compensation claims, it is rare that these workers can secure an attorney. Without an attorney, injured workers often have difficulty ascertaining the legal name and location of their employer to establish their claims.