Keefe, Campbell & Associates, LLC

Editor’s comment: As we advised last week, wage loss differential claims have skyrocketed since the 2005 Amendments to the WC Act. Claims for wage loss are now based on simple knee and shoulder surgeries—we had one knee claim involving simple surgery where claimant will not settle for less than $300K. We are aware of one truck terminal where every claimant with any medical problem wants wage loss benefits. We consider this new trend to be an Illinois “employer-buster” due to the six- and seven-figure exposures present. Rates and WC payouts are certain to go up as the economy continues to go down.

We have a reader give us a brilliant answer to our query about wage loss differential benefits for Illinois workers in last week’s KC&A Update. We are certain this benefit creates “legalized fraud” for a variety of reasons we outline below. We are also certain there are literally hundreds of questionable wage loss claims coming at Illinois employers and something is going to have to be done to stem the tide. Sadly, we are pretty confident it may not come from the current state administration.

Wage loss differential benefits are supposed to be reserved for severely injured workers who can no longer work in the same trade or occupation and suffer significant wage loss due to the permanent job change. This goal is a valid and bona fide concern for anyone who cares about someone who suffers such a loss—it is unfair for the injured worker to lose their status in life along with the possibility of losing their home, car or the ability to educate their children due to a serious and life-changing work injury. Similarly, it is unfair for an employer to have to pay wage loss differential benefits whose income rises to a level above their pre-injury status.

Please remember the above description is what is “supposed” to occur. For those of us in the trenches of Illinois workers’ compensation practice, that model is far from what actually occurs. We are seeing wage loss differential cases arise not from complex and serious injuries but from simple knee and shoulder surgeries. We recently saw a wage loss claim being made and later settled over our objection for someone who had an injury to the fifth finger of their hand—the work claimed the injury made it harder to grip and lift, therefore he had permanent lifting restrictions, therefore he could no longer do the job!! We truly felt the client panicked and should have let that claim play itself out but they are grown-ups, it is their money and risk so we don’t question.

The reason we make the bold assertion wage loss differential benefits creates legalized fraud is what we call “bad job right away.” This occurs when a construction worker, trucker, nurse or other well-paid worker suffers a moderate injury and very quickly moves into a much lower paying or minimum wage job. Right after they have such work, their attorney fires into the Commission and starts demanding a rapid hearing. In response, the insurance carrier/TPA tries to get a vocational counselor working to get the person a better paying position. The problem with vocational counseling at that point is the person already has a full-time position and it is much harder to get them better paying work when they are busy during the work day and have a minimum wage job on their current resume. Most employers start asking the right questions and understand there is a wage loss differential claim being made and want to avoid a trouble-maker. Some times the job candidate will make certain the job interviewer is aware of their claim of disability and set themselves up as a problem candidate to avoid the “good” job and reinforce their wage loss differential claim.

Why would someone want to stay in a lower paying job? Well, the rewards are great. What someone noticed a long time ago is insurance carriers/TPAs don’t like to manage the claims as the statute contemplates. There is an expense to paying for years of weekly wage loss benefits. So the carriers/TPAs try to “lump out” the benefits.

Here is where things start to go south. When six-figure lump sum settlements started to land, what claimants and lawyers began to focus on was not the need to stay at the same level of income, as the statute is designed. Suddenly, wage loss differential claims become a giant and sad-for-business “game” of trying to get a large lump sum settlement that is tax-free to claimant. Once the large lump sum check is cashed, in the vast majority of claims, the worker later returns to the same job at the same rate of pay. As we previously reported, there is a major Illinois claimant firm whose website brags they got not one but two “career-ending” settlements for one claimant. Please understand there is no proscription in Illinois law for a claimant to seek five or even ten “career-ending” wage differential lump sum settlements—this system doesn’t have a method to police such abuses.

So the easy answer is don’t do lump sum settlements of wage loss claims, right? Well, there is a major road-block to paying them out over the injured worker’s lifetime and hoping the injured worker makes more money in the future. In Cassens Transport v. Industrial Commission, the Appellate Court was faced with a claim that a worker receiving a substantial weekly wage differential benefit was asked to disclose additional new income so the benefit could be adjusted.

With deference to the Court, they ruled wage loss benefits could not be changed solely based upon new or increased income to claimant. The Court ruled there had to be a change in the “disability.” Please note most legal scholars consider this a political ruling—there is nothing in the statute that sets out such a requirement. Wage loss is set by considering both disability and wage levels; why would modification of the benefit look only to disability?

This legal concept sets up this possible scenario:

1. Claimant makes $1,500 per week or $78,000 per year driving trucks.
2. Claimant strains his back and has surgery with a permanent 50-lb lifting restriction—this restriction precludes truck driving.
3. Claimant gets a new, lower-paid job and is adjudicated to have a weekly wage loss differential of $500 per week.
4. On top of his new pay, claimant is paid $500 per week in weekly wage loss benefits by his former employer for two years.
5. His employer pays for training and claimant then finds a much better paying job as a certified computer technician making $2,500 per week or $130,000 per year.
6. Claimant’s old employer goes to the IWCC, points out the great new job they helped claimant to get and seeks relief from having to keep paying $500 per week.
7. Under the Cassens Transport ruling, claimant is entitled to the annual salary of $130K and they keep getting the $500 per week—under current medical science, we can safely assume he still has the sequalae of back surgery and a 50-pound lifting restriction.

Please note this scenario is one of the reasons many observers feel the defense side of the 2005 Amendments to the Workers’ Compensation Act were misled when they were told the period of time to modify wage loss cases was “extended” from thirty to sixty months. Basically, this legislative change made it possible to not change wage loss differential claims for up to sixty months.

So what do we do? Well, the sharp reader we mentioned above gave us a great model. First, legislatively throw out the Cassens Transport ruling and modify wage loss based on current wages and disability. She felt wage loss differential benefits could and should be modified every twelve months for the first five years. At the end of each year, the employee has to submit their tax returns and the employer and claimant could agree to seasonally modify the weekly benefit due. If they can’t agree, either side could go the IWCC and ask the Arbitrator to enter an appropriate order.

Thereafter, make it incumbent on the employee to report any wage loss changes at five-year intervals.

Further, we truly feel there should be some limit on eligibility for wage loss differential benefits—for example, you can make $150,000, $200,000 or $500,000 per year and still be entitled to wage loss benefits. If you think we are kidding, there is a decision for one of the Chicago Bears who still got wage loss benefits despite making $400K per year after leaving the team. We consider that to be completely unnecessary; at a certain point, you shouldn’t need assistance to be even wealthier than you already are.

Finally, wage loss benefits should end whenever wages end. At present, wage loss differential is paid or calculated for the entire life of claimant. Very few workers work to the end of their lives. If the employee retires or withdraws from the workforce, the employer should be able to stop supplementing “wages” the employee isn’t seeking.

As usual, our goal isn’t to end bona fide wage loss differential benefits. Our goal is to keep them as a benefit in an appropriate situation. Please reply with your thoughts and comments.