Editor’s Comments: Plaintiff Construction Company is in a fight for its life under this new and anti-business law. The company name is “Jack’s Roofing” and they were investigated by the Illinois Department of Labor (the Department) pursuant to the two-year-old Illinois Employee Classification Act. Despite production by Plaintiff of subcontractor agreements and proof of subcontractor liability insurance, the Department of Labor conducted an informal “telephone interview” and concluded Plaintiff failed to properly classify 10 subcontractors in violation of the Act. Further, Plaintiffs were notified they may be assessed fines up to $1.6 million!

Trust us; fines at that level are a death knell for most small to medium construction companies. If you look up tiny “Jack’s Roofing” they are based in Royalton, IL and have been a family run business since 1977. They have been listed with the Better Business Bureau since October 2002. You may also note the population of Royalton, IL was 1,130 during the 2000 census.

Rhonda and Jack Bartlow, doing business as Jack’s Roofing, may have set the wheels in motion for the Illinois Employee Classification Act to be declared unconstitutional by the Illinois courts. Plaintiff filed a complaint in the Circuit Court of Franklin County, Illinois, for declaratory judgment and for injunctive relief against the Dep’t of Labor. Plaintiffs alleged in their complaint the Department was attempting to enforce the Act despite the fact the Act violates the Illinois Constitution and the United States Constitution. The specific focus of the alleged constitutional violations was interference with their procedural due process rights. The Circuit Court denied Plaintiffs’ request for a temporary restraining order or TRO. They rapidly filed a timely notice of an interlocutory appeal to allow consideration by the reviewing court.

Please note of the five appellate districts in this state, the Fifth Appellate District in Illinois is, in the view of most business observers, by far the most liberal and pro-labor district. We feel they might be coming around to possibly protect small businesses in little towns who are struggling in this awful economy. In an opinion delivered by Justice Stewart, the Appellate Court, 5th District ruled the Circuit Court abused its discretion in denying Plaintiff’s TRO request. The Appellate Court went on to find Plaintiff’s raised a “fair question” concerning whether the Act violates procedural due process, because the Act “does not appear to provide the accused with a meaningful opportunity to be heard.”

The Appellate Court majority was openly critical of the cursory investigation and evidence of a mere telephone conference held by the Department before a hefty seven-figure fine was assessed. The Court noted the need for a more formal administrative hearing process, concluding “[w]e believe that the plaintiffs have raised a fair question concerning whether due process requires the Department to provide an administrative hearing when there exists a dispute concerning material facts before it can assess fines and penalties or seek other sanctions or remedies against Jack’s Roofing. The Supreme Court has stated that there is “no doubt” that administrative proceedings are governed by the fundamental principles and requirements of due process. Balmoral Racing Club, Inc. v. Illinois Racing Board, 151 Ill.2d 367, 405, 177 Ill.Dec. 419, 603 N.E.2d 489 (1992)”.

We understand the purpose behind the Employee Classification Act is to determine whether an individual performing services for a construction contractor is truly an employee versus an independent contractor. It appears from this case the Illinois Department of Labor is aggressively pursuing massive and business-crushing fines and penalties, even against relatively small family-operated businesses. As we indicate above, we feel the Department of Labor’s goal is to rapidly bring home trophies to warn others not to go down that path. Maybe the courts are noting they can’t do so after a quick review and a telephone call.

What is alarming is the fact Plaintiffs in this case produced substantial documented proof of subcontractor bids, written contracts with subs, and also demonstrated there were certificates of insurance by the subcontractors! Despite all of this, the Department chose to pursue the claim and was poised to assess fines of over one million dollars on a family business. All of this was possible without a formal hearing and/or ruling by an objective ruling body! We applaud the Appellate Court for permitting Plaintiff their day in Court to properly defend against such a claim, which would surely put this small family company out of business. We will work to track progress of this case and the development of the body of law in this area.

At the federal level, please note this effort isn’t going to stop any time soon. Businesses that utilize independent contractors should be ready for increased federal scrutiny. As part of President Obama’s federal budget for the upcoming fiscal year, $25 million was requested by the U.S. Department of Labor (DOL) to enforce wage and hour laws and pursue employers who misclassify employees as independent contractors.

Another $12 million and 90 new investigators were requested by the Wage and Hour Division to expand its efforts to ensure compliance with the law. The “Misclassification Initiative” also supports new targeted efforts to recoup unpaid payroll taxes due to misclassification through state audits of problem industries supported by federal audits. These industries include construction, manufacturing, restaurants and home health care. Additionally, the initiative includes a $10.9 million pilot program that would reward states most successful or improved at detecting and prosecuting employers that fail to pay the appropriate taxes due to worker misclassification.

In addition to the U.S. DOL, the Internal Revenue Service will be scrutinizing independent contractor arrangements. As part of a National Research Project on employment taxes, the IRS is due to audit 6,000 randomly selected companies over the next three years. The audit will focus on, among other things, worker classification. Given the potential liability for penalties, taxes and interest, businesses must pay close attention to this issue. We are confident at the federal level, stricter adherence to due process protocols will occur. We feel employers across the U.S. should engage in proactive self-audits, reviewing, among other things, payroll records and IRS Form 1099s to identify those they have been paying as independent contractors and assess whether these individuals meet the requirements established by federal, state and local laws.

This article was researched and written by John P. Campbell, Jr. Please do not hesitate to reply or send inquiries to John at jcampbell@keefe-law.com or post them on our award-winning blog.

The chiropractor wanted to be paid $550 per hour, paid in advance, with a 2 hour minimum. At one point, Defendant’s attorney offered $300.00 per hour with no minimum payment or prepayment. This offer was refused and the matter brought before the assigned judge. Circuit Court Judge Kathleen Flanagan then set an hourly fee of $66.95 and held the chiropractor in contempt of court for refusing to appear and testify at the deposition. The chiropractor appealed.

On appeal, Defendant contended a chiropractor was not a physician under Supreme Court Rule 204(c) and therefore only a subpoena with a $20.00 witness fee and mileage need be paid to the chiropractor to compel his appearance at the discovery deposition.

In considering Judge Flanagan’s ruling, the Appellate Court first examined Supreme Court Rule 204(c) and did not find any Illinois case law defining the term “physician” as used in this rule. The reviewing court then used the definition of the word “physician” as found in Illinois case law dating back to 1917, as well as the current version of the Medical Practice Act of 1987 to find the term “physician” as used in Rule 204(c) is intended to encompass a treating chiropractor. Therefore under Rule 204(c), a chiropractor is entitled to “a reasonable fee” for time spent in a discovery deposition in a case which he or she is not a party and not just a $20.00 witness fee and mileage.

The Appellate Court ruled that although the trial court’s formula for determining the reasonable fee was not the only way to calculate a reasonable fee, they affirmed the trial court’s calculations of the chiropractor’s hourly fee at $66.95 per hour. The reviewing court also affirmed the trial court’s order stating Defendant was not required to pay a 2 hour minimum or prepay the fee. This portion of the ruling was based on the committee comments to Rule 204(c), which explain the fee should be paid only after the doctor has testified, and the fee should not exceed an amount which reasonably reimburses the doctor for the time actually spent testifying at the deposition. The Court felt the trial court’s order properly reflected the Supreme Court’s intended application of the rule and reasonably compensated the chiropractor for the time spent testifying.

The question then becomes, does this case affect either a chiropractor or a physician’s deposition in a workers’ compensation case? The answer is “sort of.”

Obviously, Supreme Court Rule 204(c) which is applicable to discovery depositions does not apply to workers’ compensation because there are no discovery depositions in the WC rules. However, the rationale behind this decision is well thought out and reasonable. In that regard, the reasoning of the Court may likely be applied to the similar dispute in a worker’s compensation case if the evidence deposition of a chiropractor is needed.

Additionally, one of the paragraphs of Section 16, provides in relevant part,

The Commission shall have the power to determine the reasonableness and fix the amount of any fee of compensation charged by any person, including attorneys, physicians, surgeons and hospitals, for any service performed in connection with this Act, or for which payment is to be made under this Act or rendered in securing any right under this Act.

While this paragraph is not as detailed or explicit as Supreme Court Rule 204(c) is, it has the same intent. This paragraph allows the Commission or assigned arbitrator to determine the reasonableness of a doctor’s or chiropractor’s deposition fee. Under the “reasonable standard” of this paragraph, it would also seem that this paragraph would allow an arbitrator to deny or allow payment of a minimum hourly requirement, as well as to deny or allow prepayment of the deposition fee.

This article was written by our most recent addition to our associates, John C. Wilson, J.D. Please do not hesitate to reply or direct thoughts and comments to John at jwilson@keefe-law.com.

Like secrecy in hiring, we hate the secret “agreed bill” process and it appears to be rearing its ugly head yet again. We will never forget the public relations fiasco that led to passage of the 2005 Amendments to the Workers’ Comp Act that might have sounded great but have delivered very little effective savings to Illinois business. We are now advised by several reliable sources; the Governor convened a meeting recently of some employers and organized labor to discuss the agreed bill process involving potential changes to workers compensation law. This meeting led to a discussion of the process in general and several bills may be cooking out there.

Several measures potentially helpful to Illinois employers have been introduced. We add our thoughts at the end of each description in bold.

Workers’ Compensation Alcohol/Drugs HB 5721 (Zalewski-D-Chicago) provides no compensation is payable if an injury was caused “primarily” by the intoxication of the injured worker, to include the influence of alcohol or certain drugs not prescribed by a physician or the combined influence of alcohol and drugs that affected the worker to the extent that the intoxication constituted a departure from employment. We point out if there are no mandatory guidelines the Commission has to follow in enforcement; this bill isn’t worth the paper it is written on. We hate the legal concept of requiring denial of benefits for injury while intoxicated to necessitate a showing of “departure from employment” and consider the whole concept unenforceable and nonsensical.

Workers’ Compensation Workplace Prevailing Cause HB 6159 (Reis-R-Willow Hill) defines injury as an injury that has arisen out of and in the course of employment; provides that an injury by accident is compensable only if the accident was the prevailing factor in causing both the resulting medical condition and disability. Again, we point out that if this bill isn’t coupled with a provision similar to Missouri’s which requires strict adherence to the legislative intent, this bill is similarly not worth the paper it is written on because everyone will simply swim around it, like an ice cube in a hot swimming pool.

Workers’ Compensation Collective Bargaining SB 3829 (Link-D-Lake Bluff) provides an employer or group of employers and the representative of its employees may agree to establish binding obligations and procedures relating to workers’ compensation; provides the agreement must be limited to, but need not include an alternative dispute resolution system to supplement, modify, or replace the procedural or dispute resolution provisions of the Act. We point out this sort of legislation indicates the Commission should be reformed or not; why create a binding arbitration system and another binding arbitration system? If an employer “opts out” of the current system, do they get to keep the money they are required by law to pay for a system they won’t use?

Workers’ Compensation Objective Medical Standards SB 3830 (Brady-R-Bloomington) provides permanent partial or total disability shall be certified by a physician and demonstrated by use of medically defined objective measurements, that subjective complaints shall not be considered unless supported by and clearly related to objective measurements, and a specified publication shall be applied in determining the level of disability; provides that temporary total disability payments shall not exceed 104 weeks. In our view, this legislative concept is borrowed from other states and would be a very solid, sober and sweeping change to Illinois workers’ compensation law. Therefore, in our view, organized labor will fight it like crazy. Please note this is being sponsored by the leading Republican candidate for Governor! We feel it may have a strong chance of enactment if the political winds change as many feel they may during this coming election year.

Workers’ Compensation Fraud SB 3832 (Brady) provides the Workers’ Compensation Commission may recall a decision or settlement when fraud has been determined to be committed related to a case; provides the Commission shall implement a rule to establish a process for recalling a decision or settlement that is subject to recall due to fraud; provides the fraud and insurance non-compliance unit of the Department of Insurance shall employ one or more attorneys as special prosecutors. Again, this is a sweeping change proposed by the leading Republican candidate for Governor.

Workers’ Compensation Coverage HB 6266 (Rose-R-Mahomet) provides a subcontractor under contract to a general contractor may elect to be covered under any policy of workers’ compensation insurance insuring the contractor upon written agreement of the contractor, by filing written notice of the election on a form prescribed by the Workers’ Compensation Commission. This is a simple and solid idea.

If we put you in charge, what would you change about Illinois work comp law? Please reply with your thoughts and comments.

What happened was:

Doctors/medical caregivers providing care to workers comp claimants had to deal with a medical fee schedule for the first time in our history. In exchange, they were to get quicker payment protocols and interest on unpaid bills. We are pretty sure doctors liked the old system more but have grudgingly adapted. We do feel the medical fee schedule has been something of a success and has not resulted in doctors refusing workers’ comp patients. We do consider the surgical “implant” issue to remain an embarrassment that has to be addressed.

Other than medical benefits under the fee schedule, all other workers’ comp benefits went up in numerous and subtle ways—we feel the medical fee savings were wildly overmatched by the increased rates and new TPD and PPD benefits.

Workers’ comp fraud was introduced by our former Governor-waiting-trial almost by mistake and has gone just about nowhere, as our states’ attorneys across the state ignored the pleas of business to take action when clear fraud was present. While we salute the folks at IDFPR for their hard work investigating fraud, we simply don’t see any real impact.

Many of the new changes thought to be beneficial to the businesses and government bodies of Illinois were unclear in how they were to be applied. The jury remains out on utilization review that has not caught on—at the last training session for Illinois arbitrators, it is our understanding UR was given a rousing “thumbs down.” We truly don’t feel this will change until the Commission itself changes, if the election in the fall goes red and not blue.

As we indicate above, in exchange for the medical fee schedule, Illinois labor got a huge increase in various rates, with disability schedule increases and minimum TTD/PPD calculations. We are certain increased benefits encouraged claims of astronomically higher exposure. We truly feel Illinois business now needs caps on skyrocketing reserves for wage loss differential claims, total and permanent disability and death claims that arose from these Amendments. For example, we were listed dead last in 40 states recently surveyed for U.S. workers’ comp costs and outcomes.

Along with the 2005 Amendments to the Act, we saw judicial rulings that we feel increase the overall cost and expense of workers’ comp in our state. We are asking all of our readers for their thoughts on reform—if we put you in charge of Illinois workers’ comp, what would you do different? Please reply with your thoughts and comments.

We are confident, medical costs are rising and are certain to continue to escalate. If you note our earlier articles about spinal fusion surgeries in this state now being billed at $75,000 to $300,000 for hospital costs only, you can readily see medical costs are clearly outstripping all other costs in the workers’ compensation arena. We have a number of pending claims where the main fight is claimant wanting full payment of 100% of the costs of such surgeries from their employers under the WC and not group side.

U.S. health care costs have grown from what was about the middle of the average of OECD countries (Organization for Economic Cooperation and Economic Development) to what is now double the average. The surprising thing here is during the last ten years, the increase in workers’ compensation medical costs is twice the rate of group health increases.

The National Council on Compensation Insurance or NCCI has demonstrated the rise in workers’ compensation medical costs is due to lack of utilization review in workers’ compensation systems, leading to over-utilization of health care services, especially those for nagging and chronic soft tissue claims. This problem is a crucial stage in Illinois that brought in UR but sometimes sporadically uses and enforces.  As we have told our readers, the “wise guys” who have a controlling say at the Illinois Commission don’t want it and feel it is bad for their business.

An observer named Atul Gawande, M.D. has published a must-read article in the June 1, 2009 issue of The New Yorker. He has demonstrated even more convincingly over-utilization of medical services, including testing, surgery and hospitalization, is the main cost driver of America’s health care system.

Dr. Gawande’s lengthy article, The Cost Conundrum, provides a clear position for why costs in the U.S. are becoming so wildly high, but outcomes remain mediocre. Dr. Gawande reduces the problem to its simplest terms. He outlines the American health care system has turned the medical profession into assembly-line work that focuses on lots of care at a spiraling cost. He states our physicians in primary care and specialties are economically incentivized to over-prescribe in all areas. He also clearly shows, the areas of the country that produce the highest costs due to over-prescribing also produce the poorest health care results.

Dr. Gawande analyzes health care in relatively rural McAllen, Texas, a town in a Texas county with the lowest household income in the U.S. He notes after Miami, this county has the second most expensive health care costs. Dr. Gawande wanted to know why. He also wanted to compare and contrast health care costs in El Paso County, eight hundred miles to the north with similar demographics that were 50% lower.

Dr. Gawande also analyzed the Mayo Clinic in Minnesota with some of the best medical technology on the planet and why it produces some of the highest quality medical care in the nation but has costs that rank in the lowest fifteen percent of the nation. He was also fascinated with why Mayo Clinic was able to replicate that amazing achievement when it opened a center in Florida that has one of the country’s highest cost states.

Dr. Gawande noted when he found excellence around the country, doctors worked together in teams. All of the doctors continuously peer-reviewed each other’s work. In low-cost, high-quality areas, physician income was somewhat neutralized; there was only a limited amount to be made. At Mayo Clinic, for example, doctors are all on salary and didn’t make more or less, no matter how much care was provided. Whether they order ten procedures or none, Mayo Clinic physicians and care-givers are paid the same. This is central to understanding how to fix the problem. As Gawande writes:

This last point is vital. Activists and policymakers spend an inordinate amount of time arguing about whether the solution to high medical costs is to have government or private insurance companies write the checks. Here’s how this whole debate goes. Advocates of a public option say government financing would save the most money by having leaner administrative costs and forcing doctors and hospitals to take lower payments than they get from private insurance. Opponents say doctors would skimp, quit, or game the system, and make us wait in line for our care; they maintain that private insurers are better at policing doctors. No, the skeptics say: all insurance companies do is reject applicants who need health care and stall on paying their bills. Then we have the economists who say that the people who should pay the doctors are the ones who use them. Have consumers pay with their own dollars, make sure that they have some “skin in the game,” and then they’ll get the care they deserve. These arguments miss the main issue. When it comes to making care better and cheaper, changing who pays the doctor will make no more difference than changing who pays the electrician. The lesson of the high-quality, low-cost communities is that someone has to be accountable for the totality of care.

The Cost Conundrum, by Atul Gawande, should be required reading for anyone interested in understanding and participating in American health care reform.

The link is http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande?currentPage=all. A bio on Dr. Gawande is at: http://en.wikipedia.org/wiki/Atul_Gawande

We appreciate your thoughts, comments and concerns; please send a reply.

We ask the rhetorical question—if it is that great a concept, why not drop the secret ballot process for all local, state and national elections and start holding EFCA card-check elections for all of them from now on? Why not elect mayors and governors and presidents with similar strong-arm tactics? Try to imagine twenty folks showing up to your home, banging on your door and then telling you who to vote for by signing their draft ballot. Is that the democracy you want in this country? Is that the democracy our forefathers fought and died to create?

The EFCA bills were introduced with very little if any change from the legislative bills previously defeated. The legislation as introduced would the following:

• Eliminate compelled secret ballot elections when a union presents signed authorization cards from a simple majority of employees to the NLRB.
• The union would automatically gain recognition and could require bargaining to start as soon as ten days after recognition is certified.
• If first contract negotiations do not result in a labor contract within 120 days, the government will appoint a panel of arbitrators to arbitrate a first contract that will be put in place for two years.
• Fines against employers only for unfair labor practices would be increased up to $20,000 per incident.

Early debate in the media has both sides focused on the elimination of the compelled secret ballot election for union representation. Under current law, an election is held when a union presents signed authorization cards reflecting 30% or more of workers to the NLRB. Unions argue the election process is skewed in favor of the employers. In contrast, unions win over 55% of elections held. EFCA would give recognition to a union without the option of a secret ballot if they can present 50% plus one signed authorization cards. Proponents of the legislation adamantly deny opponents’ assertion that EFCA removes the secret ballot election. However at the same time they defend the removal of compelled secret ballot elections as the best way to organize. Opponents of the legislation, comprised of both major employers and employer groups, argue under EFCA the union would never consent to an election if it does not have to–if it gathers the requisite majority of authorization cards.

Although the bills have now been introduced, they are not expected to be taken up by either house into summer. Political attention to the Employee Free Choice Act shifted to the U.S. Senate during the last thirty days. House Speaker Pelosi put the EFCA debater squarely on the shoulders the Senate by maintaining the U.S. House would pass this legislation if and when the Senate passes it. Since the House passed this same legislation in 2007 before it failed in the Senate later that year, she saw no reason for the House to pass it again before the Senate did.

In the Senate, the 60 votes EFCA supporters need to invoke cloture and ensure an up-or-down floor vote on EFCA are falling farther and farther away. Several Senators that previously supported EFCA have withdrawn their support. As of this update, Senators Specter (R-PA), Carper (D-DE), Warner (D-VA), Lincoln (D-AK), Landrau (D-LA), Feinstein (D-CA) and Webb (D-VA) have all backed off from supporting cloture and/or EFCA. Other Senators are now openly questioning support of EFCA as it currently is proposed.

As noted in a previous KC&A Updates, there may be inquiries on whether a compromise bill can be hammered out between both sides—we consider it fatally flawed. Business and business associations including the Illinois State Chamber of Commerce hold there can be no compromise on this wildly undemocratic piece of legislation. Keefe, Campbell & Associates encourages its readerss to continue to contact their U.S. Representatives and Senators and express opposition to this bill.

Today, the Chicago Sun-Times reports as part of their probe of former Gov. Rod Blagojevich, federal investigators are examining state bid proposals and other records from 18 engineering and construction companies that made large political contributions to mostly Democrat candidates and then got big contracts from the state and from the City of Chicago, records show. We are confident embarrassing disclosures such as this may continue in the weeks and years to come. It is impossible to predict the effect of such disclosures on the electorate but the next statewide election is about a year and a half away.

State representative David Reis has proposed the following legislation for the General Assembly to consider:

ILLINOIS H.B. 58 – WORKERS’ COMPENSATION (GENERAL)

Summary: Amends the Workers’ Compensation Act and the Workers’ Occupational Diseases Act as follows:

• Provides an injury by accident is compensable only if the accident was the prevailing factor in causing both the resulting medical condition and disability;
• Makes changes regarding notice of accident;
• Makes changes in computation of compensation paid to certain employees who, before the accident for which an employee claims compensation, had sustained an injury;
• Makes changes regarding review of awards;
• Limits certain cumulative awards for partial disability;
• Provides for certification of permanent partial or total disability by physicians;
• Provides that no compensation is payable for certain injuries involving alcohol or drugs;
• Changes qualifications for Illinois Workers’ Compensation Commission commissioners and arbitrators;
• Contains provisions regarding evidentiary matters and statutory construction;
• Makes changes regarding the duties of the Workers’ Compensation Advisory Board;
• Requires performance audits of arbitrators; provides that an employer;
• The exclusive representative of its employees may agree to establish binding obligations and procedures relating to workers’ compensation.

Status: Introduced and referred to the Rules Committee January 14, 2009.

Outlook: This measure will need to be referred out of the Rules Committee to a policy committee before action on this legislation can occur. Currently, this legislation lacks majority party support. Majority party cosponsorship is seen as beneficial for a bill’s passage through the Democratically-controlled Legislature.

We consider this sweeping legislative proposal similar to the work done by the Missouri legislature a few years back. Those reforms made Missouri dramatically more competitive than our state. As we have advised our readers, we get the system we deserve. If you support this bill, contact Representative Reis at http://www.davidreis.org/contact.htm. Please do not hesitate to send thoughts and comments about this bill.

Veteran business observers, including the partners of this firm, were concerned some of these legislative changes were purely illusory. For example, one provision extended the period an 8(d-1) award could be challenged and modified to sixty months. However, under the Cassens Transport ruling, we knew the labor side that controlled the Commission and reviewing courts had effectively stripped out any chance to modify such an award so it didn’t matter if they extended the period to infinity and beyond—it was a “right” that couldn’t be redeemed. We still think the management reps got bamboozled on that one.

In “exchange” for the many new and increased benefits for labor, Illinois management was touted as having received:

1. A shiny new medical fee schedule that would cut medical costs;
2. Utilization review, a new tool to limit duration of medical care;
3. A shiny new WC fraud provision to allow businesses to avoid having to pay phony claims and allow Illinois employers to counterattack when phony claims were made.

Well, in our view, it was all a sham, designed to make us feel like we got something when clearly we didn’t. Three years later, we are suggesting Illinois business considers simply repealing the whole thing when and if we ever get any sort of say in this process again.

Why do we make this bold claim? Well, we have been advised the medical fee schedule is not even close to providing the savings most carriers and TPAs get from “usual and customary” pricing. One veteran observer noted in most areas of our state, doctors and hospitals actually raised their prices to the level of the medical fee schedule—the “floor actually became the ceiling” as this observer pointed out. We had a veteran claimant attorney tell us that was wrong so we ask all of you the question, is the medical fee schedule good for Illinois business? Does it actually limit medical bills? Is it worth the time and effort? Can it be made better?

As to utilization review or UR, last week we received an unbelievably painful ruling where a former Petitioner-attorney who is now an Arbitrator wrote a chilling attack on the whole concept of UR. He literally attacked the scope and concept in any and every way possible. We are told most Arbitrators and Commissioners feel the same way. The injured worker suffered a soft-tissue strain and nine months later, wanted to continue treatment. UR said no. An IME with a neurosurgeon said no. Surveillance indicated claimant was healthy and outwardly normal. All diagnostic testing was negative. In light of all of that evidence, the Arbitrator said yes you need even more care, solely for your subjective complaints. A unanimous Commission affirmed—we assure all of you that highlights the fact that even the management commissioner is onboard with dropping UR as a tool in this state; he is following the trend.

We feel this case epitomizes the enormous flaw in the 2005 Amendments to the WC Act—the UR provision was voluntary and not mandatory. Trust us, the secret and hidden folks who run the Commission have totally backed off their bargain and are routinely ignoring UR like they ignore everything else that might actually rein in such shenanigans. The failure to follow UR as a tool to rein in medical care is a bitter pill for Illinois business to swallow. What we don’t understand is why a claimant who fractures one ankle in a non-work-related event is allowed by his group health care provider to treat for six weeks and then no more care based on UR. In contrast, if the same guy/gal fractures the other ankle at work, they can treat and remain off work for months and years in a virtual medical fantasy-land with no defined limits on doctors or other care-givers. As we have told our readers for years, we feel Illinois business should only have to “pay what Blue Cross pays” whether it is a workers’ comp or non-work-related event.

Finally, the WC fraud provision was also wholly illusory. The statutory changes created an investigative unit at the IDFPR to investigate both WC fraud by workers and uninsured employer compliance. They actually do investigate WC fraud by workers in an interesting and herky-jerky fashion. The problem which follows the investigation is that it falls into a black hole of prosecutorial indifference—there are about 2 of Illinois’ 102 counties that actually prosecute WC fraud. The State Appellate Defender’s Office that educates state’s attorneys across the state won’t teach WC fraud. In counties where they won’t prosecute WC fraud, they basically treat the charge and IDFPR investigation as a piece of moldy cheese—they won’t respond to anyone in any meaningful fashion. Our vote on WC fraud by workers in this state is to either get the state’s attorneys to prosecute or stop wasting taxpayer dollars investigating it in counties where they won’t. And cut the budget and lay the fraud-busters off.

Our message to all of our readers and to everyone on both sides of the Illinois workers’ comp system is to start to understand the U.S. economy is getting tougher every day. Businesses across the U.S. are attacking labor costs to insure their survival in the global marketplace. Trust us; there are managers and CPA number-crunchers going over every cost of operations in our state as it relates to other states and how it relates to world costs. Some of the thousands of layoffs in our state represent jobs lost that will never come back.

We need to position Illinois to be fair and reasonable in protecting injured Illinois workers. From the outside looking in, our system appears to create accidental injuries for which no state or country allows recovery. The Illinois WC system rewards laziness and malingering and physicians who over-treat. Even real injuries some times get benefits that are at both eye-popping and premium-busting levels. What worries us most is management will get back into control of the legislature, governor’s mansion and eventually the courts and the level of reform is going to “kill” this current system that seems almost totally out of control. We would hope the secret folks who run the Commission see that coming and try to make it fairer and more reasonable using tools you agreed to use any way. We appreciate your thoughts and comments.

We are similarly fascinated to see his defense lawyer effectively drop the case in the Illinois Senate and potentially leave the Governor both unrepresented and not even present to hear the charges and evidence against him. He has already indicated he is taking the protection of the Fifth Amendment and will not testify. This may be the shortest trial to oust a Governor in U.S. history—all the state senators have to do is to read and present the evidence from the bill of Impeachment and vote. As things currently sit if the Gov isn’t going to fight other than his occasional ramblings to the media, why the heck not simply resign?

We want all of our readers to know the Governor heralded in the low era of workers’ compensation as it relates to government in Illinois. We hope soon-to-be citizen Blagojevich’s doings can be undone. We remain chagrined to see “Senator-by-Humiliation” Roland Burris take office last week, after having mortified himself to beg the recently-arrested Blagojevich for the appointment and then embarrassed the U.S. Senate into approving him after the Democrat leaders all initially vowed not to accept anyone appointed by the disgraced Governor. We salute Secretary of State Jesse White for sticking to his guns and staying above all of it.

What most of our readers don’t know or remember is from memory lane. If you look it up, in 2002, then-gubernatorial hopeful Milorad Blagojevich was in a three-way primary against now-Senator Roland Burris and former Chicago Schools superintendent Paul Vallas. What put Blagojevich over the top was financial and related primary support from the big Plaintiff firms in southern Illinois—the men and women who brought you fun things like the World’s Largest Asbestos docket or about 5,000 pending asbestos filings in a tiny rural county of 260,000 folks.

The zillionaire lawyers in that area aren’t shy about making as much money as they can off of their political contributions. As we reported, a judge from Madison County awarded a Plaintiff legal fee of $1.17 billion dollars or what we were certain was over $100,000 per hour as part of the verdict against the tobacco companies; later wiped out by the Illinois Supreme Court. From that shining example, understand the Plaintiff bar in that area isn’t bashful about wanting a return-on-investment with hand-picked hearing officers. Some of those lawyers have claims before the IWCC.

Similarly, in dealing with Mr. Pay-to-Play, the big-money southern Illinois Plaintiff firms got almost-complete control of the Illinois Workers’ Compensation Commission. They immediately picked a Plaintiff lawyer to be the Chairman they wanted, switched funding of the Commission out of general tax revenues onto a new fee levied exclusively on Illinois business, more than doubled the budget, changed the name of the joint and starting adding Arbitrators who would tow the new line of their political patrons. Most of the new Arbitrators were former Plaintiff lawyers; some of them would seemingly rule only for one side of the bar—what we started to call 99.44% Petitioner-pure. We are happy to report many of them are now into the high 80’s but the place still remains wildly imbalanced toward Illinois labor.

What then started to happen were all sorts of hi-jinks. First, we saw one of Illinois’ largest defense firms strangely get a Commission post from the pro-labor Democrat Governor. Then almost as fast as she got the appointment, rumors and investigations of “pay-to-play” began and she quietly resigned from the position. It is fascinating to see this “puzzle wrapped in a conundrum surrounded by an enigma” has never again been investigated or mentioned by either the U.S. Attorney or the media. We also later saw another Commission appointment and her political patron hit the “Rezko list” which was an Excel spreadsheet faxed to the Governor with a listing of who got what jobs and who their political sponsors were. Trust us; the only thing that surprised anyone is they were stupid enough to write it all down; this again emphasized the Commission remained highly politicized.

Finally, we saw the silly PR battle of the 2004 and later 2005 Amendments to the Workers’ Compensation Act in which Illinois’ already sky-high rates and benefits were again raised and new benefits instituted. As part of the strange bargain, Illinois business got

• A clunky and partial medical fee schedule,
• Non-mandatory utilization review the Commission sometimes considers and most times ignores and
• A workers’ comp fraud provision that has no real “teeth” in the face of wide-spread prosecutorial indifference.

We remain particularly troubled to hear:

1. While we assure you the vast majority of current Arbitrators are intelligent, honest and professional hearing officers, our readers remain infuriated to see so many former claimant attorneys acting as Arbitrators in this state. We still feel the Commission remains completely out of kilter on a simple issue of locating and appointing actual “civil servants” in these positions by employing a secret political selection and retention system. We feel such systems lead directly to the “pay-to-play” mentality that is the current sewer of Illinois politics. While police and fire testing for open positions is posted on the web in this state, you and I and the man-in-the-moon can’t find the results of civil service testing for the Arbitration posts. We assure you the best candidates get selected only if they have the political pull to get the appointments—that is not what civil service is supposed to be.

Some of our top hearing officers also continue to work under the continued threat of immediate removal from office if they simply do their jobs but issue rulings or conduct their calls/hearings in a fashion not considered favorable to the politically connected attorneys across the state. We are told the former Chairman would routinely call Arbitrators at home to threaten them with immediate removal if they conducted too many pre-trial hearings, rather than try claims. Again, that is not how civil service is supposed to work. If the jobs are going to be political, make them openly political appointments. If not, they should be available to the best possible candidates who match the requisite qualifications. And when we great solid hearing officers their jobs should come with civil service protections and not be subject to the whim of the administration of the moment. We hope the continued politicization of these posts gets media attention and is reformed.

1. Many Illinois government entities, including some departments of the State of Illinois, refuse to provide light work or institute mandatory light duty return to work programs. Outside Illinois, lots of states, counties and municipalities have their modified duty programs on the web—you will not find such programs listed for the State of Illinois, County of Cook or City of Chicago. It is not a coincidence such government entities are now taxing Illinoisans at record rates. The lack of modified work programs leaves hundreds of state and local government workers off all work and collecting Illinois’ generous and tax-free TTD rates paid for by you and me, when they could otherwise be working. If you don’t know and understand how critical modified duty and return to work programs are to cutting WC costs, please send a reply. We feel we need leadership in the various government entities who will actually start to understand running good government and avoiding truly unnecessary waste means running aggressive workers’ compensation programs.
2. We are also told and infuriated to hear there are state, county and municipal risk managers who quietly turn over lists of non-litigated but accepted work injury claims for their employees with addresses of potential claimants to Plaintiff law firms. The law firms then send letters to the injured workers to seek to initiate attorney-client relationships and file Applications. To our knowledge, if no money or other “favors” are changing hands, there is nothing specifically “illegal” about such practices but the ethics of it are deplorable. We truly feel there should be a law passed to make such referrals illegal—it is completely contradictory to every concept of good government and sound business practices for this to occur.

We will never forget the joke from the comedians at Saturday Night Live where they told our Governor, “if you are too corrupt for Illinois politics, you are too corrupt.” We want all parts of Illinois government, particularly the Workers’ Compensation Commission, to learn the lesson from the past administration and start to move to being a place where honesty, fairness and an aversion to fraud are the name of the game. Please do not hesitate to reply with your thoughts and comments.

The proposed legislation is vigorously opposed by the Illinois Association of Defense Trial Counsel and every business that sells anything from candy bars to airplanes in this state. The U.S. economy and our state businesses don’t need more tort liability. At present, 16 states have prejudgment interest and anyone on the defense side of the bar hates it for a variety of reasons.

In the absence of an applicable statute or rule, U.S. courts generally applied the traditional common law rule that prejudgment interest was not available in tort actions since the claim for damages was unliquidated or unknown until a jury decides the appropriate amount. In an effort to compensate tort plaintiffs for the often-considerable lag between the event giving rise to the cause of action or filing of the lawsuit and the actual payment of the damages, some state legislatures have enacted laws that provide for prejudgment interest in particular tort actions or under particular circumstances.  In addition to seeking to compensate the plaintiff fully for losses incurred, the goal of such statutes is to encourage early settlements and to reduce delay in the disposition of cases, thereby lessening congestion in the courts.

We feel the concept, although well-intended has the practical effect of being both inequitable and counter-productive. Prejudgment interest laws can result in over-compensation and/or hold a defendant financially responsible for delays in hearings and appeals defendant may not have caused and may then impede settlement.

Your editor supervised a case in Iowa where a woman was badly burned under questionable circumstances—she claimed an ember came out of a furnace flue and caused a couch to burn. The defense side pointed to two trays of cigarette butts next to the couch and raised the inference she fell asleep smoking and caused her own injuries. The matter was tried to completion and the jury denied the claim. Plaintiff’s counsel fought for a new trial for reasons wholly unrelated to anything the defense did. The matter was appealed to the Iowa Supreme Court and a plaintiff-friendly court ordered a new hearing. At the second hearing, she got an award from a sympathetic jury of close to a million dollars—with pre-judgment interest running from the date of her injuries to the first trial, then through two levels of appeal and a second trial, her damages doubled.

In such a setting, prejudgment interest is more like winning the lottery than a real method of compensating damages. We don’t have any problem with litigation moving quickly and smoothly to its appropriate outcome, we just don’t think one side of the other should ever get a “bonus” in a real system of justice.

We also hope prejudgment interest laws and new proposals should be reviewed to ensure they are structured fairly and in a way designed to foster settlement. At a minimum, the interest rate should reflect prevailing interest rates by being indexed to the Treasury bill rate at the time the claim was filed and an offer of judgment provision should be included.

For our business readers, please understand we aren’t reporting legislation, the ISBA has simply approved draft legislation for consideration by the legislature. We hope and pray our legislature will not follow their model. We appreciate your thoughts and comments.