WSIA's 2017 Legislative Preview

Jan. 13, 2017


This past Monday, January 9th kicked off the 2017 session of the Washington State Legislature, and now in this first week it's time once again to preview what big picture issues are coming in Olympia, and where policy related to workers' compensation and workplace safety might in. 

Big Picture Issues

According to Governor Jay Inslee and leaders from both the state House and Senate at a preview forum on the eve of session, the top issue before the Legislature this year is public school funding and a battle over the amount of tax revenue necessary to meet court-mandated funding goals. 

Depending whether you tally it in the short term or longer term, Governor Inslee is proposing four to eight billion dollars in new taxes to fund increases in education spending over the next four to eight years, a new tax burden that falls predominately on the business community and investors, through increased Business & Occupations taxes on certain sectors, elimination of preferential rates for other sectors, and a new tax on capital gains.

Legislative Republicans, meanwhile, say the state must fund education requirements first out of existing tax revenues before moving on to other priorities of government, and addressing new revenue needs depending on that prioritization.  

A statewide opinion poll released last week tends to support that position, with respondents overwhelmingly putting education funding at the top of the Legislature's to-do list, but opposing new taxes for education by a 56 to 34 percent margin. 

Clearly, the battle over taxing and spending on and for education will be the defining legislative struggle in 2017, and all other policy issues will have to figure out in some respects how they relate to it.

Enter workers' compensation. With a Legislature evenly divided between a more employer-friendly Senate majority and a more union-friendly House majority, few observers would predict sweeping reforms to the status quo to come out of that political composition. 

At the same time, to the extent legislative budget writers feel constrained to raise taxes on business to fund education or other priorities of government, there will be a search for a countervailing area where tax or regulatory costs on employers can be reduced. And in that regard, Washington's workers' compensation system is always top of mind. That dynamic is likely to give the issue of workers' comp reform a persistence throughout the months of the legislative session.

Employer Community Priorities

The business community, meeting chiefly through a coalition of allied employer organizations, has developed a legislative agenda comprised of the following five elements:

  • Recovery and reimbursement in third party actions. Ever since the Washington Supreme Court's 2010 Tobin decision, which held that a portion of damages recovered in a third party action designated as compensation for "pain and suffering" cannot be subject to lien by Labor & Industries or a self-insured employer. Predictably, in the years since, more and more third party recovery is now being designated as pain and suffering compensation, shielding millions of dollars per year from reimbursing insurers for benefits paid out, in clear contravention of the Legislature's intent. The employer community would like to see the Tobin decision overturned and prior legislative intent restored. 
  • Structured settlements eligibility. The structured settlement option for resolving claims has shown signs of promise, particularly after a 2016 report of the Upjohn Institute reported that by and large injured workers who have taken structured settlements since 2012 have had good outcomes. Yet the program has been disappointing as a promised tool for avoiding major long term disability costs. To make the option available to more injured workers, the employer community would like to see the age limitation of 50 years old removed so that any adult injured worker in an appropriate claim could consider a structured settlement. 
  • Occupational disease coverage. The employer community is also supporting legislation that would tighten occupational disease coverage standards and statutes of limitations, to clarify that work-related exposure, rather than external or lifestyle factors, must be at the heart of a claim the system covers as an occupational disease.  
  • Self-insurance claims management authority. Given the substantial amount of resources the Department of Labor & Industries devotes to re-adjudicating claims management decisions made by self-insured employers, and the substantial delay and backlog in obtaining final and binding decisions of the Department, parties from the Joint Legislative Audit & Review Committee, by way of performance audit of departmental claims management, to the Ombuds for injured workers of self-insured employers, have called for the Department to transition its resources from duplicative re-adjudication of claims to a role as an auditor and regulator of self-insured employers. The employer community is also supporting this common-sense administrative reform for this substantial segment of the workforce.
  •  Benefit accuracy. Finally, the employer community has been following the work of the Benefit Accuracy Working Group (BAWG), a collaborative between business, labor, and Departmental reps that was set up by the Legislature in 2015 to seek improvements to the calculation of wages for purposes of setting disability payments. Accordingly, the employer community has a placeholder in its legislative agenda for benefit accuracy pending the outcome of the BAWG discussions. 

Labor & Industries Agenda

The Department of Labor & Industries, meanwhile, is proposing several items of legislation of its own. Most germane to our interests are:

  • A bill to increase statutory WISHA maximum penalty levels to equal recently increased OSHA penalties, so that Washington can maintain its standing as a state OSHA program with penalty levels "at least as effective" as the federal program.
  • A bill to extend the timeframe in which the Department may re-assume jurisdiction over a WISHA appeal in order to pursue a settlement.
  • A far-ranging budget request seeking appropriation of $47 million dollars for the hiring of 78 new full time employees across the Department for purposes of additional claims management, IT projects, strategic business changes, and so on.

Union and Claimants' Lawyer Issues

No workers' compensation bills were introduced by unions or the claimants' bar in the first week of the session, but if the recent past is an indicator, this group continues to be interested in expanding the presumption of occupational diseases for firefighters, reducing the social security offset against disability payments, increasing the opportunities for an award of attorney's fees on appeal to the Board of Industrial Insurance Appeals, and the like. 

Where will it all end up? 

Remember, to become law, a bill must pass both the House and Senate in identical form, and be signed into law by the Governor. The political composition of the Legislature, to say nothing of the Governor, does not favor swift action on any of the above priorities. While the Republican-controlled Senate may be more amenable to champion employer and business-side reform ideas, those proposals face an uphill climb in the Democratic-controlled House, where unions and claimants' lawyers wield tremendous influence. And vice-versa. 

A prospective scenario for change in 2017 could be like the path taken by the Legislature in 2011, the last time a contentious workers' comp bill was passed into law. Then, the House and Senate fought over workers' compensation reform as a component of passing a state budget right up to the very end of a second overtime session. Again, with one side of the process seeking to raise general business taxes to fund education without cutting any other government programs, and with the Department seeking new money for new employees, not to mention increased safety and health penalty levels, there may be much to negotiate over by the later stages of the legislative session.

So stay tuned. WSIA members who opt-in to our Legislative Committee e-mail list can follow the action most closely, with weekly updated bill tracking sheets and summaries of that week's action. Contact WSIA's Kris Tefft for details.