Legislature Debating Sweeping Changes to Workers’ Compensation System, Will Undoubtedly Increase Employer Costs

The MI Senate Labor Committee heard testimony on the “status of Michigan’s workers’ compensation system” Thursday. The only parties invited to testify were prominent plaintiffs’ attorneys and injured workers, all of whom presented a lopsided viewpoint and called for sweeping statutory changes.

Plaintiffs’ attorneys and unions are calling for a complete overhaul of the system, which will undoubtedly increase costs for employers. This would come in the form of higher premiums for traditionally insured companies and in the form of direct costs for self-insured companies.

While no legislation has been introduced to date, we believe the legislative package could include:

• A Weakened Definition of Disability – Watering down the definition of disability would allow more individuals to remain on workers’ compensation benefits indefinitely.

• An Erosion Work Search – Current law requires individuals to look for work reasonably available to them within their restrictions or face a reduction in benefits. It seems the plaintiffs’ bar would like to shift the burden for work search from workers to employers and to weaken work search requirements. The proposed amendment could end up being similar to legislation introduced in 2019.
• A Requirement to Pay First, Ask Questions Later – Currently, Michigan has a “voluntary pay” system. This means employers/insurers can voluntarily begin paying benefits and stop paying benefits without approval of the Workers’ Compensation Agency. Although the voluntary pay system has been in place for decades, it seems plaintiffs’ attorneys would like to mandate payment within a certain timeframe via a “prompt pay” mandate. If it is later found that there is justification for stopping payment, the employer/insurer would have the ability to try to claw back payment from the worker.

While we are certain there are more components to their plan, these are just a few of the items that were addressed at the hearing.

The Michigan Chamber will continue to defend the law as written, as we were a primary champion of the latest round of reforms that were made in 2011. The law sought a balance between providing adequate benefits for injured workers and holding down costs for employers.

The 2011 reforms produced a reduction in workers’ compensation pure premium rates every year since the reforms were passed, with an overall cumulative decrease of 45 percent from 2011-2018 (the most recent year for which data is available). The 2011 reforms have saved employers an estimated $446 million in workers compensation premiums. The Workers’ Compensation Agency’s former director has been quoted as saying, “These tremendous economic savings experienced by employers allows them to hire more workers, increase salaries, open new facilities and move to Michigan. Our sustained workers’ comp decreases play an important role in the state’s regulatory environment which continues to attract businesses and add jobs.”

We will keep Chamber members apprised as this situation develops. In the meantime, please contact Wendy Block, senior vice president of business advocacy and member engagement, with any questions at wblock@michamber.com .