Legislature(2017 - 2018)BELTZ 105 (TSBldg)

04/14/2017 01:30 PM JUDICIARY

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-- Public Testimony --
         SB  29-REPEAL WORKERS' COMP APPEALS COMMISSION                                                                     
2:01:19 PM                                                                                                                    
CHAIR COGHILL  announced the  consideration of  SB 29  and stated                                                               
his intention to continue public testimony.                                                                                     
2:02:53 PM                                                                                                                    
STEVEN  CONSTANTINO, representing  himself,  stated  that he  has                                                               
been a member of  the Alaska bar for 36 years.  He was a workers'                                                               
compensation hearing  officer in  the 1990s and  for the  past 18                                                               
years  he  has  been  in private  practice  representing  injured                                                               
workers and  litigating workers' compensation claims.  He is also                                                               
the  claimants' representative  for  the  Alaska Bar  Association                                                               
annual review of workers' compensation cases.                                                                                   
He said  the legislature  entered into  two legal  experiments in                                                               
2005. First,  it changed the  standard for causation  in workers'                                                               
compensation  from "a  substantial  factor"  to "the  substantial                                                               
cause."  Second,  it enacted  the  appeals  commission to  attain                                                               
speedier  appellate  decisions  and  to  achieve  consistency  by                                                               
making  board   decisions  binding   legal  precedent.   He  said                                                               
consistency   has  been   achieved  because   of  the   precedent                                                               
provision, but  half the substantive decisions  that are appealed                                                               
and  decided   by  the  Alaska  Supreme   Court  are  overturned.                                                               
Regarding speeding up workers' compensation  appeals, he said his                                                               
experience is  that the  timelines are about  the same.  When the                                                               
superior court had jurisdiction, it  took about 6-9 months and it                                                               
takes about 6-9 months with  the appeals commission. The superior                                                               
court has not had the  opportunity to address the new substantial                                                               
cause standard,  but in  2016 it  did reverse  the interpretation                                                               
that  the  appeals  commission  made  about  four  years  earlier                                                               
regarding  the evidence  necessary  to rebut  the presumption  of                                                               
compensability.   He   also   pointed  out   that   the   appeals                                                               
commission's published final decisions  each cost between $30,000                                                               
and $40,000.                                                                                                                    
MR.  CONSTANTINO recalled  that  the Court  System indicated  the                                                               
superior  court  could  handle these  appeals  at  no  additional                                                               
fiscal impact to  the state and that the cases  would be assigned                                                               
such that the judges would  develop expertise. He noted that that                                                               
was one of the rationales for creating the appeals commission.                                                                  
He opined that the appeals  commission has not achieved the goals                                                               
set out for it and his  anecdotal observation is that it tends to                                                               
favor  the interests  of insurers  over  injured workers.  [Audio                                                               
2:09:57 PM                                                                                                                    
ERIC CROFT,  representing himself, Anchorage, Alaska,  noted that                                                               
he sent backup  material to support his testimony.  He made three                                                               
points  regarding the  Workers' Compensation  Appeals Commission:                                                               
it  is not  a fair  tribunal; it  does very  little work  for the                                                               
$440,000 it costs each year; and  the decisions are all too often                                                               
inconsistent or so  unclear that the Alaska Supreme  Court has to                                                               
step in and provide clarity.                                                                                                    
He  said   the  commission  rules  overwhelmingly   in  favor  of                                                               
insurance  companies, regardless  of  the facts.  He agreed  with                                                               
former Commissioner  Andy Hemenway's  analysis that the  39 cases                                                               
that  had gone  to the  Alaska Supreme  Court and  resulted in  a                                                               
decision were reversed 50 percent of the time.                                                                                  
Mr. Croft  said he looked at  which side the commission  ruled in                                                               
favor  of and  which side  was  ultimately found  correct by  the                                                               
Alaska Supreme  Court. He found  that when the  insurance company                                                               
should have won,  the commission got it right 100  percent of the                                                               
time. But  in the cases  where the  employee had the  right legal                                                               
position and  correct facts,  the commission  still ruled  in the                                                               
insurance  companies'  favor 80  percent  of  the time.  "Overall                                                               
those numbers  are about  85 percent of  the time  the commission                                                               
rules in favor of the insurance company."                                                                                       
He compared  the $440,000  annual cost of  the commission  to the                                                               
three-member court  of appeals. He  said that over its  life, the                                                               
court  of  appeals has  issued  about  two decisions  per  month,                                                               
whereas the appeals commission has  issued less than one decision                                                               
per month  since July 2016.  "The three-member criminal  court of                                                               
appeals in that time has issued 140 decisions or 15 a month."                                                                   
MR.  CROFT discussed  the  third point  that  the commission  has                                                               
issued contradictory  or unclear  rulings. He  noted that  in the                                                               
backup  material he  submitted he  cited a  situation where  in a                                                               
three-month  span  the   commission  issued  contradictory  rules                                                               
regarding the standard on stays.                                                                                                
He summarized,  "It doesn't provide  the clarity, it costs  a lot                                                               
of money  and doesn't do  much work,  and introduces a  bias that                                                               
shouldn't be in our judiciary."                                                                                                 
2:15:47 PM                                                                                                                    
COLBY  SMITH,  representing  himself, Anchorage,  Alaska,  stated                                                               
that he is  an attorney who primarily  does workers' compensation                                                               
defense work.  He also  presents on  the panel  on behalf  of the                                                               
Alaska  Bar  Association,  representing   the  defense  side  and                                                               
employers  presenting  cases  that  have been  in  front  of  the                                                               
appeals  commission and  the Alaska  Supreme Court.  He mentioned                                                               
previous testimony  about bias and  opined that  the conversation                                                               
should  not be  about  changing because  one  side isn't  winning                                                               
often enough.  It should be  about whether the  current structure                                                               
is right.                                                                                                                       
Under  the process  prior to  2005, the  cases went  to different                                                               
superior courts  depending on  the jurisdiction.  Those decisions                                                               
were  unpredictable  depending  on the  judge's  experience  with                                                               
workers' compensation.  Also, the decisions did  not have binding                                                               
precedent so  the cases often  went to the Alaska  Supreme Court.                                                               
In  an  effort  to  address  those  perceived  shortcomings,  the                                                               
process was changed  in 2005 and one entity was  created. That is                                                               
the  appeals  commission   that  issues  consistent,  predictable                                                               
opinions that  are binding.  Everyone agrees,  he said,  that the                                                               
commission has greatly reduced the number of appeals.                                                                           
MR. SMITH  said he wasn't  asked his opinion  in 2005 but  he has                                                               
always  thought  that designating  one  superior  court judge  to                                                               
handle  workers' compensation  issues would  have been  and still                                                               
could  be  a possible  solution  if  those decisions  were  given                                                               
binding precedence.                                                                                                             
2:20:54 PM                                                                                                                    
VICKI PADDOCK, Attorney, Anchorage,  Alaska, stated that her firm                                                               
represents  employers in  workers' compensation  matters and  her                                                               
partner,  David  Floerchinger,  submitted  a  letter  summarizing                                                               
their  opposition to  SB 29.  She pointed  out that  in 2005  the                                                               
legislature codified  its specific intent regarding  the Workers'                                                               
Compensation Act.  It was to  ensure quick, efficient,  fair, and                                                               
predictable delivery of benefits to  workers at a reasonable cost                                                               
to employers.  Returning appeals to  the superior court  does not                                                               
achieve the legislature's  codified intent and she  has not heard                                                               
testimony that the legislature changed that intent.                                                                             
Drawing on  her experience as  an attorney  and a law  clerk, she                                                               
offered her  perspective of why  returning to the  superior court                                                               
will  not be  efficient or  predictable in  workers' compensation                                                               
cases. She said  this is a unique body of  law and superior court                                                               
judges  do not  have a  day-in-and-out working  knowledge of  its                                                               
nuances and specific characteristics.  As such, those judges will                                                               
rely on  their law clerks  to do  the research in  preparation of                                                               
hearing  the  appeals. Oftentimes  law  clerks  are just  out  of                                                               
school and may only  serve as a clerk for a year  so it is likely                                                               
that  the decisions  will be  neither efficient  nor predictable.                                                               
And they will not have precedential value.                                                                                      
MS.  PADDOCK  offered  her belief  that  the  appeals  commission                                                               
should remain in  place in order for the  legislature's intent to                                                               
be maintained. But if the  legislature believes the commission is                                                               
not  as effective  as intended,  it should  consider alternatives                                                               
such as utilizing the Office of Administrative Hearings.                                                                        
CHAIR  COGHILL  asked  Commissioner  Drygas  to  respond  to  the                                                               
2:26:05 PM                                                                                                                    
HEIDI  DRYGAS, Commissioner,  Department of  Labor and  Workforce                                                               
Development  (DOLWD) described  SB 29  as a  cost-cutting measure                                                               
and  highlighted  the  conflicting testimony  about  whether  the                                                               
commission serves  its intended purpose. She  said the commission                                                               
is a specialty tribunal that  the state cannot afford, especially                                                               
given its  poor track record  at the Supreme Court.  She reminded                                                               
members  that the  number of  appeals that  have made  it to  the                                                               
commission  over the  last 10  years has  declined precipitously.                                                               
The  anecdotal evidence  indicates  that workers  do not  believe                                                               
they are getting  a fair shake at the commission  so they are not                                                               
appealing board decisions.                                                                                                      
She pointed  out that  the commission  costs nearly  $0.5 million                                                               
per  year  and the  alternatives  that  have been  proposed  also                                                               
require funds that  the state does not have.  When the department                                                               
reviewed its  statutes trying to  find ones that hamper  the work                                                               
of the  department or are ineffective,  the workers' compensation                                                               
statute  stood  out.   "That  is  why  the   department  and  the                                                               
administration put forward this bill. ¼  We simply do not believe                                                               
the  workers'  comp  appeals  commission  is  living  up  to  its                                                               
intended purpose." The state can  no longer afford this specialty                                                               
SENATOR COSTELLO asked  what will happen to the  money that funds                                                               
the Workers' Compensation Appeals Commission.                                                                                   
2:29:56 PM                                                                                                                    
PALOMA HARBOUR,  Administrative Services Director,  Department of                                                               
Labor  and  Workforce  Development (DOLWD),  explained  that  the                                                               
Workers' Safety  and Compensation Administration  Account (WSCAA)                                                               
supports   the  workers'   compensation   program,  the   appeals                                                               
commission,  and the  workers' safety  programs. Right  now about                                                               
$7.2 million in revenue is  generated into that account each year                                                               
and  the governor's  budgeted expenditures  against that  fund is                                                               
$9.1  million.   The  department   is  trying  to   address  that                                                               
significant gap  measure by measure  and SB  29 is one  of those.                                                               
Others  include cuts  to the  workers' safety  programs, $191,000                                                               
has been  eliminated from the workers'  compensation program this                                                               
fiscal  year, and  separate legislation  has been  introduced for                                                               
further workers' compensation efficiencies.                                                                                     
CHAIR COSTELLO observed that this is not a reduction.                                                                           
CHAIR COGHILL summarized  that the money will still  be there but                                                               
the department  cannot afford everything  it is doing  because of                                                               
the $2 million shortfall.                                                                                                       
MS. HARBOUR  agreed; eliminating  the commission will  not reduce                                                               
the  revenue   brought  into   the  fund   but  it   will  reduce                                                               
expenditures by about $0.5 million.                                                                                             
2:32:02 PM                                                                                                                    
SENATOR COSTELLO asked  if using those funds  for something other                                                               
than the appeals commission will create a statutory problem.                                                                    
MS. HARBOUR  said there is no  conflict with the statute,  but it                                                               
would  create a  problem  if the  commission  isn't repealed  and                                                               
legislation  passes to  "unfund" the  commission. The  department                                                               
would then have  cases it is statutorily required  to handle, but                                                               
with no funding.                                                                                                                
2:33:00 PM                                                                                                                    
CHAIR COGHILL  stated that he would  hold SB 29 in  committee for                                                               
further review.