Oklahoma Workers’ Comp Overhaul Takes Another Hit

By | May 5, 2016

The Oklahoma Supreme Court dealt another blow to the state’s 2013 workers’ comp overhaul by finding unconstitutional a provision of the Oklahoma Administrative Workers’ Compensation Act pertaining to the deferral of permanent partial disability benefits.

Several recent rulings have represented setbacks for the AWCA, which has had the support of the business community, as well as Gov. Mary Fallon and Insurance Commissioner John Doak. A significant drop in loss costs in the state’s workers’ comp system has been attributed to the 2013 law.

In Maxwell v. Sprint PCS, (Case Number: 113898), which is representative of a class of several companion cases, the Court ruled that “scheduled members are exempt from the AMA Guides under the Administrative Workers’ Compensation Act,” and that the permanent partial disability deferral provision of statute “is an unconstitutional violation of due process.”

In state statute, the term “scheduled member” includes body parts such as arms, legs, toes, fingers, etc.

The case involved a Sprint employee, Theresa Maxwell, who injured her knee in a work-related incident, properly notified her employer and filed the appropriate forms in relation to her workers’ comp claim, the Court explained. She had surgery on her knee and received temporary total disability benefits for just under three weeks.

“After reaching maximum medical improvement on July 2, 2014, she returned to her pre-injury position with her employer earning her pre-injury wages,” the Court said in its unpublished opinion dated April 12. In late September, the injured employee “filed a request for a contested hearing on the issue of permanent partial disability.”

Relying on the AMA Guide 6th Edition, the administrative law judge determined that the injury to Maxwell’s knee resulted in 2 percent permanent partial disability to the body as a whole. The compensation rate was set at $323.00 for a total award of $2,261.00. However, because the employee had returned to her job at her pre-injury compensation rate, the ALJ ordered the benefit award to “be deferred at a rate of $323.00 beginning July 2, 2014, for every week Petitioner worked in her pre-injury or equivalent job.”

The ALJ’s decision was upheld by the Oklahoma Workers’ Compensation Commission and Maxwell appealed.

Upon review, the Court found that the ALJ wrongly assigned Maxwell’s disability award to the body as a whole. Maxwell’s injury was to a scheduled member, which are exempt from AMA Guide.

“This Court, for nearly forty years, has interpreted such language to mean exactly what it says — scheduled members are exempt from the AMA Guides,” the opinion states.

The permanent partial disability award should have been in compensation for the injury to the knee, the Court said.

Also at issue for the Court is that the new permanent partial disability benefits “deferral provision advances a legislative policy that disability payments be directly connected to a reduction in earnings capacity.”

However, since “1941, permanent partial disability compensation has been awarded solely on the basis of loss of function as established by medical evidence,” and not tied to an employee’s loss of earning capacity.

The Court noted that “a permanent physical impairment caused by a work-related injury frequently results in a reduced earning capacity in the future rather than an immediate reduction in present earning capacity.”

It pointed out that workers’ comp benefits are not rewards, they replace something that is lost by the employee, “for which the employer is liable.”

The Court also maintained the deferral of permanent partial disability benefits provision under the AWCA violates the due process clause of the Oklahoma Constitution, which protects “‘citizens from arbitrary and unreasonable action by the state.'”

“Under the statutory deferral scheme, an injured employee who returns to work loses the ability to collect any subsequent permanent partial disability award issued by the ALJ because by the time the case is heard, enough time will have passed so that the injured employee, in most cases, will have forfeited his right to receive any portion of the permanent partial disability award,” the Court wrote.

In Maxwell’s case, the hearing was held more than six months after she returned to work. The Court stated that Maxwell’s “permanent partial disability award was exhausted well before the hearing on permanent partial disability actually took place.”

Effect of the Ruling

Subsequent to the Court’s ruling, Commissioner Doak warned the decision “could cause a jump in workers’ compensation rates.”

In a statement released by the Oklahoma Insurance Department, Doak said the National Council on Compensation Insurance (NCCI) has filed a supplemental advisory loss cost filing that shows shows an overall increase in loss costs of 3.4 percent. The department’s release indicated the increase was attributed to the ruling in Maxwell v. Sprint PCS.

The loss cost filing is scheduled to go into effect July 1, 2016. However, NCCI has acknowledged that the filing may be withdrawn depending on legislation passed during the current legislative session, the department stated.

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