Assembly Bill Policy Committee Analysis s2

AB 305 Page 1 Date of Hearing: May 6, 2015

ASSEMBLY COMMITTEE ON INSURANCE Tom Daly, Chair AB 305 Gonzalez – As Amended April 30, 2015

SUBJECT: Workers’ compensation: permanent disability: gender discrimination

SUMMARY: Prohibits the use of certain gender-related characteristics in the calculation of permanent disability benefits. Specifically, this bill:

1) Prohibits granting the disabling effects of breast cancer a lower disability rating than granted to the disabling effects of prostate cancer.

2) Prohibits the use of pregnancy, menopause, or osteoporosis, if these conditions are contemporaneous with the industrial injury causing the disability, to apportion permanent disability with respect to a physical injury.

3) Prohibits the use of sexual harassment, pregnancy, menopause, or osteoporosis, if these conditions are contemporaneous with the industrial injury causing the disability, to apportion permanent disability with respect to a psychiatric injury.

EXISTING LAW:

1) Provides for a comprehensive system to provide workers' compensation benefits to workers whose injuries arise out of or in the course of employment, including medical treatment and financial compensation if the injury or condition has a permanently disabling effect.

2) Establishes a Permanent Disability Rating Schedule (PDRS), a methodology for calculating impairment through the use of the American Medical Association Guides to the Evaluation of Permanent Impairment (AMA Guides), and other tools that are used to determine the extent of an injured worker's permanent disability (PD).

3) Allows for the "apportionment" of PD determinations to prior industrial causes, or to prior non-industrial causes, and reduces the amount of the injured worker's PD award to the extent these prior causes have contributed to the extent of the disability.

4) Requires the physician who is making a recommendation on the extent of disability that has followed from an industrial injury to identify, and quantify, causation of the disability that is either prior to or subsequent to the industrial injury.

FISCAL EFFECT: Undetermined

COMMENTS:

1) Purpose. According to the author, "[w]hile current law prohibits workers compensation claims from being denied based on certain protected class characteristics, it does not clearly prohibit gender or other characteristics from being taken into account when apportioning an injury. Additionally, current law requires physicians to identify "other factors" when apportioning an injury. This leaves a loophole in which an injury can be attributed to conditions predominantly or only found among the workers' gender." Proponents assert that AB 305 Page 2 lawyers who represent injured workers report that they have cases where women have had the conditions cited in the bill used as a reason to reduce permanent disability benefits.

2) Apportionment. Apportionment applies to PD determinations when the disabling effect of an industrial injury has some percentage of causation that either predates or occurs subsequent to the industrial injury. Apportionment does not apply to medical treatment. For example, no matter how much the old football injury is making an industrial knee injury more complicated or extensive, the workers' compensation system provides medical treatment for the industrial knee injury fully and comprehensively. The fact that there is pre- industrial injury causation that affects the seriousness of the injury does not limit the extent of medical treatment. However, causation of the disability is treated differently from causation of the injury.

There are at least three policy rationales underpinning the apportionment rule. First, it has been deemed unfair to require an employer to pay for disability that was not caused by the employment. Second, if the prior causation was a previous industrial injury that resulted in a PD award, the injured worker would have already been compensated for that portion of the disabling condition. Third, if an employer knew that a job candidate suffered a previous injury that might lead to more expense if he should re-injure himself, the employer might opt to hire someone else who does not pose that financial risk.

Apportionment as a policy is not without its critics. On a "but for" causation rationale, the injured worker would not be suffering the current disability to any extent but for the current industrial injury. And if the injury were being compensated in the tort system, the person who acted negligently to cause an injury would be responsible for the full extent of the disability, because in tort the "victim's" preconditions do not operate to diminish the consequences of the acts that cause injury. However, apportionment is the rule in workers' compensation, and this bill proposes exceptions to the normal rules of apportionment.

3) Prior legislation. In 2008, SB 1115 (Migden), and in 2011, AB 1155 (Alejo), addressed the apportionment discrimination issue in virtually the same language. Unlike AB 305, those bills would have broadly prohibited the use of the protected classes defined in the Unruh Civil Rights Act as a basis to apportion permanent disability awards. Each was vetoed by the Governor. The Veto Message to AB 1155 provided:

"This bill would state that workers' compensation injury determinations shall not include consideration of race, religious creed, color, national origin, age, gender, marital status, sex, sexual orientation, or genetic characteristics.

The courts already recognize that apportioning a disability award to any of these classifications is antithetical to our states' non-discrimination policies. The courts also recognize that apportioning to an actual non-industrial condition that contributes to causing a disability is permissible and required by the principle that apportionment is based on causation.

This bill would not change existing law as interpreted by the courts to date. This bill would, however, generate new litigation over questions of whether it is intended to change existing interpretations. At best, that additional litigation would add to employers' costs for workers' compensation. At worst, this bill AB 305 Page 3 could disturb the appropriate interpretation of existing law that is already taking shape in the courts."

AB 305 takes a different approach to the issue. Rather than addressing the use of protected characteristics, the bill proposes to prohibit precisely what the AB 1155 Veto Message notes that courts currently recognize: that apportionment to actual, factual prior industrial or non- industrial causation is acceptable. AB 305 identifies specific factors that proponents argue are inappropriate apportionment factors, and prohibits their use regardless of whether there is factual causation.

4) Case law. In an unpublished appellate decision, Vaira v. WCAB, the Court of Appeal returned a case to the Workers' Compensation Appeals Board (WCAB) because the record was insufficient to determine whether the physician had based his apportionment decision on medical facts that showed the older female claimant suffered from osteoporosis, or on the basis that the risk factor (older women face a high risk of suffering from osteoporosis) alone was sufficient to assign a percentage of the causation to osteoporosis. This decision has been broadly applied in the workers' compensation courts as establishing the following rule: a risk characteristic such as older women having a high incidence of osteoporosis, or older African American men having a high incidence of hypertension, cannot be used as a basis to apportion a permanent disability award. However, a woman diagnosed with osteoporosis that contributes to her disability resulting from the subsequent industrial injury, or an African American man diagnosed with hypertension that contributes to his disability resulting from the subsequent industrial injury, can have the disability award apportioned based on the prior nonindustrial causation. This is the rule Governor Brown alluded to in his AB 1155 Veto Message.

5) Gender discrimination. Proponents strongly argue that it is inappropriate gender discrimination to use even factual conditions that contribute to disability causation if those factors are uniquely attributable to being a woman. Thus, the policy argument is that the uniquely female gender factors addressed by the bill should simply not be used to reduce permanent disability awards. Opponents counter that the workers' compensation system is designed to require employers to pay to injured workers what the job itself caused, not what non-job factors caused.

6) Scope of problem. There is substantial disagreement as between supporters of the bill and opponents of the bill on whether or not there is a serious problem of gender-based unfairness in the workers' compensation system. Some supporters have asserted that "we see it every day" while some opponents assert that the wrongs complained of simply do not occur in the workers' compensation courts.

This issue has been presented to, and debated in, the Legislature in one form or another for at least 7 years, and there is a paucity of concrete evidence, either academic or anecdotal, to show that there is pervasive discrimination based on gender, or other protected classes. The California Applicants' Attorneys Association (CAAA), in its letter in support of the bill, cites several examples of cases where women are alleged to have suffered unfair treatment by the system. Without getting into too much case-specific detail, two things appear from the cited examples: first, the characteristics used to reduce permanent disability awards appear to be risk factors or broad characteristics like those the Vaira case prohibited; second, in each example, it is claimed that "the doctor determined" the offending apportionment factor. Opponents have argued that "dumb doctors" making ill-advised, discriminatory AB 305 Page 4 apportionment statements are not a basis to change the law – they are a basis for the attorney representing the injured worker to argue to a workers compensation judge that the doctor recommended an illegal or inappropriate factor that does not support apportionment. Opponents state that they are unaware of any workers' compensation judge or Workers' Compensation Appeals Board (WCAB) decision that has adopted or endorsed apportionment on the basis of the considerations cited by CAAA.

7) Contemporaneous. Recent amendments to the bill provide that, in order for the gender- related factor to be a prohibited basis for apportionment, that factor must occur "contemporaneous" with the industrial injury that is causing permanent disability. The amendment is intended to ensure that prior factual conditions that may have been associated with a prohibited characteristic may still be used for apportionment. For example, if a pregnant woman suffers a back injury due, in some factually causative way, to pregnancy, and she has an existing back injury, this prior back injury is acceptable for purposes of apportionment when she suffers an industrial back injury 5 years after her pregnancy. Or, in the case of a psychiatric injury, a sexual harassment at the hands of a college professor 5 years prior to the industrial psychiatric injury that contributes to the permanent disability would not be prohibited as a basis to apportion the permanent disability.

While acknowledging that the purpose of this amendment serves to narrow the bill, and eliminate one of the concerns that remote, but factual, prior injuries would be used to argue against legitimate apportionment, opponents fear that the language fails to accomplish that goal, and that old, factual injuries will still be used to argue against apportioning job-related disability for non-job-related factors. This is a consistent theme in opponents' objections to the bill – that much of the practical effect of the bill will be to establish vague and uncertain factors that cannot be used to apportion permanent disability, with a resulting substantial increase in frictional litigation costs.

In this regard, it is important to note how courts treat legislative enactments that add new language to statutes. One of the most important rules of statutory construction is that "significance should be given to every word, phrase, sentence and part of an act" and that the Legislature does not engage in idle acts or adopt words that are mere surplusage. Thus, when the Legislature chooses to use certain words in a statute, the courts will assume that something specific was meant by those words, and seek to ascertain what that meaning is. From the opponents perspective, the addition of the "contemporaneous" amendment will enable a broad range of litigation in an effort determine what the Legislature intended.

In addition, this concern about how courts will interpret other terms in the bill, and the frictional litigation costs associated with those court proceedings, underpins many of the opposition's arguments with the substantive factors the bill proposes. Even those insurers and employers who profess that "we don't apportion to those factors" fear frictional expenses associated with litigants' efforts to obtain advantage by broad use of vague terms.

8) Menopause. Without question, menopause is a gender-based characteristic that ought not be used as a basis to apportion permanent disability. Opponents even state that "we don't do that." However, the effect of adding menopause to the apportionment statute causes opponents great concern. They point out that courts have held that menopause is not a disability. They also point out that there are any number of symptoms that may or may not be associated with menopause, and if any of those symptoms is associated with a factual pre- existing condition that contributes to permanent disability, there will be costly litigation AB 305 Page 5 because attorneys would be duty-bound to pursue the argument that menopause, and not the symptom, is the actual basis for the proposed apportionment.

9) Pregnancy. As with menopause, it is difficult to argue that permanent disabilities ought to be apportioned due to pregnancy. Indeed, many employers and insurers argue that this is not done, nor is it allowed in the workers' compensation system. However, they point out that adding this characteristic to the statute poses problems. First, they argue that it confuses the idea of causation to injury with causation to disability. They suggest that pregnancy can contribute to injury, but it is hard to understand how it is a condition that causes permanent disability. However, by adding pregnancy to the apportionment statue, uncertainties are created that will cause extended litigation to determine the precise meaning of the statutory change.

10) Osteoporosis. Osteoporosis presents a fundamental difference of perspective as between proponents and opponents. This is a predominantly (although not exclusively) female medical condition involving loss of bone mass, and the resulting risk of broken bones and other complications. Proponents argue that it is fundamentally wrong to reduce a woman's permanent disability award for a physical injury that occurs on the job due to this inherently gender-specific causation factor. Opponents, on the other hand, argue that it is fundamentally wrong to require employers to pay for disability that is factually unrelated to employment.

11) Psychiatric injuries. Psychiatric injuries, and the addition of sexual harassment as a prohibited apportionment factor for psychiatric injuries, poses some unique issues in addition to the issues associated with physical injuries.

First, due to the "contemporaneous" element of the current version of the bill, it appears that sexual harassment cannot be used to apportion a permanent disability caused by a psychiatric injury, but this sexual harassment must be contemporaneous. Most logically, the psychiatric injury would have to be caused by a sexual harassment. If that is the case, then it is difficult to understand how the sexual harassment could operate to reduce any permanent disability. On the other hand, if the psychiatric injury is not caused by the sexual harassment, but by some other stressor that causes psychiatric injury, it is difficult to understand how a contemporaneous sexual harassment would be involved.

Second, but partially related to the first point, psychiatric injuries are treated differently than physical injuries in at least two significant ways: 1) in order to qualify for compensation, the psychiatric injury must be predominantly work caused, and 2) psychiatric injuries that are not the primary injury, but rather are consequences of the primary injury, are no longer included in the total PD calculation. Opponents argue that all of these uncertainties, coupled with the unique way the law treats psychiatric injuries, will inevitably lead to costly litigation. In making this argument, the opposition asserts that they are in no way seeking to justify an employer that commits or allows sexual harassment in the workplace. Nonetheless, they find it difficult to understand exactly how the bill changes the law, and thus have the concerns noted above.

12) Breast cancer. Breast cancer is the one aspect of the bill that has nothing to do with apportionment. Rather, the bill prohibits giving a lower PD rating to a woman based on the "sequelae" associated with breast cancer as compared with the sequelae associated with prostate cancer. ("Sequelae" means pathological conditions resulting from a disease.) This AB 305 Page 6 would be a public policy judgment that the permanent disability "value" associated with breast cancer (women) should be the same as the permanent disability "value" associated with prostate cancer (men). In essence, it would be a public policy judgment that these two cancers have comparable effects on their respective victims.

The 2004 workers' compensation reform (SB 899 (Poochigian), Statutes 2004, Chapter 34) sought to reduce the subjectivity of the permanent disability system, and replace it with a more objective method of determining PD. One of the ways SB 899 sought to accomplish this goal was to adopt the AMA Guides as the basis for calculating the level of impairment caused by industrial injuries. The underlying premise was that objective, scientific evaluations and determinations of the consequences of various disabling conditions ought to displace the prior system which relied upon subjective evaluations and litigation, with judges making the final determinations. The AMA Guides are used in a number of states as the best source of objective, medically expert-based classifications of impairment.

AB 305 proposes, with respect to breast cancer, to replace the judgment that went into the AMA Guides with a public policy judgment that equates two different conditions that proponents argue are similar as a matter of public policy. Opponents object that this entry into subjective policy judgments is a slippery slope that will, eventually, undermine the AMA guides as arbiter of objective evidence-based medical impairment evaluations.

REGISTERED SUPPORT / OPPOSITION:

Support

9to5 California, National Association of Working Women American Federation of State, County and Municipal Employees (AFSCME), AFL-CIO CA Conference Board of the Amalgamated Transit Union CA Conference of Machinists California Applicants' Attorney Association (CAAA) California Nurses Association (CNA) Engineers & Scientists of California International Longshore & Warehouse Union Professional & Technical Engineers The Teamsters UNITE-HERE, AFL-CIO Utility Workers Union of America

Opposition

Acclamation Insurance Management Services (AIMS) Allied Managed Care (AMC) ALPHA Fund American Insurance Association Association of California Insurance Companies California Chamber of Commerce California Coalition on Workers' Compensation California Grocers Association California League of Food Processors California Manufacturers and Technology Association AB 305 Page 7 California Newspaper Publishers Association California Retailers Association California State Association of Counties CSAC Excess Insurance Authority Independent Insurance Agents and Brokers of California Workers' Compensation Action Network

Analysis Prepared by: Mark Rakich / INS. / (916) 319-2086