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Workers Compensation

Workers Compensation: The Biggest Issue For Employers

When asked what they would tell Gov. Schwarzenegger to do differently, the majority of survey respondents mentioned workers compensation.

“Workman's compensation is out of hand and the cost is too expensive--not only for the owner, but for the employees too,” one respondent said. Another commented, “Number one, they still need to overhaul workman's compensation, the rates are too high, and we are too regulated.”

The California State Fund, a non-profit, public enterprise fund that operates like a mutual insurance carrier, is in effect the only option for state employers; for-profit carriers say that high costs, fraud and red tape make it impossible to operate here profitably. But despite the highest rates in the nation, business advocates say the State Fund serves neither employers nor employees well; injured workers stay off the job longer and receive less compensation than in most other states.

“The rates have simply become insane,” said Robert Flick, owner of California Carpets, a $12 million carpet business employing 35 people. “Between workers compensation and other taxes, the burden is 32% of payroll. Some of my competitors cope by simply not putting people on payroll. Those of us large enough to be forced to comply are at a huge disadvantage in competitive pricing.”

Worse than the high rates, employers say, is the fact that the rate you are paying might be revised upward retroactively—leaving you owing thousands of dollars or more.

One employer who asked to remain anonymous said his $25 million East Bay commercial general contracting business just finished a year-long battle with the state over reclassification of ten of its employees.

“Twice in the past they agreed with us that the workers should be classified as ‘executive supervisors',” he said. “Then--same people, same jobs, same company doing the same work—the State Fund came in, conducted a three-year audit and decided to reclassify our workers. The rates went up retroactively—and they wanted to collect it going back three years. I can’t go back and bill my clients more for the jobs our workers did three years ago, but the state can come in and arbitrarily increase my cost of doing business for that period.”

Fortunately, he had the resources to fight. Many businesses don’t, unfortunately.

“Who has time for this kind of distraction?” he asked. “Yet, if you don’t fight, you can be put out of business. If you have a dispute you just have to fight it as hard as you can.”

If you’re an employer who wants to become active in calling for changes in California’s workers compensation program, you may want to log on to the California Chamber of Commerce Website, www.calchamber.com where various legislative initiatives under consideration are described.

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