HOUSE BILL REPORT

ESB 5510

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

Background:

Under the state's industrial insurance laws, workers who, in the course of employment, are injured or disabled from an occupational disease are entitled to benefits. Depending on the disability, workers are entitled to medical, temporary time-loss, and vocational rehabilitation benefits, as well as benefits for permanent partial and total disabilities.

Monthly temporary time-loss and permanent total disability benefits provide partial wage replacement to the worker. The amount of benefits is based on the worker's pre-injury wages from all employment and depends on the worker's marital status and number of children. An unmarried childless worker with no children receives 60 percent of the worker's wages, while a married childless worker receives 65 percent of the worker's wages. The percentage is increased by 2 percent for each child, up to a maximum of 10 percent. The monthly benefit is capped at 120 percent of the state's average monthly wage, as determined by the Employment Security Department.

The statutory definition of wages includes health benefits; bonuses; the reasonable value of room, board, fuel, or similar considerations; and tips to the extent they are reported to the employer for income tax purposes. For seasonal and part-time workers, monthly wages are determined by using total wages earned, including overtime, from all employment in any 12-month period which represents the worker's employment pattern, and dividing the total by 12.

Workers receive an annual cost of living adjustment.

Summary of Amended Bill:

The Department of Labor and Industries (Department) must convene a benefit accuracy working group under the industrial insurance system no later than August 1, 2015. The working group must focus on improving the accuracy, simplicity, fairness, and consistency of calculating and providing wage replacement benefits. Overall reductions in benefits levels may not be considered. Working group members are appointed by the Director of the Department and consist of two members each representing labor and employers, and at least two members representing the Department.

The working group must report to the appropriate legislative committees by February 1, 2016, and September 1, 2016, and the provision expires on December 31, 2016.

Staff Summary of Public Testimony:

(In support) This is an important issue that has been around for years. Wage calculation has an immediate impact to employers and employees and the current system is unfair to both. The current wage calculation is complicated and confusing and results in substantial litigation. The same person can come up with a different result when doing the calculation a second time. The laws have not been dealt with since the 1970s and don't account for new wage methods. Because of the complexity of this issue, a study is warranted. Improving wage calculation will give claim managers more time to work on the nuts and bolts of claims. Having a working group outside the Legislature is a new approach to de-escalate the politics around this issue. The amendment on the books is supported. The bill's model of bringing stakeholders together has worked in the past.

(With concerns) The bill is going in the right direction but does not recognize possible administrative solutions. The language implies there is a problem. The calculation of wages can be complex because of how a person's pay is structured and a perfect system is not possible.

(Opposed) None.

Persons Testifying: (In support) Senator Braun, prime sponsor; Bob Battles, Association of Washington Business; Kris Tefft, Washington Self-Insurers Association; and Carolyn Logue, Northwest Grocery Association.

(With concerns) Joe Kendo, Washington State Labor Council; and Michael Temple, Washington State Association for Justice.