You Should Know: Iowa workers compensation reform

July 24, 2017
| United States

On March 30, 2017 Iowa Governor Terry Branstad signed a comprehensive workers compensation reform bill which will go into effect on July 1, 2017.

The amendments to the statute summarized here apply to injuries occurring on or after the effective date and are not retroactively applied to prior injuries.

In spite of the concessions made in the final version, the new law should have significant benefits to employers/insurers, which will ultimately lower workers compensation costs in Iowa. Following is a summary of the changes:

  • Intoxication defense strengthened — Shifts the previous law which required the employer/insurer to prove intoxication was the proximate cause of a workplace injury. The employee now has the burden to prove that the intoxication was not the primary cause of the accident/injury if the alcohol or drug was either not prescribed by an authorized physician or was not being used in accordance with the prescription.
  • Notice of injury — Requires notice to the employer of an injury within 90 days after the injury or 90 days after the date the employee knew or should have known the injury to be work-related.
  • Refusal of suitable job offer grounds for discontinuance of wage loss benefits — If the employer offers the employee suitable work and the employee refuses to accept the suitable work offered by the employer, the employee is not entitled to wage loss benefits during the period of the refusal. The employer must communicate an offer of temporary work to the employee in writing, including details of lodging, meals and transportation.
  • Payment of permanent partial disability (PPD) benefits — Initiation of PPD benefits must occur when the employee is deemed at maximum medical improvement (i.e., end of healing), and the extent of PPD can be determined based on the American Medical Association (AMA) guide, 5th edition.
  • Permanent partial disability for shoulder injuries — Shoulder injuries were previously rated as a percentage disability to the body as a whole. The statute now quantifies the shoulder as a specific body part based on a percentage of 400 weeks. In contrast, whole body ratings were based on a percentage of disability according to the AMA guide at 500 weeks. More importantly, loss of earning capacity or industrial disability is no longer allowed for shoulder injuries.
  • Industrial disability — For whole person PPD ratings, the statute now stipulates that eligibility for industrial disability is not allowed if the employee returns to work or is offered work for which the employee receives or would receive the same or greater earnings than at the time of injury. Subsequent termination from employment is grounds for reopening a claim for industrial disability with the commission.
  • Pre-existing injuries or conditions — Employers/insurers are not liable for compensating an employee’s preexisting disability that arose out of and in the course of employment with a different employer or from causes unrelated to employment.
  • Vocational re-training program — Maximum benefit of $15,000 for participation in a vocational training program if the employee is unable to return to gainful employment.
  • Plaintiff attorney’s fees — Plaintiff attorneys cannot recover fees for legal services based on the amount of compensation voluntarily paid or agreed to be paid to an employee by the employer/insurer. Fees are now based upon benefits paid which would not have been paid but for the attorney’s involvement.

Not surprisingly, we expect that employers could see an increase in the number of reported injuries prior to the effective date of these changes and should be prepared to investigate and document reported claims.

As with all statutory amendments, changes will almost certainly be challenged in the courts and subject to judicial review and interpretation. For these reasons as well as the subjective nature of some of the changes, it is difficult to estimate the potential savings to employers and insurers in Iowa. Notwithstanding the above, adding a process for discontinuing wage loss benefits based on the employee’s refusal of a suitable temporary job offer will make it extremely important for employers to follow closely the requirements in the statute.

Removing shoulder injuries from whole body permanent partial disability ratings and consequential industrial disability will almost certainly reduce benefits for this category of injuries. However, it will likely increase the potential that employees will claim broader injuries (i.e., neck) in an effort to counteract the statutory limitations. Employers should temper expectations about the full impact of the amendments to the statute regarding shoulder injuries until some actual cases have gone through judicial review and interpretation.

As with temporary job offers, the limitations on industrial disability for permanent job offers which would return the employee to pre-injury earnings will be equally important to limiting the employer’s and insurer’s potential liability. This is perhaps the most interesting and positive amendment to the statute for employers and yet one of the most speculative. For example, how long does an employee have to reopen a claim for industrial disability following maximum medical improvement, return to work and payment of an impairment rating? If an employee is laid off due to an economic downturn 20 years after closure of a workers compensation claim where he/she received permanent restrictions, can they make a case for industrial disability and have the matter reopened with the commission? It will likely take some time for many of these types of questions to be answered. While the addition of this language to the statute is certainly positive for employers, it will require diligence and attention to detail on the part of employers and adjusters in terms of documentation.

We are following these changes closely and how they impact our clients.

Additional references