Battle Builds Over Workers’ Comp

It was an inspirational moment, even for a roomful of lawyers.

Richard Wooley recalls the moment when he and about 1,200 fellow attorneys, all of whom make their living representing injured workers, jumped to their feet during a luncheon at Rancho Mirage last month as celebrity political strategist James Carville called them to action in his trademark Louisiana drawl.

Carville urged the buttoned-down members of the California Applicants’ Attorneys Assn. to “do whatever it takes” to fight Gov. Arnold Schwarzenegger and business allies who want to reduce workers’ compensation insurance premiums paid by companies.

“Don’t let the powerful take away medical care and benefits for people hurt on the job,” the onetime advisor to President Clinton told the crowd, according to Wooley and others who were there. “Take out the envelopes. Where it says ‘Pledge,’ mark ‘Yes.’ Don’t write three figures, but four or more.”

Carville’s speech, for which he was paid $20,000, yielded about $2.4 million in checks and pledges for donations, Wooley said. For the lawyers in the room, it was “a good investment.”

The reason: Schwarzenegger is asking the Legislature, which passed a workers’ comp reform package last fall, to clamp down harder on the rising costs and skyrocketing insurance premiums bedeviling the $29-billion-a-year system. The governor wants, among other things, claims handling to be streamlined and barriers erected to make lawsuits more difficult to file.

Time is of the essence, Schwarzenegger says -- to save jobs, to keep firms from fleeing the state and to rebuild the recession-racked economy. The Republican governor has vowed to take his proposal “directly to the people” through a November ballot initiative if the Democratic-controlled Legislature doesn’t act by March 1.

For their part, labor leaders and the lawyers who help workers’ comp applicants navigate the system’s bureaucracy are determined to protect what they contend are important worker rights; lawyers also may be motivated by the prospect of losing fees if reforms lighten their caseloads. Wooley, immediate past president of the attorneys group, hopes Carville’s cheerleading will spur members to bankroll the opening round of what may turn into a classic California initiative fight.

“We have to prepare ourselves now,” Wooley said, “because if we wait until [the initiative] is coming down our throat, it will be too late.”

Industry also is suiting up for combat. The California Chamber of Commerce and the California Manufacturing and Technology Assn. are threatening to back a ballot initiative that would closely mirror Schwarzenegger’s bills in the Legislature.

And supporters of three competing workers’ comp ballot measures, including the Small Business Action Committee, the Independent Business Coalition and Grimmway Farms, a big Kern County carrot grower, have begun to unite behind one measure that would implement most of the governor’s program of cost controls and premium reductions. They have amassed a $1.6-million start-up war chest to pay for collecting the 598,105 signatures of registered voters needed to put a proposed state constitutional amendment on the ballot.

Joel Fox, a veteran initiative warrior who heads the Small Business Action Committee, anticipates that his side would have to spend at least $20 million to get a workers’ comp reform ballot measure passed. He reckons that opponents, mainly attorneys and labor unions, would spend just as much.

“It’s a gathering storm,” said state Sen. Chuck Poochigian, a Fresno Republican who is sponsoring the governor’s reform proposal in the Legislature and hopes to head off a ballot-based brawl.

A legislative stalemate could mean that Californians are in for “one of the larger initiative battles that this state has ever seen,” said Mark Baldassare, research director for the Public Policy Institute of California, a San Francisco think tank.

The conflict could rival the blockbuster ballot contests over automobile insurance in the late 1980s and Indian gambling in the late 1990s. The 1998 combat over the opening of casinos on Indian tribal lands cost both sides close to $100 million, making it the most expensive initiative campaign in California history.

Lobbying budgets already are strained by a flood of ballot measures -- 26 are circulating and another 26 are being teed up in the attorney general’s office.

The state Chamber of Commerce has its hands full and its pocketbook committed to pushing for the repeal of a law requiring employers to pay for workers’ health insurance. It’s also gearing up to fight proposed initiatives that would raise commercial property taxes and put surcharges on telephone bills, while promoting its own ballot measure to limit the ability of attorneys to file unfair-competition suits.

Waging a workers’ compensation campaign on top of all the others would make for “an expensive war” for the chamber in the upcoming initiative season, said Allan Zaremberg, the group’s president. But he said the chamber had no intention of shying from a fight.

Workers’ comp insurance premiums in California are about twice the national average and rising quickly. The cost of the insurance is “the No. 1 issue for job creation” in California, Zaremberg said.

A campaign surely would be rife with expensive and emotional TV spots, featuring maimed workers, greedy attorneys and rapacious insurance companies.

Stanley Zax, chairman of Zenith National Insurance Corp., a Woodland Hills carrier that is the state’s second-largest private workers’ comp insurer, sees it degenerating into “the pro-business side talking about jobs, progress and tax receipts, and the other side showing pictures of workers being screwed by the system.”

The two sides differ on how to fix the system. But they agree, at least publicly, that an all-out initiative war would best be avoided. To do that would require a partisan, often dysfunctional Legislature to resist high-pressure lobbying from the myriad groups with an interest in the outcome.

So far there hasn’t been much action in Sacramento.

The governor’s office has held one so-called stakeholders’ meeting, in mid-January, with about 60 lobbyists and interest group executives. They didn’t make any progress, participants say. Labor leaders confirm that they’re holding low-key talks with unnamed companies that they say want to head off a costly and risky initiative contest.

State Insurance Commissioner John Garamendi is working to drum up support for his own compromise, which he said “protects employers from liability and compensates injured workers equitably and efficiently.”

Christine Baker, the director of the state-funded California Commission on Health and Safety and Workers’ Compensation, a research panel, is shopping her own proposal that would create a two-tiered system of benefits designed to get injured employees back on the job more quickly.

“There’s a lot of huffing and puffing going on,” said Garamendi, who wants the issue resolved by March 31 so he can issue recommendations to insurers to lower rates for workers’ comp policies that renew July 1.

But getting the half a dozen or more workers’ compensation players to endorse Schwarzenegger’s concept of “comprehensive reform” is like “five blind men agreeing [on the shape] of a couple of elephants,” Wooley said.

Whether reform is pursued in the Legislature or in the voting booth, the differences between the two sides on the arcane details of the state’s 101-year-old workers’ compensation system are stark.

Business wants to save money by eliminating what it sees as unnecessary medical care and making it harder to prove that injuries actually occurred at work. Changes would be made in the way compensation cases are handled by judges, tilting the balance away from workers, and independent panels would be created to review treatment plans.

Labor groups contend that reforms passed last year already address the issue of unneeded care. Moreover, they say, increasing the burden of proof and other business-based changes could transform workers’ comp from a “no-fault” system to a tort-based one, leading to an explosion of expensive lawsuits.

Trying to resolve these issues by way of an overheated initiative campaign could prove problematic for business, said Thomas Rankin, president of the California Labor Federation.

“Even if they win, nothing would be implemented until July 2005, and it would be litigated for God knows how long,” he said. “Or they could try to work something out [in the Legislature] that is reasonable and not going to hurt injured workers and try to get it in place by July 2004.”

For their part, business interests appear ready to make that bet.

“The shooting is going to start,” said Fox of the Small Business Action Committee. “For the health of the California economy, we need to make this reform.”

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Workers’ Comp: The Players

Here are some key figures in the battle over reform of California’s workers’ compensation insurance system.

State Sen. Richard Alarcon: The Sylmar Democrat chairs the Labor and Industrial Relations Committee and is a leading advocate for workers’ comp reform in the Legislature.

Joel Fox: The Los Angeles political consultant, who has long experience running initiative campaigns, is readying a workers’ comp ballot measure if legislative reform efforts fail.

State Sen. Chuck Poochigian: The Fresno Republican is sponsoring the Schwarzenegger administration’s workers’ comp reform proposal.

Thomas Rankin: The president of the Oakland-based California Labor Federation is pressing for “reasonable” legislative reforms that would protect workers’ benefits.

Gov. Arnold Schwarzenegger: The governor wants a “comprehensive” reform package to protect businesses and save jobs. He’s using the threat of an initiative to pressure lawmakers to act on his proposed reforms.

Richard Wooley: The Pomona resident is immediate past president of the California Applicants’ Attorneys Assn. He is urging the group to raise money to fight Fox’s initiative if it makes it to the ballot in November.

Allan Zaremberg: The president of the Sacramento-based California Chamber of Commerce is a leader in businesses’ efforts to revamp workers’ compensation this year.

Stanley R. Zax: The president and chief executive of Zenith National Insurance Corp. of Woodland Hills is using his bipartisan political clout to lobby lawmakers, warning that insurance companies will leave the state is they can’t profitably sell workers’ comp coverage.

Times research