Senator Flanagan Announces Agreement Designed To Benefit Both Workers And Employers

John J. Flanagan

February 28, 2007

Senator John Flanagan (2nd Senate District), a member of the Senate Labor Committee, today announced a newly reached agreement that will enhance the rights of the New York State workforce. The landmark agreement, which is supported by the leaders of the Assembly and the Senate and Governor Eliot Spitzer, will reform the state’s workers’ compensation system by providing greater benefits for workers and reducing related costs faced by job creating businesses throughout the state.

"The workers of our state deserve to know that New York is working for them. These men and women are the driving force of our economy and we need to demonstrate that we will be there when they need us. This agreement will strengthen that commitment while reducing the burden faced by employers and I applaud all involved for working together to get this done," stated Senator Flanagan.

"This is a remarkable win-win situation for both workers and employers," said Governor Spitzer. "Thanks to the cooperation of legislative leaders and staff, and with constructive input from business and labor, we’ve developed an approach that will achieve the twin goals of helping injured workers and improving the state’s competitiveness."

Under the agreement, benefits for injured workers will be increased for the first time in more than a decade. This increased benefit for the workers will be accompanied by an estimated billion dollars in savings for the businesses of our state. These employer costs, which are among the highest in the nation, will be reduced by 10 to 15 percent with savings to grow over time.

The key elements of the comprehensive reform package are:

-The maximum weekly benefit for injured workers will be increased from $400 to $500 in the first year, $550 in the second year, $600 in the third year, and to two-thirds of the average weekly wage in New York in the fourth year. Once the maximum benefit reaches two-thirds of the average weekly wage, the maximum benefit will be indexed annually;

-The minimum weekly benefit will be increased from $40 to $100;

-Cost savings worth hundreds of millions of dollars will be achieved by setting maximum number of years that a small percentage of claimants can receive cash benefits. To make sure that these workers are protected, medical services will continue and a safety net will be established to help these workers return to gainful employment and to intervene in cases of extreme hardship;

-Innovative programs are being established to get workers prompt medical treatment and to help them return to work;

-Strong antifraud measures will be in place, including the ability to stop work on a job site where a company has failed to purchase workers’ compensation insurance for its workers, higher criminal penalties for violators and debarment provisions;

-The Second Injury Fund that is now financed by employers will be closed. This extremely costly fund was initially set up to help injured Word War II veterans, but has been used by some insurance carriers as a costly loophole to avoid paying claims; and

-The Compensation Insurance Rating Board, which helps determine workers’ comp costs for employers, will sunset as of February 1, 2008. The Superintendent of Insurance will make a recommendation to the State Legislature in September 2007 as to what, if anything, should replace it.

"This is a major step toward reducing the cost of doing business in New York State. It is a big win for improving our economic climate, especially Upstate," said Kenneth Adams, President of the Business Council of New York.

"The New York State AFL-CIO is proud to have been part of the process and is immensely pleased with this agreement. Labor, business and political leaders joined together to forge an historic agreement for the common good of injured workers, the business community and all New Yorkers," stated Dennis Hughes, President of the AFL-CIO. "This agreement not only addresses some of the most pressing needs and concerns of injured workers, but immeasurably improves a system long believed to be broken beyond repair. The New York State AFL-CIO is deeply indebted to Governor Spitzer and the leaders for their dedication throughout this process."

As part of the negotiated reform package, the Superintendent of Insurance has been directed to make sure that these savings are captured in premium rate reductions, beginning in the next rate setting cycle that concludes this July. This will require the Superintendent to engage the insurance industry on this subject in a way never done before.

As the reforms phase in, reductions in premiums and assessments related to the Second Injury Fund are expected to reach double digit levels, providing significant relief to New York’s business community, particularly small employers for whom such costs have been a major impediment.

In addition, after close consultation with the legislature, the Governor has directed the Superintendent of Insurance along with appointees of the legislature, business and labor to work with the Workers Compensation Board, the Department of Labor and legislative Task Forces to pursue a number of additional reforms administratively and to make recommendations about additional legislation.

These important initiatives include:

-Gathering data on system costs. For years, the legislature and the public has had to struggle to understand the costs and the outcomes of the workers compensation system. There will now be transparency;

-Designing an expedited hearing process to reduce litigation and speed the time it takes for workers to receive treatment and return to work; and

-Designing by year-end new fact-based medical guidelines to replace New York’s current outdated system. In addition, in conjunction with the Workers’ Compensation Board, the Superintendent will design treatment guidelines and training for law judges.