Summary of Amendments to the Michigan Workers' Disability Compensation Act

as Amended, December 19, 2011

Governor Snyder signed the amendments to the Michigan WDCA on December 19, 2011. The bill was given immediate effect. The amendments apply to injuries that occur on or after December 19, 2011.

There were a number of changes, some of which will affect the adjuster’s claim handling on a daily basis, weekly basis or yearly basis.  Some non-substantive changes were of a corrective or grammatical nature.


Independent Contractors

The 2011 amendments added several additional provisions that become effective on January 1, 2013. On and after 1/1/2013 to determine if an employer-employee relationship exists we are to look to the 20-factor test used by the United States Internal Revenue Service. (See Revenue Ruling 87-41, 1 C.B. 296). Additionally if the employer is required to withhold Federal Income Tax this would be prima facie evidence that an employment relationship exists. After 1/1/2013 a business entity may ask for a ruling from the Michigan Administrative Hearing System on an individual case Basis.


Board of Magistrates

The Qualifications Advisory Committee (QAC) has been abolished.  The Governor has the sole power to appoint Magistrates.  The only pre-qualification is the individual has been licensed to practice law in the State of Michigan for at least five years.  The Magistrates are evaluated by the Director of the Agency and the Chief Magistrate on an annual basis.  The Governor has the power to remove the Magistrate based upon their recommendations or what the Governor considers to be a neglect of duties.

The Magistrates are appointed to four year terms and may be reappointed without term limitations. (This eliminates the prior 12 year term limitation)


Wage-Earning Capacity

Under the prior § 301(4)(b), “wage-earning capacity” means the wages an employee “is capable of earning” at a job reasonably available to him or her.  The legislature added language “…whether or not wages are actually earned.”  The amendments place an affirmative duty on the employee to seek work that is reasonably available and that a Magistrate may consider a good faith job search in determining that availability.

The employee must:

1.               Disclose his/her qualifications and training, including education, skills and experiences, whether or not they are relevant to the job the employee was performing at the time of his or her injury.

2.               Provide evidence as to the jobs, if any, he or she is qualified and trained to perform within the same salary range as his or her maximum wage earning capacity at the time of the injury.

3.               Demonstrate that the work related injury prevents the employee from performing jobs identified within his or her qualifications and training paying maximum wages.

4.               If the employee is capable of performing any of the jobs identified above, they must show that they cannot obtain those positions.

The Act requires a showing of a good-faith effort to procure post-injury employment on the part of the employee.

The burden then shifts to the defense to refute the employee’s testimony. Therefore, the Act now provides a right of discovery to the employer “if necessary for the employer to sustain its burden and present a meaningful defense.”  The employee may then present additional rebuttal evidence.

Under § 301(8) of the new amendments, if the disability is partial, the employer is responsible for 80% of the difference between the after-tax AWW at the time of the injury and the employee’s “wage-earning capacity after the injury.”  In figuring this differential, we use the new definition that includes what the employee actually earns as well as what he or she is capable of earning.

Police/Firefighters Exception - the wage-earning capacity standard is different for police and firefighters under § 302.  It omits the language contained within § 301 that defines wage-earning capacity as the capability of earning wages “whether or not actually earned.”  We will determine the full impact of that omission from the Michigan courts in the months and years ahead.


Aggravation of Pre-Existing Conditions

§ 301 adopted the language from the Rakestraw case relative to aggravation:

A personal injury under this Act is compensable if work causes, contributes to or aggravates pathology in a manner so as to create a pathology that is medically distinguishable from any pathology that existed prior to the injury.

Prior to the amendments mental disabilities and conditions of the aging process, including heart and cardiovascular conditions were the only conditions or injuries that were subject to the “significant manner” test. The amendments have added the term “degenerative arthritis” as a condition of the aging process subject to this additional standard of proof. This is a significant change which could have a major impact on cases as we deal with an aging workforce.

Mental disabilities were further defined with the addition of the following language:

…and if the employee’s perception of the actual events is reasonably grounded in fact or reality.

We expect the new language requiring perceptions to be “reasonably grounded in fact or reality” will be further clarified by the Michigan courts in the coming years.


Favored Work

The 2011 amendments state in 301(9) (b) “If an employee is terminated from reasonable employment for fault of the employee, the employee is considered to have voluntarily removed himself/herself from the work force and is not entitled to any wage loss benefits under the act.” It appears from this language that the forfeiture of wage loss benefits is permanent. Please note that medical and other benefits are not forfeited, only “wage loss” benefits. Reasonable medical care is still required.

If the employee after being employed doing “favored or accommodated” work loses his/her job through no fault of the employee and if the employee is still disabled they are then entitled to benefits as follows: if the favored work was less than 100 weeks then you are required to reinstate wage loss benefits. If the favored work lasted longer than 100 weeks but less than 250 weeks the 2011 amendments state that the employee must first exhaust their unemployment benefits and then there is a rebuttable presumption that they have established a new wage earning capacity. Benefits are to be reinstated but based upon the new wage earning capacity and not the original wage at date of injury. The burden is upon the employee to file a petition to prove that he/she has not established a new wage earning capacity. Note that this is a complete switch of the burden from the prior law. As indicated above under the prior law if the favored work was for less than 100 weeks the presumption was that the employee had not established a new wage earning capacity and the employer had the burden of going forward with proof that a new wage earning capacity had been established.

If the favored work is for more than 250 weeks there is a presumption that a new wage earning capacity has been established. It appears from the language of the new amendments that this presumption is “non- rebuttable”.

These are significant changes from the old law relative to favored work. Before the 2011 amendments fault was not a factor in less than 100 week cases and the act stated benefits “shall” be reinstated. Now that is true only if the employee was not at fault in losing his/her job. Under the old law the rebuttable presumption was that a new wage earning capacity had not been established and the burden was on the employer to prove otherwise. Under the 2011 amendments the reverse is true.


Medical Care and Treatment

§ 315 Allows the employer/carrier to direct treatment for 28 days “from the inception of medical care.”  As in the prior act, there is a provision which allows the employer/carrier to file a Petition with the Board of Magistrates objecting to the employee’s choice of physician “for cause.”  The Magistrate will have the power to order treatment discontinued if “good cause” is shown. This type of hearing should have “60 day” rush status.


Rehabilitation Hearings

Rehabilitation hearing determinations will now be appealed directly to the appellate commission as opposed to the Board of Magistrates. This means that future rehabilitation hearings will need to be conducted “on the record.”


Dependency and Coordination

The amendments have removed the “conclusive presumption” that an injured employee’s wife is a dependent.  Also, if an employee is already receiving old-age social security benefits at the time an injury occurs, the coordinated social security reduction under § 354 cannot lower the weekly workers’ compensation rate below 50% of the full benefit rate that would be in place if the individual was not on social security.  The employer may take a credit for old-age social security or pension benefits regardless of whether the employee is receiving those benefits.  However, they cannot be forced to apply for a pension or old-age social security.


Specific Loss/Trammel

One final significant amendment considered specific loss benefits and the standards outlined by the recent decision in Trammel v Consumers Energy. The amendments state that the effect of the joint replacement “shall be considered” is determining whether a specific loss has occurred.  Under Trammel, the standard revolved around the “pre-corrected” state.  It is not retroactive and all pending cases will be evaluated under the old Cain II standard.


Miscellaneous

The inconsistencies between Chapter 3 and Chapter 4 have been eliminated.

There were several amendments to the section covering professional athletes. Basically, these changes prohibit the filing of petitions in multiple states.

There were some final administrative changes regarding subpoenas, redemption hearings and mediation that are still being developed.  We expect guidance from the Agency and/or publication of new rules on how these procedural changes will be implemented. Mediation will be eliminated and the mediators transferred.  Future mediations will be conducted by a Magistrate.