Disability formula arbitrary, judge says

SACRAMENTO —  Lawyers for injured workers Friday claimed a major victory after a judge ruled that the state’s formula for calculating permanent disability benefits was arbitrary.

The decision came amid a rising clamor from advocates for injured workers, labor unions and Democratic leaders of the state Legislature over a landmark overhaul of California’s once-troubled workers’ compensation insurance system. Critics charge that the 2004 law has slashed benefits to people injured on the job even as it boosted the bottom lines of employers and insurance companies.

In a ruling issued this week and made public Friday, a Workers’ Compensation Appeals Board judge in San Francisco found that the administration of Gov. Arnold Schwarzenegger did not base its schedule of benefits on empirical evidence, such as lost future wages.

Judge Jacqueline C. Duncan concluded that permanent disability regulations issued by the state in January 2005 violated a law that the business community considers the signature achievement of Schwarzenegger’s first term.

The opinion, which is expected to be appealed to the full board, marks a first major win in court in a two-year-long effort by opponents of the Schwarzenegger regulations that, according to some studies, reduced payments to permanently injured workers by 50%.

“This is the first time they’ve gotten a judge to rule on the merits that the schedule is invalid,” said Lachlan Taylor, a workers’ compensation judge and a researcher at the state-backed Commission on Health and Safety and Workers’ Compensation in San Francisco.

The Schwarzenegger administration, however, called Duncan’s ruling flawed and said it might be in conflict with a recent decision by a higher panel, the Workers’ Compensation Appeals Board.

“We continue to maintain that the permanent disability schedule was constructed in compliance with the law,” said Susan Gard of the California Division of Workers’ Compensation.

The judge’s ruling, if upheld, could boost efforts by statehouse Democrats to pass legislation to boost permanent disability payments.

“Injured workers are suffering with what I think are tremendous uncompensated losses from a schedule I believe is arbitrary and not following the mandates of the labor code,” said Linda Atcherley, president of the California Applicants’ Attorneys Assn. “We’re trying to get a legislative fix to increase permanent disability benefits so that they are adequate.”

To that end, aides to Assembly Speaker Fabian Nunez (D-Los Angeles) and Senate President Pro Tem Don Perata (D-Oakland) held a first meeting Friday with representatives of labor unions, attorneys for injured workers, large employers and insurance companies in hopes of crafting legislation that would increase disability benefits without driving up costs for business.

Many business groups, however, remain skeptical of any type of legislative tinkering. Jerry Azevedo, a spokesman for the Workers’ Compensation Action Network, denounced the latest legal challenge as “another example of a concerted effort by the applicants’ attorneys to undermine the 2004 workers’ compensation reforms.”

marc.lifsher@latimes.com