2016 marked 100 years since the passage of the constitutional form of the Workers’ Compensation Act in Kentucky. The workers’ compensation legal community formed a committee to commemorate the Centennial of this important piece of legislation, with various events, activities, and presentations.
The history of the Workers’ Compensation Act in Kentucky demonstrates the efforts of our state government, within the broader context of a modern social movement toward safety and fairness in the workplace, to balance the interest of individuals and society in protecting workers against the need for industry to manage liability for injury as a cost of doing business.
Origins of the Act
Kentucky Workers Compensation Centennial
The legal concept of compensation for injury has been traced to the Hammurabi Code, law of Ur, and ancient Arab, Chinese, Greek and Roman law, which provided for specific compensation for particular injuries. These codes, and compensation for injury in the common law, were based on fault of the liable party. During the industrialization of Europe, Otto von Bismarck passed the first modern workers’ compensation act in 1871 which provided compensation to workers for accidental injuries which occurred while working. In 1884 an industrial accident insurance act was created, that absolved employers of liability other than that provided under the insurance code. Thus began the historical compromise of guaranteed coverage of injuries without regard to fault, in exchange for limitation of liability.
The United States in the late 1800s and early 1900s saw many state governments pass workers’ compensation laws which were struck down or limited on constitutional grounds. Beginning with Wisconsin in 1911, numerous states passed comprehensive workmen’s compensation laws in the 1910s which were based on voluntary acceptance of the Acts. During that decade, a total of 43 states adopted such laws.
The earliest effort to enact workers’ compensation in Kentucky was 1912. Governor James B. McCreary, in his message to the General Assembly on January 2, stated:
"...'we favor the enactment of wise laws for the protection from accident and injury of all laborers engaged in hazardous employments...' And there should be also, an Employers Liability Law."
No workers' compensation was passed in 1912, however, and Governor McCreary again recommended such legislation in his address on January 6, 1914. He said:
"The principle, that the cost of industrial accidents must be charged to the industries causing them or owners thereof, and not be permitted to fall entirely upon the unfortunate workers, who are injured, has been recognized in many states.
I recommend that the subject of workmen’s compensation for injuries while they are actually laboring, be carefully examined and a wise and just law enacted."
A hastily drafted law was passed by March 1914. That law was modeled largely on existing Ohio law. The statute provided for a State Fund but also allowed an option for buying private insurance or carrying the risk uninsured, upon sufficient proof of solvency.
The law was put in operation in June 1914 with the creation of a Board which consisted of the Attorney General, the Commissioner of Insurance, and the Commissioner of Agriculture.
In anticipation of possible constitutional questions, the Attorney General brought a lawsuit against the Kentucky State Journal, which agreed to act as a defendant. In Kentucky State Journal v. Workmen’s Compensation Board, 161 Ky. 562, 170 S.W. 1166 (Ky., 1914), a divided court in a four to three decision held the Act unconstitutional on the basis that the Act deprived an employee of his right to recovery for injuries at common law in violation of Section 54 of the Kentucky Constitution. The law constituted a legal compulsion and was, therefore, unconstitutional. Upon rehearing, the Court clarified that the law was not unconstitutional as to employers. State Journal Co. v. Workmen’s Compensation Board, 162 Ky. 387, 162 S.W 674 (Ky. 1915).
A second attempt in 1916 set in place a system of workers’ compensation that continues to the present, under Governor A. O. Stanley. A number of changes were made to the law to address the earlier constitutional challenge. The law was made clearly elective and each employer and employee who elected to come under the act was required to complete and sign a form to be covered.
The effort to pass the law was led by Sen. Charles Knight and Rep. William Duffey. Primary opposition came from Sen. Hiram Brock.
The Act, Senate Bill No. 40, was approved March 23, 1916. Administrative provisions became effective April 1, 1916. Liability provisions were not effective until August 1, 1916.
Gov. Augustus Owsley Stanley
The 1916 Act was again challenged in the courts. This time it was upheld as constitutional in Greene v. Caldwell, et al, 170 Ky. 571, 186 S.W. 648 (Ky., 1916).
The law differed from the 1914 Act by clearly being elective on the part of the employee. It also incorporated the use of private insurance and self-insurance. The State Fund model of Ohio was rejected. The new Board also was radically different from that established by the 1914 Act. Rather than being composed of elected officials, or heads of state agencies or cabinet, the Board consisted of three members appointed by the Governor for four-year terms.
The first three members were: R. C. P. Thomas of Bowling Green, for a four-year term; S. W. Hager of Owensboro, for a three-year term; and Robert T. Caldwell of Campbellsville, for a two-year term. Caldwell’s term included the title of ex officio chairman. The members also were assigned to districts with Hager in the Central District, Thomas in the Western District, and Caldwell in the Eastern District.
Thomas and his older brother practiced law in Bowling Green. In addition to being on the first Workmen’s Compensation Board, he served as judge of the Warren County Court from 1930 to 1933 when he was appointed as District Judge for the Panama Canal Zone. After his term as judge, he returned to his law practice.
Hager previously practiced law in Ashland. In 1886, he was elected Boyd County Judge. In 1899, he was elected Kentucky State Treasurer. In 1903 he was elected State Auditor. He ran for governor in 1907 but lost. He was appointed to the Board by Governor Stanley.
Caldwell also practiced law in Ashland. However, he began his practice in Louisville in 1910 and later became an Assistant Attorney General. As Assistant Attorney General he was involved in writing the 1916 Workers’ Compensation Act. After serving as Chairman of the Workmen’s Compensation Board for two years he was an artillery captain in World War I.
The Board also chose Alexander Gilmour as secretary and Charles J. Howes as assistant secretary. Gilmour was actively engaged in the insurance field and subsequently left the Board to return to the insurance business in Louisville. Howes had been clerk of the Kentucky House of Representatives.
The Board also employed its first medical officer, Dr. Milton Board. Dr. Board practiced medicine for many years in Kentucky, including being director of the State’s Bureau of Tuberculosis.
First Workmen’s Compensation Board and staff taken in front of the Old Capitol, Frankfort, Kentucky circa 1916. Pictured in Front Row: second from left, Dr. Milton Board, Medical Officer, third from left, S.W. Hager, Board Member; fourth from left, R. C.P. Thomas, Board Member; far right, Robert. T. Caldwell, Board Member and Chairman. Also in Front Row: Secretary, Alexander Gilmour and Charles J. Howes, Assistant Secretary.
The First Workmen’s Compensation Board was active in implementing the new system. The Board also issued several published annual reports which provide detailed information on the number of injuries and claims. 13,894 injuries were reported and 5,850 agreements were approved for a total of $293,522.09 in payments. 208 formal claims were filed with the Board.
Over one-third of all injuries were attributable to the coal mining industry. The Board recommended that many employees had failed to accept the Act and were thereby deprived of its protections, and recommended that the legislature attempt a constitutional amendment to remedy this problem.
Additionally, the Board published several reports of leading decisions which provide a glimpse into the important issues presented in an emerging field of law. These decisions deal with many of the same types of issues we still encounter today, such as questions of the course and scope of employment, penalties for violations of safety rules, survivors’ benefits, and statutes of limitation.
Developments and Amendments 1927 - 1952
During this period employers and employees had to accept the provisions of the Act, and many cases turned on whether the employee had signed the employer’s register prior to his injury. Conversely, lawsuits by employees or their estates could be dismissed on proof that the employee had elected to come under the provisions of the Workers’ Compensation Act prior to injury or death.
In 1934 the General Assembly extended coverage to operators of threshing machines and for deaths due to inhalation of “bad air”. This amendment also specified that employers and employees engaged in operations which caused diseases such as silicosis could voluntarily subject themselves to the Act. The 1944 session extended compensation benefits to include any employer and their employees. Prior law had exempted employers with fewer than 3 employees.
Amendments were made to the provision of medical expenses for accidents at work. The original 1916 Act stated that medical could not exceed 90 days and could not be more than $100.00. From that time through 1946, the only changes were increases in the amount of benefits. After the 1946 session, not only was there some increase in the amount of medical benefits, but the 90-day cut-off was eliminated. In 1950, the amount of medical expenses was again raised. In 1952, an employer was deemed liable for artificial limbs and braces.
From 1916 forward, there was no requirement to pay for the first 2 weeks of disability. While eventually that was reduced to 7 days, the issue of how long a person needed to be disabled to get retroactive pay was changed. In 1948 the period of duration before retroactive payment from the first day of injury was reduced from 4 to 3 weeks. It was again changed in 1956 from 3 weeks to 2 weeks. Medical benefits were not affected by these provisions.
The death benefit provision has changed over the years which started in 1916 with $75 in funeral expenses and $100 to the decedent’s estate where there were no dependents.
Widows and surviving children were provided with income benefits based on the decedent’s average weekly wage, 50% to the widow and a portion to surviving children, not to exceed $4000 over 335 weeks. There were changes in 1946, 1950, 1952 and thereafter raising the amount of death benefits.
Compensation for total disability in the 1950 Act included the losses of a hand, an eye or a foot. The loss of a hand and an eye or the foot and an eye was added to the list of total and permanent disabilities.
The original Act set compensation for Permanent Partial Disability at 65% of the weekly average earnings but not less than $16.00 and no more than $33.00 determined by the percentage of disability caused by the injury and not exceeding 400 weeks or $13,200.00.
Earnings of the employee subsequent to the accident did not affect the compensation. That section was not changed until 1946 when an amendment was passed prohibiting compensation for an injury or disability to a member to be greater than the amount allowable for the loss of the member.
In 1946 a Subsequent Injury Claim Fund was created which provided for payment for any disability resulting from a combination of existing permanent partial disability and a subsequent compensable injury. KRS 342.120. The Fund would pay the increased disability after subtracting the prior pre-existing disability and the portion to be paid by the Employer for the subsequent injury.
The concept of the contribution of a pre-existing disease or condition is the basis for an award of disability gradually expanded. The statute in 1947 excluded diseases as compensable accidents, stating: “personal injury by accident' as herein defined shall not include diseases except where the disease is the natural and direct result of a traumatic injury by accident, nor shall it include the results of a preexisting disease * * *."
However in Wood-Mosaic Co. v. Shumate, 305 Ky. 368, 204 S.W.2d 331 (Ky. 1947), the Court of Appeals stated benefits could be awarded if the pre-existing disease had lain dormant and had not manifested its active disabling effect prior to the traumatic injury, as happens in heart attack and hernia cases.
A later amendment of the statute to include the word “traumatic” before the term “personal injury by accident” was held not to change the compensability of heart attacks caused by previously dormant arteriosclerosis and over-exertion at work. Grimes v. Goodlett and Adams, Ky., 345 S.W.2d 47 (Ky., 1961).
The liability of the Subsequent Injury Fund, originally created to encourage employment of injured veterans returning from World War II, expanded to include excess disability caused by the combination of an injury at work and a pre-existing disability caused by a disease.
Combs v. Gaffney, 282 S.W.2d 817 (Ky., 1955). In 1960, the Subsequent Injury Fund’s liability was expanded to include the effects of a dormant non-disabling disease condition aroused into disabling reality by a work-related injury or occupational disease. In 1964, the Fund was renamed the Special Fund, and awards based upon the arousal of dormant conditions were apportioned between the employer and Special Fund.
In 1952, the workers' compensation laws became less voluntary and more mandatory. Most workers’ compensation acts were written in such a way that an employer was deemed to have accepted the provisions of the workers' compensation law and an employee was required to affirmatively reject the Act rather than accept it.
In Wells v. Jefferson County, 255 S.W. 2d 462 (Ky., 1953), the Kentucky Court of Appeals held that Act’s requirement of a rejection by the employee instead of an affirmative acceptance was nonetheless a constitutional waiver of jural rights. The Court noted that the Act was constitutionally valid as to employers as was held in the State Journal case upon rehearing.
As late as 1975, the Kentucky Supreme Court in Davis vs. Turner, Ky., 519 SW2d 820 (1975) mandated that except for employers of exempt employees, there was no option on the part of the employer not to come under the law. In fact, employers who might otherwise have exempt employees under the Act can, if they so desire, operate under the Act by securing workers' compensation insurance and appropriately notifying the Department of Workers’ Claims.
An employee may continue to reject the Act by executing a standard form available through the Department of Workers’ Claims and by filing that rejection with the Department. The courts have generally taken a dim view of voluntary rejections, however, particularly in circumstances where it appears the employer has made rejection of the Act an obligation of employment.
In Dick v. International Harvester Co., 310 S.W.2d 514 (Ky., 1958), the Court discussed acceptance of the coverage of the Worker’s Compensation Act in the context of an occupational disease. In that case the employer had entered into a contract with the deceased employee’s union. Coverage under the Act was found even though the employee had not specifically elected to come under the Act with regard to occupational disease. Later legislation provided that employees were covered under the Act in occupational disease cases as with injury cases.
Over the years between 1950 and 1972 the Act was periodically updated to increase the maximum amount of medical expenses that could be paid as a result of an injury, from $2500 in 1950, up to $3500 in 1966, and in 1964 adding an option to apply to the Board for payment of extraordinary medical expenses beyond that amount. In 1972, the act was amended to allow medical treatment for an injury at any time during disability, meaning for lifetime.
Permanent disability benefits were paid for 10 years in the case of total disability, and for 450 weeks in the case of partial disability, according to the 1950 law. In 1956 the periods were reduced to 425 weeks for total disability, and 400 for partial disability. Certain injuries, such as loss of a finger or leg, were paid according to a schedule of weeks for the loss, and other injuries limited to 400 weeks.
Reforms and Modernization of the Act 1972-1987
In 1972 the National Commission on Workmens’ Compensation Laws sought to make uniform the various state laws concerning workers’ compensation, and Federal oversight in the form of national minimum standards was proposed to eliminate the disparities in laws across state borders, and to ensure fair and equitable treatment of injured workers. Such federal oversight was never enacted due to the states’ legislative responses in attempting to achieve the goals the Commission had established.
In late 1972, a special session of the Kentucky Legislature occurred. That Act, which became effective January 1, 1973, constituted a substantial change in the workers' compensation law. All disability benefits were paid for life. Claims for coal workers' pneumoconiosis became more significant and substantial. Coincidentally, the wages of coal miners were on a significant upturn as was the awarding of Federal black lung benefits. Weekly benefits continued to be fairly low and were less than the state's average weekly wage.
1976 brought forth two decisions that played a significant role in a change in the workers' compensation law by the 1980 Legislature. The first was Apache Coal Co. vs. Fuller, Ky., 541 S.W.2d 933 (1976), in which the Supreme Court interpreted certain provisions of the Act as mandating a minimum weekly benefit whether it be a permanent total or permanent partial award and regardless of the individual's average weekly wage. The other decision was rendered in C. E, Pennington Co, vs. Winburn, Ky., 537 SW2d 167 (1976), in which the Court concluded the percentage of disability was multiplied by an individual's average weekly wage before it was reduced to the maximum benefit. Because of increasing wages being paid to employees, it was conceivable that a high wage earner would receive the statutory maximum benefits for life even though their actual disability might be 50 to 60%. In essence, individuals were permitted to return to work without fear of reopening by the employer while continuing to receive maximum benefits under the Act.
Compensation for death as a result of a work-related accident remained at $10,000 from 1972 until 1996, reducible by income benefits already paid, and not payable where there was a widow or survivor. In addition, a funeral expense capped by $2500 remained in effect until that time. Survivors’ benefits were paid at 50% of the deceased’s average weekly wage to the widow, and to the children based on a formula for the number of children.
During the regular Legislative session in 1980, significant modifications occurred. First, permanent partial disability benefits were limited to 425 weeks with any temporary total disability benefits reducing the number of weeks payable for permanent partial. By the same token, however, the weekly benefits under the Act received by the employee were increased. If an individual received a total occupational disability, it would be for that individual's life. The requirement for minimum weekly benefits ceased to exist for permanent partial disability claims but continued for total claims.
Although the courts had, on a number of occasions, differentiated between "impairment" and "disability", the Act for the first time made reference to the use of the American Medical Association Guidelines to Functional Impairment. A statutory provision addressing permanent partial disability directed that disability be determined in accordance with the latest edition of the American Medical Association Guidelines to Functional Impairment or actual occupational disability. The Court in Cook vs. Paducah Recapping Service, Ky., 694 SW2d 684 (1985) concluded the language used by the Legislature did not mandate a minimum benefit in accordance with the American Medical Association Guidelines to Functional Impairment nor, for that matter, did it establish a maximum. In reality, the AMA Guidelines became merely one of the many factors to be used in determining "disability".
In 1980 the Act was amended to be known as the Workers’ Compensation Act, and the Workmen’s Compensation Board began being called the Workers’ Compensation Board, in order to reflect the social and legal trend toward gender neutrality.
Amendments to Reduce Costs 1987 - 1997
During the 1980’s, the rising cost of workers’ compensation to Kentucky employers, and the continued growth of the unfunded liability of the Special Fund became a major concern for Industry and governmental leaders. Governor Martha Layne Collins formed a Task Force composed of representatives of Industry and Labor following the end of the 1986 Regular Session of the General Assembly. The goals including achieving a less costly and speedier adjudication system, The General Assembly met in an Extraordinary Session, and the Workers’ Compensation Act was amended effective October 26, 1987.
Ten full-time Administrative Law Judges replaced the Workers’ Compensation Board as the adjudicator of the merits of claims. A full-time three-member Workers’ Compensation Board replaced the Circuit Courts as the first level of appeal. The Department of Workers’ Claims was created, and was administered by the Workers’ Compensation Board through a Commissioner. The time frame for litigation of a claim was shortened. Medical and vocational evidence was permitted to be introduced into evidence without depositions. The number of medical witnesses was limited to three per party. Inconsistent provisions for survivor’s benefits were changed.
The Workers’ Compensation Funding Commission was created to manage the Special Fund’s finances. A more current life expectancy table was adopted. Two new options were provided to the claimant for payment of attorney fees. The reopening criteria was amended to provide for a change in occupational disability, rather than a change of condition. The black lung system was amended to provide criteria based upon both chest x-rays and spirometric studies. A claimant with category 1 coal workers’ pneumoconiosis and no breathing impairment was provided with a Retraining Incentive Benefit (RIB). A claimant with category 1 simple CWP and a breathing impairment of 10 to 20% was awarded 75% PPD benefits for 425 weeks.
A claimant with category 1 CWP and a breathing impairment of 50% or more was presumed to be 100% PTD. If a claimant had category 2 or 3, or complicated CWP was presumed to be PTD. The Act was amended to require that miners must be exposed to the hazards of CWP in Kentucky for a continuous period of not less than two years during the ten years, or any five of the fifteen years, immediately preceding the date of last exposure. The coal mining industry was required to pay a larger share of the Special Fund assessment. Apportionment between the employer and Special Fund in claims involving pre-existing conditions of the back or heart are automatically 50/50. The definition of a “partner” in a business was amended to eliminate shams attempting to exempt employees from coverage. The employer or insurer were required to pay medical bills within 30 days of receipt.
Employers were prohibited from discriminating against workers with coal workers’ pneumoconiosis in the hiring process. A civil action was created for employees who are harassed, coerced, discharged or discriminated against for pursuing a claim. Workers’ Compensation Nominating Commission was created to select candidates for ALJ and WCB positions. The attorney fee was capped at $6,500 in the original proceeding, and at $3,500 on reopening.
In 1990, the Supreme Court held in Vessels v. Brown-Forman, Ky., 793 S.W.2d 795 (1990) that review by the Workers’ Compensation Board was not equivalent to a review by a court, and that a litigant in a workers’ compensation claim was constitutionally entitled to one appeal as a matter of right from one court to another. Ky. Const. §115. The first court review of a claim occurs in the Court of Appeals. Since that decision, Workers’ Compensation Claims were entitled to an appeal as a matter of right to the Supreme Court, instead of by discretionary review. Special Civil Rules were created to accommodate the number of workers’ compensation cases appealed to the Court of Appeals from the Workers’ Compensation Board and to the Supreme Court.
The Act was amended effective July 13, 1990. The cap on the attorney fee was removed both for the original claim and for reopening. The number of ALJs was increased to 15. Additional language was included in KRS 342.012 regarding the definition of a qualified partner, and requiring the filing of the partnership identification number assigned by the IRS and the tax return of the partnership. If TTD benefits were denied, delayed or terminated without reasonable foundation, the rate of interest was 18%, not 12%, and the ALJ can award an attorney fee not charged against or deducted from benefits otherwise due to the employee.
New provisions were made for adjudication of RIB claims. The insurer was no longer required to advise the WCB when a policy lapsed, terminated, expired or non-renewed; it was only required to report when a policy was canceled. Any mutual insurance association, except city, county, municipal or urban-county employers, are required to have 11 members, instead of only 2. The rehabilitation panel was eliminated. Burial expense was increased from $2,500 to $4,000. For calculation of PPD benefits, the “latest edition available” was to be used instead of the 1977 edition. The provision allowing 45 days to appeal from an ALJ decision in a RIB claim was deleted.
The 1987 amendments did not meet expectations for sufficiently reducing the cost of workers’ compensation to Kentucky employers, and did not sufficiently address the issues involving the Special Fund’s growing unfunded liability. The voluntary insurance market had declined due to prohibitive costs, insurance options were becoming fewer, and approximately 50% of the private workers’ compensation insurance market was in the assigned risk pool. The General Assembly recognized that this situation threatened the economic welfare of the Commonwealth and its ability to create and maintain jobs for the citizens. The Act was amended again effective April 4, 1994. The authority to administer the Department of Workers’ Claims was removed from the WCB, and placed in the Commissioner.
The role of WCB was now solely as an appellate body. An Ombudsman program was created to help injured workers navigate a system where the limitations on attorneys’ fees prevented workers from obtaining counsel. The definition of “physician” was expanded. Employers were allowed to provide medical services through a managed care organization. A provision was made to preclude acceleration of the Special Fund’s payment period when the claimant unilaterally settled with the employer. Apportionment to the Special Fund was capped at 50% in all claims. Income benefits for permanent partial disability were based on the impairment rating or the percentage of occupational disability, whichever was greater.
If there was no occupational disability, then there was no award of PPD benefits based on the impairment rating. If the employee returned to work at equal or greater wages, then the award of PPD benefits could not exceed double the impairment rating. The impairment rating was to be determined pursuant to the most recent edition of the AMA Guidelines to the Evaluation of Permanent Impairment. The “tier down” provisions reduced all income benefits beginning at age 65, with identical reductions at age 66, 67, 68, 69 and 70, if the injury occurred prior to the employee’s 65th birthday. If the PPD was 50% or less, the compensable period was 425 weeks. If the PPD was over 50%, then the compensable period was 520 weeks.
The attorney fee was capped at $15,000. Mental/Mental claims were excluded from coverage. The Commissioner was allowed to establish a pilot program to integrate workers’ compensation medical benefits with health insurance benefits. The Commissioner was required to contract with a qualified consultant to evaluate the methods of health care delivery, quality assurance and utilization mechanisms, type, frequency and intensity of medical services, risk management programs, and the medical fee schedule, and then promulgate Regulations to effect a 25% reduction in the total cost of the system.
The nature of vocational rehabilitation was changed from mandatory to voluntary, in the absence of an Order – these amendments essentially eliminated Regulations promulgated pursuant to earlier law providing these services on a mandatory basis. The number of ALJs was increased to 16. The Workers' Compensation Insurance Plan, the assigned risk pool, was not allowed to write new policies or renew policies after September 1, 1995. Kentucky Employers' Mutual Insurance (KEMI) was created and became the market of last resort and a competitive source of insurance in the voluntary market.
Kentucky again faced an emergency situation. The cost of workers’ compensation continued to climb, attracting new businesses to Kentucky was becoming even more difficult, and some insurers were cutting back on writing workers’ compensation insurance. What was intended to be another sweeping reform of the Workers’ Compensation System was enacted by the General Assembly meeting in an Extraordinary Session, with the amendments becoming effective December 12, 1996. Many of the 1994 amendments were deleted.
The Workers’ Compensation Board was to be abolished in four years, with the creation of an informal claim resolution system using Arbitrators, with a right of appeal to an Administrative Law Judge. In an attempt to reduce the number of claims and the number of awards of permanent total disability benefits, significant changes were made in definitions of terms, such as “injury”, “temporary total disability”, “permanent partial disability” and “permanent total disability”. For example, “Injury” does not include the effects of the natural aging process.
The Special Fund was abolished for claims arising from and after December 12, 1996. The Commissioner was authorized to promulgate Regulations establishing Utilization Review of medical treatment. The Commissioner was authorized to promulgate Medical Practice Parameters, and later adopted practice parameters for the treatment of acute lower back injuries.
A four-year limitation was placed on reopening, except for medical fee disputes, fraud or the 2x multiplier. No claim could be reopened for two years, which created a two-year window of opportunity for reopening. Attorney fees were capped at $2,000 before an Arbitrator and $10,000 before an ALJ. The caps on attorney fees were also made applicable to defense attorneys. PPD benefits were reduced by 50% when the employee returned to work at equal or greater wages. PPD benefits were multiplied by 1.5 when the employee lost the physical capacity to perform the same type of work he performed when injured. A statute limiting compensation and establishing a procedure for compensating occupational hearing loss was added. All income benefits terminate when the claimant becomes eligible for normal old age Social Security retirement benefits.
Amendments to the 1996 Changes and the Present Law
The 2000 Amendments to the Act became effective on July 15, 2000. Part of the theme of the 2000 amendments was that the Generally Assembly had gone too far in its attempts to reduce the cost of workers’ compensation, rendering it unfair to injured workers. The Workers’ Compensation Board was retained as an appellate body, rather than being abolished. The Arbitrator system was abolished. Claims were again initially litigated before an Administrative Law Judge. The statutory grid factors for converting the impairment rating to PPD were increased.
When the employee returned to work at equal or greater wages, during cessation of that employment, PPD benefits were multiplied by 2. If the employee lost the physical capacity to return to the type of work performed at the time of injury, PPD benefits were multiplied by 3 with add-ons for advanced age or less than a high school education. The penalty for a safety violation by the employer was increased from 15% to 30%. The $25,000 lump sum payment for a work-related fatality was increased to $50,000, with an annual escalation clause based upon the Average Weekly Wage of the state.
The four-year limitation on reopening does not apply to seeking TTD benefits during the period of the award. The prohibition on reopening within two years of the award was eliminated. Reopening was prohibited within one year of a prior motion to reopen. The terms of the WCB members were staggered. Attorney fees were capped at $12,000. The number of ALJ positions was increased to 19.
The theme of the 2002 amendments again were to ease the impact of the 1996 amendments on the black lung program. The Division of the Special Fund was renamed the Division of Workers’ Compensation Funds. The Coal Workers’ Pneumoconiosis Fund ceased to be a Division with its own Director, and is administered by the Director of the Division of Workers’ Compensation Funds. Major changes were made to the black lung program in terms of how claims were to be adjudicated. This was known as the consensus process.
For black lung claims, only chest x-rays could be used, and only interpretations by B-readers were admissible. A miner with category 1 CWP and spirometric values of 80% or more were allowed the one time only RIB award which shall only be paid while the employee is enrolled and actively and successfully participating in a bona fide training and education program or pursuing a GED. The schedule of benefits which provided irrebuttable presumptions of degrees of disability based on the category of pneumoconiosis and the degree of reduced spirometric findings was modified from the previous Act.
In 2004, the Act was amended to establish minimum financial standards for self-insured groups. In 2006, the Act was amended to create a guaranty fund to pay claims that occurred prior to the creation of the self-insurance guaranty funds previously created effective March 1, 1997.
In 2007, the Act was amended to provide that a public sector self-insured employers shall not be required to deposit funds as security, indemnity, or bond to secure the payment of liabilities under this chapter, if the public employer has authority to raise taxes; raise tuition; issue bonds; raise fees or fares for services provided; or has other authority to generate funds for its operation. In an effort to encourage drug-free workplace programs, the Legislature authorized the Commissioner to approve rating plans and premium credits for employers with drug-free workplace programs. The medical fee schedule was required to provide coverage and payment for surgical first assisting services to registered nurse first assistants.
In 2008, the publication of the 6th Edition of the A.M.A. Guides to the Evaluation of Permanent Impairment prompted a study of the appropriateness and feasibility of the newer edition, and Kentucky continued to use the 5th edition of the AMA Guides, instead of the “latest” edition. In 2010, the 5th Edition of the A.M.A. Guides, and the 2nd Edition with respect to psychiatric impairments, were permanently adopted in lieu of the latest edition to determine impairment rating.
On December 28, 2011, the Kentucky Supreme Court issued its Opinion in Vision Mining, Inc. v. Gardner, 364 S.W.3d 455 (Ky. 2011). The Court declared that the consensus process for adjudicating black lung claims violated due process of law constitutional protections. To date, the Department of Workers’ claims has struggled to administer these claims without a remedial enactment by the Legislature.
In 2014, the Act was amended to require every partnership and limited liability company to provide, upon the request of the Commissioner, a copy of its partnership agreement or articles of organization for purposes of demonstrating compliance with the Act. The following language was deleted from KRS 342.640 defining “employee”: “every person regularly selling or distributing newspapers on the street or to customers at their homes or places of business”.
In 2016, we still practice under much the same statute as was enacted in 2000, constructed on the principles of the original statute. Interpretations of the 2000 statute have altered the language of some of the provisions, but income benefits are still calculated under that law, and the procedure of adjudication and appeal has remained the same since that time. Modern changes to procedure may be coming by way of electronic filing of pleadings and constant re-interpretation of the act by the Workers’ Compensation Board, the Court of Appeals and Supreme Court. All of these are manifestations of the continuation of 100 years of evolution and compromise of the Workers’ Compensation Act in Kentucky.
The foregoing was researched and written by:
Dwight Lovan, Commissioner, Dept. of Workers’ Claims; Charlie Lowther, General Counsel, Department of Workers’ Claims; James Fogle, Fogle Keller, Purdy PLLC; Scott Miller, Attorney at Law; and written, researched, and edited by Peter Naake, Priddy, Cutler, Naake & Meade, PLLC.