SB 29-REPEAL WORKERS' COMP APPEALS COMMISSION  2:01:19 PM CHAIR COGHILL announced the consideration of SB 29 and stated his intention to continue public testimony. 2:02:53 PM STEVEN CONSTANTINO, representing himself, stated that he has been a member of the Alaska bar for 36 years. He was a workers' compensation hearing officer in the 1990s and for the past 18 years he has been in private practice representing injured workers and litigating workers' compensation claims. He is also the claimants' representative for the Alaska Bar Association annual review of workers' compensation cases. He said the legislature entered into two legal experiments in 2005. First, it changed the standard for causation in workers' compensation from "a substantial factor" to "the substantial cause." Second, it enacted the appeals commission to attain speedier appellate decisions and to achieve consistency by making board decisions binding legal precedent. He said consistency has been achieved because of the precedent provision, but half the substantive decisions that are appealed and decided by the Alaska Supreme Court are overturned. Regarding speeding up workers' compensation appeals, he said his experience is that the timelines are about the same. When the superior court had jurisdiction, it took about 6-9 months and it takes about 6-9 months with the appeals commission. The superior court has not had the opportunity to address the new substantial cause standard, but in 2016 it did reverse the interpretation that the appeals commission made about four years earlier regarding the evidence necessary to rebut the presumption of compensability. He also pointed out that the appeals commission's published final decisions each cost between $30,000 and $40,000. MR. CONSTANTINO recalled that the Court System indicated the superior court could handle these appeals at no additional fiscal impact to the state and that the cases would be assigned such that the judges would develop expertise. He noted that that was one of the rationales for creating the appeals commission. He opined that the appeals commission has not achieved the goals set out for it and his anecdotal observation is that it tends to favor the interests of insurers over injured workers. [Audio difficulties.] 2:09:57 PM ERIC CROFT, representing himself, Anchorage, Alaska, noted that he sent backup material to support his testimony. He made three points regarding the Workers' Compensation Appeals Commission: it is not a fair tribunal; it does very little work for the $440,000 it costs each year; and the decisions are all too often inconsistent or so unclear that the Alaska Supreme Court has to step in and provide clarity. He said the commission rules overwhelmingly in favor of insurance companies, regardless of the facts. He agreed with former Commissioner Andy Hemenway's analysis that the 39 cases that had gone to the Alaska Supreme Court and resulted in a decision were reversed 50 percent of the time. Mr. Croft said he looked at which side the commission ruled in favor of and which side was ultimately found correct by the Alaska Supreme Court. He found that when the insurance company should have won, the commission got it right 100 percent of the time. But in the cases where the employee had the right legal position and correct facts, the commission still ruled in the insurance companies' favor 80 percent of the time. "Overall those numbers are about 85 percent of the time the commission rules in favor of the insurance company." He compared the $440,000 annual cost of the commission to the three-member court of appeals. He said that over its life, the court of appeals has issued about two decisions per month, whereas the appeals commission has issued less than one decision per month since July 2016. "The three-member criminal court of appeals in that time has issued 140 decisions or 15 a month." MR. CROFT discussed the third point that the commission has issued contradictory or unclear rulings. He noted that in the backup material he submitted he cited a situation where in a three-month span the commission issued contradictory rules regarding the standard on stays. He summarized, "It doesn't provide the clarity, it costs a lot of money and doesn't do much work, and introduces a bias that shouldn't be in our judiciary." 2:15:47 PM COLBY SMITH, representing himself, Anchorage, Alaska, stated that he is an attorney who primarily does workers' compensation defense work. He also presents on the panel on behalf of the Alaska Bar Association, representing the defense side and employers presenting cases that have been in front of the appeals commission and the Alaska Supreme Court. He mentioned previous testimony about bias and opined that the conversation should not be about changing because one side isn't winning often enough. It should be about whether the current structure is right. Under the process prior to 2005, the cases went to different superior courts depending on the jurisdiction. Those decisions were unpredictable depending on the judge's experience with workers' compensation. Also, the decisions did not have binding precedent so the cases often went to the Alaska Supreme Court. In an effort to address those perceived shortcomings, the process was changed in 2005 and one entity was created. That is the appeals commission that issues consistent, predictable opinions that are binding. Everyone agrees, he said, that the commission has greatly reduced the number of appeals. MR. SMITH said he wasn't asked his opinion in 2005 but he has always thought that designating one superior court judge to handle workers' compensation issues would have been and still could be a possible solution if those decisions were given binding precedence. 2:20:54 PM VICKI PADDOCK, Attorney, Anchorage, Alaska, stated that her firm represents employers in workers' compensation matters and her partner, David Floerchinger, submitted a letter summarizing their opposition to SB 29. She pointed out that in 2005 the legislature codified its specific intent regarding the Workers' Compensation Act. It was to ensure quick, efficient, fair, and predictable delivery of benefits to workers at a reasonable cost to employers. Returning appeals to the superior court does not achieve the legislature's codified intent and she has not heard testimony that the legislature changed that intent. Drawing on her experience as an attorney and a law clerk, she offered her perspective of why returning to the superior court will not be efficient or predictable in workers' compensation cases. She said this is a unique body of law and superior court judges do not have a day-in-and-out working knowledge of its nuances and specific characteristics. As such, those judges will rely on their law clerks to do the research in preparation of hearing the appeals. Oftentimes law clerks are just out of school and may only serve as a clerk for a year so it is likely that the decisions will be neither efficient nor predictable. And they will not have precedential value. MS. PADDOCK offered her belief that the appeals commission should remain in place in order for the legislature's intent to be maintained. But if the legislature believes the commission is not as effective as intended, it should consider alternatives such as utilizing the Office of Administrative Hearings. CHAIR COGHILL asked Commissioner Drygas to respond to the testimony. 2:26:05 PM HEIDI DRYGAS, Commissioner, Department of Labor and Workforce Development (DOLWD) described SB 29 as a cost-cutting measure and highlighted the conflicting testimony about whether the commission serves its intended purpose. She said the commission is a specialty tribunal that the state cannot afford, especially given its poor track record at the Supreme Court. She reminded members that the number of appeals that have made it to the commission over the last 10 years has declined precipitously. The anecdotal evidence indicates that workers do not believe they are getting a fair shake at the commission so they are not appealing board decisions. She pointed out that the commission costs nearly $0.5 million per year and the alternatives that have been proposed also require funds that the state does not have. When the department reviewed its statutes trying to find ones that hamper the work of the department or are ineffective, the workers' compensation statute stood out. "That is why the department and the administration put forward this bill. ΒΌ We simply do not believe the workers' comp appeals commission is living up to its intended purpose." The state can no longer afford this specialty tribunal. SENATOR COSTELLO asked what will happen to the money that funds the Workers' Compensation Appeals Commission. 2:29:56 PM PALOMA HARBOUR, Administrative Services Director, Department of Labor and Workforce Development (DOLWD), explained that the Workers' Safety and Compensation Administration Account (WSCAA) supports the workers' compensation program, the appeals commission, and the workers' safety programs. Right now about $7.2 million in revenue is generated into that account each year and the governor's budgeted expenditures against that fund is $9.1 million. The department is trying to address that significant gap measure by measure and SB 29 is one of those. Others include cuts to the workers' safety programs, $191,000 has been eliminated from the workers' compensation program this fiscal year, and separate legislation has been introduced for further workers' compensation efficiencies. CHAIR COSTELLO observed that this is not a reduction. CHAIR COGHILL summarized that the money will still be there but the department cannot afford everything it is doing because of the $2 million shortfall. MS. HARBOUR agreed; eliminating the commission will not reduce the revenue brought into the fund but it will reduce expenditures by about $0.5 million. 2:32:02 PM SENATOR COSTELLO asked if using those funds for something other than the appeals commission will create a statutory problem. MS. HARBOUR said there is no conflict with the statute, but it would create a problem if the commission isn't repealed and legislation passes to "unfund" the commission. The department would then have cases it is statutorily required to handle, but with no funding. 2:33:00 PM CHAIR COGHILL stated that he would hold SB 29 in committee for further review.