How Gov. Walker's 2018-2019 Budget Bill Affects the Worker's Compensation Act of Wisconsin

On Feb. 8, 2017, the administration of Wisconsin Gov. Scott Walker issued the governor’s proposed budget for the state’s fiscal years 2018 and 2019. The governor’s budget bill included amendments to the Worker’s Compensation Act, Chap. 102, Wis. Stats. The most significant proposal is to eliminate appeals from orders of the Dept. of Hearings and Appeals (DHA) administrative law judge to the Labor and Industry Review Commission. In its place, the governor proposes that the DHA’s administrator review orders from an administrative law judge (ALJ). 

Specifically, Assembly Bill 64/Senate Bill 30, the budget bill, amends Wis. Stat. Sec. 102.18(3) such that appeals from decisions by ALJs go to the administrator of the DHA, rather than to the LIRC. As a state agency, the LIRC is eliminated. (Appeals from unemployment insurance cases go to the Unemployment Insurance Division administrator and appeals in equal rights cases go to the administrator of the Equal Rights Division.) The amendment gives the DHA administrator roughly the same powers as the LIRC had to change ALJ orders. Sec. 1335 of the bill provides that the administrator “shall either affirm, remand, set aside, or modify” the ALJ’s “findings or order, in whole or in part.” The only difference between the amendment and the current law is that the amendment substitutes “remand” for “reverse.” That appears to be a distinction without a difference because the administrator is allowed to modify the ALJ order “in whole or in part.” A “whole” modification would essentially be a reversal of the ALJ’s findings or order. 

Sources suggest that the current DHA administrator asked that “remand” be substituted for “reverse” because he does not intend to reverse (or apparently modify in whole) ALJ orders. Instead, he will remand them to be rewritten as the administrator prefers. If true, that begs a couple of key questions. One, what if the ALJ refuses to rewrite the order to the administrator’s satisfaction? Will the ALJ then be reversed by the administrator with a modification “in whole”? Two, what if a different administrator chooses to approach appeals in a more aggressive way and wants to rewrite ALJ orders? The “modify in whole or in part” provision allows that.

The budget bill also amends Wis. Stat. Sec. 102.23(1), the section that governs appeals from DHA orders to the circuit and appellate courts. There are provisions in the amendment to this section that cause some confusion. It starts with the first sentence of Wis. Stat. Sec. 102.23(1)(a)1: “The findings of fact made by an examiner acting within his or her powers shall, in the absence of fraud, be conclusive.” (Most provisions of the Act call what we know as ALJs “examiners”; Wis. Stat. Sec. 102.18(2)(c) equates “examiner” to “administrative law judge”.) The rest of the section discusses court review of the administrator’s order or award. It is the administrator’s order that is referred to the court for review. Wis. Stat. Sec. 102.23(1)(d). Yet in sections dealing with the grounds under which the court may reverse the administrator’s order, there are references to the examiner’s findings of fact. 

Wis. Stat. Sec. 102.23(1)(e) is the key section on the reviewing court’s authority over the administrator’s order. If amended as currently proposed, it will read as follows (with the new words in italics): 

. . . the court may confirm or set aside such order or award; and any judgment which may heretofore have been rendered thereon; but the same shall be set aside only upon the following grounds: 

1. That the administrator or the examiner acted without or in excess of his or her powers. 

2. That the order or award was procured by fraud. 

3. That the findings of fact by the examiner do not support the order or award. 

Wis. Stat. Sec. 102.23(6) also limits the reviewing court’s authority (new words in italics): “If an order or award depends on any fact found by an examiner, the court shall not substitute its judgment for that of the examiner as to the weight or credibility of the evidence on any finding of fact. The court may, however, set aside an order or award and remand the case if the order or award depends on any material and controverted finding of fact that is not supported by credible and substantial evidence.” The amendment to the second sentence removed references to the LIRC as the source of the award and also as to the destination of any remand. The amendment leaves vague whose order the court reviews and where the court’s order is remanded. 

The larger confusion is whose decisions are being reviewed? Both sections, 102.18 and 102.23, as amended, indicate that the administrator’s order or award is what is being appealed. But some of the language in sec. 102.23’s amendments suggests that the ALJ’s “findings of fact” – the ALJ’s assessment “as to the weight or credibility of the evidence” – are what the reviewing court assesses. What if the ALJ’s findings were modified in whole or in part by the administrator? Are there two orders being appealed, with the courts considering only portions of each order? Is the administrator precluded from changing the ALJ’s findings of fact? If yes, how is that consistent with granting the administrator power to modify the ALJ’s “findings or order” in whole or in part? If the bill becomes law as currently drafted, it will require court review to put meaning to its terms. 

The wisdom of eliminating the LIRC is also puzzling. Here is how one applicant’s attorney described the decisions on worker’s compensation cases coming from the current LIRC: “Historically . . . I don’t believe there has ever been a LIRC so overtly one sided than this LIRC. Historically, LIRC has not had an era where one side’s winning percentage on appeal to LIRC was so one sided as this LIRC. Just go back and look at LIRC’s own WC statistics, and whether R[epublican] or D[emocrat was] in charge [as governor], the winning percentages were always pretty balanced -- but not this LIRC.” Any worker’s compensation attorney, applicant or defense, with any experience will echo those sentiments. The current LIRC is more prone to accept the opinions of respondent medical examiners than in recent memory. It dismisses a fair amount of hearing applications, reduces the size of ALJ awards and is reluctant to award permanent and total disability compensation. Employers and insurers have saved hundreds of thousands of dollars under the current LIRC’s treatment of worker’s compensation cases, not only by winning cases but by leveraging the threat of winning on LIRC appeal in settlement negotiations. 

So why eliminate the LIRC? Sources say it is the cart behind the political horse. The Walker administration is reportedly upset with the LIRC’s reinterpretation of issues in unemployment insurance cases involving misconduct, substantial fault and fraud. The administration considers the LIRC too liberal on those cases. UI cases compromise a large portion of the LIRC’s docket so assessments from the unemployment insurance budget fund a large portion of the LIRC’s budget. The administration reportedly amended the UI law to allow its UI division administrator to decide appeals so that its policies will not be altered on appeal to the LIRC. Having removed UI cases from the LIRC’s docket, it was apparently a small step to remove worker’s compensation and equal rights cases too. Gov. Walker can tell the public that he eliminated an entire state agency. But that is going to cost employers more in worker’s compensation. Perhaps the political calculation was that employers would save more in UI than they would lose in WC. The governor’s stated reasons are efficiency and quicker decisions. 

It is likely that the DHA administrator, whoever he or she is, will affirm ALJ worker’s compensation decisions to a greater degree than has the LIRC. The LIRC has a staff of lawyers to review WC appeal briefs and evidence; the DHA administrator has no staff for that purpose. The DHA administrator also has to review appeals in Chapter 227 cases. He or she will not have time to carefully consider worker’s compensation appeals, at least not to the degree that is currently being done by the LIRC. ALJ affirmances are not generally good for employers. Over the past several decades, the worker’s compensation judges have trended politically liberal and pro-employee. The LIRC, on the other hand, has wavered, depending on which political party appointed the majority of its members. Since the early 1980s, the LIRC has had several periods where it was more pro-employer than the ALJs. If the effect of these amendments is an increased rate of ALJ affirmance, that will result in more pro-employee awards and increased costs to employers. The occasional pro-employer “holiday” will never occur, unless the political orientation of the ALJ staff is altered, a process that will take years and be uncertain because there are about 20 ALJs. Thus, the worker’s compensation amendments in the governor’s budget bill are anti-employer. 

The amendments also eliminate an element of independence from the worker’s compensation scheme. The three LIRC commissioners were appointed by the sitting governor for staggered six-year terms. There often were pro-employee and pro-employer commissioners on the same LIRC. That helped maintain the employer-employee balance that is the bedrock of Wisconsin’s pioneering worker’s compensation scheme. The LIRC commissioners were not beholden to the Worker’s Compensation Division or the DHA and, therefore, could render independent judgments on the evidence. They could rely on their own staff of lawyers for legal assessments. Those of us who believe that dispersing political power preserves liberty are disappointed by the governor’s proposal. 

The budget bill suggests that the LIRC will be defunct by the start of fiscal year 2019. That seems unrealistic because the bill does not amend Wis. Stat. Sec. 102.03(4). That statute provides that “the right to compensation and the amount of the compensation” are determined by the version of the WC Act that was in effect on the injury date. There are several exceptions, but removal of the LIRC is not one of them. Thus, any claim for injury occurring prior to the effective date of this proposed change will arguably be entitled to LIRC review. The administration may claim that its amendments do not affect the “right to compensation and the amount of compensation” and are not covered by the statute. But does not the current LIRC determine who is entitled to, or has the right to, compensation and how much compensation that person might get? A court could find retroactive application of the amendments unconstitutional. The administration may avoid that by allowing a skeleton LIRC to exist. The governor could appoint each division administrator to the LIRC, one from unemployment, one from equal rights and one from worker’s compensation. If the administrators deferred to each other’s expertise, review of “examiner” decisions would be similar to the newly proposed scheme and likely have the same effect.

Gov. Walker’s budget bill contains one other provision that affects worker’s compensation litigation. He proposed eliminating stenographic court reporters to be replaced by recording machines. Most lawyers prefer human court reporters over machines because the court reporters help maintain hearing room decorum by preventing parties from speaking over each other. They produce more accurate transcripts and are more reliable than recording technology. The governor’s stated purpose in eliminating court reporters is to save costs. 

Finally, the governor did not present his major change proposals to the Worker’s Compensation Advisory Council for its consideration. This is the second budget cycle in a row where he proposed substantial changes to the Worker’s Compensation Act without consulting the advisory council. This is another affront to those who believe that the success of Wisconsin’s worker’s compensation system derives from the balancing of employer and employee interests inherent in the WCAC’s makeup. At some point, the interests the current governor favors will be in the minority and other factions will be in control. If they choose, they can disrupt all of the governor’s recent changes and make others that will cause employers to rue the day that they supported the current breach of protocol. We are seeing that play out in the United States Senate today, as Democrats regret ending the filibuster rule for some presidential appointments when it was politically convenient. Our state’s current rulers ought to learn a lesson from that mistake and let the WCAC deliberate freely over the current proposal and, if it considers it unwise, to save the LIRC and the court reporters.