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The Kentucky Workers’ Compensation Act and House Bill 2

On Behalf of | Jun 14, 2018 | Workers’ Compensation

Workers’ compensation laws evolved during the late 1800s with the Second Industrial Revolution as railroad mileage tripled. Coal mining and steel production grew exponentially. Work-related injuries often resulted in death or disfigurement, and those who survived were often unable to seek redress through the court due to antiquated common law rules. In an effort to protect railway employees, Congress passed the Federal Employers Liability Act in 1908, and states developed their own regulations as well. Kentucky’s Workers’ Compensation Act was passed in 1916, and has evolved over the years, most recently with House Bill 2.

House Bill 2 is the Legislature’s response to the Kentucky Supreme Court’s decision in Parker v. Webster County Coal, 529 S.W.3d 759 (Ky. 2008), decided in April 2017. There, the Supreme Court held that the provision that cuts off workers’ compensation benefits when the employee becomes eligible for Social Security benefits, or two years after the injury or last exposure, KRS 342.730(4), violates equal protection standards. Its rationale was that since Kentucky teachers do not participate in Social Security retirement benefits, the cut-off provision treats teachers different from non-teachers. Therefore, the stated bases for the cut-off provision, i.e. to prevent duplication of benefits and to generate savings for the Workers’ Compensation system, did not work. Several Board decisions since Parker have reverted to and applied the prior version of the cut-off provision from 1994, which tiers down benefits until the employee reaches age seventy (70) years, at which point the employee continues to earn 40% of the original award.

Governor Bevin signed House Bill 2 into law, and it will go into effect on July 14, 2018. What a portion of the Bill does is re-examine the cut-off provision in an effort to be all-inclusive. Instead of benefits terminating based on Social Security eligibility, now all income benefits will terminate when the employee reaches seventy (70) years of age, or four (4) years after the injury or last exposure, whichever last occurs. Moreover, all income benefits will be offset not just by employer-funded disability, sickness or accident plans, but retirement plans or salary continuations as well.

At the same time, however, House Bill 2 raises the employee and state average weekly wage caps for permanent partial disability benefits from 75% to 82.5% of the employee average, and from 100% to 110% of the state average. What this means is that although the timeframe to receive benefits has shortened, the amount of benefits that an employ may receive has increased. The limits for temporary total disability benefits have changed as well, similarly increasing the state average weekly wage cap to 110%.

The effect these cap increases are anticipated to have is increased wage benefits for higher earning employees. That being said, House Bill 2 adds a set-off provision for temporary total disability benefits, reducing those benefits in part by amounts earned by the employee should the employee return to a light-duty or alternative job position. In a twist, House Bill 2 now also includes a benefits termination provision for Kentucky professional athletes. Going forward, temporary total disability benefits for these individuals will end no later than when the athlete’s employment contract terminates, so long as the athlete has been released to return to employment for which he or she has prior training or experience.

How exactly the amendments contained in House Bill 2 will play out remains to be seen. The Commissioner of the Department of Workers’ Compensation has organized two committees, the Medical Advisory Committee and the Regulatory Advisory Committee, to assist with developing processes and regulations for implementing these changes in the coming months.