Through John H. Geaney
Tuesday, December 28, 2021 | 0
It’s not well known, but the new workers compensation rates of 2022 in New Jersey are 10% higher than those of 2021!
Yes, you read that right – 10% more than in 2021. This is the biggest increase in benefit rates since the early 1980s.
The annual percentage increase in maximum and minimum benefits from 1990 to 2021 was rather modest. The highest increase in the benefit rate over the past 32 years has been 5%. Most were 2-3% per annum, and in 2011 the top rate actually dropped slightly.
Consider this: the minimum rate for temporary disability benefits in 2021 was $ 258; the minimum rate in 2022 will be $ 284 (10% higher). The maximum rate of temporary and permanent disability benefits in 2021 was $ 969; the maximum rate in 2022 will be $ 1,065 (10% higher).
What does it mean? First, it means that a high-wage earner will be compensated for time lost at $ 1,065 for every week of wages lost before reaching maximum medical improvement, and not at $ 969 as in 2021. It also means that Payments for permanence pay will be considerably higher, requiring employers and carriers to sharply increase their reserves.
The first 90 weeks will be valued at $ 284, which is 10% more than current 2021 rates. A 15% premium is currently $ 23,220. This is because 90 weeks multiplied by $ 258 equals $ 23,200. A 15% allocation at the 2022 rates will be $ 25,560, an increase of 10%. These are the lowest rewards, but when you get high percentage rewards the dollars will have a lot more impact on employers and carriers. A 50% price will cost almost $ 20,000 more than in 2021. In 2021, that price would be $ 193,800. Add 10% more for the same disability award in 2022.
That’s not all. This increase in compensation rates also increases lawyers’ fees quite sharply. This is another cost that employers and carriers will have to bear. On a percentage award, such as 30% Permanent Partial Disability, the claimant’s lawyer typically receives a 20% fee. For example, a 30% scholarship in 2021 amounts to $ 56,934 for a fairly high employee. Legal fees would amount to 20% of this compensation, or $ 11,386.
From now on, these fees will increase by 10%. Since the defendant pays 60% of the plaintiff’s attorney fees on an order approving the settlement, the rate hike means that employers will pay slightly more money in attorney fees for the plaintiffs attorneys. It’s also worth noting that this means injured workers will have to pay their lawyers more in dollars.
Why the massive increase in workers’ compensation rates? The rates in New Jersey are tied to the increase in the average weekly wage statewide. The Labor Department must have calculated that the statewide average weekly wage is up 10%. Inflation has jumped in many sectors of the economy, pushing up wages.
There is a great shortage of workers in New Jersey and most of the states. This, in turn, fuels wage inflation, and higher wages translate into higher rewards.
There is an intrinsic loophole in New Jersey law. Keep in mind that annual rates are adjusted based on whether the average weekly wage increases or decreases statewide. The emphasis is on salaries. Yet many injured workers return to work after an injury and do the same job without affecting their ability to work or their wages. They can get a reward by proving a big impact on non-professional activities. So if an injured worker testifies during settlement that there is no impact on earnings or working ability (only impact on activities of daily living), why should employers pay 10% of more in 2022 than in 2021 for the same injury? This compensation seems to relate only to functional loss. It doesn’t make sense for a worker to get compensation of $ 44,154 (25% of subtotal) for a rotator cuff injury operated on in 2021 with no impact on wages, but receive an additional $ 4,400 for the same rotator cuff injury that occurred in 2022.
Next, consider the injured worker who has a very physical job who can no longer do that job due to the work-related rotator cuff tear. Suppose the worker is to be in a lower paying job. If this is the case, wages will be impacted for many years, possibly for the rest of working life. The worker’s family will be directly affected. This is the person the weekly rate hike was intended for. Additionally, each compensation judge will likely award a higher percentage of disability in this scenario. These are the two ways to put more money in the pocket of a worker whose wages are seriously affected by an injury.
While weekly benefit increases are good news for injured workers, what about the impact on employers and carriers? This year’s 10% benefit rate hike is very bad news for employers who were unable to raise prices during the pandemic. Their incomes are declining or static as the cost of doing business rises sharply, and the cost of workers’ compensation is a big part of that increase.
Some employers have had to close their doors or have seen their incomes drop due to the impact of the coronavirus. The timing couldn’t be worse for them.
The public sector will also be affected by this large percentage increase in weekly benefit rates. When public employers pay more workers’ compensation benefits, taxpayers are actually footing the bill through higher property taxes in a state with extremely high property taxes to begin with.
John H. Geaney is a lawyer, executive committee member and shareholder of Capehart Scatchard, a New Jersey defense law firm. This post appears with permission from Geaney’s New Jersey Workers’ Comp blog.