State News : Tennessee

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April 2013

Tennessee Legislature Passes Major Workers' Compensation Reform Bill

After several years of gathering steam, the Tennessee workers' compensation reform movement has culminated in arguably the most significant change in the law since the statute was enacted in 1919.  The driving force behind this reform movement was the sentiment among many that rising workers' compensation costs in Tennessee was driving away business.  The reform bill (SB 0200/HB 0194) easily passed both the state senate and house, and it has been transmitted to the governor for signature.  Once signed by the governor, the new law will go into effect July 1, 2014.

The reform bill drastically changes several aspects of Tennessee workers' compensation law.  Perhaps the most visible change is that an administrative system will be adopted.  Under current law, Tennessee claims are handled by a hybrid system where the first part of the claim (e.g. temporary disability benefits, medical benefits, mediation) is administered by the Tennessee Department of Labor.  The second part of the claim (e.g. the adjudication of permanent disability and future medical expenses) is handled by the trial courts.  Under the new system, the trial courts will no longer have a role.  All issues of temporary and permanent workers' compensation benefits will be decided by the new Court of Workers' Compensation Claims, whose judges will be appointed by the Administrator of the Division of Workers' Compensation.  The Tennessee Supreme Court will remain as the ultimate level of appeal.

Another significant change in the law involves statutory construction.  The current law provides that the Tennessee workers' compensation statute is remedial in nature and is to be construed equitably.  In effect, this means that close issues are typically decided in favor of the injured worker.  However, under the reform bill the remedial construction has been eliminated.  The new workers' compensation statute states that it shall not be remedially or liberally construed, but shall instead be applied impartially favoring neither the employee nor employer.

The calculation of permanent indemnity benefits is also significantly changing under the new law.  Currently, permanent partial disability (PPD) benefits are based on either scheduled injuries (whose maximum value is determined by statute) or whole person injuries (whose maximum value is 400 weeks).  The amount of those benefits is generally determined by a multiplier system.  If the employee makes a meaningful return to work for the pre-injury employer, then PPD benefits are capped at 1.5 times the impairment rating.  If there is no meaningful return to work, then PPD benefits are capped at up to 6 times the impairment rating.  Under the new law, the determination of PPD benefits will be completely different.  For instance, all injuries will be examined as whole person injuries, and the maximum value will be increased to 450 weeks.  PPD will be calculated based solely on the impairment rating regardless of whether the employee has returned to work.  However, the employee might be eligible for additional benefits if certain conditions are subsequently present.  For instance, the PPD award may be increased by a factor of 1.35 times if the employee is not returned to work with any employer or is earning less than the pre-injury wages.  The award may be further increased by multiplying the award by the product of the following factors: (a) 1.45 times if the employee lacks a high school diploma or GED; (b) 1.2 times if the employee is more than 40 years of age; and (c) 1.3 times if the employee lives in a Tennessee county with at least 2% higher unemployment rate than the state average.  Finally, additional benefits might also be available to the employee if at the time of the award or settlement, the employee can prove by clear and convincing evidence at least three of the following four factors: (1) the employee lacks a high school diploma or GED, or cannot read and write at the 8th grade level; (2) the employee is 55 years of age or older; (3) the employee has no reasonably transferrable job skills; and (4) the employee has no reasonable employment opportunities available locally considering the employee's permanent medical condition.

Since this new system is brand new and untested, it is difficult to determine with any certainty how it will ultimately affect exposure for PPD.  Undoubtedly, some of these various factors have an element of redundancy.  In addition, it remains to be seen how these different factors might work together on a single claim.  However, according to the sponsors of the bill the end result of these changes is intended to be lower average indemnity awards for workers' compensation claims.  That is probably accurate, though an interesting open question is how this will affect the return-to-work analysis.  Under the current multiplier system, employers have a tremendous financial incentive to return injured workers back to work.  However, it would seem that there would be significantly less incentive to do so under the new system.

The causation analysis will also be affected by the new law, which changes the definition of injury to include an injury by accident, a mental injury, occupational disease, or cumulative trauma condition arising primarily out of and in the course and scope of employment.  Two years ago, the "primarily" standard was introduced for repetitive trauma conditions and the new law will now apply it to all injuries.  "Primarily" is defined to mean that the employment contributed more than 50% percent in causing the injury, considering all causes, as established by a preponderance of the evidence.  The opinion of the treating physician shall be presumed correct on the issue of causation, but this presumption may be rebutted by a preponderance of the evidence.

Another change in the law concerns panels of physicians.  Under the current law, the employer is required to provide a panel of three physicians or surgeons, not associated in practice, located in the employee's community, from which the employee may select the treating physician.  For back injuries, the panel must be expanded to four, including one chiropractor.  If the treating physician refers the employee for specialist care, the employer must then provide a new panel of three specialists, not associated in practice, located in the employee's community.  Under the new law, employers will still be required to provide an initial panel of three physicians, surgeons, chiropractors, or specialty practice groups, if available in the employee's community, from which the employee will select the treating physician.  If three or more providers are not available in the employee's community, then the panel may include providers from a 100 mile radius of the employee's community.  If the treating physician makes a referral to a specialist, the employer shall be deemed to have accepted the referral unless, within three business days, a new panel is provided to the employee.  It is important to note that both under the current law and the new law, "community" remains undefined.

The issue of medical expenses is a huge issue in Tennessee workers' compensation.   According to recent testimony in the Tennessee Workers' Compensation Advisory Council, medical costs account for approximately 67% of all costs associated with Tennessee workers' compensation claims.  This issue is also addressed in the reform act through the creation of a Medical Advisory Committee.  This committee shall consult with the Administrator, who must adopt guidelines by January 1, 2016, for the diagnosis and treatment of commonly occurring workers' compensation injuries.  Any treatment that follows the guidelines will be presumed reasonable and necessary, and this presumption may only be rebutted by clear and convincing evidence.

In summary, big changes are on the horizon in Tennessee.  Proponents of the bill claim that these reforms will result in fairer, faster, and more efficient resolution of Tennessee workers' compensation claims.  Opponents of the bill have questioned the ability of the Tennessee Department of Labor to effectively administer such a system, the perceived drastic reduction of workers' compensation benefits, and possible chilling effect on the filing of new claims in the future.  Note that since the new law will not go into effect until July 1, 2014, the Tennessee legislature will have another legislative session to further tinker with the bill if they choose.  So, stay tuned for more developments.

Fredrick R. Baker, Member
Wimberly Lawson Wright Daves & Jones, PLLC
1420 Neal Street, Suite 201
P.O. Box 655
Cookeville, TN 38503-0655
Phone: 931-372-9123
Fax:  931-372-9181