Spiraling workers’ compensation costs are threatening the city’s bottom line and raising questions about workplace safety, city officials said this week.
In fiscal year 2003, which ended in June, the city paid at least $6.8 million in workers’ compensation costs, a 23 percent jump over the $5.5 million doled out in fiscal year 2002, according to a new report presented to City Council Tuesday night.
“That’s a big number,” said Dave Hodgkins, acting deputy director of human resources.
The problem is particularly acute for a city that, despite raising taxes and cutting services in recent months to close a $9 million deficit for fiscal year 2004, still faces an $8 to $10 million shortfall in 2005.
City Councilmember Gordon Wozniak, who worked on safety issues during his career as a senior scientist at Lawrence Berkeley National Laboratory, gave city staff a tongue-lashing on the economic and ethical dimensions of the issue Tuesday night.
“We have a moral obligation as a city to provide a safe work environment,” said Wozniak. “I think the city manager needs to go to the head of public works and say ‘this is unacceptable, what are you going to do about it?’...I want to hear some urgency on this.”
City Manager Weldon Rucker defended the city’s approach, noting that a new training program for supervisors, with a focus on prevention, is underway and that workers’ compensation has gained a more prominent place in the evaluation of managerial staff.
“I am holding department heads accountable,” he said.
According to a study by the Sacramento-based firm of Bickmore Risk Services, Berkeley has 47 percent higher costs than the average of several local cities and towns participating in the Bay Cities Joint Powers Insurance Authority, administered by Bickmore.
Berkeley’s highest losses, as is typical for most cities, have come in the police, fire and public works departments, where workers face the most dangerous jobs.
City officials, union leaders and everyday workers say they are unsure about what lies behind the soaring workers’ compensation rates. But the city has hired the Berkeley-based Lindy West and Associates to conduct the first full audit of the city’s system in years.
In the meantime, a host of theories abound. Hodgkins said, for instance, that Berkeley provides a few services, like solid waste collection, that many municipalities do not— opening the door for more injuries.
Rucker said there’s a larger cultural problem in the city’s ranks.
“People have taken for granted the entitlement of workers’ comp,” he said. “There’s been a culture of, kind of, it’s OK to get hurt. No, it’s not OK to get hurt.”
Hodgkins points to a unique provision in the city’s labor contracts that allows all workers to receive full pay for a year if they are out on workers’ compensation. State law requires a full year’s pay for sworn employees— police officers and firefighters— but does not require Berkeley to extend the provision to all its employees.
John Burton, Jr., an economist and professor at Rutgers University’s School of Management and Labor Relations in New Jersey, said the contract language, which dates back at least 30 years, encourages workers to take advantage of the system and stay off the job longer than needed.
“I don’t want to call that fraud, it’s simply a rational reaction,” he said. “I think you’re inviting a problem.”
René Cardinaux, director of public works— which saw a 55 percent jump in employee hours lost this year, according to the new report— used stronger language.
“It’s just like welfare or anything else,” said Cardinaux, who questions the 55 percent figure. “There’s not a solid citizen around who believes women and children don’t deserve government help...[But] you and I know these things get abused.”
But workers and union officials said they don’t believe the policy is a major contributor to the city’s workers’ compensation costs.
“I’ve heard of some people taking advantage, but to my knowledge, [I don’t know anyone] personally,” said Rolando Vargas, a city mechanic in the public works department. “The city’s been cracking down on that sort of thing.”
Current contracts for non-sworn employees expire in the summer of 2008. Hodgkins declined to say whether the city would ask the unions to drop the full year’s pay provision from their next contracts.
Eric Landes-Brenman, a senior management analyst who chairs the budget and negotiations committee for Public Employees Union, Local One, which represents 160 employees, was cool to the idea, noting that it was a “very contentious issue” in the last round of negotiations.
But he said it would be premature to discuss the issue at length at this point, especially since city officials and labor leaders have been meeting for the last six months to come up with strategies for reducing workers’ compensation costs.
Part of the talks have focused on ironing out the details of a separate contract provision that will provide employees with a one-time, one percent bonus if workers’ compensation costs decline.
The city is also working to get more aggressive in its “return to work” policy, pushing injured workers to perform light duty until they heal.
Ed Welch, director of the Workers’ Compensation Center at Michigan State University, said the key to a strong return to work policy is bringing back employees quickly.
“In the first week or two, workers say they can’t wait to come back to work. They say the walls are closing in on them,” he said. “If you leave people at home for six weeks or six months, their whole attitude changes.”
Return to work is also a powerful deterrent to fraud, Welch said.
“If no matter what’s wrong with you, your [employer] is going to find work for you, there’s no reward for being a fraud,” he said.
But Cardinaux said the policy doesn’t always work in the real world. Most public works jobs involve heavy manual labor and it can be difficult to find low-impact tasks for injured employees, he said.
“I can only have them sweep the corporation yard for so many hours,” he said, adding that employees hired to do heavy lifting don’t necessarily have the skills to work on a computer or perform other office work.
Another obstacle is employee perception of workplace safety. A survey conducted by Bickmore for the city found that, in an unusual twist, workers actually have greater confidence in the city’s safety precautions than managers.
John, a skilled laborer who declined to give his last name, suggested that feeling was well-founded.
“We all look out for each other,” he said, adding that his supervisors are responsive when workers raise safety concerns.
Berkeley may have a bigger problem with workers’ compensation than its immediate neighbors. But the city is, by no means, the only employer facing skyrocketing workers’ compensation bills in California. Medical inflation and vague language in the state’s workers’ compensation law— inviting costly lawsuits— have lead to skyrocketing costs for business, nonprofits and government, Burton said.
The state legislature is currently considering about 20 bills that would address the problem, through a variety of caps on medical costs and restrictions on services available to employees. Hans Hemann, chief of staff for State Assemblywoman Loni Hancock (D-Berkeley), said the legislature will have to walk a fine line between holding down costs for employers and providing full medical care for workers.
In the meantime, medical bills continue to mount and worries continue to grow in Berkeley. Hodgkins said $1.1 million in overhead expenses means the city actually paid more than $6.8 million on workers’ compensation last year. The city, he said, is likely spending between eight and nine percent of its $95 million payroll on the program, creating serious financial headaches.
City Councilmember Linda Maio said Tuesday that the city, which has an overall budget of about $280 million, is moving in the right direction with a new emphasis on prevention. But it must act decisively to address the problem, she suggested.
“We really have to get in front of this,” Maio said.