Business leaders emphasized the risk rising workers’ compensation costs pose to Florida’s economic competitiveness during an Associated Industries of Florida-sponsored discussion Monday.
“There are other governors competing against our governor for the next plant, the next manufacturing facility, the next high-tech jobs,” said Tom Feeney, president and chief executive officer of the business lobby.
“They are suddenly able to use our workers’ compensation situation against Florida, the same way our governor uses high taxes and high regulations that other states have to attract businesses,” Feeney said. “It’s putting us at a competitive disadvantage.”
Bill Herrle, Florida director for the National Federation of Independent Business, agreed and emphasized that the repercussions will travel throughout the economy.
“We know that this is going to be debilitating to small business,” Herrle said. “But we need to carry the message out there that this is affecting every layer of employment, including our very important public sector.”
AIF organized the discussion during its annual conference in Tallahassee.
The event coincided with a trial judge’s final order refusing to stay her ruling that a 14.5 percent increase in workers’ compensation premiums were illegal, on the ground that they were reached in violation of Florida’s open-government laws.
Leon County Circuit Judge Karen Gievers had issued an oral preliminary ruling on Friday refusing to stay that decision. On Monday, she put it in writing.
The legal issue remained alive, however, because the 1st District Court of Appeal had blocked Gievers’ order before she even issued it. Proceedings will determine the increase’s legality before that appeal court.
The increase promises to feature prominently during next spring’s legislative session, when AIF, the Florida Chamber of Commerce and other business groups will press lawmakers to do something.
The increase began to take effect on Thursday and will hit employers as their policies come up for renewal over the next 12 months.
Many critics blame Florida Supreme Court rulings striking down business-friendly reforms the Legislature approved in 2003. One ruling in particular — Castellanos v. Next Door Co., striking limits on attorney fees in workers’ compensation disputes — accounts for some 10 percent of the increase, according to the state Office of Insurance Regulation.
Those reforms pegged attorney fees to benefits actually won for workers, regardless of the time attorneys spent in winning them. That eliminated incentives for plaintiffs’ lawyers to litigate over small details, said Jim McConnaughhay, of the defense-side workers’ compensation law firm McConnaughhay, Coonrod, Pope, Weaver & Stern.
“Unquestionably, that’s where the savings were,” he said.
“What the Castellanos decision really creates is an environment where a mechanized and industrialized legal industry can gear up and begin to make these very small, garden-variety cases very, very profitable,” Herrle said.
“They have given license to file as many pleadings, nuisance claims, and run up bills, and then are able to go and ask a friendly judge in court for as much of an hourly rate and they can get for as many hours as they can find an imaginative way to create,” Feeney said.
The post-2003 environment “has been great for growth and in helping Gov. (Rick) Scott and our legislators in making us one of the fastest growing economies,” Feeney said, but the Supreme Court rulings threaten to undo that.
By contrast, the situation now might chase insurers out of the Florida market, he continued.
“Workers’ comp insurers can’t work efficiently and in a cost-effective manner unless you have insurance companies willing and able to engage in the business and turn a profit,” Feeney said. “Otherwise, they will just deploy their capital in some other line of business or in some other state.”
As for a legislative fix, Feeney estimated an AIF task force likely would release its proposals in late December.
He didn’t pretend a fix would be easy.
“If we’re going to address workers’ comp, it’s likely to be an all-out war in the Legislature,” Feeney said.