• Study participants.

The Second Injury Fund Subcommittee, chaired by Delegate Joan H. Munford, Chairman of the House Labor and Commerce Committee, met between the 1990 and 1991 sessions to discuss this fund's current performance and determine whether changes in its scope and structure are desired. The following were appointed to serve with Delegate Munford on the HJR-312 subcommittee:

Delegate Robert S. Bloxom, Member, House Labor and Commerce Committee;
Delegate Edward R. Harris, Member, House Labor and Commerce Committee;
Senator William E. Fears, Chairman, Senate Committee on Commerce and Labor;
Senator Richard J. Holland, Member, Senate Committee on Commerce and Labor;
Commissioner William E. O'Neill, Chairman, Workers' Compensation Commission of Virginia;
James C. Roberts, Esq., Mays & Valentine, Esqs., representing workers' compensation insurance carriers;
James A. Metcalf, Esq., representing labor under the Workers' Compensation Act; and
J. Thomas FowIkes, Esq., representing employers under the Workers' Compensation Act.
Arlen K. Bolstad, Esq. and Mark C. Pratt, research associate from the Division of Legislative Services served as the subcommittee's legal and research staff. Anne R. Howard from House Committee Operations provided administrative assistance to the subcommittee.

• Study catalyst.

A 1990 report of the Joint Legislative Audit Review Commission (JLARC) on Virginia's workers' compensation system stimulated this legislative study authorized by House Joint Resolution 312 of the 1991 session. The JLARC report concluded that the second injury fund is "underutilized" and thus not achieving its purpose of encouraging employment of previously disabled workers.

The JLARC report noted that less than a quarter-million dollars have been disbursed from the fund to disabled employees with work-related injuries in their current employment since it was established in 1975. It said that 13 states with second injury fund eligibility criteria more restrictive than Virginia's had a comparatively higher utilization rate. The report concluded that further study of the fund's eligibility criteria and utilization level was warranted.

A special commission studying the needs of disabled workers and related issues, headed by Lt. Governor Beyer ("the Beyer Commission"), was successful in obtaining further study of the Second Injury Fund through House Joint Resolution 312. The Beyer Commission viewed the fund as a potentially valuable resource for promoting employment of persons with disabilities.

• Purpose of the second injury fund.

Second injury funds are intended to encourage employers to hire disabled persons by alleviating employer fears about the potentially high costs of workers' compensation claims made by disabled employees injured on the job. In addition, the funds are designed to provide full compensation for total disability whether the employee stays with the employer in whose employment he was first injured, or leaves such employment and goes to a different employer, or comes to an employer with a partial disability caused by a noncompensable injury.

• How the fund works.

Virginia's second injury fund was established by the 1975 session of the General Assembly. Its coverage, then and now, is extended to those individuals with extremity-related disabilities sustaining like injuries (i.e., the "second injury") on the job. Employers must pay ordinary compensation benefits for any disability related solely to the second injury. However, if a pre-existing disability and a second injury combine to create a cumulative disability level greater than that caused by the second injury alone, the second injury fund generally pays for the excess disability.

For example, a job-related leg amputation, alone, results in a permanent, partial disability under Virginia's workers' compensation laws. However, if a worker sustaining a job-related amputation was previously disabled by complete paralysis in the non-amputated leg, the worker's cumulative disability is permanent and total. Under Virginia law, a worker receives 175 weeks of compensation for the loss of a leg; the loss of two legs, however, entitles him to 500 weeks. In this case, the second injury fund will pay the difference between the two levels of compensation: the employer pays the first 175 weeks; the second injury fund pays the excess up to the 500·week maximum.

As a matter of procedure, the employer provides the Workers' Compensation Commission notice of the second injury, pays compensation benefits for the cumulative disability, and then seeks reimbursement for excess disability payments from the fund.

• Fund financing.

The fund is underwritten by insurance carriers issuing compensation policies along with employers who self-insure their workers' compensation obligations. A one-quarter of one percent tax is levied on compensation carriers' premiums and self-insured employers' payrolls to generate the fund. When the fund is above $250,000 no further taxes may be assessed until the fund drops below $125,000. According to the JLARC report, a fund tax was levied in 1976 to create the initial funding; no levy has been made since. The key variables determining the frequency of fund taxes are injury categories covered by the fund) and the level of utilization.

No claims were made against the fund until 1982 when its balance stood at nearly one-half million dollars. The fund's balance dropped a quarter-million dollars in 1985 when that amount was appropriated to the general fund. Subcommittee members recalled that the State Corporation Commission's administrative fund was similarly tapped that same year. The fund's balance has dropped below $125,000, currently standing at approximately $90,000. According to the Workers' Compensation Commission, a fund tax will be assessed at the end of calendar year 1991. If the one-quarter of one percent statutory formula is followed, nearly $1 million will be generated.

• Fund utilization levels.

The subcommittee reviewed the fund's utilization record as well. Commissioner O'Neill reported that fifty claims have been made against the fund since its inception. To date, the Workers' Compensation Commission has approved six claims (three are presently in active payment status); twenty claims are pending, some dating back to 1987. Twelve claims have been denied. The pending category, he added, includes claims filed but not followed through to payment.

Some subcommittee members suggested that the Workers' Compensation Commission's utilization statistics may not necessarily represent the total number of claims eligible for coverage by the fund. Some insurers may abandon second injury fund claims or simply decline to file them when it appears ultimately less expensive to pay the full claim and close the file rather than initiate a reimbursement- claim with the Workers' Compensation Commission.

• Impact of new federal law on hiring of persons with disabilities.

The federal "Americans With Disabilities Act" ("ADA"), 42 U.S.C. 12101, et seq., was signed into law on July 26, 1990. The Act's key labor provisions that prohibit employment discrimination against persons with disabilities, and require employers to reasonably accommodate disabled workers in their hiring practices will become effective in July 1992. At that time, regulations promulgated by the federal Equal Employment Opportunity Commission (EEOC) will requires nondiscriminatory job application procedures, qualifications standards, and selection criteria by employers in businesses "affecting commerce" with 25 or more employees. Many subcommittee members viewed this Act as comparatively more effective in generating employment opportunities for disabled workers than expanding the second injury fund's coverage.

• Subcommittee postpones action.

At the study's conclusion, members of the Subcommittee decided to postpone consideration of changes to the second injury fund at this time because the ADA's employment regulations may achieve, in a very direct way, the employment opportunities for disabled persons sought by the Beyer Commission. They further concluded that the marketplace impact of the EEOC's ADA regulations should be monitored for one year following their July 1992 effective date. A motion recommending that the General Assembly postpone consideration of amendments to the second injury fund until after July 1993 was passed unanimously by the Subcommittee.