District Court Invalidates SIBs Rule

On December 2, 2020, a Travis County District Court ruled that Division of Workers’ Compensation Rule 130.102(d)(1)(D) is invalid because it authorizes a method of proving entitlement to Supplemental Income Benefits which conflicts with the Texas Labor Code. The Court permanently enjoined the Division from applying the rule. The judgment also permanently enjoined the Division from applying the “work search contacts” language in Rule 130.102(f) to a claimant that is not participating in work search efforts through the Texas Workforce Commission.

The Division may appeal the judgment and if it does so the injunction will be stayed pending final outcome of the appeal.

Background

SIBs are paid to claimants who have an impairment rating of 15% or greater and who either cannot work or who can work but only in an underemployed capacity. In 2005, the legislature changed the job search standard from a subjective “good faith effort” standard to an objective “active work search” standard. Despite the change, the Division continued to apply the “good faith effort” standard until 2009 when it finally promulgated rules to implement the 2009 standard.

However, those 2009 rules added a method to qualify for SIBs that was not reflected by the statute— that all a claimant had to do to qualify for SIBs was show the same number of job “contacts” per week that the Texas Workforce Commission requires for job searches in the county where the claimant lives when a claimant is working “through” the TWC.

This relaxed the statutory standard. Over the years this easing of the objective job search requirements devolved into the situation where all a claimant had to do to qualify for SIBs was to complete a SIBs application and send it to the carrier. The Division’s interpretation made it difficult for carriers to verify the claimant’s efforts or to challenge doubtful or dubious job seeking behavior.

The rule effectively abrogated the Legislature’s three work search options: 1) to actively participate in a vocational rehabilitation program; 2) to actively participate in work search efforts conducted through the Texas Workforce Commission; or 3) to show evidence of active work search efforts document by job applications submitted by the claimant.

When DWC adopted the new rules, it created a new method of qualification—making work search “contacts” outside the context of participation with TWC. Over time, this resulted in claimants no longer working with vocational rehabilitation specialists to find employment.

The Lawsuit

The suit challenged the validity of the SIBs rules on the basis that the Division lacked statutory authority to adopt rules that effectively rewrite the statute. In addition, the lawsuit challenged certain agency statements as illegal ad hoc rules (statements of policy generally applicable but not formally adopted). Specifically, the suit was aimed at DWC’s policy statements made through the Appeals Panel and other means that instructed system participants as to how the agency intended its new rules to be applied.

The court did not accept the carrier’s argument that the Division had engaged in ad hoc rulemaking. However, the judgment provides:

Defendant Texas Department of Insurance, Division of Workers’ Compensation’s Appeals Panel Decision 100229-s and Appeals Panel Decision Manual were published as part of the Defendant’s adjudicative duties. Although these may not be ad hoc rules, this Court believes that the Defendant can no longer rely on them to support decisions that conflict with this ruling. Furthermore, the Court believes that Defendant will likely need to make revisions to its preamble to Rule 130.102, Appeals Panel Decision Manual, and Application for Supplemental Income Benefits in order to comport with this ruling.

The carrier was supported in its argument by an amicus brief filed by the State Office of Risk Management. In that brief, SORM argued:

If the injured worker is conducting their job search through TWC or another vocational rehabilitation program, as envisioned by the Legislature in its bill analysis. However, if an injured employee is not working with TWC or a licensed vocational rehabilitation program, but rather making their work search efforts on their own or in some other manner, then the plain language of the statute and legislative analysis requires documentation by the submission of job applications.

However, in Rule 130.102(f) the Division conflates two of the work search requirements: the work search efforts through TWC and the work search efforts documented by job applications, which are separate requirements in both the statute Section 408.1415(a)(2) and (3), and the rule in 130.102(d)(1)(C) and (D). “As provided in subsection (d)(1)(C) and (D) of this section regarding active participation in work search efforts and active work search efforts, an injured employee shall provide documentation sufficient to establish that he or she has, each week during the qualifying period, made the minimum number of job applications and or work search contacts consistent with the work search contacts established by TWC which are required for unemployment compensation in the injured employee’s county of residence pursuant to the TWC Local Workforce Development Board requirements.”

Once a claimant becomes entitled to SIBs, under the Division’s current rule it is easy to receive benefits up to the full 401 weeks allowed — and never go back to work even if the claimant could do so with reasonable efforts. This has the effect of discouraging return to work efforts rather than encouraging them. Requiring that injured workers engage in meaningful job search activities effectuates the legislature’s goal to return workers to the workforce.

We are carefully monitoring this litigation and will continue to update you as developments occur.