Call to Order and Roll Call
The first meeting of the Interim Joint Committee on Local Government was held on Wednesday, June 22, 2016, at 10:00 AM, in Room 171 of the Capitol Annex. Representative Steve Riggs, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Representative Steve Riggs, Co-Chair; Senators Ralph Alvarado, Christian McDaniel, Morgan McGarvey, Albert Robinson, Dan "Malano" Seum, and Damon Thayer; Representatives George Brown Jr., Mike Denham, Jim DuPlessis, Richard Heath, Cluster Howard, Adam Koenig, Brian Linder, Tom McKee, Michael Meredith, Jonathan Shell, Arnold Simpson, Chuck Tackett, James Tipton, and Susan Westrom.
Guests: Representative Russell Webber; Bennie Brown, Shepherdsville City Council; Tim Wade, Shepherdsville City Police Officer; Tim House, Jared Downs, and Duane Curry, Department of Housing, Buildings and Construction; Dwight Lovan, Department of Workers’ Claims; J. D. Chaney and Bert May, Kentucky League of Cities; Shellie Hampton, Kentucky Association of Counties; Kamp Purdy, Fogle, Keller, Purdy Law; Bob Weiss, Homebuilders Association of Kentucky; Bill Kauflolz and Jason Finch, Fischer Homes; Finley Messick, Jill Smith, and Laura Owens, Kentucky Ready Mixed Concrete Association; Prentice Harvey, State Farm Insurance; Ron Wolf, Associated General Contractors of Kentucky; Judy Piazza, Finance and Administration Cabinet; and Mike Sunseri, Office of Homeland Security.
LRC Staff: Mark Mitchell, John Ryan, Joe Pinczewski-Lee, and Cheryl Walters.
Consideration of Referred Administrative Regulations
The committee considered referred administrative regulations promulgated by the Department of Housing, Buildings and Construction: 815 KAR 7:120 (Kentucky Building Code); 815 KAR 7:125 (Kentucky Residential Code); 815 KAR 8:095 (HVAC: vehicle identification); 815 KAR 20:084 (Plumbing: storage and installation of cross-linked polyethylene piping); 815 KAR 20:191 (Plumbing: minimum fixture requirements); and 815 KAR 20:195 (Plumbing: medical gas piping installations). Tim House, Deputy Director, Mr. Jared Downs, General Counsel, Duane Curry, Director of Codes Enforcement represented the department.
In response to a question from Senator Seum, Mr. Curry said the Board of Housing is represented by industry individuals and those individuals notify their constituents about potential changes to the codes.
In response to a question from Senator McDaniel, Mr. Curry said the changes will apply to residential occupancies. The board intended for all residences to conform to the 2009 Energy Conservation Code. The board felt that the 2009 code was more cost effective while meeting minimum energy requirements. The 2009 code allowed for 7 “air changes” per hour versus the three allowed in the 2012 code for certain residential occupancies.
Ms. Laura Owen, legislative agent, Mr. Finley Messick, Executive Director, and Ms. Jill Lewis Smith of the Kentucky Ready Mixed Concrete Association (KRMCA) voiced their opposition to the changes proposed to 815 KAR 7:120 and 815 KAR 7:125. Mr. Messick said the change would revert the Energy Conservation Code from 2012 code standards to 2009 code standards. KRMCA felt the changes would move Kentucky backwards in energy efficiency. The changes affect apartments and dormitories and other residential applications in addition to single-family residences. The changes are for monetary reasons and are not in the best interest of the health and welfare of the final consumer which are renters or owners. The association has been invited by the department for input into future discussions relating to the building codes.
Ms. Smith said that no notice was provided to the American Institute of Architects in Kentucky regarding the changes. She was not aware of any other place in the nation where anyone is trying to mesh the 2009 residential code with the 2012 commercial code. Nineteen states use the 2012 commercial code, and six states use the 2015 commercial code. Drury Inns is an example of cost-effective buildings demonstrating energy efficiency.
In response to a question from Representative Riggs, Ms. Owen said that the benefits to owners and occupants from a more stringent code would be savings in energy costs.
Ms. Smith said that building costs were cited as a reason for going back to the earlier code. In her experience it did not cost any more to design a building to the later code. Owners and occupants will always be responsible for paying the energy bills.
In response to a question from Representative DuPlessis, Ms. Smith said that it is no more difficult to meet the air exchange standard in a stick-built house versus a concrete panel house if you use correctly-installed insulation, wraps, or liquid-applied wrap. An insulated concrete form home in Louisville was built for $126 a square foot, the same as for homes nearby that had difficulty meeting the air-tightness test.
Representative DuPlessis commented that he, as a consumer, would like to have the option to build to a higher energy code standard, rather than be required to.
Ms. Smith commented that she would prefer one category of codes, rather than picking and choosing from different code versions.
In response to a question from Representative Tipton, Mr. Messick said that the proposed change applies to multifamily residences—not single family residences. Ms. Smith added that if wraps and windows were installed correctly, the residences would meet 2012 energy code standards.
Representative Linder said that the type of air conditioner or heater used has a cost on energy consumption in addition to air-tightness.
Representative Linder requested a copy of the two standards to be sent to him.
Representative Meredith commented that a commercial building built last year under the 2012 code was twice as expensive as a residence he is building under the 2009 code. The market could contribute in part to the difference. People may not have “up-front” money.
Mr. Messick said that, while costs of a more expensive building may be passed on to a renter, that the renter may save energy costs.
Senator Robinson noted the committee’s limited jurisdiction over the administrative regulation. He said that a legislative change may be required to effect change.
Mr. Bob Weiss, Executive Vice-President of the Home Builders Association of Kentucky, and Mr. Bill Kauflolz, an architect with Fischer Homes, addressed the committee.
Mr. Weiss said that the regulation has gone through the administrative process. In addition, the code is meant to be a minimum code. Under the regulations, one and two family residences are presently under the 2009 code. The purpose of the regulation is to bring all residential construction under the same code.
Mr. Kauflolz said that the biggest concern is associated with cost. Condominiums are the most affordable product his company produces. The differences between the codes are more than a blower door test. Meeting the 2012 code requirements can impact the engineering decisions used to construct the building adding to the total construction cost.
In response to a question from Representative Koenig, Mr. Kauflolz said that there was a $900 difference per home for his company. Switching codes may always include new costs.
Senator McDaniel commented that increasing standards will increase costs.
Representative Riggs stated that a written report of the review will be submitted to LRC.
Workers’ Compensation as it relates to Local Governments as Employers
Commissioner Dwight Lovan, Department of Workers’ Claims, Mr. J.D. Chaney, Deputy Executive Director, Kentucky League of Cities (KLC), Ms. Shellie Hampton, Director of Governmental Affairs, Kentucky Association of Counties (KACo), and Mr. Kamp Purdy, Attorney with Fogle, Keller, and Purdy Law, PLLC, were invited to address the committee.
Representative Riggs explained that workers’ compensation is important to the committee and to local governments as they are employers.
Commissioner Lovan background information relating to the entitlement of temporary total disability (TTD) from a legal standpoint. There are three kinds of disability as it relates to income benefits: temporary total disability, permanent total disability, and permanent partial disability. KRS 342.0011(11)(a) defines temporary total disability as “the condition of an employee who has not reached maximum medical improvement from an injury and has not reached a level of improvement that would permit a return to employment.”
“Maximum medical improvement” is generally defined as the date after which further recovery from or lasting improvement to an injury or disease can no longer be anticipated, based upon reasonable medical probability. While improvement is not ruled out, the individual has reached a plateau in substantial improvement.
Determination of income benefits for disability is found in KRS 342.730(1)(a) which reads: “(1) Except as provided in KRS 342.732, income benefits for disability shall be paid to the employee as follows: (a) For temporary or permanent total disability, 66 2/3 percent of the employee’s average weekly wage when the person sustained the injury.”
W.L. Harper Construction Co., Inc., v. Baker was the first case that defined “maximum medical improvement”, and it said: “temporary total disability is payable until the medical evidence establishes the recovery process, including any treatment reasonably rendered in an effort to improve the claimant’s condition, is over, or the underlying condition has stabilized such that the claimant is capable of returning to his job, or some other employment, of which is capable, which is available in the local labor market. Moreover, the question presented is on of fact no matter how temporary total disability is defined.”
This case was decided in 1993. Persons become eligible for TTD when they are off work for more than seven days.
The schedule of maximum and minimum amounts paid for injuries is found in KRS 342.730(1)(a). For example, the maximum amount paid for temporary and permanent disability for January 1-December 31, 2016 was $798.63 and the minimum amount paid was $159.72.
Decided in 2000, Central Kentucky Steel v. Wise was the first case to modify the W.L. Harper Case. An individual was released to go back to work but at a less strenuous level than before. The court expanded the definition saying that the person needed to be able to do their customary work. This decision was based on the question of whether or not being released to some kind of work terminated TTD benefits. It did not deal with the situation of a person going back to work in a different category of job.
Magellan Behavioral Health v. Helms focused on the return to employment question. In Central Kentucky v. Wise, “return to employment” was interpreted to mean a return to the type of work which is customary for an injured employee or that which the employee had been performing prior to injury. Prior to those time frames, if an individual was released and returned to work, the individual’s TTD status may have been terminated if that person had not reached maximum medical improvement.
In three subsequent cases: Mull v. Zappos.com., Inc., Nesco Resources v. Arnold, and Delena Tipton v. Trane Commercial Systems, which occurred around 2014, the Court of Appeals seemingly substantially altered the standard for determining an employee’s entitlement to total temporary disability benefits. The Nesco case in particular seemed to imply that a person could return to work at a different capacity and still receive TTD benefits.
In Livingood v. Transfreight, the Supreme Court declined to hold that a claimant is entitled to total temporary disability benefits simply because he or she is unable to perform the work performed at the time of the injury.
The case with the greatest impact was the decision in the Supreme Court appeal to Delena Tipton v. Trane Commercial Systems. The reversal clarified that “customary work” does not mean that one had to do the same job that one performed before in order to no longer qualify for TTD payments. It clarified that TTD decisions will be made on a case by case basis and includes evaluations of the actual work done when it is different than the employee’s original position.
In response to a question from Representative Riggs, Mr. Purdy said the statistics show that if an employee returns to work prior to reaching maximum medical improvement, there is a better chance of seeing that person succeed in the workforce later on. The goal, ultimately, has to be to return people to the workforce as early as possible, medical restrictions notwithstanding. Whatever restrictions there are should be accommodated, but if the employer is willing to and can accommodate, double dipping on the employer’s dime is not productive for anyone.
Mr. Chaney said that KLC worked with KACo, Kentucky Chamber of Commerce, and Kentucky Employers Mutual Insurance on 2016 SB 151 that Senator Steve West sponsored, which passed the Senate but did not get a hearing in the House because of disagreements with labor and trial attorneys on exactly how the situation should be remedied. But both private industry and governmental employers had a big problem with the Court of Appeals opinion that Commissioner Lovan highlighted. Employers were having potential situations where the employees were receiving both their wages for the light duty or modified duty work, and at the same time, receiving TTD benefits. This did not serve the purpose of the worker’s compensation statutes for wage replacement if employees were getting both their wages for light duty and total temporary disability benefits at the same time. SB 151, if enacted, would have clarified that if an employee returns to modified duty, the wages earned would be offset against the total temporary disability benefits. KLC and the other groups will continue the effort to get that legislation enacted in the next session of the General Assembly. HCR 185, the worker’s compensation task force, will hopefully look at this as part of its efforts. Regarding the court decisions and legislation, there should be a consistent standard where employers can predict situations where they might fall into a double indemnity.
Ms. Hampton reiterated Mr. Chaney’s remarks on behalf of KACo.
Mr. Purdy noted that there could be a situation where an employee could be drawing TTD benefits and a salary when on light duty and actually make more money than before. This is not a palatable situation for an employer.
Mr. Chaney noted that TTD benefits are not considered creditable compensation toward retirement.
In response to a question from Representative Meredith, Mr. Chaney replied that the creditable compensation issue could affect a spiking situation as well in consideration of the new spiking laws that have passed recently.
Representative Meredith commented that an employee in one of his counties was told there was no light duty for her, so she resigned. She did not receive any disability benefits and was told the reason was because she resigned. Mr. Purdy said she should have received disability benefits. Resigning from a job does not impact whether or not an employee receives disability benefits.
Representative Riggs commented that when he hears an employer say there is no light duty work, the employer needs more education, not the employee.
In response to a question from Senator Seum, Commissioner Lovan replied that the TTD benefits are not taxed and do not need to be claimed.
In response to another question from Senator Seum, Commissioner Lovan said that the restarting of TTD benefits versus simply continuing to pay a person’s salary varies from company to company when an employee takes time off due to a an injury.
In response to a question from Representative Riggs, Mr. Chaney said that KLC is still interested in pursuing legislation, especially since the Trane decision does not solidly define “customary work.”
Representative Riggs announced that the committee will not meet in July. The next meeting will be held in August.
There being no further business, the meeting was adjourned at 12:00 p.m.