HBA-EVB, MPA, ATS C.S.H.B. 2842 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 2842 By: Brimer Business & Industry 4/8/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE The Labor Code entitles an employee to temporary income benefits that replace a substantial part of lost wages if the employee has a disability and has not attained maximum medical improvement. Temporary income benefits continue until the employee reaches maximum medical improvement. These benefits are calculated using a statutory formula. The amount of a temporary income benefit is equal to 70 percent of the amount computed by subtracting the employee's weekly earnings after the injury from the employee's average weekly wage, or, for the first 26 weeks, 75 percent of the amount computed by subtracting the employee's weekly earnings after the injury from the employee's average weekly wage if the employee earns less than $8.50 an hour. The weekly temporary income benefit is tax-free. Injured employees who do not receive temporary income benefits under the Labor Code because they are covered by a company provided benefit, known as salary continuance, receive their salary subject to taxes. Although these payments are subject to income tax, employees who receive continuance payments actually receive more in after-tax earnings than if they had not been injured and continued to work. This is because employees are entitled to a rebate of the tax withheld on the portion of their salary continuation benefits that would have otherwise been paid to the employee in the form of taxfree temporary income benefits under the Labor Code. C.S.H.B. 2842 requires that salary continuation payments be considered payment of income benefits for purposes of determining the accrual date of any subsequent income benefits under the Texas Workers' Compensation Act. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 408.003, Labor Code, by amending the title, as follows: Sec. 408.003. New Title: REIMBURSABLE EMPLOYER PAYMENTS; SALARY CONTINUATION; OFFSET AGAINST INCOME BENEFITS; LIMITS. Adds "Salary Continuation; Offset Against Income Benefit; Limits." SECTION 2. Amends Section 408.003, Labor Code, by adding Subsections (f) and (g), as follows: (f) Requires that salary continuation payments be considered payment of income benefits for purposes of determining the accrual date of any subsequent income benefits under the Texas Workers' Compensation Act. (g) Provides that payments made as salary continuation or salary supplementation do not affect the exclusive remedy provisions of Section 408.001 (Exclusive Remedy; Exemplary Damages), Labor Code. SECTION 3. Amends Subchapter F, Chapter 408, Labor Code, by adding Section 408.105, as follows: Sec. 408.105. SALARY CONTINUATION IN LIEU OF TEMPORARY INCOME BENEFITS. (a) Authorizes an employer to continue to pay the salary of an employee who sustains a compensable injury under contractual obligation between the employer and the employee in lieu of payment of temporary income benefit. (b) Authorizes salary continuation to include wage supplementation if employer reimbursement is not sought from the carrier, and the supplementation does not affect the employee's eligibility for future income benefits. SECTION 4. Effective date: September 1999. Makes application of this Act prospective. SECTION 5. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 2842 differs from the original in SECTION 1 by amending the title of Section 408.003, Labor Code, adding "Salary Continuation; Offset Against Income Benefit," which was part of SECTION 2 in the original bill. SECTION 1 of the original bill added a new Subdivision (39) to Section 401.011, Labor Code, to define "salary continuation." C.S.H.B. 2842 differs from the original in SECTION 2 by moving the new title to SECTION 1, and making nonsubstantive changes. C.S.H.B. 2842 differs from the original in SECTION 3 by adding proposed Section 408.105, Labor Code, which substantially reorganizes SECTION 1 (proposed Section 401.011(39)) of the original bill for clarification purposes. The substitute deletes from the original the proposed language "the employer may elect to treat salary continuation payments as made pursuant to such contractual obligation rather than pursuant to this Act." The substitute provides that salary continuation may include wage supplementation if the supplementation does not affect the employee's eligibility for any future income benefits. C.S.H.B. 2842 differs from the original by moving the effective date from SECTION 3 of the original to SECTION 4 of the substitute, and by substituting standard language making application of this Act prospective. SECTION 5 of the substitute is redesignated from SECTION 4 of the original bill.