EMPLOYERS EYE GOVERNOR RACE

SACRAMENTO, Calif. -- Workers compensation reforms and tort laws are at stake in the Golden State's race for governor, employers say.

Neither Republican Attorney General Dan Lungren nor Democratic Lt. Gov. Gray Davis have made workers comp or tort reform cornerstone issues in their campaigns for the governor's post. But employers and insurers point out that plaintiffs' attorneys and labor -- often employers' foes on the two issues -- are among Lt. Gov. Davis' chief backers.

The race is particularly crucial because the governor appoints key decision-makers, said Joe Markey, president of the California Self Insurers Assn. in Sacramento.

California's director of the Department of Industrial Relations is appointed by the governor and serves in the governor's Cabinet. The administrative director of the Division of Workers Compensation and the seven members of the Workers' Compensation Appeals Board are gubernatorial appointees. The governor also appoints members to the Commission on Health and Safety and Workers' Compensation, which was created under 1993 reforms to monitor and improve the system.

Reforms have eased employers' workers comp burdens and helped create a favorable business climate, Mr. Markey said. Those gains could slip away.

Furthermore, employer lobbyists say they have counted on the current governor, Republican Pete Wilson, to veto unfavorable legislation. Legislation introduced during the last session that would have increased workers comp benefits didn't even make it out of the legislature because lawmakers knew the governor would veto it, one employer lobbyist said.

Term limit laws make Gov. Wilson ineligible to seek re-election.

Some state employers will support a Democratic candidate. But many employer and insurance leaders say that when it comes to employment and tort issues, they prefer Mr. Lungren.

"The feeling among employers is you hope you have a Lungren, and the feeling among labor is you hope you have a Davis," said Lori Kammerer, executive director of the Californians for Compensation Reform in Sacramento. But Ms. Kammerer said that if Lt. Gov. Davis is elected, he likely would not derail the state's economic growth with anti-business policies.

Lt. Gov. Davis would include business leaders in his decision-making process, said a campaign spokesman for the lieutenant governor. "He's going to take a common-sense, consensus approach to solving problems," the spokesman said. "Whether it be with regard to education, business or tort reform, you cannot solve problems without bringing all the parties together."

But armed with a 1997 Rand Corp. report that found injured workers are undercompensated for disability injuries, labor is expected to keep pushing for benefit increases (BI, Nov. 24, 1997). Keeping increases in check could be tougher with a pro-labor governor, lobbyists said.

"I suspect employment issues are going to be harder for me," said Willie Washington, legislative director for the California Manufacturers Assn. in Sacramento. "Labor has already told me in the hallway, 'Wait until Davis comes in; you are really going to have to work.' "

Mr. Washington does not speak for the entire association. From his perspective, however, Mr. Lungren is the preferred candidate, he said.

Insurers are echoing a similar cry.

"I think the employer gains they have achieved during the Wilson administration might be reversed if Davis is elected," said Barry Carmody, president of the Assn. of California Insurance Cos. in Sacramento. "He has three primary donors: one is the trial lawyers, second is labor, and the other is the donations from teachers unions."

Lt. Gov. Davis' own list of endorsements does include prominent labor organizations, and the Sacramento-based Consumer Attorneys of California say he is their choice.

"There are probably some Republican trial lawyers who will put money into Lungren," said a spokesman for the Consumer Attorneys. "But it always comes down to issues, and the fact is Gray Davis is better on the issue of tort than Dan Lungren."

That backing makes it likely that Davis will support legislation exposing employers and their insurers to more lawsuits, Mr. Carmody said.

The ACIC contributes to both political parties, depending on candidates' support for a business agenda, Mr. Carmody said. "Right now, the only candidate supporting a business agenda is Lungren," he added.

Lt. Gov. Davis is working to portray himself as a centrist. But employer groups and insurers say his political history makes them leery.

"Just following Davis' career and particularly having watched him when he was chief of staff of (former Governor Edmund G. Brown Jr.), I have grave concern about his role as a governor," Mr. Markey said.

Still, many employers are not eager to antagonize the lieutenant governor. Current polls show him ahead by 11 percentage points.

"If he is elected, I only can hope he will keep an eye open for the business climate," Mr. Markey said.