California’s workers' compensation system may soon undergo its most significant reform in over a decade. Senate Bill 555 (SB 555), introduced by Senator Anna M. Caballero on February 20, 2025, proposes a significant update to the state's workers' compensation system.
The bill aims to adjust the computation of average annual earnings for California injured workers who have sustained permanent partial disabilities (PPD) by incorporating an annual cost-of-living adjustment (COLA) aligned with the federal Social Security Administration's COLA. Here’s what you need to know.
What Is SB 555?
SB 555 aims to adjust permanent disability (PD) payments to account for inflation in California workers' comp history. Currently, PD rates have remained stagnant since 2014, with injured workers receiving just $290 per week regardless of rising living costs.
Key Highlights of SB 555
✔ Annual Inflation Adjustments – PD payments would increase yearly based on cost-of-living data (similar to Social Security).
✔ Future-Proofing Benefits – Unlike past one-time increases, this reform ensures automatic adjustments without legislative intervention.
✔ Effective January 2026 – If passed, the new rates would apply to claims filed from 2026 onward.
✔ Amendment to Labor Code Section 4453 – SB 555 proposes changes to Section 4453 of the California Labor Code, which governs the calculation of average annual earnings for disability benefits. The amendment would mandate the application of the COLA to the specified earnings ranges used in these calculations.
Why Is SB 555 Needed?
- Inflation has surged (over 50% in some areas since 2014), yet PD payments haven’t been budged.
- Many injured workers lose their jobs due to work restrictions, relying on PD as a critical source of income.
- Temporary disability (TD) already adjusts for inflation—why not permanent disability?
Who Benefits—and Who Loses?
Winners:
✔ Injured Workers – Higher payments better reflect today’s living costs.
✔ Advocates & Attorneys – Fairer compensation for lifelong disabilities.
Potential Opposition:
❌ Insurance Companies – Yearly increases mean unpredictable costs.
❌ Employers – Higher premiums could lead to increased business expenses.
Impact on California's Workers' Compensation System
If enacted, SB 555 would directly affect the benefits received by workers with permanent partial disabilities:
- Enhanced Financial Support: By tying PPD benefits to the Social Security COLA, injured workers would receive benefits that better reflect current economic conditions, helping them manage rising living expenses.
- Systematic Adjustments: The bill introduces a systematic approach to benefit adjustments, reducing the need for periodic legislative interventions to update benefit levels.
As of March 26, 2025, SB 555 has been set for a hearing on April 9, 2025.
What’s Missing from SB 555?
While the bill is a step forward, some argue it should:
- Be retroactive to help current claimants.
- Address doctor shortages in workers' comp networks (especially in rural areas).
- Include stronger protection against insurer pushbacks.
How Can You Support SB 555?
- Contact your state senator and voice your support.
- Share your story—highlight how stagnant PD rates have affected you.
- Stay informed by tracking the bill’s progress at California Legislative Tracker.
The Bottom Line
SB 555 could mark a historic shift toward fairer workers' comp benefits in California. While insurers may resist, advocates argue it’s a necessary change to protect injured workers in an era of skyrocketing costs.
The current system simply isn’t cutting it anymore. Injured workers deserve a permanent disability rate that matches today’s cost of living, not outdated figures.
On the other hand, Senator Caballero stated that California's economy relies on workers, and when they are injured on the job, they deserve fair compensation that reflects real-world costs.
What do you think? Should California tie PD payments to inflation? Please, let us know!
About the author
Bilal Kassem President and Co-founder
Bilal Kassem, is the co-founder of Pacific Workers. Bilal has been nominated for Applicant Attorney of the Year. His passion for helping injured workers brings his leadership with his team to assist with empathy and world-class customer service. He fosters a supportive atmosphere, which is why each one of his team members feels empowered to excel. With a 98% success rate at Pacific Workers, Bilal is on a mission to continue to educate and serve any injured worker in CA.