Tuesday, February 18, 2020
The general challenge to California’s AB 5 is now on its way to trial absent a successful pre-trial motion by California state authorities. But readers may recall that a California federal district court recently upheld a challenge of the law as applied to truckers on Federal Aviation Administration Authorization Act of 1994 (FAAAA) preemption grounds in California Trucking Association (CTA) v. Becerra. It may be some time before we know the outcome of that case, but it seems clear the dispute will be analyzed by the 9th Circuit under its previous opinion in Dilts v. Penske Logistics, LLC, 769 F.3d 637 (9th Cir. 2014) (cert denied in 2015), which addressed whether California laws on meal and rest breaks were preempted by the FAAAA. The heart of that case concluded:
California's meal and rest break laws plainly are not the sorts of laws “related to” prices, routes, or services that Congress intended to preempt. They do not set prices, mandate or prohibit certain routes, or tell motor carriers what services they may or may not provide, either directly or indirectly. They are “broad law[s] applying to hundreds of different industries” with no other “forbidden connection with prices[, routes,] and services.” . . .. They are normal background rules for almost all employers doing business in the state of California. And while motor carriers may have to take into account the meal and rest break requirements when allocating resources and scheduling routes—just as they must take into account state wage laws . . . or speed limits and weight restrictions . . . the laws do not “bind” motor carriers to specific prices, routes, or services . . . Nor do they “freeze into place” prices, routes, or services or “determin[e] (to a significant degree) the [prices, routes, or] services that motor carriers will provide,” . . . Further, applying California's meal and rest break laws to motor carriers would not contribute to an impermissible “patchwork” of state-specific laws, defeating Congress' deregulatory objectives. The fact that laws may differ from state to state is not, on its own, cause for FAAAA preemption. In the preemption provision, Congress was concerned only with those state laws that are significantly “related to” prices, routes, or services. A state law governing hours is, for the foregoing reasons, not “related to” prices, routes, or services and therefore does not contribute to “a patchwork of state service-determining laws, rules, and regulations.” . . . It is instead more analogous to a state wage law, which may differ from the wage law adopted in neighboring states but nevertheless is permissible . . .
The analytical problem with the preemption provisions in the FAAAA, the Airline Deregulation Act (upon which the FAAAA provision was modelled), and ERISA (the granddaddy of all the sweeping preemption provisions) is, of course, their breadth, and it matters not whether that breadth results from laziness or lobbying. (Jim Wooten at University of Buffalo has done masterful work on the mysterious emergence of the ERISA preemption provision). In the context of the FAAAA, the Court in Dilts further observed:
. . . generally applicable background regulations that are several steps removed from prices, routes, or services, such as prevailing wage laws or safety regulations, are not preempted, even if employers must factor those provisions into their decisions about the prices that they set, the routes that they use, or the services that they provide. Such laws are not preempted even if they raise the overall cost of doing business or require a carrier to re-direct or reroute some equipment . . . Indeed, many of the laws that Congress enumerated as expressly not related to prices, routes, or services—such as transportation safety regulations or insurance and liability rules . . . are likely to increase a motor carrier's operating costs. But Congress clarified that this fact alone does not make such laws “related to” prices, routes, or services. Nearly every form of state regulation carries some cost. The statutory text tells us, though, that in deregulating motor carriers and promoting maximum reliance on market forces, Congress did not intend to exempt motor carriers from every state regulatory scheme of general applicability . . .
Nor does a state law meet the “related to” test for FAAAA preemption just because it shifts incentives and makes it more costly for motor carriers to choose some routes or services relative to others, leading the carriers to reallocate resources or make different business decisions . . .
. . . In short, even if state laws increase or change a motor carrier's operating costs, “broad law[s] applying to hundreds of different industries” with no other “forbidden connection with prices[, routes,] and services”—that is, those that do not directly or indirectly mandate, prohibit, or otherwise regulate certain prices, routes, or services—are not preempted by the FAAAA. (emphases supplied)
The argument CTA seems to be making is that the independent contractor model is not merely a cost-saving aspect of the trucking industry but is, rather, essential to it and therefore not “several steps removed from prices, routes, or services.” Moving down the slippery slope, the implicit argument is that the ABC classification will cause carriers to exit the market. (But the proponent of preemption defense usually has the burden of proving its applicability—so it is not clear to me how receptive will be to a mere assertion of horribles). In other words, this argument has limits, and it is worth noting that the Third Circuit expressly rejected it very recently in Bedoya v. American Eagle Express, Inc., 914 F.3d 812 (3rd Cir. 2019) (cert denied)—see pp. 23, 24 in this linked slip opinion. The U.S. Supreme Court in a 2013 FAAAA opinion, Dan’s City Used Cars, Inc. v. Pelkey, 569 U.S. 251, stated,
. . . the breadth of the words “related to” does not mean the sky is the limit. We have refused to read the preemption clause of the Employee Retirement Income Security Act of 1974 . . . which supersedes state laws “relate[d] to any employee benefit plan,” with an “uncritical literalism,” else “for all practical purposes pre-emption would never run its course.” . . . And we have cautioned that [the FAAA preemption provision] does not preempt state laws affecting carrier prices, routes, and services “in only a ‘tenuous, remote, or peripheral . . . manner.’”
At the end of the day that is the question: how “remote” is “intrastate-ABC worker law” to carrier prices, routes, and services when taking due regard of a state’s traditional police powers?
Michael C. Duff
Sunday, February 16, 2020
There is a very close relationship between two federal preemption provisions that are having an impact on state employment law and state workers’ compensation systems. One such provision, in the Airline Deregulation Act (49 U.S.C. § 41713), prevents state workers’ compensation systems—including Wyoming’s—from regulating payments to air ambulance operators for transportation of injured workers. A second such provision, under the FAAAA (49 U.S.C.§ 14501(c)), is (temporarily) interfering with California’s application of the ABC employee test to workers of truck carriers. ADA preemption was “created” in the late 1970s and modelled on the ERISA preemption provision (29 U.S.C. § 1144). FAAAA preemption was modelled on ADA preemption and enacted in the mid-1990s. This post is specifically about ADA preemption as it concerns air ambulance services in Wyoming, but each of the preemption provisions just mentioned creates regulatory “dead zones” in which no substantive federal regulation on certain important state problems exists, and no state regulation on those problems is possible. This is a real federalism mess.
A proposed Wyoming bill related to air ambulance coverage of injured workers has emerged (the bill would tentatively locate the law at W.S. 27-14-401). Under 27-14-401(j) “Emergency and medically necessary air ambulance transport services for an employee shall be covered under W.S. 42-4-123, subject to availability and any limitations specified by the department under W.S. 42-4-123(a). The department of workforce services shall pay reimbursement for services under this section to the department of health as specified under W.S. 42-4-123.
Current 42-4-123 (effective as of 4/1/2020) requires the state department of health, with approval of the governor to apply to HHS for a Medicaid waiver “to make coverage of air ambulance transport services through Medicaid available to all Wyoming residents, except that coverage may be limited to specified groups of Wyoming residents as necessary to obtain approval.” The same 42-4-123 created an “air ambulance transport services program” under the auspices of the state department of health. Following transportation, “the air ambulance provider shall provide services under this section if the provider otherwise makes air ambulance transport services available to persons in Wyoming who are eligible for Medicaid independent of the coverage provided by this section” and “shall accept payment under this subsection as full satisfaction of all charges, costs and fees relating to air ambulance transport services” though “an air ambulance provider shall [in specified instances I won’t discuss here] collect a copay or other cost sharing requirement for services covered under this section . . .
The state structure goes on from there, but this is enough of an exposition to facilitate discussion. The first time I saw 42-4-123, I surmised the model was an attempt to maneuver the federal government into indirectly limiting the cost of an air ambulance trip, and I wondered why CMS would grant such a waiver. It turns out, as explained in CMS's letter of last month, that it won’t:
Section 1115(a) of the [Social Security] Act cannot be used to circumvent other federal statutes, including the preclusion clause set forth in the Airline Deregulation Act of 1978, which specifically precludes state regulation of matters related to air carrier rates, routes, and services. As noted above, the Secretary may approve a demonstration project under section 1115(a) of the Act if, in his judgment, the project is likely to assist in promoting the objectives of title XIX . . . While the proposed Wyoming Medicaid Coordinated Air Ambulance Network demonstration is expected to serve Medicaid beneficiaries, those services are already authorized in Wyoming’s Medicaid state plan. Using the Medicaid administrative structure to provide services to other individuals in the state as a mechanism to avoid the application of federal aviation law is a clear departure from the core, historical mission of the Medicaid program to provide health coverage to the Medicaid eligible population. (Emphases supplied)
Perhaps even more to the point,
Furthermore, CMS will not approve a demonstration project under section 1115(a) of the Act unless the project is expected to be budget neutral, that is, the demonstration project may not result in Medicaid costs to the federal government that are greater than what the federal government’s Medicaid costs in the state would likely be absent the demonstration. The state's proposed approach to budget neutrality as provided in its application does not indicate that the proposed Wyoming Medicaid Coordinated Air Ambulance Network demonstration is or would ever be budget neutral. (Emphases supplied)
Translation: what the federal government allows for charges under Medicaid for air ambulance transportation is a function of many complex variables, and that cost function “might” be thrown into disarray by allowing an air ambulance carveout Medicaid expansion for a state’s entire population. (It might be worth mentioning here that the Wyoming legislature has rejected Medicaid expansion).
I think there is something to the air ambulance industry’s argument that Wyoming’s proposed approach would essentially ration air ambulance services for its citizens. As a Wyoming Public Radio/NPR story explained last summer before CMS rejected the model:
Wyoming officials propose to reduce the number of air ambulance bases and strategically locate them, to even out access. The state would then seek bids from air ambulance companies to operate those bases at a fixed yearly cost. It’s a regulated monopoly approach, similar to the way public utilities are run . . . “You don't have local privatized fire departments springing up and putting out fires and billing people . . . The town plans for a few fire stations, decides where they should be strategically, and they pay for that fire coverage capacity.” . . . Medicaid would cover all the air ambulance flights in Wyoming — and then recoup those costs by billing patients’ insurance plans for those flights. A patient's out-of-pocket costs would be capped at 2% of the person's income or $5,000, whichever is less, so patients could easily figure out how much they would owe. Officials estimate they could lower private insurers' average cost per flight from $36,000 to $22,000 under their plan.
Injured workers would be captured within the same structure and might be disparately impacted under it. This would raise difficult workers’ compensation quid pro quo questions. On the one hand, Wyoming workers traded tort rights for workers’ compensation benefits, and paying $5000 out of pocket for work-related injury expenses would violate that principle. On the other hand, the quid pro quo did not contemplate a federal benefits structure like Medicaid into which medical costs could be substantially subsumed. The quid pro quo moreover takes on a different complexion if the only remedy to which any state citizen is entitled is a federalized Medicaid recovery (leaving to one side the Wyoming state constitutional requirement, in Art. 10, Sec. 4, that the only exception to the right of tort damages for physical injury is workers’ compensation benefits). In fairness, the Wyoming model—notwithstanding the recent bill, the timing of which I don’t quite understand—never had a chance to get off the ground, so it was not yet clear precisely how the statewide model would interact with Wyoming’s monopolistic workers’ compensation system. Given CMS’s position, the model seems a dead letter now (and I think the statute, if challenged, would still have had to fight off ADA preemption arguments).
Michael C. Duff
Tuesday, February 11, 2020
In a 24-page decision that went much as I expected, a Federal district judge in the Central District of California concluded that California Assembly Bill 5 2019 (AB 5) was rationally-related to a legitimate state interest, did not deprive gig economy workers of the right to pursue their chosen occupation, and did not unconstitutionally impair Gig employers’ contracts with workers. The core of the challenge sounds in equal protection, and the court found plaintiffs Lydia Olson, Miguel Perez, Postmates, and Uber unlikely to prevail on its merits. With respect to the request for injunctive relief:
When “an injunction is requested which will adversely affect a public interest . . . the court may in the public interest withhold relief until a final determination of the rights of the parties, though the postponement may be burdensome to the plaintiff.” . . . Considering the potential impact to the State’s ability to ensure proper calculation of low income workers’ wages and benefits, protect compliant businesses from unfair competition, and collect tax revenue from employers to administer public benefits programs, the State’s interest in applying AB 5 to Company Plaintiffs and potentially hundreds of thousands of California workers outweighs Plaintiffs’ fear of being made to abide by the law.
Accordingly, injunctive relief was denied. “For the reasons stated below, the Court does not find likelihood of success on the merits or that sufficiently serious questions have been raised as to the merits of these claims.” (This case is not directly related to the “trucker preemption” matter under the FAAAA concerning which I’ve written in these pages).
The decision is complex and well worth reading in its entirety. One section of interest:
. . . evidence submitted by Plaintiffs indicates that according to academic studies, “a majority of workers do not value scheduling flexibility” and only a “substantial share”—by inference, less than a majority—“are willing to give up a large share of their earnings to avoid employer discretion in setting hours.” McCrary Decl. at ¶ 26. This statement by Plaintiffs’ expert indicates that of the 395,000 or more drivers for Uber and/or Postmates, a majority may favor—or at least be neutral to—the application of AB 5 to their worker classification. To be sure, Olson, Perez, and individual amici attest that being classified as employees would be financially devastating and upend their schedules and expectations. See, e.g., Perez Decl. ¶¶ 8, 18–20; Olson Decl. at ¶¶ 10, 12; see also Br. of Amici Curiae U.S. Chamber of Commerce, Engine Advocacy, and TechNet at 10 (citing U.S. Dep’t of Labor, Contingent and Alternative Employment Relationships, Bureau of Labor Statistics, (May 2017) (79 percent of independent contractors prefer their work arrangement). The Court does not doubt the sincerity of these individuals’ views, but it cannot second guess the Legislature’s choice to enact a law that seeks to uplift the conditions of the majority of non-exempt low income workers rather than preserve the status quo for the smaller subset of workers who enjoy independent contractor status. (emphasis supplied)
My translation? Even if a minority of the population has sincere reasons for not wanting to be protected by the rules of the road it does not follow that the state must eliminate the rules of the road. (I have recently written about this idea in these pages). Or put somewhat differently, the state (a.k.a. the democratic polity) is entitled to exercise legitimate police power to protect its citizens. While the 14th amendment places limits on the exercise of legislative power, those limits are very sharply circumscribed—as challengers of workers’ compensation laws know only too well. This was a principle that became well-established during the era of enactment of workers’ compensation statutes; it is one of the central theses of New York Central R. Co. v. White, 243 U.S. 188 (1917).
It was also interesting to see Chamber of Commerce types have to grapple with a proposition that has bedeviled claimants challenging workers’ compensation laws: “The burden is on plaintiffs to negate ‘every conceivable basis’ which might have supported the distinction between exempt and non-exempt entities.” I have written in these pages about how difficult it is to overcome this standard.
Lydia Olson, et al.—which is ultimately about the state’s power to impose the ABC employment test on classes of putative employers—now moves on to the merits phase. As I have said in these pages, I don’t see how plaintiffs can prevail under existing law. But it appears likely that they have advanced and structured the case for review by the current U.S. Supreme Court. And we have some recent history of the ad hoc flexibility that body has afforded the 14th amendment in key moments, so this is not an irrational strategy.
Michael C. Duff
Sunday, February 9, 2020
A recently-offered Pennsylvania bill doubling-down on the ABC employee-status test for app-based companies like Uber and Lyft has created in me the strong impression that one school of national opinion seems to be coalescing around a presumption that the Gig economy writ large is not benign but a form of regulatory arbitrage (to borrow a term from the Gig-economy “friendly” Harris-Krueger/Hamilton Project Report). As in New York, the proposed Pennsylvania legislation requires alleged employers to affirmatively disprove the employee status of their workers. But unlike the New York bill (or California’s AB-5), the Pennsylvania bill, House Bill 2215 of 2020, introduced about three weeks ago, targets app-based enterprises like Uber and Lyft.
Under the “Application-Based Company Worker Misclassification Act,”
A person providing labor or services for remuneration to an application-based company shall be considered an employee rather than an independent contractor unless the application-based company demonstrates that all of the following conditions are satisfied:
(1) The person is free from the control and direction of the application-based company in connection with the performance of the work, both under the contract for the performance of the work and in fact.
(2) The person performs work that is outside the usual course of the application-based company's business.
(3) The person is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed..
Moreover, the Act would impose a variety of civil and criminal penalties for misclassification, though good-faith defenses are available. In short, the Pennsylvania bill is the polar opposite of the Handy, Inc. bills about which I’ve written in these pages, both in substance and in spirit.
Obviously, it is unclear whether the Pennsylvania bill will become law. But what interests me is the sharp and focused tone of the proposed legislation. It is not merely abstractly altering the legal test for employment but additionally contemplates deliberate gaming of the system. Intentional violations of the Act would be misdemeanors; non-intentional violations would be summary offenses. It would be a specific violation of the Act for an app-based company to fail to properly classify an individual as an employee for purposes of the Pennsylvania Workers’ Compensation Act (or to fail to provide workers’ compensation coverage).
My hunch is that organized labor was involved in drafting and sponsoring the bill. Complete acquiescence to the Gig economy in the end would yield fewer “employees.” Because only “employees” have the right to collectively bargain, or to protest adverse working conditions, dissolution of employee-status necessarily means dissolution of union representation. Recently, the Trump National Labor Relations Board determined in an administrative memo (the conclusion has not been tested in the courts) that certain Uber drivers were independent contractors rather than employees. In the recent past, the NLRB, an extremely “political” agency at its apex, has continued to utilize the common law, under the Section 220 of the Restatement Second of Agency test, when analyzing employee status (it is bound to do so because the common law definition is the default under federal statutes). Under the NLRA workers of Gig-type employers have, in recent years, been found employees: in two informal NLRB adjudications/internal memoranda Download Handy Advice Memo, Download Postmates Advice memo, and in one formal NLRB adjudication. The NLRB has rejected the argument that intentional misclassification of workers, without more, violates the National Labor Relations Act. But “employees” acting in concert in protest over working conditions remain protected against employer retaliation. Gig employers taking adverse action against concerted worker protest on the theory that those employees are unprotected as non-employees under state law do so at their peril. Still, the NLRB’s Uber Memo is signaling its proclivity to withdraw federal law protection from Gig workers. Evisceration of employee status at the state level could provide cover for an NLRB “vanishing employee” agenda. Unions would obviously fight such developments on multiple levels. Collective employee protest against employee misclassification under state law could feed into the strategy, but a shrinking base of “employees” would not help organized labor’s cause.
Emerging ABC-type laws (in New York and California, in particular), which at first blush seem most closely connected to employment law (including workers’ compensation law), raise other complicated labor law issues. Some provisions would, in addition to modifying employee-status law, confer collective bargaining rights on Gig workers--an idea that some in the European Union have been championing. Assuming Gig workers are employees, these provisions could be preempted under Machinists’ labor law field preemption. On the other hand, if Gig workers are not employees, but are independent contractors, conferral by states of collective bargaining rights on them is fraught with antitrust complexity (though states—as opposed to cities like Seattle—enjoy broad antitrust immunity). Organized labor involvement in “local” laws (including what I am speculating is its involvement in the Pennsylvania bill) is evidence that the legal battles playing out extend well beyond the domain of workers’ compensation. It will take effort for workers’ compensation specialists to discern the sometimes hazy lines of conflict bubbling up in their neighborhood.
Michael C. Duff
Saturday, February 1, 2020
I think about the question of employee status, under workers’ compensation statutes and elsewhere, as in part a contest between the actual working class (and its advocates), and a class of purported “exceptionals” who hyper-focus and insist upon preserving their “liberty” to “hit” the lottery by becoming part of the one percent. Why would someone opt for a world bereft of law and without limits? Well, you might get lucky. You might not be the one to suffer a workplace injury (among other things). And so, even though as a matter of pure probability you will almost certainly never become part of the one percent utterly without need of the social contract, you identify with them: those who must be motivated by noblesse oblige and are rightfully—you contend—beyond the law. You argue that you have no need of nanny-state protections like “employee status.” Now I am not for demonizing your irrational exuberance, but neither am I for subsidizing it. Hence my resistance to a world without employees and full of lots (and lots) of underinsured, “independent” contractors.
A bill currently sits in the New York Senate, Senate Bill S6699A sponsored by Robert Jackson of the 31st Senate District. The bill reads in relevant part (that is, as it relates to workers’ compensation),
4. Subdivision 6 of section 201 of the workers' compensation law is amended by adding a new paragraph E to read as follows:
1. (A) The term “employment” includes, unless specifically excluded by a provision of this subdivision, any service by a person providing labor or services for remuneration unless the hiring entity demonstrates that all of the following conditions are satisfied:
(i) the person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and
(ii) the person performs work that is outside the usual course of the hiring entity's business; and
(iii) the person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
(B) For the purposes of this section, any person providing labor or services for remuneration pursuant to subparagraph (A) of this paragraph shall be considered an employee rather than an independent contractor.
5. This act shall take effect immediately.
This is essentially the ABC test/California’s AB-5, and represents the continuation of a struggle unlikely to abate soon. One of the public comments on the bill, located on the NY Senate’s website, argues that the proposed law is likely to harm the very people that it seeks to help. The commenter contends that the bill alarms “freelancers and self-employed people” who are not exploited but are “happy, productive people who have chosen freelance for a reason.” Artists, writers, and digital developers are cited as examples. Forcing enterprises to provide them with workers’ compensation coverage will purportedly interfere with their happiness (presumably by compelling the enterprises to stop using their services).
The commenter in my view precisely states the issue, but may misapprehend the analysis of the overall situation. If you think that most of the economy is, or will soon be, comprised mainly of, artists, writers, digital developers, and other such generally happy and productive people, then the actions of the California Assembly, and now potentially the New York legislature, seem incomprehensible. Why pass laws that would damage the economic fortunes of most workers (by forcing companies to go out of business rather than succumb to regulation)? Yet what would help most workers? This bill? Or the current state of affairs allowing enterprises to so easily categorize their workers as independent contractors? Is the greater evil that certain enterprises could be forced to prove that the economic reality of the working conditions they supply do not amount to an employment relationship; or is it that many workers who should be classified as employees are not because of artful manipulations of the current legal system? Maybe legislatures, particularly in very large states, are becoming suspicious that most workers are not participating in some golden-age, creative-class adventure; and that the ever-encroaching Gig economy has little to do with a new economy, and everything to do with the very old game of regulatory evasion.
Here is a factual portrait of our economy: according to a recent Brookings study, more than 53 million people—44% of all workers aged 18-64—are low-wage workers and earn median hourly wages of $10.22 and median annual earnings of $17,950. Please don’t try to persuade me that these workers are philosophically in favor of low-paying, precarious, but “flexible” work. Pundits can call it what they want. I call it unacceptable. And this explosion of staggering inequality has occurred during the Gig economy. Legislators are entitled (indeed have the duty) not to be willfully blind to the obvious. So, yes, a golden age of flexible, creative work may be just on the horizon, and laws making it harder to “de-employee” society may turn out to be mechanisms frustrating the development of such an Age of Pericles. Or current law facilitating bad actors’ bad actions in obliterating the employment relation to avoid as much regulation as possible may be the veritable “man behind the curtain.”
There is no denying that the lottery class prefers an employee-less world that preserves the maximal liberty of those for whom members of the class de facto work to “produce” according to whim—jeux sans frontiers. The question I have for this class is whether it collectively imagines that others will abandon the rule of law to preserve its “right” to try to hit the lottery. The lottery class should not be surprised if the slumbering giant of our democracy chooses instead to deploy the “disruption” of the rule of law.
Michael C. Duff
Saturday, January 25, 2020
I have begun work on a project in which I seek to compare the monopolistic workers' compensation systems in the United States and Canada. The Workers' Compensation system in Canada has separate legislation and policies for each province or territory, but the majority of Canadian workers are covered in some form by workers' compensation when they are at work. To help get me started with the project, researcher Terry Bogyo kindly directed my attention to the 1913 report of Sir William Ralph Meredith, a storied figure in the history of Canadian workers' compensation, to the Lieutenant-Governor of the Province of Ontario. The report makes for extraordinarily rich reading, I dare say to any student of workers' compensation. It is interesting to note that Meredith deemed the German system superior to the English, which is contrary to the American view of the time, which fastened on to the English system. In this regard, the report reveals interesting differences of opinion between Meredith and P. Tecumseh Sherman, a principal draftsman of the prototypical American statute adopted, more-or-less, by most American states. (I discuss some of this early history here). I am especially struck by the extent to which the dialogue of the era was explicitly moral. If you will indulge me, I offer the following passage of the report as evidence of this epochal morality. The statement was in response to a counter-proposal to Meredith's proposed bill that had been offered by the Canadian Association of Manufacturers:
A just compensation law based upon a division between the employer and the workman of the loss occasioned by industrial accidents ought to provide that the compensation should continue to be paid as long as the disability caused by the accident lasts, and the amount of compensation should have relation to the earning power of the injured workman. To limit the period during which the compensation is to be paid regardless of the duration of the disability, as is done by the laws of some countries, is, in my opinion, not only inconsistent with the principle upon which a true compensation law is based, but unjust to the injured workman for the reason that if the disability continues beyond the prescribed period he will be left with his impaired earning power or, if he is totally disabled without any earning power at a time when his need of receiving compensation will presumably be greater than at the time he was injured, to become a burden upon his relatives or friends or upon the community.
And again, commenting on the inadvisability of a proposal for a one-time, lump-sum, fixed permanent partial award, Meredith wrote:
The limitation to $1,500 of the amount of compensation in case of permanent partial disability is, I think, unreasonable . . . The payment of lump sums is contrary to the principle upon which compensation acts are based and is calculated to defeat one of the main purposes of such laws – the prevention of the injured workman becoming a burden on his relatives or friends or on the community – and has been generally deprecated by judges in working out the provisions of the British act . . .
I wonder if Meredith would be considered a wild-eyed dreamer (or worse) in today's mean, mean times.
Michael C. Duff
Friday, January 24, 2020
Safer workplaces or concealed injuries? Absolutely terrifying. How much of a pay premium should a brine hauler demand to do this work? The recent Rolling Stone piece, "America’s Radioactive Secret: Oil-and-gas wells produce nearly a trillion gallons of toxic waste a year. An investigation shows how it could be making workers sick and contaminating communities across America," is a must read item:
“The workers are going to be the canaries,” says Raina Rippel of the Southwest Pennsylvania Environmental Health Project, a nonprofit public-health organization that supports residents impacted by fracking. “The radioactivity issue is not something we have adequately unpacked. Our elected leaders and public-health officials don’t have the knowledge to convey we are safe.”
But knowledge is out there. Radium can be detected in urine; a breath test can pick up radon. Because radium builds up in bone, even a body buried in a cemetery could convey details of someone’s exposure, says Wilma Subra, a Louisiana toxicologist who first started tracking oil-and-gas radioactivity in the 1970s.
“There is a massive liability that has been lying silently below the surface for all these years,” says Allan Kanner, one of the nation’s foremost environmental class-action lawyers, whose recent cases have included PFAS contamination and the Deepwater Horizon oil spill. “The pieces haven’t all really been put together, because the industry has not really been telling the story and regulators haven’t been telling the story and local doctors aren’t informed, but at some point I expect you will see appropriate and reasonable litigation emerge on this.”
If so, it could have a devastating impact on the fossil-fuel industry, especially if tighter regulations were put in place and oil-and-gas waste was no longer exempted by the EPA from being defined as hazardous waste. “The critical component of the profit margin for these companies is that they can get rid of the waste so cheaply,” says Auch of FracTracker Alliance. “If they ever had to pay fair-market value, they wouldn’t be able to exist.”
The rest of the piece can be found here.
Michael C. Duff
Wednesday, January 22, 2020
I am not implacably opposed to all that is new. Indeed, I think we need a new, New Deal, and I am not so confident to claim that I know exactly what that should look like. But I’m also a product of my experience. And as someone who has battled companies like Walmart in the trenches, while employed as a trial attorney with the National Labor Relations Board fighting for employees’ union organizing rights, I’m also not about to give certain actors the benefit of the doubt. So when I see a story like the one I saw in WorkCompCentral recently (behind paywall here), about how Walmart has devised an efficient “mass settlement” program—a bunch of employees, judges (!!), and lawyers gathered in the same Walmart facility at the same time to settle cases—and how the company is “all in” on settling cases, I’m not going to lie, my first reaction was “uh oh.”
Nevertheless, the way I try to react to all new things I hear about is to apply simple cost-benefit analyses having an emphasis on the bottom-line benefit for working people. That is how I would have approached the original New Deal. Want to sell me on the virtues of arbitration, workers’ compensation opt-out, Walmart mass settlements, the Gig economy, or any other innovation? It’s simple – just show me how working people are better off under the arrangement. Notice I didn’t say “just show me the change is pareto efficient.” Imagine I have two marbles, and you have a mountain of marbles. Then we make a trade. Now I have three marbles and you have an even bigger mountain of marbles. That trade was pareto efficient – someone (in this case both transacting parties) was made better off, and no one was made worse off. But did I mention that at the time we made the trade I was in dire poverty, and that the trade did nothing meaningful to alleviate my poverty? When pareto efficient, wheeling and dealing (a.k.a. innovation coupled with economic rent seeking) is made in a preexisting context of social contract erosion, it is hard to see how something good has happened.
These days, I have become aware that it is increasingly rare for the economically powerful to even attempt to demonstrate why their schemes are better for ordinary people. I’m constantly telling people that my late dad was the type of Republican who would try to demonstrate how his viewpoint would actually be better for ordinary people. I always respected him for that quality. And even though we frequently disagreed, I thought that if he and I were in a room for long enough we might actually be able to come up with something workable (temporarily, at least). So, my bottom line on Walmart mass settlements is this: show me how much injured workers are receiving in these settlements, and describe for me the process under which the deliberations are carried out. Transparency is everything. If you won’t show me, I don’t believe you. Or to put it in lawyer-speak, I will draw an adverse inference, and assume the arrangement will be worse for working people, not better.
Michael C. Duff
Saturday, January 18, 2020
The California Trucking Association has temporarily carved out an exception to applying the ABC test to truck drivers in California, who will continue to be stripped of important rights regardless the economic realities of their “contractor” arrangement. The route to this right-stripping is predictably circuitous. Because, according to a federal district court judge, a worker could never be found an independent contractor under the ABC test, use of that test violates the Federal Aviation and Administration Authorization Act of 1994 (“FAAAA”). Under that federal law, states “may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier . . . with respect to the transportation of property.” 49 U.S.C. § 14501(c)(1). This is the theory on which the federal district court in San Diego, in the case California Trucking Association (CTA) v. Becerra, Download California_Trucking_Associati, 2020 WL 248993 granted a permanent injunction in favor of the CTA.
You may recognize the “relate to” phraseology. As the court acknowledges in its opinion, it is the same phrase that, under the Airline Deregulation Act, prevents states from enacting a law “relating to” air ambulance rates. Morales v. Trans World Airlines, Inc., 504 U.S. 374, 386 (1992) (“a State . . . may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier that may provide air transportation.”). Both statutes, in turn, admittedly pattern their language after the Employee Retirement Income Security Act of 1974. ( “the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan . . .”) In the case of ERISA, early Supreme Court cases held, “Congress used the words ‘relate to’ in § 514(a) in their broad sense. To interpret § 514(a) to preempt only state laws specifically designed to affect employee benefit plans would be to ignore the remainder of § 514. It would have been unnecessary to exempt generally applicable state criminal statutes from preemption in § 514(b), for example, if § 514(a) applied only to state laws dealing specifically with ERISA plans.” The Court began to walk ERISA preemption back in the Travelers case. Justice Souter’s opinion reemphasized that,
[D]espite the variety of these opportunities for federal preeminence, we have never assumed lightly that Congress has derogated state regulation, but instead have addressed claims of pre-emption with the starting presumption that Congress does not intend to supplant state law . . . Indeed . . . where federal law is said to bar state action in fields of traditional state regulation . . . we have worked on the "assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress."
The question in the context of the preemption provision of the FAAAA, and the Airline Deregulation Act for that matter, is, what traditional state law would not be preempted? As Justice Souter also presciently wrote,
If “relate to” were taken to extend to the furthest stretch of its indeterminacy, then for all practical purposes pre-emption would never run its course, for “[r]eally, universally, relations stop nowhere,” H. James, Roderick Hudson xli (New York ed., World's Classics 1980). But that, of course, would be to read Congress's words of limitation as mere sham, and to read the presumption against pre-emption out of the law whenever Congress speaks to the matter with generality. (Emphasis supplied).
A layperson might be inclined to dismiss the importance of the preemption of state law by federal law. After all, who really cares if state or federal law addresses a problem, as long as the problem is addressed. All-too-frequently however, in the case of these sweeping preemption provisions given virtually unchecked sway, substantive state law is supplanted by non-substantive federal law – a phenomenon I have referred to as “empty preemption.” It is not as if federal law with similar substantive provisions substitutes for state law. Rather, state law, even within traditional state spheres, is defeated utterly. Here, the state cannot regulate trucking substantively (as extremely broadly defined) but federal law provides no solution. Similarly, state workers’ compensation systems are prevented from taking measures to curtail unacceptably high air ambulance costs, but federal law contains no applicable alternative. And now, states are prevented from acting against “unreal” employment classification practices. Surely, one might think, there must be some federal resolution to the employment classification problem. After all, time and time again, the U.S. Supreme Court has instructed that common law definitions of employment be utilized where a federal statute is silent on the question. And the FAAAA is substantively silent on employee classification. The question then becomes, “whose” common law, and common law from which century?
Read closely, CTA v. Becerra, Download California_Trucking_Associati ,and some of the cases cited therein, seem on the one hand to say that Congress meant to preempt the traditional sphere of state definition of employee status (as an aside, a determination with important tort ramifications), and on the other to say that the problem is not with traditional state control (to which lip service is paid), but with the change in a state rule—not traditional enough?—which has upset settled business expectations because it makes establishment of employee status much more likely (See Becerra, slip op. at 6 citing California Trucking Association v. Su, 903 F.3d 953, 964 (9th Cir. 2018) (Borello test as applied to truckers not preempted by FAAAA), which I interpret as a back-door, due process challenge. There is much more to say, but I will close here by arguing that this is a major federalism case. The heretofore obscure progeny of ERISA preemption are about to be sorely tested. Though the U.S. Supreme Court has recently avoided review of 9th Circuit rebuff of aggressive California Trucking Association tactics, another such rebuff here (which I anticipate) may render these issues unavoidable.
Michael C. Duff
Thursday, January 16, 2020
All the World’s a Platform?: Some Remarks on “Marketplace Platform” Employment Laws -- an Anti ABC/Dynamex/AB 5 Ethic
I've written a short paper in advance of the 2020 Workers' Compensation Midwinter Conference panel in which I'll be participating on March 28 in New Orleans. The panel is titled, "WORKERS’ COMPENSATION AND THE "GIG” ECONOMY: CHALLENGES FLOWING FROM TEMPORARY WORK." As usual, I will play the role of "unreasonable angry guy" raving only barely controllably at "mean stuff." Blogmate Judge David Torrey will provide needed stability, as will Pittsburgh attorney, Justin Beck.
On the panel I'll be discussing my short paper, as titled above, addressing the enactment of "marketplace platform" laws, which have arisen as a remarkable feature of the "gig" economy in recent years. A marketplace platform law decides the question of whether an individual worker is an independent contractor or an employee—an ongoing controversy in all employment law, including workers’ compensation law—by emphasizing factors other than those normally considered in traditional legal analyses. As of this writing, seven states appear to have enacted marketplace platform laws.
In short, marketplace platform laws--developed substantially and lobbied aggressively by the company Handy, Inc.--make it much easier to classify a worker as an "independent contractor" rather than an "employee." Essentially, as the paper shows by analyzing one such law, if a company uses "online enhancements" in the operation of its business it may qualify as a "marketplace contractor" rather than an "employer," whatever the degree of control of working conditions it may exercise de facto in the workplace. The paper shows how, in the case of workers' compensation law, this de-emphasis of the control factor in assignment of responsibility for workplace injury flies in the face of original workers' compensation theory. The development is also at complete odds with the "ABC" employee test, which not only emphasizes the control factor but places the burden of proof on employers to show absence of control. However one may come down on the "employee status" issue, there seems no denying that, in light of California's substantial adoption of the ABC test in broad swaths of its employment law, what rights a worker has to legal protection is increasingly dependent on the worker's state of residence or employment. You can obtain the full paper here.
Michael C. Duff
Saturday, January 11, 2020
I have always thought that the Federal Arbitration Act would make its first systemic appearance in workers’ compensation cases in highly proceduralized (and non-medical) contexts. Cases turning exclusively on notice or statute of limitations issues seem likely candidates. And from the perspective of an employer, I would think that cases alleging an employee was fired for claiming workers’ compensation benefits or exercising workers’ compensation rights are also well-suited for arbitration. After all, 53.9% of nonunion, private-sector employers already have mandatory arbitration procedures (governed de jure by the Federal Arbitration Act) pursuant to which all other employment law discrimination cases are decided. What’s so different about a workers’ compensation retaliation suit?
My blog mate David Torrey alerted me a while back to a decision of the West Virginia Supreme Court in Rent-A-Center v. Ellis. A simplified summary of the case is that Rent-A-Center moved to compel arbitration of a lawsuit by an employee alleging that she was unlawfully fired from her job for pursuing workers’ compensation benefits. The employee had signed a standard, pre-hire arbitration agreement which contained a delegation clause instructing that the arbitrator possessed exclusive authority to resolve any challenge to the enforceability or formation of the arbitration agreement. The employee unsuccessfully attempted to avoid the agreement by arguing that the clause was ambiguous as to whether arbitrability issues were for the arbitrator, was unconscionable under state common law, and was invalid for violating West Virginia statutory law. Reversing a lower-court determination that the delegation clause was procedurally and substantively unconscionable, and that there was no mutual agreement to arbitrate, the West Virginia Supreme Court unsurprisingly compelled arbitration of the claim. (It is not likely the Court would risk running afoul of the FAA following its dressing down at the hands of the U.S. Supreme Court in Marmet Health Care Center, Inc. v. Brown). In a nutshell, the Court concluded that the delegation clause clearly expressed an intent to arbitrate and was not substantively or procedurally unconscionable (unequal bargaining power, “take it or leave it” adhesion, and etc.).
More recently, in Hobby Lobby Stores v. Cole (opinion issued on 1/3/20), a Florida appellate court reversed a decision of a trial court refusing to enforce an arbitration agreement in a workers’ compensation retaliation claim. The trial court found the arbitration agreement unconscionable, but the appellate court concluded “that the Agreement was binding, enforceable, and not unconscionable . . .” The appellate court discussed the agreement as follows,
The Agreement is a two-page, single-spaced document Hobby Lobby and Mr. Cole signed on July 27, 2015. The Agreement conditioned Mr. Cole’s employment on his acceptance of its terms. The parties agreed that any employment-related dispute Mr. Cole had with Hobby Lobby, including “[d]isputes involving interference and/or retaliation relating to workers’ compensation,” would be submitted to and settled by final and binding arbitration. Mr. Cole could select from two sets of arbitration rules, and Hobby Lobby agreed to pay all arbitration fees and costs. The parties acknowledged they had each read the agreement, gave up any right to sue one another, waived any right to a jury trial, and “knowingly and voluntarily consent[ed] to all terms and conditions set forth in this Agreement.”
The readership of this blog, being an especially astute and sophisticated group, will know that, whatever the eventual arbitral decisions in these cases, they will not as a practical matter be subject to judicial review. If the arbitrator, for example, “screws up” the state legal standard applicable to workers’ compensation retaliatory discharges—perhaps it derives from the McDonnell Douglas v. Green burden shifting standard in Title VII cases—neither party could have the award set aside on that basis. Awards may only be set aside where procured by corruption, fraud, or undue means; arbitrator misconduct in refusing to postpone a hearing, refusing to hear material evidence; or of any other “misbehavior;” or where “the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.” Spend a few days reading cases and you may understand why this former trial and appellate lawyer claims there is no real judicial review of an arbitration award.
The cases demonstrate that there is nothing that would prevent an employer from compelling arbitration in any workers’ compensation case, and one should take special note when an impact litigation employer rolls out new lines of legal argument (though the Hobby Lobby agreement was executed in 2015 it seems interesting that the probable boiler plate language is being enforced now). For now, the risk and unpredictability of having non-specialist arbitrators involved in medico-legal controversies may exceed the benefit of the liability savings that would almost certainly result from widespread use of arbitration in workers’ compensation cases. But I doubt that would remain the case if the economy were to go into a serious tailspin. Yet I also think that the attempted extension of the FAA into such a traditional police power, state-law enclave as workers’ compensation may ultimately trigger the reaction that I know is coming – the FAA has already gone too far, as the #MeToo controversy has revealed. There is a reason, after all, that workers’ compensation was generally carved out even from ERISA, the mother of all employment-preemptive statutes.
Michael C. Duff
Sunday, January 5, 2020
Ipse Dixit: The Deep Legal Stirrings in the “Gig” Employers’ Challenge of California Employment Law AB 5
From the beginning, the Achilles heel of the “gig economy” is that its justifications have proceeded as ipse dixit (defined as assertions made but not proved, and as an aside a great name for a Southern rock band). Something about what the new employers were/are doing was/is so new and mysterious it simply cannot be comprehended within the old world order of “employers” and “employees” (let alone ferreted out by notions of control and the Restatement Second Section 220 of Agency). After all, these companies were (and are) not cab companies, not delivery companies, not handyman companies (all which sounds rather “zen”). They. Just. Are. Not. They are technology companies because they use, well, technology. Ipse dixit. At its core, California’s new employment law AB 5—and the ABC employment test that will make it harder for employers to claim their workers are independent contractors—takes the bloom off the rose. As of this month, says California, “prove it, employer – prove that this is not an employment relationship.” The titans of the Gig economy are not pleased. They seek to challenge the law with old, Lochner-era arguments—the Government is interfering with our liberty, and our liberty, akin to the divine right of kings, trumps all. I think these arguments cannot possibly succeed, but there may be constitutional implications for challengers of workers’ compensation laws if they do.
Before thinking of the constitutional implications of the gig employers’ challenge, there is perhaps something more fundamental to point out about the nature of employment law. To me, employment law is deeply instrumental. Employment law obviously regulates employment but it is also profoundly important in communicating social contract policies. We have, for example, an employment law—actually several—that says you can’t discriminate in employment on the basis of race or sex. While employment law is the medium by which social-contract, anti-racist and anti-sexist policy is transmitted, the heart of what is going on is anti-racism and anti-sexism, not employment (which is a necessary, but not sufficient, condition for the policies). We also have a social-contract policy that says, “people who are injured should be adequately taken care of.” Some of that policy is transmitted through the medium of workers’ compensation law; some through tort law; some through social security disability law; some through private disability contract law (ERISA). The underlying policy embedded in the National Labor Relations Act (NLRA) is the facilitation and/or decriminalization of workers taking collective action to level the bargaining playing field against their much more powerful employers, improve their economic circumstances, reduce inequality, and reduce the likelihood of industrial strife. The NLRA is simply a medium for achieving broader social-contract policies. Do the titans of the gig economy imagine that once employment status is eviscerated the social contract policies animating employment law will also be eviscerated? Perhaps. But it’s the old adage, be careful what you wish for. Society may react to such dissolution not by accepting the milquetoast, half-expedient of watered-down “portable benefits,” but rather by requiring users of “independent contractors” also to comply with the social contract policies previously transmitted exclusively through “employment” law. Keep poking California in the eye and let’s see what happens. On the federal side, want to decree that “gig” economy workers can’t unionize under the NLRA? You may have provoked a future Congress to expand such rights. (And let’s not even talk about the Federal Arbitration Act . . .)
But back to contemporary times and the current AB 5 challenge. One count of the titans’ complaint Download Gig complaint alleges in part: “AB 5 violates the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution because it draws classifications between network companies and non-network companies without a rational basis for distinguishing between the two groups.” Tellingly, another part of the same count alleges, “Strict scrutiny review applies because AB 5 is designed to burden, and if enforced against independent service providers like Individual Plaintiffs and network companies such as Company Plaintiffs in a manner consistent with the sponsors’ stated intent would burden, the fundamental rights of network companies and workers to pursue their chosen profession and determine when and how they earn a living.” Why is this telling? Because equal protection challenges are analyzed under the “rational basis” standard. And under that standard the challenger almost always loses. So yes, titans, you’d better conjure a strict scrutiny argument, even if from thin air, and continually use the word “fundamental” to describe the rights supposedly infringed. A federal due process challenge also makes a predictable appearance in another count of the complaint: “In addition, California businesses have a constitutionally protected interest in operating free from unreasonable governmental interference. Businesses are therefore protected from baseless or invidiously discriminatory standards and have a right to be free from excessive and unreasonable government conduct intentionally directed toward them to force them out of business.” Yes, just like government was “invidiously” trying to force employers out of business when enacting workers’ compensation statutes back in the 1910s. The fact is that the state can exercise its police powers to protect the health and welfare of its citizens. That has been the answer to this argument for roughly eleven decades.
These are, in short, Lochner challenges, and I doubt it will take a federal court long to dispose of them. (I omit here the titans’ challenges under analogous California constitutional provisions, which will share a similar fate—this post is already too long). In short, a California loss in the AB 5 challenge would have me scurrying to call my former Constitutional law professor, Laurence Tribe, for re-immersion into the mystical rites of Constitutional law, because I will clearly have lost “the thread.” But if the Gig titans did prevail, if modern equal protection and due process analysis were stood on its head, straight on up through the federal courts, I can’t help thinking about the potential vulnerability of workers’ compensation laws to various claimant challenges. Some of the objections to draconian scaling-back of claimants’ rights over the past decades have been met with by little more than the argument, “You can’t prove the legislature was insane when it passed this law.” Oh for the abandonment of the “not insane” standard! Perhaps this is the ultimate, cosmic purpose of the emergence of the peddlers of the Gig economy, whose claims proceed apace as ipse dixit.
Michael C. Duff
Friday, December 27, 2019
Here are my humble recommendations of the best books for the workers’ compensation professional – at least those that I read – for 2019.
Let’s start, however, with two brief, largely negative, mentions. In the category of the entirely unsatisfactory experience falls the novel My Chemical Mountain (2013), by Corina Vacco. The teen protagonist spends the book working out a vendetta against his late father’s employer, a Buffalo, NY-area chemical factory, and its employment lawyer. The latter is an evildoer who has tricked the widow into signing what appears to be a very illegal workers’ compensation release and who tools around in a glitzy silver Lexus. In the end, our hero dynamites the factory and its attorney is sent to jail for his many misdeeds. “Kiss your stupid Lexus good-bye!” is our protagonist’s final ungenerous sentiment.
Not much better was Stephanie Land’s Maid: Hard Work, Low Pay, and a Mother's Will to Survive (2019). Land – whose sudden status as single-mother, thrown out by her abusive boyfriend – finds herself in an epic struggle to get by. She does recount what it is like to work as a maid. We learn, for example, that it is hard on one’s back, and she tells of many an Ibuprofen 800 popped to help her get through the day. Yet, much of the book is comprised of her bitter complaints about governmental poverty programs, the indifference of her family, and the innumerable woes of her toddler.
Enough complaining of my own!
The most educational book I read this year was The Technology Trap: Capital, Labor, and Power in the Age of Automation (2019), by Carl Benedikt Frey. Frey addresses that ubiquitous concern we talk about at workers’ compensation conferences: the growing threat of artificial intelligence (AI) to eliminate the jobs of millions of workers. The concern is voiced by lawyers and others in our community in a more narrow, existential way. If the number of jobs is significantly truncated, particularly those in the industrial sector, will workers’ compensation become superannuated, and along with it those who labor in the dispute resolution process? Of course, a healthy commentary already exists in this realm. But in this new book, Frey takes a novel retrospective/historical look at the situation and tries to predict the future from experiences of the past.
Journalist Steven Greenhouse’s tour de force history of the labor movement, particularly as it has unfolded since the New Deal, is invaluable. That book, Beaten Down, Worked Up: The Past, Present, and Future of American Labor (2019), is, indeed, a history of labor and not simply of unions. The author treats the remarkable phenomena of fast-food workers campaigning for equitable pay in the “Fight for $15” movement and immigrant tomato harvesters fighting for humane working conditions in Florida. These are workers who were not, and are not likely to be, laboring under the auspices of a collective bargaining agreement. While this new book discusses all aspects of labor, front and center is the unavoidable account of the decline of union power and influence. For those sympathetic to labor, the Greenhouse book is a grim read.
Next on my recommended list is Jeffrey Pfeffer’s Dying for a Paycheck: How Modern Management Harms Employee Health and Company Performance – and What We can Do About It (2018). The author asserts that modern business practices create harmful work conditions for employees. He argues that businesses as a whole do little to tend to the emotional well-being of their workers. As a result, workers become disaffected, sick and, in some cases, even die because of work conditions. To Pfeffer, this is at once an injustice, as business, and hence society, are shown to have little regard for workers’ overall health; and a waste, because establishing good work conditions, and keeping workers happy, should both enhance employee performance and the success of business.
Journalist David Owen’s new book, Volume Control: Hearing in a Deafening World (2019), is a personal-journey account his investigation into hearing loss, remedies for the same, and seemingly all of its cultural manifestations. Owen explores the mechanics and physiology of hearing loss, causation, audiograms, how such losses have been interpreted over the centuries, the experience of the deaf, the business and progress of hearing aids and cochlear implants, and regulation of noise in industry, the military, and in our personal lives.
Workers’ compensation professionals can benefit by a grounding in the industrial and organized labor histories which were so formative to our field and the larger system of which we’re a part. Behemoth: A History of the Factory and the Making of the Modern World (2018), by Joshua Freeman, assists in providing such education. The book is an account of the rise and partial fall of the great factories which were, for so many years, the centers of international industrial growth. The manufacturing facilities treated by the author range from the early cotton mills of Britain and New England to those of the Ford Motor Company, its Soviet imitators, and the modern mega-factories of mainland China.
Recently, I wrote on this blog about the most recent National Academy of Social Insurance data showing continued declines in employer costs and employee benefits per $100 of employer payroll. As I have written, there are various explanations for this phenomenon. Perhaps it reflects significantly safer workplaces overall. Perhaps there is significant underclaiming of benefits and ongoing legal obstacles to obtaining and retaining benefits. (See here Emily Spieler and John Burton’s article, The Lack of Correspondence Between Work-Related Disability and Receipt of Workers’ Compensation Benefits). The NASI data set does not attempt the expensive and complicated task of capturing information required to answer these granular questions. (In my opinion, the federal government should be gathering the information).
This past November, the NCCI released an issue brief showing that “since 2000, indemnity benefits on a wage-adjusted basis have . . . kept pace with wage growth across all indemnity injury types in most of the NCCI states.” Assuming this fact to be accurate, is it a counterweight to the NASI graph in my last post that shows a decidedly downward-sloping line for benefits since roughly 1991 (from $1.65 per $100 in payroll in that year to 80 cents per $100 in payroll in 2017)?
One immediate reaction with respect to comparing anything with wage growth since 2000 is – what wage growth? Keeping pace with wage growth may mean keeping pace with real wage declines. As the Pew Research Center reported in 2018, “today’s real average wage (that is, the wage after accounting for inflation) has about the same purchasing power it did 40 years ago.” Moreover, “what wage gains there have been have mostly flowed to the highest-paid tier of workers.” And with respect to recent years, the Economic Policy Institute claims “nominal wage growth since the recovery officially began in mid-2009 has been low and flat. This isn’t surprising—the weak labor market of the last seven years has put enormous downward pressure on wages.”
This highlights at least a couple of problems. First, wage growth since 2000 is an especially difficult metric from which to draw many conclusions about the adequacy of workers’ compensation benefits since the Great Recession lay embedded within the period. But, intuitively, I accept the idea that benefits in the aggregate have “kept pace with” wages in the aggregate during that period. The larger question is whether wage growth keeps pace with inflation. (Keeping pace with breadcrumbs may be all that the workers' compensation system demands). Still, what might be more useful for analytical purposes is to compare the relationship between wage growth and benefits during the 1980s, 1990s, and 2000s. I suspect benefits came crashing down relative to wages in earlier decades, and that we are now working from that already depressed baseline. (John Burton has written about the diminished urgency of fixing workers' compensation subsequent to the disbanding of the 1972 Commission. In a nutshell, benefits initially went up for a short period, and then seemed to deteriorate following the election of Ronald Reagan, which ended any realistic threat of federal intervention into state workers' compensation systems). In other words, more rapid erosion may have occurred in earlier decades and some seem to demand accolades for not slipping further.
The second problem with comparing benefits to wage growth is that most wage growth in recent decades has gone to the top of the socioeconomic ladder. In order to assess the relationship more carefully I would want to know how benefits have kept pace with wages at several different junctures of the wage scale. It may be that workers’ compensation benefits have kept pace with the wages of low-earners but not with those of high-earners. Or it may be that low wage earners have experienced significant real wage declines, and there is a policy question as to how to adjust workers’ compensation benefits in the context of those declines.
In any event, it is hard for me to conclude that the NCCI issue brief is contrary to NASI figures. Each data set measures different trends, and each shows why multiple metrics are required to gain a clear picture of what is transpiring nationally. It is also evident that workers’ compensation is subordinate to larger economic trends. For example, I have little doubt that the current relative silence in workers’ compensation policy circles has everything to do with waiting to see who is going to prevail in the Medicare for All battle. Hard to have a deeper policy debate on workers’ compensation when the entire paradigm could be set on its head.
Michael C. Duff
Saturday, December 14, 2019
I had the privilege and honor of presenting on this subject on December 12 on a panel at the National Council of Insurance Legislators' Annual Meeting. My co-panelists were Robert Stokes of the law firm Flahive, Ogden & Latson; and Glenn Deshields, Legislative Director of the Texas State Association of Fire Fighters. The main points I attempted to make were first that PTSD could not reasonably have been part of the original workers' compensation quid pro quo because negligent infliction of emotional distress was in its infancy as a tort cause of action. It makes sense to me that PTSD would expand under workers' compensation as negligent infliction of emotional distress expanded under tort. And when you have claimants like first responders held in universally high regard, a "bridge" is formed that permits policy expansion. I also emphasized a point that David Torrey has made in some of his writings -- there is nothing new about occupational disease presumptions. They existed in the British Act of 1906 and were picked up in New York beginning about 1920. I have some cites in my working paper that may be of interest to researchers.
Whenever policy makers consider expanding workers’ compensation coverage there is concern expressed that expansion risks converting workers’ compensation into general accident or health insurance. It is easy to understand why policy uneasiness may emerge when assessing expanded coverage of arguably work-related disabilities like post-traumatic stress disorder (PTSD), or when debating the option of adopting relaxed workers’ compensation causation standards—"Firefighter Presumptions”—in connection with diseases sustained by law enforcement officials, safety personnel, and first responders. After all, expanded coverage means expanded costs (and, of course, the need to insure against those costs). But workers’ compensation has had a long history of fundamental expansion since its inception over a century ago, often to the point where one can no longer imagine the expansion as not being originally part of the system. Often under the surface, workers’ compensation expansion is tracking similar expansion in tort liability, and the workers’ compensation expansion reflects a perceived need for enhanced tort immunity—though many involved in the debate may not be aware of this dynamic. In other words, increases in workers’ compensation costs are constantly being weighed against the potential for increased tort liability.
To take one broad historical example, many observers of workers’ compensation may be unaware that, in the earliest versions of the American workers’ compensation statutes, circa 1911, no provision at all was made for payment of ongoing medical care in connection with work-related injuries. At that time, workers’ compensation medical benefits were limited to post-injury first aid at the workplace, and perhaps initial medical treatment for, at most, 90 days. The first United Kingdom workers’ compensation statute (of 1897, as amended in 1906—the progenitor of most American statutes did not cover ongoing medical benefits: something akin to national health care for workers was about to arrive on the scene in the U.K. in 1911. The other early workers’ compensation model, German workers’ compensation, established in about 1884, was similarly part of a much broader universal health care insurance system in which work-related medical costs and indemnity payments merged into a broad social insurance structure). The point is that American statutes had to expand to cover ongoing medical treatment for work-related injuries. Few in 2019, however, think of medical coverage for work-related injuries as an “expansion” of the original idea of workers’ compensation. Workers’ compensation “had” to expand because, if American workers’ compensation statutes had not covered the expense of ongoing medical treatment for work-related injuries, that expense would have to have been pursued by workers in tort litigation, with all the expense that process has always entailed. American stakeholders preferred expanded workers’ compensation and tort immunity to expanded tort liability.
Along similar lines, many readers may know that workers’ compensation was originally limited to coverage of extra hazardous employment. One reason for the limitation was that it was not known by state legislatures until 1917 whether the United States Supreme Court would uphold on constitutional grounds a version of the Grand Bargain that included non-hazardous employment. Another reason for states deciding initially to cover only extra hazardous employment was that it was there that the need for workers’ compensation coverage was most acutely felt. (Necessity is often the mother of invention). Eventually, the U.S. Supreme Court very broadly authorized the Grand Bargain—the historic “quid pro quo” of workers’ compensation benefits for tort damages (and defenses). The High-Court authorization solved major problems, but created new ones. Now that states possessed a more-or-less legal blank slate on which to write workers’ compensation law (albeit with some very broad boundaries), they were placed in a position of having to flesh out exactly what the quid pro quo should entail. But states had no hesitation expanding workers’ compensation coverage from solely extra hazardous employment to most employment. And, again, from the perspective of employers, with the costs of workers’ compensation expansion came (and comes) the benefits of expanded tort immunity. There were, of course, other statutory beneficiaries: workers relieved of the time and expense of pursuing tort litigation (to say nothing of workers who would have had no viable tort claims at all); and society-at-large, which benefited from having the costs of workplace injury shifted to producing sectors of the economy (and away from broad taxpayer subsidization), and which also benefited from safer workplaces generally.
The rest of the paper can be found here.
Michael C. Duff
This year, I had the honor and privilege of serving on the National Academy of Social Insurance Workers' Compensation Data Panel. Twenty-three panel members from various backgrounds and policy perspectives (including my blog mate Judge David Torrey) scrutinized data collection over a period of several months and then met in early November to debate, discuss, and refine findings and thought about findings. It was scintillating to this evolving policy wonk. The panel makes every attempt to be a neutral body. Of course, everyone operates through a series of cognitive biases and honest brokers reveal those biases in advance. I think everyone who reads these pages from time to time understands that I am biased in favor of injured workers. When I smell a rat, I say so. I'm not embarrassed about choosing a side or about choosing the particular side I've chosen -- I conjecture there are plenty of advocates out there who can make the case that what is good for their respective clients is good for America. I made my choice a long time ago.
Still for all of that -- the chart above seemed to rankle certain workers' compensation observers. What does it show? It's very simple. The benefits for injured workers per $100 of payroll continues to go down. The costs for employers per $100 of payroll continues to go down. Now you and I can have a debate about why that might be so. But that is what the numbers show. You might argue that the metric itself is flawed. Maybe you think that benefits and costs per $100 of payroll is a meaningless statistic. Of course, if you have that view you would be in opposition with NASI panels going back several years and, by the way, the use of the metric by other governmental agencies. But, of course, you have the right to disagree with everyone -- I do it all the time. The full NASI report is here, and in my humble opinion is essential reading.
Some critics of the current report seemed to be complaining that benefits can't be decreasing all that much because since the 2012-16 Oklahoma drama there have been no major incursions on the workers' compensation citadel. In a way, I agree with them. Creeping erosion has been the norm. We won't see more opt-out drama until the next severe economic downturn. When that comes--and it always will--the same questions we were considering in 2016 will once again be front and center. I am always amazed at how very intelligent people can talk themselves into the proposition that the 2016 tumult was a tempest in a teapot. I hope you will remember (when the time comes) that this observer thought that, when times get especially bad, the first question an employer might pose to a legislator is, "why do we have to have this expense at all?" If you think there is a clear answer to that question, I respectfully respond that you are wrong. Legal and social consensus is always much more fragile than contemporaries imagine.
The outgoing Obama Department of Labor produced a 41 page report titled, "Does the Workers' Compensation System Fulfill its Obligations to Injured Workers?" My answer to the question is, of course it doesn't. But if I'm going to be intellectually honest I have to concede that the answer depends on the premises that 1) there is a broader social obligation to injured workers and 2) we have some kind of consensus about what is meant by fulfillment. It is on point number 2 that I think we have tremendous disagreement. Some believe that workers' compensation is a bare, anti-destitution safety net program. Others believe that because injured workers have forfeited valuable tort rights something more than starvation wages is required.
Forgotten in the clamor is the point that the National Commission in 1972--chaired by the esteemed John Burton and peopled with members who could hardly be considered anti-business--concluded, at the risk of oversimplification, that workers' compensation was inadequate and thought that federal intervention could be in order in the absence of significant improvements. To me, that is the correct context in which to view the chart above -- but that is one man's opinion. The DOL report discussed the National Commission's 19 Essential recommendations and discussed the six focus areas of those recommendations only two of which I'll mention here:
adequate weekly benefits for temporary total, permanent total and death benefits including both statutory rates and a desired earnings replacement rate. This area included recommendations that the maximum weekly benefit rise to a maximum of at least 100 percent of the state’s average weekly wage initially, and then to 200 percent, and that, subject to this maximum, benefits be at least 66 2/3 of the worker’s gross weekly wage. Notably, many of the 84 National Commission recommendations not included in the 19 essential recommendations went further with regard to income maintenance, including that beneficiaries in death cases have their benefits escalate with increases in the state average weekly wage and that maximum weekly benefits should ultimately reach 200 percent of the state’s average weekly wage.
no arbitrary limits on the duration of benefits for permanent total disability or death,including that total disability benefits be paid for the duration of the worker’s disability or for life
In my day, I was a fair to middling trial attorney and was schooled by excellent mentors to sit down when I'd made my point. You'll be the judge of whether I have. I'll merely point out that the graph above begins only eight years after the Commission's report was issued -- and the graph does not seem to reflect a system that could possibly be improving from the perspective of injured workers.
Michael C. Duff
Wednesday, December 11, 2019
One reason it is hard to bamboozle me on the true state of working America is that before I became a lawyer, and then a law professor, I did 15 years of hard labor in working America. I've worked as a janitor, in warehouses, restaurants, and on airport tarmacs -- often as putative part-timer doing full time work without full benefits. I've been hurt on the job. And none of it as part of a social science experiment. It was my livelihood, and I didn't know if I'd ever make it out. So let's just say I'm a different kind of law professor when I evaluate labor and employment issues. Here's a little sunlight revealing what is going on in a workplace governed by America's second largest employer. If you thought nobody could make Walmart look like a safe employer consider this joint Atlantic/Reveal expose:
Amazon’s famous speed and technological innovation have driven the company’s massive global expansion and a valuation well over $800 billion. It’s also helped make Amazon the nation’s second-largest private employer behind Walmart, and its CEO, Jeff Bezos, one of the richest humans on Earth. Now an investigation by Reveal from the Center for Investigative Reporting has found that the company’s obsession with speed has turned its warehouses into injury mills.
Reveal amassed internal injury records from 23 of the company’s 110 fulfillment centers nationwide. Taken together, the rate of serious injuries for those facilities was more than double the national average for the warehousing industry: 9.6 serious injuries per 100 full-time workers in 2018, compared with an industry average that year of 4. While a handful of centers were at or below the industry average, Reveal found that some centers, such as the Eastvale warehouse, were especially dangerous. Dixon’s was one of 422 injuries recorded there last year. Its rate of serious injuries—those requiring job restrictions or days off work—was more than four times the industry average.
The full story from November's Atlantic is here.
Statistics and data are important, but sometimes (for whatever reason) they just don't line up with what any fool can see is truly unfolding on the ground. How much more do you have to see about what is going on at Walmart and Amazon, the number 1 and 2 private sector employers in the U.S. to understand that it is not safe out there?
Michael C. Duff
Wednesday, December 4, 2019
I'm very pleased to announce the publication of my Wyoming Workers' Compensation treatise. I'm especially tickled that I was able to do it "open source":
A Treatise of Wyoming Workers’ Compensation Law seeks both to introduce Wyoming workers’ compensation students to the law of their own jurisdiction, and to provide a continuing resource to those same students as they embark on workers’ compensation legal practice after graduation. In this way, the text fills a gap in the literature by serving as a concrete exemplar of what it means to assist students in becoming “practice-ready” as soon as possible after graduating from law school. In short, practice ready lawyers must have some exposure to the law of their own jurisdictions. Furthermore, Wyoming Workers’ Compensation Law is meant to be a resource to all practicing lawyers in the state of Wyoming. This objective is intimately connected with the mission of the University of Wyoming as a Land Grant Institution broadly striving to serve the needs (including legal needs) of Wyoming citizens.
Substantively, the treatise canvasses the traditional areas of workers’ compensation law: employee/employer definitions, causal connection to work, evaluation of the extent of disability, types of benefits, and a brief discussion of the Wyoming administrative structure. In several places the treatise first introduces a substantive area of law generally, for example “causal connection,” and then focuses on how Wyoming analyzes the area of law. In discussing some substantive areas of workers’ compensation law, the treatise underscores especially unique Wyoming idiosyncrasies. Not content to merely “restate” the law, the treatise in certain areas subjects the law to academic criticism and suggests legal reform in order to stimulate broader discussion of the legal doctrine.
The text is free to download. You just need your name, email address, and law school affiliation (which I don't think is aggressively policed so you can probably simply enter the name law school closest to where you reside).
Michael C. Duff
Monday, November 25, 2019
Gig Economy Article by Keith Cunningham-Parmeter (Williamette Law School) is One-stop Shopping to Understand the Misclassification Debate Surrounding Platform-based Gig Workers
In a new article, the author argues that the traditional common law right of control test is inappropriate, and unworkable, for analyses of whether workers in the platform-based gig economy are employees or independent contractors. See Keith Cunningham-Parmeter, Gig-Dependence: Finding the Real Independent Contractors of Platform Work, 39 Northern Illinois University Law Review 379 (2019).
The author, Keith Cunningham-Parmeter, identifies the long-appreciated reality that the control test was developed centuries ago as the criterion of establishing whether the negligence of an agent of an enterprise, towards a third party, could be ascribed to the enterprise via respondeat superior. If control, or the right of control, existed, then the enterprise would be considered the master, the agent the employee, and vicarious liability would attach.
This test has, over the last century, been cut-and-pasted over to areas like wage and hour protections and, of course, workers’ compensation. Certainly this describes the Pennsylvania experience and the current law, 104 years after enactment.
But all of this, the author correctly argues, really does not make any sense. Respondeat superior is based on the idea that an entity which has the power to control a disempowered, subordinate actor presumably also has the economic wherewithal to answer for such an agent’s torts. When such control does not exist, and the agent can be viewed as economically autonomous, it makes sense for that party, a truly independent actor, to be responsible for its torts – and the enterprise protected.
Programs like the Fair Labor Standards Act and workers’ compensation, on the other hand, were intended to expand the responsibilities of such enterprises to workers. The control criterion does not vindicate this purpose. In the author’s view, economic autonomy, and not control, should be the controlling test when considering whether a worker is really an independent contractor.
The author commences his article with an account of the efforts of platform-based gig enterprises – via “clever branding” – to establish their workers as independent contractors. He refers to this practice as reflecting “platform exceptionalism.” The idea here is that the gig economy presents a whole new type of business innovation that does not have employees in the first place. After all, for example, Uber is not a transportation enterprise but, instead, a technology company. The author is, rightly, suspicious of this rhetoric.
In any event, to remedy the situation, the author argues that courts and legislatures should follow the example of the California Supreme Court in the recent Dynamex case. See Dynamex Operations, W. v. Superior Court, 416 P.3d 1 (Cal. 2018). That case, he explains, “embraced a simplified standard – the so-called ‘ABC Test’ – to determine whether contemporary workers are genuine independent contractors. Rather than engage in the … [control-dominated] multifactorial balancing – a process guaranteed to yield muddled results – the ABC test begins with the presumption that most workers who provide labor to firms are employees. If firms want to overcome this presumption, they must prove three separate elements to establish that their workers possess the marketplace strengths of legitimate independent contractors.”
Those three elements, notably, are inquiries into whether the worker is engaged in the firm’s usual course of business; whether he or she is operating a separate business; and whether the worker is free from control of the purported principal.
The author notes that use of this test does not necessarily mean that all platforms will be deemed employers. For example, delivery services workers (as in Dynamex) for enterprises like GrubHub may well be deemed employers, but handymen working for a “chore” platform like TaskRabbit may well be deemed independent contractors.
The author’s footnotes feature a seemingly unabridged recounting of all the latest cases and scholarship in this area. This straightforward and well-written article is one-stop shopping for the lawyer or judge seeking out the latest arguments, pro and con, on the misclassification debate surrounding platform gig workers.
Sunday, November 24, 2019
The late 1980s and much of the 1990s were the period of the "Hearing Loss Wars" in Pennsylvania workers’ compensation. Most lawyers and judges came to learn the basic aspects of the law and medicine of hearing loss. We knew by heart that 90 decibels was the OSHA limit for an eight-hour workday, that a worker who experienced a “temporary threshold shift” had no doubt sustained some level of permanent sensorineural loss, and we routinely heard of the 6000 to 8000 hertz “notch” of the typical audiogram.
So intense and litigated were hearing loss cases that my treatise on workers’ compensation features nearly 30 single-spaced pages devoted to the law and practice of such claims.
Those wars are over now, likely because of the decline of manufacturing in our state. If they return, however, both the novice and the hoary veteran will want to read journalist David Owen’s new book, Volume Control: Hearing in a Deafening World (Riverhead Books 2019).
The author, in a chatty, personal-journey type account, reports here on his investigation into hearing loss, remedies for the same, and seemingly all of its cultural manifestations. Owen, specifically, explores the mechanics and physiology of hearing loss, causation, audiograms, how such losses have been interpreted over the centuries, the experience of the deaf, the business and progress of hearing aids and cochlear implants, and regulation of noise in industry, the military, and in our personal lives.
Owen frequently turns philosophical about hearing loss. For example, would it be better to be blind or deaf? Owen suggests that most people who have thought about the issue at length believe that deafness is much worse, as it interferes with communication and estranges the victim from society. On another issue, why is it that most of us know that exposure to loud noise can be harmless, but we ignore the hazards nonetheless? One reason is inconvenience or sloppiness, to which we probably can all attest, but it turns out that, as well, the brain actually likes certain things, like music, loud. Rock concerts (and the finales of Brahms symphonies, I would add), are not overwhelmingly loud for nothing.
The irony, however, is that even soft noises, like the drip of a leaking faucet, can be irritating. Hearing, the author’s interviewees point out, is closely related to our emotions. The author, in this regard, might well have identified loud, unmuffled motorcycle exhaust; giant exhaust pipes on pick-up trucks; and car stereos with exaggerated subwoofers supporting vulgar lyrics. None of these noise sources probably damage hearing, but they disrupt the peace of whole neighborhoods.
Owen’s most interesting chapters address the recent improvements in hearing aids. For many years, a few companies controlled the market, and for an aid to be adjusted required a trip to the audiologist. Now, however, regulation is loosening, and many enterprises market other devices that aid in hearing, short of being hearing aids. Owens’ chapter, “Beyond Conventional Hearing Aids,” was the most enlightening for this reader.
In the realm of occupational noise, Owen discusses one item that was often discussed at hearing loss medical depositions, to wit, the role of loud noise in the workplace that was not shown to be in excess of the OSHA thresholds. Experts suggested to Owen that such noise may well, indeed, cause hearing loss – the OSHA standard is hardly definitive in establishing which workers have sustained occupational hearing loss and which have not. As Owen states, correctly, the OSHA standards “say that if you work in a covered industry you can legally be exposed to eight continuous hours of 90-decibel noise (motorcycle eight meters away, lawn mower), or to two hours of 100-decibel noise (New York City subway car, jackhammer, kitchen blender, snowmobile), or to thirty minutes of 110-decibel noise (car horn one meter away, chain saw) – every day of your career .…” Owen concludes, “Probably the best that can be said about the rules is that they’re better than nothing.”
In his final chapter, Owen nods his head briefly to the issue of law and regulation. The residents of some urban areas have revolted, in this “deafening world,” and insisted on noise regulation. But, as Owen correctly states, enforcement is a major problem. Already-overworked law enforcement personnel may be reluctant to spend lots of time doing noise control, and some urban areas are unavoidably going to be noisy. He uses the all-night garbage collection trucks of Manhattan as a familiar and persuasive example.
Owen’s book is not heavily footnoted, but his bibliography features what seem to be excellent references, usually supported by websites, for further reading. The book would have benefited by illustrations and diagrams, but overall this new book is an enriching one for the workers’ compensation professional.
Especially for those who missed the Wars.