Reflections on the Costs and Benefits of Changes in Workers’ Compensation Law

As Professor Jason Bent has recently discussed on this blog, there have been a series of recent constitutional challenges to Florida’s workers’ compensation statute. Casual readers may be left with the sense that the Florida Supreme Court has done something reckless, and perhaps wrong. In July, the National Council of Compensation Insurance (NCCI), the workers’ compensation rate maker for 38 states, proposed a rate increase in Florida of 20% in response to the Westphal (striking down the 104-week statutory limitation on temporary total disability benefits) and Castellanos (mandatory attorney fee schedule unconstitutional) decisions. Then, within the last week or so, the same organization “projected” one-billion dollars of unfunded liability arising from the same two cases, and from a third case, Murray v. Mariner Health, decided in 2008 (attorney’s fees must be based on hourly schedule rather than a percentage of accrued benefits). The gist of the NCCI’s projection of enormous, inchoate liability is that injured workers’ attorneys may be able to pursue attorney’s fees retroactively, and that paying more than 104 weeks of temporary total benefits to qualifying injured workers will be terrifically expensive. Plaintiffs’ attorneys, in turn, have roundly derided the projections as outlandish and exaggerated.

The ensuing argument over these potential costs can be framed in any number of ways. Injured workers’ lawyers (not workers themselves, the argument goes) will unjustifiably, retroactively seek additional compensation from cases thought to be over that have now been illegitimately reopened as a result of the Florida High Court’s rulings. Or, if you prefer, lawyers have been outrageously underpaid during the preceding decade and are merely achieving a long-due, upward adjustment in fees; and an unjust and unsupportable gap in worker coverage has been rightfully closed.

However one frames the argument, there is a very real issue as to how to retroactively apply judicial changes to law in some rational pricing model. The entire discussion also squarely raises the issue I constantly discuss with my law students. In a system as large as “workers’ compensation” (in 2013, 63. 5 billion dollars in benefits were paid, while employers’ overall costs were 88.5 billion dollars), how can we ever confidently conduct cost-benefit analyses in a manner that is sufficiently persuasive to all stakeholders? The NCCI, a sophisticated and influential but solitary rating organization, attempts to project the retroactive effect of changes to the existing substantive law, an exercise made necessary by a workers’ compensation dynamic in which many cases are simply never “over.” Hard to gain trust with those kind of variables.  

Here is another question to ask. During the first decade-and-a-half of the 21^st century, have employers been helped or hindered by the exclusive remedy rule, by which workers a century ago surrendered their tort rights for workers’ compensation statutory remedies. I sense that until we know the answer to such a basic question we cannot intelligently, or globally, think about costs and benefits. After all, what would a billion dollars in additional costs mean in a country where workers could routinely sue employers in negligence lawsuits in court? In the meantime, policy battles concerning the magnitude of benefits will continue to rage within legislatures, and there will be winners and losers. Then the deck will be shuffled, and we’ll do it all again. In the midst of this din, reflexive castigation of judges who must attempt to fashion just outcomes from confusion avoids the real legislative work of being clear, open and honest about who will pay what, and why.  

Michael C. Duff