Monday, April 24, 2017
Workers’ Compensation Statutes as Governmental “Takings”: A Different Perspective on Benefit Adequacy
Workers’ compensation benefit adequacy discussions are difficult because workers’ compensation claimants in reality fall into two separate “victim” categories. Accident victims are the product of pure chance; negligence victims are the product of unintentional “wrongdoing.” Negligence victims are the direct heirs of the quid pro quo. With respect to them, a true Grand Bargain (as endorsed by the Supreme Court in the famous N.Y. Central R.R. Co. v. White case) applies. But what about accident victims? I suspect that those who argue (implicitly or explicitly) that subsistence benefits are morally justifiable have in mind accident victims. After all, the world of 1911 would have provided accident victims with no compensation at all. Any deal that an accident victim got was a good deal. In a way, accident victims were the “free riders” of a system agreed to by employers desiring to insulate themselves from evolving notions of tort liability. The point of the workers’ compensation system was, in part, to avoid the expense of separating, through tort litigation, meritorious from non-meritorious cases. In the subsequent America of social security disability benefits, employer-provided disability benefits, and unemployment compensation, it has been easier for some to see limited harm in the provision of subsistence-level-only workers’ compensation benefits. Costs are understood (consciously or unconsciously) to be easily shift-able between benefit regimes. Some of these assumptions may be dramatically altered in the next year or two. But I believe this fairly describes the good-faith moral deliberations of present-day workers’ compensation analysts able to defend the woeful levels of current workers’ compensation benefits.
Nevertheless, it is still not cost-free to separate accident from negligence victims. And, even taking pain and suffering out of the equation (as those who have seldom encountered pain are wont to do), purely compensatory tort damages will create “losers” of some unknown number of employers. It is still true that some employers, in the absence of insurance, would be devastated by tort liability even in “tort-reform” states. Thus, assuming there continues to be little appetite for incurring the costs associated with separating workplace injury victims into different legal categories, and assuming a continuing market for tort immunity, we are still left with the problem of how to “price” workers’ ex ante exchange of tort rights for statutory benefits.
The analysis is further complicated because as a society we still seem undecided where remedies for personal, physical injury (like tort rights) sit in the hierarchy of rights. True enough, drafters of the Constitution, who were relatively unlikely to routinely face the terrors of physical injury, explicitly privileged property and contract rights over all others, as embodied in the 5th Amendment of the Constitution. If the Government takes my property, there is a virtually irrebuttable presumption that I am entitled to “just compensation.” But what if the Government takes my right to pursue a remedy for physical injury? Is that not a “taking?” Is that not what the Court in White was suggesting implicitly: we are signing off on the Grand Bargain because we think, as it has been presented to us, it is in fact a bargain; if it were not, we would look at the situation differently. It is unclear how the Court of that time might have evaluated an un-square deal. And that is worthy of exploration.
To that end, my writing this summer will center on how we might look at the adequacy of workers’ compensation benefits viewed through the prism of “just compensation” utilized in property law.
Michael C. Duff
Wednesday, April 19, 2017
As a former History Prof, when I review writing contest entries, I am always impressed by a relevant and illustrative historical reference. Alex Lonnett, this year’s Writing Contest winner, began his paper on “Employee Waivers of the Right to Sue Third Party Tortfeasors” with this prefix: “Tales of trouble like these are worth telling, as they reveal the spirit of the people who suffered.”
That was a quote from Crystal Eastman, a progressive era lawyer whose 1910 report, “Work Accidents and the Law” on Pittsburgh labor conditions help set the stage for the first workers’ compensation law (which she drafted in New York state). Alex followed this eloquent beginning with a compelling argument that employee waivers were void as against public policy.
One of the symposium speakers at our annual conference posed this question: “Where will we find the next Crystal Eastman?” The answer, perhaps, is among our contest entrants (several of whom, by the way, are pursuing careers as workers’ compensation lawyers. I should also note that several winners, like Alex, are former students of Judge David Torrey, the College Board Secretary who also teaches Workers’ Comp at Pitt Law School.). So, on behalf of the College and the Writing Committee, I am pleased to announce the Law Student Writing Contest First Prize to Alex Lonnett. Alex received a $2000 prize, and his law school (Pitt) received $1000. In addition to posting on the College website, Alex’s essay will be published in the Work Injury Law and Advocacy Group national magazine Workers First Watch and the National Association of Workers’ Compensation Judiciary Newsletter (edited by College Board member Luanne Haley) and an additional podcast posted by Board member Alan Pierce.
The Second Place winner was Zach Hadler of Missouri Law School. Congratulations to the winners and thanks to all who participated.
Wednesday, April 12, 2017
Workers’ compensation observers have in recent years become accustomed to a narrow version of legal “opt out.” In 2013, Oklahoma passed a law, ultimately found unconstitutional under state law in 2016, authorizing (even encouraging) employers to opt-out of that state’s workers’ compensation law. I want to suggest that a broader version of “opt out” has been playing out in the form of the “Gig economy.” It is often contended that literally everything about the Gig economy is so different from the “traditional” economy that different workplace legal rules must be applied. Gig economy employers, it is claimed, are simply unable to comply with workers’ compensation laws, employment discrimination laws, or labor relations laws. It is never quite clear why this is so.
Much of the alleged legal struggle of applying law to the Gig economy centers on the threshold concept of “employee”: whether an individual working for a Gig employer is, or is not, an employee within the meaning of a particular employment statute. If not, the individual is not covered by the law, and the employer need not comply with it. This is hardly a new question; the test for employee status is as old as the onset of comprehensive employment statutes first passed in the twentieth century, statutes employers have long resisted. My law students apply this test in virtually every exam I give. It is unsurprising that contemporary companies utilizing labor—including Gig employers—claim not to understand the well-known test as part of their broader argument of needing to opt-out from labor statutes and the costs imposed on them (while failing to acknowledge the benefits conferred by the statutes on the broader society).
The Gig economy, opt-out project (“we are not employers”)—unlike the much narrower workers’ compensation opt-out gambit in Oklahoma (“we are not ‘regular’ workers’ compensation employers”)—has been almost exclusively “unilateral.” By unilateral, I mean it has been actuated primarily by employers. States’ regulatory structures have either opposed radical deregulatory efforts or, at a minimum, have not wished to encourage them. One of the disorienting questions surrounding the Oklahoma debacle, however, was why that state would simultaneously wish to have, and not to have, a workers’ compensation statute. The politics of the situation are perhaps not so complicated. Imagine trying to explain to the general public that a hundred-year old benefits system had been jettisoned simply because businesses (like all of us) wanted to save money. The question surfacing immediately is how far such a rationale can go. What are its limits? Much easier, and less provocative, to provide an elastic “legal” vehicle allowing sophisticated employers to incrementally and virtually imperceptibly escape from a century-old legal guarantee.
I recently read in WorkCompCentral (behind a paywall) that a movement for “portable” benefits for Gig workers is emerging. I think this is a terrible concept, for it buys into the idea of what I call a “bi-lateral” opt-out. By “bi-lateral,” I mean that, like the situation in Oklahoma, governments “partner” with business to concede the rule of law and erect “government-lite.” At the state level, a statutory-lite benefits regime is probably preempted by ERISA, which strictly forbids state regulation of any employee benefit plans, except those maintained solely for the purpose of complying with state workers’ compensation, unemployment compensation, or disability laws (not, by the way, “lite” versions of those laws). At the federal level, a “Gig” structure (which Senator Mark Warner of Virginia has apparently championed), may effectively frustrate state attempts to compel employers to simply obey state law (much of this project would represent federal intrusion into historically state law). Whether of federal or state origin, the touchstone of the bona fides of “portable benefits” will be the extent to which the benefits are commensurate with traditional benefits. If they are not, any such opt-out scheme is, in my view, deeply pernicious and inimical to the rule of law. Better to compel employers to be the employers they already likely are under well-established traditional rules and not assist them in escaping their responsibilities under the law (and as part of the social contract). In short, pay attention to the man behind the curtain offering “portable benefits.”
Michael C. Duff
Sunday, April 2, 2017
Close observers of the workers’ compensation landscape will recall that Florida claimant attorneys have in recent years been arguing that the steady erosion of workers’ compensation benefits over the past few decades have essentially undone the quid pro quo of workers’ compensation benefits in exchange for tort remedies. A separate component of the argument contends that changes in tort law over the last few decades have resulted in the systematic undervaluation of workers’ compensation claims. At the beginning of the twentieth century, the employer negligence defenses of contributory negligence, assumption of the risk, and the fellow-servant rule frequently shut off workers’ workplace injury claims altogether. In modern times, however, a substantial majority of states have substituted comparative negligence for contributory negligence and assumption of the risk. Comparative negligence does not automatically shut off a plaintiff’s claim if the plaintiff, too, was negligent.
Suppose a worker was injured in the workplace by a damaged tool. Somehow it is determined that both the worker and the employer were negligent (“careless”). The worker is deemed 30% negligent; the employer is deemed 70% negligent. The damages (however calculated) are a million dollars. Under early 20th century negligence law, the worker’s claim would have been completely shut off. But in the absence of workers’ compensation, 21st century negligence law, in a comparative negligence state, would in theory allow the worker a recovery of $700,000. Thus, the theory continues, the workers’ compensation for tort quid pro quo of an earlier era was premised on case values that were, in the aggregate, lower than comparable cases, if applying 21st century negligence law. The deal is therefore argued to be “bad,” and should perhaps be renegotiated, especially in the context of eroding benefit levels and coverage.
But does this argument work in reverse? Consider the dramatic tort reform bills that have been recently passed by the U.S. House of Representatives. Although substantively beyond the scope of this post, H.R. 985, the Fairness in Class Action Litigation Act, H.R. 725, the Innocent Party Protection Act, H.R. 720, the Lawsuit Abuse Reduction Act, and H.R. 1215, the Protecting Access to Care Act would almost certainly act in tandem to reduce the cost to defendants (including employer-defendants in the absence of a workers’ compensation regime) of negligence suits. Although the fate of the bills in the U.S. Senate cannot presently be known, one can easily imagine employers making the argument that the quid pro quo is no longer a good trade for them in light of a weakened tort regime.
Of course, as I have argued elsewhere, tort law should not be subject to legislative modification, willy-nilly: I value my property (remedy for dispossession of which is constitutionally-protected), but it is difficult for me to claim that I value it more than my right to a remedy against one who has physically injured me. Most American courts, however, continue to allow legislatures to make virtually any non-irrational modifications to injury remedies. As long as this continues, we will be reconsidering periodically and critically the acceptability of the quid pro quo.
Michael C. Duff