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

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