Sunday, June 16, 2019

Professor Duff on Adequacy of Benefits, in Historical Aspect

            Recent court cases have highlighted how some states, in this era of business-friendly workers’ compensation  reform, have cut back on disability benefit levels.  In Alabama, Florida, and Kansas, courts have all reviewed benefit levels (duration limits are frequently an issue as well), and declared them inadequate. Other courts, however, reflecting a traditional hands-off-economic-legislation approach, have indicated that benefit levels are instead appropriately addressed by the legislature.

            A pervasive inquiry surrounding benefit adequacy is whether a compensation program is constitutionally legitimate if the benefits provided are so miserly that they cannot be said to fairly substitute for workers’ surrender of their tort rights.

            In a recent article, stylish and in rich prose, Professor Michael Duff goes back to the origins of the system and tries to determine what the founders of state systems of compensation believed was adequate.  Michael C. Duff, How the U.S. Supreme Court Deemed the Workers’ Compensation Grand Bargain “Adequate” Without Defining Adequacy, Workers’ First Watch, p.27 (WILG Winter 2018),

            More importantly, he examines the benefit levels which were a feature of the New York act, upheld by the U.S. Supreme Court in the landmark case New York Central R. Co. v. White (U.S. 1917).  That case, of course, recognized the quid pro quo of the workers’ compensation scheme, and famously suggested that a law abolishing a cause of action is only legitimate if the replacement is a reasonably just substitute.

            Duff establishes that the progenitors of U.S. workers’ compensation laws were highly influenced by the European models of the program, especially those of industrial powerhouses Germany and Great Britain.  (In this portion of his article, he reviews the role of lawyer/lobbyist P. Tecumseh Sherman – yes, son of the Civil War general – who was to be a major commentator on the nascent Pennsylvania legislation.) 

            Germany and Great Britain, notably, established less-than-full-wage replacement for weekly disability payments, brief waiting periods, and caps on the duration of benefits.  Groups in the U.S., having studied these laws, proposed weekly benefit levels ranging from 50% to 2/3 of weekly wages for both total and partial disability benefits, subject to a weekly maximum.

                It was such a law that was under consideration by the U.S. Supreme Court in the White case.  Of course, the pivotal issue in that case was whether the imposition of no-fault liability on employers constituted a denial of due process.  The court held that it did not, but along the way at least suggested (in a doctrinal tease that has endured for over a century) that a system which abolished common law rights was only valid if the remedy placed in its stead was reasonable.  Duff suggests that perhaps the benefit levels provided by the New York law under consideration might be regarded as a “floor” to what was, at least at the time, reasonable.  Still, his more definitive opinion is that the court was aware of the expert consideration which had informed the creation of the law, and that it in effect deferred, to these creators of the system, the determination of what was reasonable – and adequate.

            Importantly, Duff comments, “The difficulty with the Court’s approach is that little has been left to posterity explaining what scale of employee benefits the Court might have deemed inadequate or unreasonable as an exchange for employee tort damages. The pregnant silence on federal constitutional boundaries continues to impact current discussions on limits to legislative reductions of workers’ compensation benefits.”

            Duff makes the point that the issue of what was adequate and fair was alive and well at the time workers’ compensation laws were created.  This proposition is overwhelmingly supported by the experience of the Pennsylvania system.  In our state, our original 1915 enactment was notoriously miserly, a point immediately identified by national leaders, and thereafter debated for decades.  When benefit levels were increased in 1937, the law was struck down, in Rich Hill Coal Co. v. Bashore (Pa. 1939), as violative of the state constitution’s admonition that a workers’ compensation law must only provide for “reasonable” benefits.  Only in 1972, when benefit levels were raised above poverty levels, did inadequacy cease to be an issue.  (Inadequacy is still a practical issue for those workers permanently disabled with a less-than-35% impairment; such workers are limited to a maximum of 11.6 years of disability payments.)  In any event, taking the long view of the Pennsylvania experience, Duff’s analysis of adequacy, in its historical context, rings familiar and true.

            Recent commentaries, and another Florida challenge, have raised the question of whether maximum compensation payable, a ubiquitous feature of state laws, are constitutional under the quid pro quo/White analysis.  On this point, Duff seemingly answers the related inquiry – where did maximum compensation payable come from in the first place?  The answer apparently lies in the German and British examples.  In Germany, under the 1911 law, temporary and permanent total disability was subject to a cap of 3 marks (71 cents) per day; and in England, under the 1907 law, weekly disability was subject to a cap of £1 ($4.87) per week.  Maximum compensation payable may be unfair and leave high-paid workers in the lurch, but Professor Duff’s adequacy article establishes that it is profoundly historical.

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What many fail to consider when adequacy is considered (Stahl v. Hialeah Hosp. Cert Den) is that when WC laws were first passed the standard for tort was contributory negligence. When comparative negligence became the norm, ALL WC laws immediately became inadequate and have remained so for decades.

Posted by: Mark Zientz | Jun 17, 2019 7:25:14 AM

Indeed, Duff discusses this critical point at length.

Posted by: Dave Torrey | Jun 17, 2019 8:19:09 AM

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