Workers’ Compensation Law Prof Blog

William Meredith and the Foundations of Canadian Workers' Compensation

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

More From "Safe Workplace" America: Fracking and Radioactive Brine

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

Skeptical Ruminations on Walmart "Mass Workers’ Compensation Settlements"

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     

ERISA Preemption Progeny Strike Again: Lower Federal Court Strikes AB-5 As Applied to Truck Drivers

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 9^th Circuit rebuff of aggressive California Trucking Association tactics, another such rebuff here (which I anticipate) may render these issues unavoidable.

Michael C. Duff

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

Mandatory Arbitration of Workers’ Compensation Retaliation Claims: An Evolving Trend?

    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

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