Workers’ Compensation Law Prof Blog

Fifty More Years of Ineffable Quo?: Workers' Compensation and the Right to Personal Security

Here is an abstract of my most recent academic article on workers' compensation:

During the days of Covid-19, OSHA has been much in the news as contests surface over the boundaries of what risks of workplace harm are properly regulable by the federal government. Yet the original statute that created OSHA—the Occupational Safety and Health Act of 1970—was not exclusively concerned with front-end regulation of workplace harm. Just over fifty years ago, the same Act mandated an investigation of the American workers’ compensation system, which consists of a loose network of independent state workers’ compensation systems. The National Commission created by the Act to carry out the investigation issued a report of its findings in 1972 and concluded that American workers’ compensation was neither fair nor adequate. The Commission made nineteen “essential recommendations” for the system’s improvement. The federal Department of Labor shifted into high gear to monitor state compliance with the recommendations under implicit, but vague, threat of workers’ compensation federalization if progress was not achieved. In what is perhaps the most interesting part of the story, nothing changed. Today, the Department of Labor no longer monitors workers’ compensation’s attainment of any benchmarks, although some organizations monitor workers’ compensation “trends.”

 

Lost in discussions of workers’ compensation is any sense of a baseline. Why does this matter? Because workers’ compensation was conceived as a “Grand Bargain” or “quid pro quo,” in which workers surrendered tort rights for adequate statutory benefits. This article contends that the absence of investigation as to whether workers’ compensation benefits are too low has effectively unmoored workers’ compensation from the faintest echoes of the tort rights for which it was exchanged. The article seeks to provoke discussion of what it means, as a matter of both policy and constitutional law, for a state to dispossess injury remedies by converting workers’ compensation from a reasonable substitute remedy for tort to a pale, anti-destitution law relegated to functioning as a form of “welfare.” The article explores the phenomenon of permanent partial disability benefits paid to workers for injuries according to bizarre schedules that are not to any degree based on workers’ lost earning capacity nor on any rational criteria that anyone can identify. Permanent partial benefits—the largest component of workers’ compensation indemnity benefits—are arbitrary.

 

In its essence this article is about whether state legislatures have carte blanche to annihilate meaningful remedies for workers wrongfully injured in the workplace. Furthermore, to the extent that state legislatures pursue such objectives, the article presses for recognition of a Blackstonian “absolute” right to personal security. Evisceration of remedies not only makes workers poorer, but also leads to their insecurity because they work for actors with insufficient incentives to act safely. The solution to the problem is for legislatures to be more transparent about the relationship between workers’ compensation benefits and foregone negligence remedies—particularly because the original Grand Bargain was struck at a time when negligence affirmative defenses would instantly defeat tort claims, a situation that no longer obtains. The time for benefit inscrutability and ineffability is over.    

A link to the full version is here.  (Full pdf is now available)

Michael C. Duff

 

January 2022 Rand Report on Workers' Compensation and COVID is Highly Recommended!

          The Rand Corporation last month published an educational white paper on COVID and workers' compensation that is educational in the extreme for the workers' compensation professional. The lead author is an economist, and his remarks about insurance, in particular, are enlightening.

 

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Michael Dworkin & Bethany Saunders-Medina, COVID-19 and Workers’ Compensation: Considerations for Policymakers (White Paper, Rand Corporation, January 2022), https://www.rand.org/content/dam/rand/pubs/perspectives/PEA1300/PEA1346-1/RAND_PEA1346-1.pdf. 

          

         In this white paper, economists at the Rand Corporation broadly examine workers’ compensation and its role in the COVID pandemic.  

 

The authors accurately depict the workers’ compensation program in general, and then, pertinently, note that many state statutes (though not that of my state, Pennsylvania) exclude “diseases of everyday life.”  Yet, they correctly point out that, despite difficulties of proof of causation (which is likely why such maladies are excluded):

1. Some state laws have been amended, via the adoption of causation presumptions (they vary widely), to make it easier for certain workers to make COVID claims; and

2. Even without the aid of presumptions, many claims by workers have in fact been voluntarily paid.  (Others, certainly in Pennsylvania, have, in the face of insurer denials, been litigated by workers and their dependents.)

          The authors are persuaded by studies that indicate that African-Americans, Hispanics, and modestly-paid workers are more prominently at risk of occupational exposure to, and illness from, COVID.  This is so given their employment in certain essential jobs.  Such essential workers are “less likely to be able to work from home than white essential workers …[.] [Also,] essential workers who cannot work from home have lower incomes than those who can work from home.”   
 

          The authors strongly suggest that compensating COVID infections, as matter of law and practice, is advisable.  Prompt no-fault payment may keep workers beneficently at home during their infections, thus protecting not only themselves but the rest of the workforce.  On the risk management side, wide acknowledgment of COVID as compensable should, at least in theory, prompt employers to undertake safety efforts to avoid claims. The authors, indeed, suggest that employers which engage in systematic, proactive efforts to avoid contagion in the workplace (like providing personal protective equipment and installing improved ventilation systems) should receive premium discounts.
 

          Of note, still, is the authors’ point that, in the face of a pandemic claims, imposing premium increases for those with a disadvantageous experience (lots of claims) does not make sense:
 

Part of the usual justification for [such] insurance pricing is that safe employers should not be forced to cross-subsidize the costs incurred by more-careless employers in the same industry.  This makes sense for injury risks that are largely under the employer’s control.  In the pandemic, however, community spread undercuts this fairness argument: Employers that do everything right still face some possibility that their workers will become sick and file claims.
 

As a result, the authors point out, rating bureaus like NCCI and the PCRB currently “have adopted regulations excluding COVID-19 from experience rating.”  (As for the Pennsylvania Rating Bureau policy, see https://www.hendersonbrothers.com/wp-content/uploads/2020/05/Pennsylvania-Workers-Compensation-Rule-Changes-due-to-COVID.pdf.) 

          Of course, a jurisdiction which legally recognizes occupationally-acquired COVID-19 as compensable will likely impose increased premium costs on employers.  And employers, they say, must be ready for the potential that a worker who has successfully claimed work-related COVID may, in fact, have incurred the infection somewhere else.   

 

The authors, as if to ease the harshness of this observation, follow-up this unremarkable proposition by observing: “Economic research has shown that workers – not employers – ultimately pay for mandated benefits like workers’ compensation via reduced wages ….”  (Citing Jonathan Gruber & Alan B. Krueger, The Incidence of Mandated Employer-Provided Insurance: Lessons from Workers’ Compensation Insurance, 5 Tax Policy and the Economy, pp.111-143 (1991)).  Yet, they in turn further explain: “[T]hese findings reflect long-run labor market equilibrium; it is plausible that employers will have to pay higher total compensation costs in the short run until wages adjust.”

New, Accessible Cal-Berkeley Law Review Article Treats the "Fissured Workplace," Argues for More Rights for "Non-entrepreneurial" Independent Contractors

    Next month, Professor Duff and I will (after a two-year delay), present, for the ABA New Orleans CLE, on the gig workforce and workers' compensation.  In reviewing the absolute latest literature, one broad treatment of the issue stood out most prominently for me: Tanya Goldman & David Weil, Who’s Responsible Here? Establishing Legal Responsibility in the Fissured Workplace, 42 Berkeley Journal of Employment & Labor Law 55 (2021).

    In that new article, the authors propose a re-conceptualization of employment, vis-à-vis work rights and social welfare protections, in light of what they call the “fissured workplace.” This term -- coined by co-author Dean David Weil in his enlightening 2014 book -- refers to the decline of the familiar employer-employee model of work, and the corresponding rise of non-entrepreneurial independent contractorship, franchise arrangements, and the like.  The authors explain this trend, revisiting in critical aspect Weil’s 2014 account.  (As for the original book, see David Weil, The Fissured Workplace: Why Work Became So Bad for So Many and What Can Be Done to Improve It (2014)).

    The article, a concise and fluidly-composed tour de force, is an excellent primer (or refresher) on the thorny issue of employment and the rights and benefits associated with the same.  And, notably, the authors are attentive to one key benefit enjoyed by employees but not by independent contractors: workers’ compensation.

    In summary, a “common repercussion of fissured workplace business models," the authors posit, is “that they release the organizations that most directly benefit from contracted work from obligations to follow standard employment and labor laws.  In other words, many businesses now treat workers like employees (specifying behaviors and then closely monitoring outcomes) but classify workers as independent contractors (engaging them at an arms-length and depriving them of the rights and benefits tied to employment).”   Indeed, as in the original Weil book, the authors depict the fissured workplace as a hazard for workers, who have lost, or stand to lose, critical rights, social insurance protections, and other benefits which have, by tradition, been tied to employment.

     The authors also make a simple, critical point which is sometimes forgotten: “Independent contractors are no longer primarily entrepreneurs with skills and bargaining power who do not need significant legal protections; instead, they are often the most vulnerable and underpaid workers.”

    The authors’ employment-and-rights reconceptualization, analyzed for the most part on a philosophical level, advocates for rights being tied not to employment (and its century-old, but inapposite, “control” criterion) but, instead, to work. 

    They reject, notably, the idea that a third category of worker, lying somewhere between employee and independent contractor (the “dependent contractor”) should be created.  They assert that such a designation could further erode labor standards and would be a step in the wrong direction.  They state, among other things, that categorizing rideshare drivers in such a manner “would only decrease their rights, including rights to a minimum wage and access to workers’ compensation.”

    Instead, they say, rights and benefits tied to work should be analyzed in three categories, which they depict as “a concentric circle framework of rights, protections, and responsibility at the workplace.”

    The first, and most inner, circle, possesses the greatest breadth, and constitutes rights that all workers should possess, regardless of how, in the past, they might have been categorized. “The Inner Circle,” they explain, “includes prohibitions on discrimination and retaliation; affirmative rights to work in a safe and healthy environment; requirements that work be appropriately compensated; and freedom of association and the right to engage in acts for mutual aid and protection.”

    The second, or middle, circle of rights, protections, and responsibilities “are those already linked to employment status, but with a presumption and test that enhance those protections.  These include, for example, the right to overtime under the FLSA, the right to organize and be represented through collective bargaining under the NLRA, and safety net protections including access to workers’ compensation and unemployment insurance.”  

    The third, outer, circle “would include a set of rights, protections and responsibilities that workplace policies incentivize but that employers are not legally required to provide to legitimate independent contractors.  In particular, it would include two social safety net benefits: workers’ compensation and unemployment insurance.  The Outer Circle would also include access to currently non-mandatory benefits such as paid family and medical leave, retirement savings, and training and skill development funds for both employees and independent contractors.”

    The authors’ advocacy is mostly compelling to this writer, though the current political scene and the weakness of worker interests do not favor this framework prevailing anytime soon.  Still, the authors point out that, historically, with a number of enactments, Congress and other lawmakers have in fact shown themselves capable of enacting broad, and needed, employment protections.