The basic policy question workers’ compensation is whether the system is an “adequate” substitute for tort (civil lawsuits for damages). In the seminal 1917 White case, the Supreme Court suggested it would never have approved the wholesale dispossessing of workers’ tort rights if the “workers’ compensation” they received in return was not adequate:
[I]t perhaps may be doubted whether the state could abolish all rights of action, on the one hand, or all defenses, on the other, without setting up something adequate in their stead. No such question is here presented, and we intimate no opinion upon it. The statute under consideration sets aside one body of rules only to establish another system in its place. If the employee is no longer able to recover as much as before in case of being injured through the employer’s negligence, he is entitled to moderate compensation in all cases of injury, and has a certain and speedy remedy without the difficulty and expense of establishing negligence or proving the amount of the damages. Instead of assuming the entire consequences of all ordinary risks of the occupation, he assumes the consequences, in excess of the scheduled compensation, of risks ordinary and extraordinary. On the other hand, if the employer is left without defense respecting the question of fault, he at the same time is assured that the recovery is limited, and that it goes directly to the relief of the designated beneficiary. And just as the employee’s assumption of ordinary risks at common law presumably was taken into account in fixing the rate of wages, so the fixed responsibility of the employer, and the modified assumption of risk by the employee under the new system, presumably will be reflected in the wage scale.
What then is an “adequate” benefit? The 1972 National Commission on State Workmen’s Compensation Laws, chaired by Emeritus Professor John Burton (a republican, as were most members of the commission) famously established 19 recommendations for a well-functioning and adequate workers’ compensation system. I link to that masterful report here and will say in this text “that only seven states follow at least 15 of the 19 recommendations made by [the Commission] after a national assessment in 1972 found state laws ‘inadequate and inequitable.'” However, I think the situation is even worse than it appears. Only a handful of American empirical studies of benefit adequacy have even been made in the last two decades. (Not surprisingly, the studies found benefits inadequate). Yet the lynchpin of the Constitutional acceptability of the entire workers’ compensation system is in my judgment the very question of benefit “adequacy,” the employer’s part of the bargain for receiving insulation from tort lawsuits.
Now come “opt-out” statutes in various states allowing employers to establish alternative benefit plans governed by a federal employment benefit statute called “ERISA.” The chief feature of ERISA? Benefit plans governed by that statute are not required to provide ANY particular level of benefits for injury, let alone an “adequate” level. Not surprisingly, the opt-out structure has begun to generate Constitutional challenges. I’ll write more soon about the “Burton Commission’s” 19 recommendations, so that you can see how your state fares under them (the Federal government used to track state compliance with the recommendations but ceased in 2004). For now, ask yourself — what is adequate compensation for a work-related injury? Some people prefer to begin with the question of costs for businesses, but that is only one aspect of a complete and fully lawful cost-benefit assessment.