The End of the Workers’ Compensation World as we Know it?

I recently read a blog post by respected workers’ compensation commentator David DePaolo titled “the Shrinking Market.”  In it, Mr. DePaolo reviewed a study by another well-known workers’ compensation commentator/analyst, Peter Rousmaniere, which discussed injury frequency rates by state, and projected apparent declines in that rate out into the future (to calendar year 2024 to be precise). In a nutshell, the study suggests that the frequency and severity of workplace injuries are declining. In light of this, Mr. DePaolo interestingly reflected upon the future relationship between workers’ compensation insurers and their employer-customers. Simply put, if workplace injury writ large declines, the cost of injury writ large will decline, and sooner or later employers will pressure insurers for insurance premium cost reductions. If those cost reductions become sufficiently large, insurance companies may eventually exit the workers’ compensation business.

Obviously, projections are imprecise. They focus on a particular snapshot of the current state of affairs and speculate what would happen if conditions continue to evolve exactly as at present. There is no doubt that the workplace of 2016 bears little resemblance to the dangerous and deadly workplace conditions of the early 20th century, when workers’ compensation was first created. Of course, part of the reason work is safer may have something to do with the offshoring of more dangerous manufacturing jobs. If those jobs were to re-shore in significant numbers, the projections under discussion could be impacted. Another question I have about the actual existence of a safer workplace is whether “gig” jobs, in which workers are not counted as employees under various employment statutes, are being reflected in aggregate projections (not to mention injuries transpiring in the surprisingly large “informal” economic sector).

But let us take the projections in the study at face value. Let us accept that the workplace is becoming safer, and that workers’ compensation insurers may as a result leave the workers’ compensation business. One could plausibly argue that this represents a tremendous workers’ compensation policy victory. After all, the purpose of workers’ compensation was to effectuate a harmonious solution to an almost overwhelming social problem. If the problem of workplace injury has receded to the point where the structure of workers’ compensation is no longer necessary, we should all applaud the accomplishment. Of course, injuries, including fatal injuries, have not ceased, and it is unlikely they will ever cease, despite our best efforts. If the workers’ compensation insurance market became “not viable,” states would still have to determine how to remedy workers’ injuries. Perhaps, as private insurance markets eroded, we would see a resurgence of state monopolistic funds (that is, states might become the de facto insurers of workers’ compensation obligations – as is the case in my home state of Wyoming).  Perhaps tort (civil personal injury) cases could successfully deal with workplace injury in a smaller arena of such injury, and the exclusive remedy rule (the 100-year deal in which workers exchanged torts remedies for adequate workers’ compensation benefits) could be broadly abandoned. Although civil suits would doubtless continue to be fraught with delay and complexity, tort law is much substantively friendlier than it was in 1910. Most tort systems, for example, have transitioned from contributory to comparative negligence and have softened the assumption of the risk doctrines. In sum, where employer negligence played a role in workplace injury it should be much easier than in past decades for employees to obtain substantial damages in civil suits. I recognize, of course, that in tort workers injured purely by accident would receive no compensation, and that other benefit systems would in that event have to absorb the cost of purely accidental injuries. However, policy makers may determine such cost shifting to be socially tolerable if the workplace is truly becoming safer and safer.

One under-discussed problem accompanying proposals for deconstruction of the workers’ compensation model is the Employee Retirement Income Security Act of 1974 (ERISA). That federal statute broadly preempts state regulation of employee benefits regulation and may well have to be amended if employee benefit experimentation (as opposed to reestablishment of tort rights) is seriously contemplated by state-level policy makers.

As a social justice advocate for the rights of injured workers, my fundamental bottom line is that all workers should be treated fairly and receive truly adequate compensation for workplace injury. Accordingly, I am willing to listen to all approaches accepting that bottom line as a non-negotiable presumption.  However, let me be clear. The present workers’ compensation structure has endured for a century and continues as an important part of the implicit social contract in the United States. I place a heavy burden upon those arguing for its elimination or significant modification.

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