The Question of Adequacy in Workers’ Compensation

“Nor is it necessary, for the purposes of the present case, to say that a state might, without violence to the constitutional guaranty of ‘due process of law,’ suddenly set aside all common law rules respecting liability as between employer and employee without providing a reasonably just substitute.”

………..

“it 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.”

……….

One of the grounds of its concern with the continued life and earning power of the individual is its interest in the prevention of pauperism, with its concomitants of vice and crime. And, in our opinion, laws regulating the responsibility of employers for the injury or death of employees, arising out of the employment, bear so close a relation to the protection of the lives and safety of those concerned that they properly may be regarded as coming within the category of police regulations.

These quotes come from the original Supreme Court case upholding state workers’ compensation laws. New York Central R. Co. v. White 243 U.S. 188 (1917). When night watchman Jacob White lost his life while guarding tools and materials that would be used to build a new train station, his widow sued under New York’s very young workers’ compensation statute. The railroad in question challenged the statute. The Supreme Court rejected the challenge, concluding that the statute was a legitimate use of the state’s police power to prevent pauperism.

The cited passages reveal, however, that the Court might not have upheld a workers’ compensation statute if it had not been “reasonably just” or if the State had attempted to abolish “all rights of action” or defenses without “setting up something adequate in their stead.”

On a social media site yesterday, a post raised the question of workers’ compensation benefit “adequacy.” A number of numerical measures of adequacy were advanced, and the author cautiously arrived at the conclusion that even a decade ago it could be shown that most states failed to compensate longer-duration total disability injuries (10 years plus) at 50% of the standard 66 2/3% of the pre-injury wage benefit level. The author also explained that a number of de facto deductions from workers’ compensation — waiting periods and setting a benefit ceiling of 66 2/3% of the weekly wage, for example — have been thought necessary to counter the problem of “moral hazard.” In a nutshell, if we pay too much, the argument goes, workers will be more likely to seek and obtain workers’ comp benefits and will stay out of work longer if they get them.I am told there are studies proving that such behaviors exist. I know of another kind of moral hazard that surfaces when legal actors are exposed to insufficient damages to deter negligent conduct. I leave it to the reader to decide which is the greater hazard.

In any event, all may agree that baselines of benefit “adequacy” have proven elusive. What is an adequate benefit for an injured worker?  I’ll be talking more about that question soon (there are measures — for example state fidelity to the major recommendations of the 1972  National Commission on State Workmen’s Compensation Laws) but a good place to start may be with the state statutory purpose discussed by the Supreme Court a century ago: the prevention of pauperism. While we would have to define what we mean by pauperism, and then be confident we can measure it, let me modestly suggest that any workers’ compensation statute that does not demonstrably prevent the pauperism of injured workers is inadequate. Surely we can agree to that modest proposition. (We can argue later about what the consequences of inadequacy should be).

 

 

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