Thinking About the Wyoming Workers’ Compensation System

Last week I surveyed readers about the Wyoming workers’ compensation system asking in a very open-ended way what might be done to improve it. In response, I got this gem of a response from widely-respected and long time “Dean” of Wyoming workers’ compensation (yes, I know I am embarrassing him, and it is kind of fun) George Santini. George said,

One of the major unresolved issues in Wyoming Compensation law is the potential due process violations inherent in the WSCD having multiple roles as the claims administrator, premium setter/collector; rules-maker and active litigant.

Of these the most troubling to me that as a state agency the WSCD should be neutral in how it handles claims and not actively pro-employer or pro-employee entity. Internally the WSCD has structured itself so the claims analysts are required to communicate directly with the employer in their decision making process. Then if there is an objection , the WSCD supports the employer in any contested case proceedings. This strikes me as a conflict of interest which seems to raise fundamental concerns over the impartiality of the process.

The excellent comment immediately caused me to put on my administrative law professor hat and recall the classic 1975 Supreme Court case Withrow v. Larkin. In that case a physician in a license suspension case challenged the involved agency’s “split enforcement” scheme. Because the same Wisconsin state officials had both investigated and adjudicated his case, the physician argued the adjudication was biased. The Supreme Court’s response has always struck me as inadequate:

The contention that the combination of investigative and adjudicative functions necessarily creates an unconstitutional risk of bias in administrative adjudication has a much more difficult burden of persuasion to carry. It must overcome a presumption of honesty and integrity in those serving as adjudicators; and it must convince that, under a realistic appraisal of psychological tendencies and human weakness, conferring investigative and adjudicative powers on the same individuals poses such a risk of actual bias or prejudgment that the practice must be forbidden if the guarantee of due process is to be adequately implemented.

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Query for Wyoming Workers’ Compensation Practitioners and Professionals

Friends — I am bogged down this week in the labyrinth that is ERISA preemption, so my musings have been “somewhat” restrained. I did, however, want to take a survey of my Wyoming Workers’ Compensation colleagues. One objective I hope to accomplish with this blog is to stimulate discussion of problematic areas of Wyoming Workers’ Compensation Law. I wanted to ask you as practitioners in the field — from your perspective, what substantive or procedural areas of law are — for lack of a better phrase — messed up? What have the Wyoming Supremes gotten wrong? What gaps in the law cause you problems? What areas of the law do you find impenetrable?

It is my hope that your comments will generate conversation among yourselves, and when I have had a chance to review results next week I’ll give you my take on them. Then, I’m happy to give everyone my two cents on some or all of the areas identified. Perhaps this can even be the starting point for organizing a Wyoming Workers’ Compensation CLE (which I understand is sorely needed) around identified problematic areas.

Monopolistic Workers’ Compensation Systems

Most states in the United States possess workers’ compensation systems that are underwritten by private insurance companies, stable “self-insured” employers, or some mix of the two. However four states–North Dakota, Ohio, Washington, and Wyoming–have what are known as “monopolistic” systems. In these states, state government acts as both insurer and administrator of the workers’ compensation system. The historical origins of these systems are fascinating. As a resident of Wyoming, I get a kick out of thinking how, once upon a time, Wyoming prairie populists and labor union members were so distrustful of corporate involvement in the delivery of workers’ compensation benefits, and so powerful, that they were able to insist on a “socialistic” workers’  compensation structure.

Lately, I have been wondering whether some variant of monopolistic workers’ compensation systems may soon have more widespread appeal in the United States. As I discussed in a recent post, some commentators have argued that increasingly safe workplaces cannot continue to support employer premiums sufficiently high to attract private insurance companies to workers’ compensation markets. If this is true, how will workers’ compensation risks be insured?  One possibility is that states may fill the void with some form of monopolistic system.

Another factor arguing for an increased role for monopolistic systems has to do with ERISA. As the workers’ compensation “opt-out” debate has revealed, attempts by states to innovate by authorizing creation of alternative “not workers’ compensation” plans maintained directly by employers immediately generates conflict with ERISA, which broadly preempts state regulation of “employee welfare benefit” plans. However, funds or plans created and maintained by a state, and therefore not by an employer, are probably “governmental plans” not covered by ERISA.  My suspicion is that ERISA may in the future cause such difficulty with state workers’ compensation innovation that any “not ERISA” approach (including, possibly, monopolistic structures) will become increasingly attractive (unless, of course, ERISA is amended — and I will leave it to the reader to evaluate the possibility of that development).

None of this is to suggest that monopolistic plans are without their flaws. One problem centers on whether state systems without private market competition will be sufficiently incentivized or possess adequate sophistication to efficiently set workers’  compensation rates (which most places in the country are set by the National Council on Compensation Insurance, a nongovernmental organization). Just as your automobile insurer has to know what premium to charge you in order for it make a profit (it must be able to pay on demand your legitimate claims and the claims of all other insureds without going out of business), so too a workers’ compensation insurer (whether public or private) has to know what workers’ compensation premiums to charge employers based on the relative riskiness of their businesses. As the history of workers’ compensation will attest, this has not always been an easy feat. In the pre-history of workers’ compensation insufficiently sophisticated insurance companies went out of business.

Another problem I see with monopolistic systems has to do with getting the state, writ large, to distinguish between social “welfare” benefits (discretionary benefits delivered by a state for reasons of compassion) and workers’ compensation benefits (non-discretionary benefits delivered as an historical swap for tort rights). My experiences in Wyoming have suggested that state actors (especially legislators and agency administrators) have difficulty understanding and appreciating this important distinction.

Notwithstanding these problems, the benefits of monopolistic workers’ compensation structures may in the not distant future exceed the costs, at least in certain states.

Wyoming case: Collins v. COP Wyoming, 366 P.3d 521 (WY 2016)

Wyoming has at times maintained what I think is a fairly good symmetry with respect to the Exclusive Remedy Rule: because the workers’ compensation exclusive remedy is the quid pro quo for tort, it follows that where a category of injury is excluded from workers’ compensation coverage a remedy in tort should be available if the injury was negligently inflicted. In Collins v. COP Wyoming, 366 P.3d 521 (WY 2016) the Wyoming Supreme Court reached this result in connection with mental injuries arguably caused by work but not resulting from a work-related physical injury. Since 1994, The Wyoming Legislature has excluded such “mental-mental” injuries (an alleged psychological injury created by a non-physical cause like mental stress) from coverage under its workers’ compensation Act. 1994 Wyo. Sess. Laws ch. 86, at 287; Wyo. Stat. Ann. § 27–14–102(a)(xi)(J) (LexisNexis 2015). A symmetrical application of exclusive remedy would seem to require that a negligence action be allowed in connection with mental-mental injuries. However, in Anderson v. Solvay Minerals, 3 P.3d 236 (WY 2000) the Court had held that a mental injury caused by distress suffered from the work-related physical injury or death of another worker (there the distress of parents at the work-related death of their son) was sufficiently “physical” to be covered by the Workers’ Compensation Act and therefore not actionable in tort — even though the “physicality” derived from a different person.

In Collins v. COP Wyoming, the Court reversed the rule of Anderson. In Collins, Charley Collins worked in the same workplace with his son Brett Collins. In the course of employment Brett was severely injured by a supervisor. Charley rushed to the scene and attempted to administer first aid, but Brett died. Charley sued COP Wyoming for negligent infliction of emotional distress. The trial court dismissed under the rule of Anderson but the Supreme Court reversed concluding that the “but for” rule followed by some courts was too broad:

Here, Charley alleges that he has suffered an injury separate and distinct from his son’s death. It is an injury which is outside of the “grand bargain” because worker’s compensation provides no remedy for it, and he should be permitted to go forward to try to establish his claim against COP Wyoming and Mr. Ross.

I think this is the right result and is reminiscent of Federal District Court Judge Nancy Freudenthal’s 2012 Order in Romero v. Reiman Corp, where an undocumented worker excluded from workers’ compensation coverage by statute was permitted to pursue an ultimately successful tort action. A bargain is a bargain.

Variations in citizens’ legal instincts

I have taken a variety of workers’ compensation related calls at my University of Wyoming College of Law office that have suggested to me how different the legal instincts of everyday citizens can be from state to state. For example, a woman called me and articulated what I thought was a straightforward case for a workers’ compensation claim. I asked her if she had called the appropriate local office. She said she had and had been told she should just “file for unemployment.” She asked me if this “sounded right.”

I grew up in Massachusetts and Pennsylvania and spent the first 15 years of my life working in warehouses and on airport tarmacs in the greater Philadelphia area. I am quite sure I knew by the age of 17 about the existence of something called “workers’ compensation.” And at an even younger age I attended the same Boston-area middle school as Sam Adams and knew by heart “The Midnight Ride of Paul Revere” by the age of 10. Which is all to say I would have given that workers’ compensation employee an earful if I had been told to “file an unemployment claim.” It is hard to get Philadelphia and Boston kids off the phone as easily as this poor woman.

Of course, there is a deeper legal lesson here. When an administrative agency provides information (rules) upon which a citizen relies to her detriment, a due process issue is presented. In fact, I would argue that the oral provision of such information is in effect the creation of a “non-legislative rule” for which the administrative agency is officially responsible. I would like to see some feisty Wyoming lawyers push that point in the near future.