04 Oct 2016

The Grand Bargain on Life Support: What Is the Future of Workers’ Compensation?

By Richard B. Rubenstein, Esq., Rothenberg, Rubenstein, Berliner & Shinrod, LLC, Livingston, NJ

On September 23, 2017, Rutgers University Law School in Camden, N.J. brought together a panel of academics, jurists, and practitioners to discuss the feared—and for some the perceived—demise of workers’ compensation, once called “The Grand Bargain” between labor, management, and government. Three separate panels discussed legislative trends, constitutional challenges to reform, and new paradigms for workers’ compensation.

From a practical standpoint, it is worth noting that that few current practitioners of workers’ compensation systematically study the history of the various Acts adopted by every state a century ago. Practitioners seldom enter a workers’ compensation practice through an academic track, and there is perhaps no more practical, and less theoretical quotidian legal specialty than workers’ compensation, with its arcane practices rooted in oral tradition and habit. A truly national, holistic vision is difficult for a practitioner, legislator, or jurist to acquire. As one panelist pointed out, “If you know one workers’ compensation system…you know one workers’ compensation system.” The opportunity to think anew about workers’ compensation, against a backdrop of Professor John Burton’s sweeping history of the various Acts, and through the prism of comparisons of the recent directions of more than a dozen State systems, was rare and invaluable.

Professor Emily Spieler opened the Symposium with an overview of the transition between the nearly century-long national consensus on workers’ compensation and the current existential crisis. Workers’ compensation resulted from a truce between the nascent union movement, management, and government. The long term effect was the employers buying constant, controlled tort immunity, and labor receiving certain and timely benefits regardless of fault. This placed in sharp focus the cataclysmic changes in tort law over the last century, as opposed to the glacial changes in workers’ compensation law.

Three generations after the creation of our workers’ compensation plans, a national commission, reviewing the statistical outcomes under the various Acts, made 19 recommendations for the continued stabilization and improvement of the systems. By then, the fabled consensus had given way to sharp division. Compliance with the recommendations of the commission was very poor. Thereafter, from 1980-2013 there was a consistent pattern of claims decline during the period. Benefits peaked per $100 wages in 1992. Recently, the proportion of workers’ compensation dollars devoted to medical costs has sharply increased. In response, the rules changed. States responded to increased premiums by placing higher burdens of proof of injuries or occupational disease. Courts and Legislatures erected higher barriers to proof of causation. Gainsaying the original grand bargain, which eliminated fault, States created “Safety rule” defenses, and mandated drug testing after accidents, with dire result. States have now eliminated compensation for specific conditions. Additionally, increasing reliance upon AMA guidelines for impairment, and heightened oversight of treatment and evaluation of injuries were put in place. Finally, the workers’ compensation constituency itself has been attacked, with carve-outs for classes of workers in some states, notably in Texas.

Interestingly, states which allowed claimants the choice of medical providers, either freely, or from a panel or list, registered savings on the aggregate cost of medical treatment within the system. This raises serious questions as to whether the very foundation of reforms enacted over the last two decades is in any way efficacious.

The panel noted that traditional proof requirements, once very much consistent with a liberal and benevolent purpose of the state Acts, have also been altered in some states. Systems have adopted the elimination or limitation of claims for aggravation of pre-existing conditions, requiring the workplace experience to be a major cause, instead of a more-than-minimal cause. These alterations have created the specter of “dual denial,” where an injured worker has no remedy in workers’ compensation, and no remedy in tort, either.

The panels discussed the trend toward negative incentives to produce cost savings. In Florida, for instance, the law incentivizes a broad range of drug testing, which encourages the denial of claims. Limitations on attorney’s fees also operate as a disincentive to claimants, rendering remedies illusory.

The panelists discussed the various State Constitutional challenges to attacks on the workers’ compensation system, including the recent Oklahoma case, where an opt-out provision was stricken by the Oklahoma Supreme Court as an unconstitutional “special law” which singles out injured workers for inequitable treatment. Previously, the Court had invalidated a provision deferring permanent partial disability payments to workers who returned to their jobs after injury. Professor Robert Williams and his panel presented on the various State Constitutions that shield workers’ compensation system from attack by guaranteeing meaningful remedies for rights created by Statutes. The use of Constitutional arguments has frustrated reforms in a number of states, but many other systems have no such Constitutional safeguards.

Some treatment was given to the development and effectiveness of OSHA and state occupational safety regimes, and their effect on the incidence, and necessity for, workers’ compensation systems in the modern era. Professor Adam Scales applied an insurance analysis model to the history and development of the systems. He discussed the growth of tort law over the past century, and posed a question: Did the widespread development of law and techniques of adducing evidence render a workers’ compensation system redundant? Are the reasons for adopting a strict liability system for workplace injuries still relevant? Professor Scales postulated that despite the enormous growth of a body of law and procedure modernizing tort law, there has been no parallel modernization of workers’ compensation law and procedure. He raised the issue of an imbalance in the “rights compromise” on the side of employers, whose liability is extraordinarily limited, with no corollary re-balancing on the opposite side.

Several panelists discussed redundancies in benefits and the necessary inefficiency created by them: Private or employer-provided disability insurance and health insurance, nearly non-existent at the time of adoption of state Acts, is now very prevalent. Means for elimination of the inefficiency of redundant coverages include cost-shifting, changes in primacy of coverages, and elimination of components of workers’ compensation coverage entirely.

The forward-thinking portion of the program considered the concept of “blowing up the comp system.” As one panelist, Professor Adam Scales, put it: “We need to resist the temptation to rearrange the deck chairs on the Titanic.” An alternative model would be universal health care, disability and life insurance, and the abolition of the morally indefensible tort immunity for employers. This certainly ties in with the economic analysis discussed by panelist Professor Monica Galizzi, who examined the moral hazard inherent in a strict liability/limited remedy system that does not efficiently incentivize loss prevention and limitation. In point of fact, economic analysis of the various American systems defies models of fairness, efficiency, and response to the needs of the constituencies served by the system.

In the end, the Symposium very much resembled a group of physicians of differing specialties, gathered around a terminal inmate on death row, debating whether to administer extraordinary life-prolonging methods. Each one has a specific, risky, and potentially conflicting course of treatment to recommend. None can agree on whether the patient should continue to live at all. Ironically, all agree someone else should pay for the medical services they would administer.