Langham: Where Do We Go From Here?

Friday, March 11, 2016 | 0

Dissatisfaction with workers' compensation is nothing new. In 1972 the National Commission issued its report regarding workers’ compensation. There is discussion today of federalizing workers’ compensation, or establishing federal standards. Some even discuss the potential for a 21st Century Commission. Recently the 1972 report has received additional coverage in the news as some use it as support for their conclusions regarding workers' compensation.  

After 44 years, there has allegedly been minimal progress towards fulfilling the dreams of the Commission. This is a cause of consternation and curiosity for some; their inclination is to reference the report with reverence, and question the failure of America to respond. Others question the relevance of the report and refer to it derisively as "outdated," or "one-sided."

Few believe that federal legislative action regarding workers' compensation is imminent or even likely. But there is an effort building for a broad-based 21st Century national conversation about workers’ compensation. Is workers' compensation what it could be, should be, or is there room for improvement? If it is to see its destiny, today's leaders will have to make that happen.

With little probability of Congressional or Presidential action, any national conversation will not likely be a top-down mandated conversation, like 1972's. If it is to occur successfully, it will be grass-roots. The conversations that have recently occurred have been primarily driven by a handful of bloggers and industry leaders. The national press has contributed minimally, sporadically and for the most part superficially. 

Is a broad, open conversation possible or practical within these parameters, without a an excutive or legislative mandate? Some think it is. Some complain that the 1972 conversation was driven by academics and bureaucrats. If this illustrates anything, it is that some people will be critical of whatever effort is made. But, conscious of the criticisms of the 1972 Commission makeup, any effective conversation today will need to be more inclusive. It is also likely that the volume and quality of data today is far greater than was practical 44 years ago. This is not because we necessarily know more, but because more effort and perspective has been brought to bear on obtaining, analyzing and reporting data. 

The 1972 Commission report introduced that “in recent years serious questions have been raised concerning the fairness and adequacy of present workmen's (sic) compensation laws . . ..” (throughout, I use "workmen" because the commission did). That is a fairly broad premise. The Report recognized that the economy, “nature of the labor force,” science, medicine and employment were changing. They still are. It noted that the Occupational Safety and Health Act of 1970 (OSHA) had recently appeared, some would argue belatedly, onto the scene. 

They would argue "belatedly" because the American industrial revolution was mature in 1972; some might argue that manufacturing and heavy industry in America was nearing retirement age in 1972, and fading from national prominence. Certainly American manufacturing prominence in the economy has declined even further in the last 40 years. They would further argue that employment safety had been regulated by state agencies for decades before the OSHA sought prominence. 

The Report found foundational relevance in the American worker, stating that “the vast majority of American workers . . . are dependent on workmen's (sic) compensation.” From this premise, the Report concluded that American workers required “full protection” from “job-related injury or death.” To accomplish this, the Commission concluded America “requires an adequate, prompt, and equitable system of workmen's (sic) compensation as well as an effective program of occupational health and safety regulation.”

This is a noble foundation; these are the statements of mission and purpose upon which the Commission built its argument for aspirational national standards for workers’ compensation programs. Some have curiously noted that this focus may either ignore, or barely acknowledge that workers’ compensation is a “mutual renunciation of common-law rights and defenses.” (Emphasis added). Although there is much in the Commission Report that is of interest, some have criticized the foundation. They point out that the absence of reference to the employer is curious. 

Perhaps the Commission acknowledged mutuality when it mentioned "and equitable system." Did the Commission mean that the system must be adequate and prompt and equitable for employees and employers who are in a symbiotic relationship with those workers? Even some of those who argue this context to the Commission's language concede that a recognition of mutuality and symbiosis could have been more clearly stated. 

Is “an adequate, prompt, and equitable system of workmen's (sic) compensation as well as an effective program of occupational health and safety regulation” required only because these many workers and their families are reliant thereon? Or, can the case be made that such programs are of interest and benefit to employers? If that case cannot be made, then there could be a fatal flaw in the formula. Both sides of the relationship have to want it to work, or the marriage fails. If the formula is flawed, discussions may become impractical.

We have witnessed years of reform and adjustment to various American state workers' compensation programs. Are those reforms the product of mutuality and balance? We hear about the "pendulum swinging" and there is a perception that workers' compensation laws have a history of favoring employers for a period and then favoring employees, and the emphasis shifting back and forth. Should the overarching goal be to provide for America's employees, or America's employers, or should the overarching goal be to provide a system that is focused upon, fair and equitable to, both? Can "equity" really be defined otherwise?

There are, of course, a great many others involved now. This thing that started with employers and employees has become a massive industry that is bigger than the NFL, NBA, NHL, and NASCAR combined. See How Huge is it Anyway, published in the Lex and Verum. There have been insurance companies involved since states began to abandon the monopolistic model. But many believe that the last 44 years have seen an influx of other vendors and specialists and consultants on a massive scale. 

Some argue that workers’ compensation is multi-faceted, and that it must be because of the variety of employment mixture in the various states. They argue the appropriateness of what a particular state “needs” or how a particular statute could be “reformed” is inherently local. In the local context, observers perceive that "reform" attracts special interests, which appear unbidden (or unwelcome?). 

They are seen coming to the reform discussions to profess their expertise and explain their solution(s). Some perceive these solutions too often just happen to be a product or service that this particular expert coincidentally sells. Workers’ compensation, and more generally the medical and insurance industries, are perceived as having attracted a great many experts touting an amazing assortment of solutions (services).

In mandating the 1972 Commission, and posing its legislative interest, Congress found that it was important for laws to “provide an adequate, prompt, and equitable system of compensation." Though employers were not patently the Commission focus, might employers be as interested in foundational interests such as promptness and equity? The success of the systems is likely dependent upon both sides, employee and employer, seeing value in the  “mutual renunciation." (Emphasis added).

It bears recognizing that workers’ compensation systems exist as a legal alternative to common-law rights and responsibilities; legal, not equitable. This distinction will not be lost on the attorneys who read this. Nor can we believe that it was lost on the scholars and experts of the 1972 Commission. Some argue that "equity," as used by the Commission meant fairness or equity in terms of the volume and duration of benefits to the worker. It is possible the Commission was also focused, perhaps more subtly, on fairness and equity in terms of the burden on employers. Critics complain this, if it were the focus, could have been more plainly stated.

In the context of studying workers' compensation, the Commission conducted significant research. There were multiple meetings, and testimony from many individuals. Additionally, the Commission considered “more than 200 documents,” some of which were “previous publications,” while other reports and papers were prepared specifically for the Commission. The Commission had a large staff and relied on a significant list of experts and organizations. One that existed then, and remains today, is the National Council on Compensation Insurance, or NCCI. 

Other organizations played a role. The International Association of Accident Boards and Commissions (IAIABC) existed in 1972, as did the Southern Association of Workers' Compensation Administrators (SAWCA). These organizations can offer expertise and perspective, but have never  been the equivalents of NCCI in terms of research and analysis.

The Commission, with this variety of data and perspective “evaluated the effects of these changes (reforms) on the ‘fairness and adequacy’ of the (state) program(s) launched more than 50 years ago,” and “concluded there is a substantial and vital role for workmen's (sic) compensation in contemporary America.” The Commission was right in this regard, as we have seen in the 44 years since its conclusion. Workers’ compensation is undoubtedly alive in America. It is undoubtedly vital to American economic success. 

Perhaps the modern conversation can presume the ongoing "substantial and vital role" (it is alive), and the discussion can perhaps now focus upon the other issue: is workers' compensation well? And, in approaching that analysis, the foundation of workers’ compensation has to be respected. This is a system of “mutual renunciation.” 

A thought or two on perspectives may also be helpful. The Commission included two employers back in 1972. Ford Motor Company (Commissioner Clarence Carothers) and Georgia Pacific (William Moshofsky) represented employers. In 1972 Ford was number 3 on the Fortune 500, and Georgia Pacific was 81, according to the Fortune.com database. Employer interests were represented, but by two of the biggest companies in the country.

The interests of America’s workers were represented by the American Federation of Labor (AFL-CIO) through two Commissioners, James O’Brien and Michael Peevy. At its peak, union membership in America was 28.3% (1954), according to Union Membership Trends in the United States. According to the Bureau of Labor Statistics, that has decreased to just over 11% in 2015. 

Of the whole commission, four members represented the employers and employees. The entire premise of workers' compensation is the "mutual renunciation" of rights by employees and employers. But, some argue that these two parties were minimally represented in that conversation. 

This has led to questions. For example, one of the Report's conclusions is that “workers’ compensation should be compulsory rather than elective.” Explaining this broad conclusion, the Commission noted that small employers were often not included by state laws, as were farm workers, casual labor and government employees. Some have asked how the Commission reached conclusions regarding small employers and their employees. with no small employer or small business employees on the Commission.  Some have questioned who represented the farmers and farm workers?

Another criticism of the 1972 Commission has been its amazing (in retrospect) apparent lack of diversity. It seems the Commission was 100% male. At a conference years ago, I heard a speaker voice concerns about leadership of a particular industry. That criticism might be applied to the Commission, that it was "too male, too pale, and too stale." A conversation about the future of workers' compensation should attract a variety of people, from a variety of backgrounds, ethnicities, genders, industries, and perspectives.

Too often, rights collide. America is an amazing society that recognizes individual rights. And those rights cannot be considered in a vacuum. In a particular context, it may not be possible to respect a person's right unequivocally without impairing someone else's right(s). Thus, we struggle with balancing rights against government powers; we struggle with balancing the rights of individuals against the rights of others. The answers are too often not subject to "bright lines" and simple resolution. Any discussion of workers' compensation, inherently dependent on rights of both employees and employers, must include appreciation for a variety of rights on both sides.  

Those that perceive federalization as a be-all and end-all may find history relevant. Federal programs have not been free from controversy, or the epitome of efficiency. The Veteran's Administration, Internal Revenue Service, and other agencies have been criticized in recent memory. Social Security has experienced issues, and the first federal program bankruptcy is upon us even now. As the market discusses what is wrong and where solutions may lie, some would say there are serious questions about whether the federal government is a real solution.

Finally, a modern conversation has to recognize that it is not 1972. ("Toto, I've a feeling we're not in Kansas anymore"). What is different today? I would suggest that there is far more existing data today. The National Academy of Social Insurance (NASI) did not exist when the Commission worked in 1972. NASI was founded in 1986. The Workers’ Compensation Research Institute (WCRI) was founded in 1983. Both of these organizations join NCCI as major academic contributors to the discussion. 

Employment has changed. More pertinently, as recognized by the Commission 44 years ago, employment is going to continue to change. As an example, employee leasing was a new idea in 1972, with minimal application. Today the Professional Employment Organization (PEO) impact is perhaps as much as $150 billion. The "on demand" economy is all around us with disruptions like Uber, Wag, Washio and more, as recently detailed by Forbes. 

We are in the midst of an economic revolution that could potentially be as disruptive to our present as the industrial revolution was to the farming paradigm of our past. Manufacturing has declined, from off-shoring and from robotics. Technological change surrounds us and the pace of change is challenging us all. 

Can we have a conversation about workers' compensation? Can we discuss the workplace (which more often than ever may be our home), the economy, the contract nature of modern employment, the needs of employees and employers? I have heard many a bright person posit that workers' compensation is antiquated, irrelevant, irreparable. 

I have spent a lifetime in this industry, and have been privileged to know some brilliant people. I continue to believe that the brilliant and imaginative experts of workers' compensation are capable of leading this industry into the future. The benefits to employers and employees remain important, can be balanced, and can be equitable for both. The brilliant among us need only decide how. 

David Langham is deputy chief judge of the Florida Office of Judges of Workers' Compensation Claims. This column was reprinted with his permission from his Florida Workers' Comp Adjudication blog.