The Evolution of Workers’ Compensation with Alan Pierce

Episode Notes

Transcript

Workers Comp Matters

The Evolution of Workers’ Compensation with Alan Pierce

06/28/2019

 

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Intro: This is Workers Comp Matters, hosted by attorney Alan S. Pierce, the only Legal Talk Network program that focuses entirely on the people and the law in workers’ compensation cases. Nationally recognized trial attorney, expert, and author Alan S. Pierce is a leader committed to making a difference when Workers Comp Matters.

 

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Alan S. Pierce: Welcome once again to Legal Talk Network and Workers Comp Matters with your host Alan Pierce. I am with Pierce, Pierce & Napolitano, a workers’ comp law firm here in Salem, Massachusetts and we are bringing you another edition of Workers Comp Matters.

 

Before we begin, I would like to thank our sponsor PInow, find a local qualified private investigator anywhere in the United States. Visit pinow.com to learn more.

 

Today’s episode in Workers Comp Matters is going to be a little different for those of you who regularly or irregularly listen to us and for me as well, I don’t have a guest. I will be my own guest.

 

And the reason for that is that in thinking about another program, keeping in mind that I went back and did a little checking and I have been doing these podcasts for Legal Talk Network starting in June of 2005, so 14 years ago this month I did my first show, and it was on sick building and the sick building syndrome and injuries and illnesses which occur as a result of exposures to environmental issues in older, unhealthy buildings.

 

And in the last 14 years I note that we have done about 85 half-hour shows and I think when I started I didn’t in any way think we had 85 different subject areas, the topic areas to discuss, but in many ways we have sort of started to scratch the surface of what is a very interesting field of law.

 

And in that vein, there is a quote from a Florida workers’ comp case back in 1982 which serves as a motto for the College of Workers’ Compensation Lawyers, an organization that I have been privileged to have been inducted as a fellow. And Judge Mills in a decision that on its merits has been lost to history said the following: “Workers’ compensation is a very important field of the law, if not the most important. It touches more lives than any other field of the law. It involves the payments of huge sums of money. The welfare of human beings, the success of business, and the pocketbooks of consumers are affected daily by it.”

 

And I don’t think there is anything that could be more true and succinctly put than that that I have found in my years of dealing with workers’ compensation in various facets that it is indeed a very important and different field of law, and it does touch almost everybody’s life, whether you are misfortunate enough to have been injured at work or have a family member or just run a business or work for a business.

 

The other reason for this show is that not only did I note that the podcasts I have been doing for 14 years, but it was 50 years ago also in June, back in June of 1969, I had just graduated college, I wasn’t sure what I was going to do professionally, and I saw an ad or a posting at our College Placement Office with Liberty Mutual Insurance Company who was looking for claims adjusters in greater Boston area.

 

So I was interested, I applied, and I was hired, and I actually began my career by showing up at the Home Office of Liberty Mutual in the third week of June in 1969, and as we are recording this today, this is the third week of June of 2019, exactly 50 years ago.

 

And I began my training at the Home Office of Liberty Mutual and then in August of 1969 I was assigned to a Branch Office of Liberty in Lynn, Massachusetts, where I started my career as a workers’ compensation claims adjuster, a job that I held and learned from for five years, during which I realized that perhaps a career in the law suited me. So I went to law school in the evenings and continued to work as a claims adjuster during the day.

 

And I blinked and it’s 50 years later, and in that time I again worked five years as a claims adjuster, spent about 12 years as a defense attorney for various insurance companies, and then went out on my own, representing injured workers approximately 35 years ago and have remained ever since.

 

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So I started to think about what has happened in the last 50 years of my professional life, and I am also interested in where this practice of law, where this system of unique social insurance is going to go in the next 50 years or more, if in fact it continues to exist or change. And I thought it might not be a bad idea to just personally reflect about this.

 

And in doing so I thought back to when I first started, once I got my training and got assigned to Lynn, I was given a company car and a Polaroid camera and a statement pad, and I was told to investigate newly reported injuries. I was required as a claims adjuster, as most of us were back then, to make immediate contact with an injured worker, preferably at his or her home within 24 hours of notice of a lost time accident, and handle the case from the beginning until either the worker returned to work or if it had to go into some type of controversy or litigation, provide support for our legal department.

 

So the first thing that strikes me is that in the past 50 years the nature of how claims are handled has changed. We no longer, or very rarely, see claims adjusters that are on the road; we now deal with usually inside claim reps, they could be many miles, if not many states, away. Most cases are handled either telephonically or electronically, and we have moved away from the personal attention of claims representatives and injured workers and employers.

 

That could be a topic for another show, but in thinking more about workers’ comp and where it came from, I think we have done shows on this in the past here on Workers Comp Matters, but we certainly can trace workers’ compensation in the United States to the year 1911, which is the year the first state-based elective workers comp system was established legislatively in the State of Wisconsin. Claims credit for having the first system started in the spring of 1911. But New Jersey and Massachusetts closely followed and through the early second decade of the 20th Century we saw the spread of workers’ compensation.

 

But workers’ comp doesn’t begin in the late 18th or 20th Century, if you really go back, and I have sort of become a student of workers’ comp history along the way, one could find references to how an employer treats its workers really from the scriptures.

 

You could go into various — Bible’s Old Testament, New Testament, Quran, various religious doctrines and you will find many references to work. In the Old Testament, for example, there is a statement, if an employer asks workers to “carry on their shoulders” a heavier load than agreed upon, well, that is customary, the employer is liable for the harm suffered by the worker, including damages for loss of income, loss of limb, pain incurred and medical expenses. So right there, going back perhaps 3,000 or 4,000 years, there is a reference to an obligation, a moral, if not a legal obligation.

 

A gentleman by the name of Gregory Guyton wrote in 1999 a Brief History of Workers’ Compensation, and in that article, which was published by, of all groups, the Iowa Orthopedic Journal, Guyton refers to a 2050 B.C. tablet in ancient Sumer, which is now Iraq. And the Law of Ur, contained in the Nippur Tablet, actually it’s No. 3191, provided for compensation for injury to a worker’s specific body parts. So if a worker lost a thumb or a hand or a finger or a leg, there was an appropriate amount of remuneration or payment to the worker or if it involved a death, to the worker’s family.

 

So going back even 2000 years B.C. there was a written system and we have found over the years other similar systems not unlike our Scheduled Benefits today, where if somebody today in Massachusetts or really anywhere covered by workers’ comp loses a finger or a part of a hand or a limb, there is a scheduled payment, a written down the formula.

 

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That was also seen in the 16th Century among the pirates. Captain Henry Morgan is famous, not only for being the brand of rum that is commonly sold, but he also had a written contract with his crew, pirates or privateers as they were called, so that if they were to lose a hand or a leg or an eye, and we have all seen the caricatures of the pirates with the hook and the peg leg and the eyepatch, but there was a specific remuneration based upon the amount of money or pieces of eight that was generated by the particular voyage that a victim of an injury while in the course of getting that plunder would receive. And this has transcended history and is part of what we now know as workers’ comp.

 

But getting back to the present system of workers’ comp, as I mentioned earlier, it began in 1911 and it was as a result of some very significant changes in, not only in the world, but in the United States. We had moved probably in the mid to late 19th Century from an agrarian economy, which was primarily farming and some merchants, but there wasn’t really a whole lot of industry.

 

There was of course slave labor in the south and there were pockets of manufacturers, but we were not a mechanized society, but with the invention of the steam engine and then the invention of electricity and the influx of immigrants from primarily Europe and the East Coast and from Asia and the West Coast and the growth of this country, the building of railroads, the building of factories, the need for massive amounts of labor in working conditions, which were to put it mildly grossly unsafe.

 

As a society we were seeing hundreds, thousands, if not hundreds of thousands of injuries or deaths in these developing industries, factories, shops, construction projects, railroads, building of skyscrapers, buildings of cities, and the toll of the injuries which were really not covered by what we know as insurance today and certainly not covered by any type of workers’ comp fell onto society.

 

And what would happen to these folks? These folks were in need of medical care, wage replacement, they had families to support, and it became apparent that the lack of a system or the civil system of having a worker injured having to sue in civil court his employer for negligence or fault just wasn’t doing the job.

 

So as a result workers’ comp came into play and the model for it came really from Europe, as I mentioned, in the mid to late 19th Century in Prussia, Germany, Bismarck created a system of compensation for the newly industrialized Central Europe, spread to Westwood, to England and some of the other countries, and came across the United States in what has been described as the grand bargain, and that is a phrase that is still used today.

 

And it basically means that in exchange for giving up their rights to sue and tort for negligence, the employees of an employer would receive limited benefits, originally for wage loss and medical expense, without regard to fault, and that was the bargain. It was a compromise between labor and management, whereby in exchange for the labor giving up their rights to sue, they would get guaranteed speedy and reasonable benefits.

 

And of course this was controversial at the time. Employers, while happy to be relieved from the burden of civil liability, were concerned about payment to everybody without regard to fault as a result of a work injury. And as one might expect the constitutional issues surrounding this unique area of law made its way to the US Supreme Court in 1917 and the court in New York Central Railroad v. White required that for a workers’ compensation statute to be constitutional to not deprive a party of due process and provide everybody equal protection of the law that the workers’ comp statute must provide a reasonable amount of compensation.

 

The actual language says it should not be unreasonable; there is a bit of a double negative there, but what is and has been considered “reasonable” or not unreasonable has really been the thread of the development of workers’ comp over the ensuing now 100 — really 102 years since the White decision.

 

So since workers’ comp became established as part of the fabric of our social insurance network and really a foundation really for the New Deal, when other social programs such as Social Security and minimum wage and child labor laws and a variety of other workplace safety issues sort of became front and center.

 

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And with the development of the Organized Labor Movement, we saw a recognition across the country that the workers’ comp system was probably the most fair way of providing sustainable benefits that are not unreasonable to people that are injured in the scope of and in the course of employment.

 

So that’s sort of how things started and for the first let’s say 50 or 60 years following 1911, we saw the expected development of this rather embryonic area of the law that basically was originally elective and it only covered certain types of documented traumatic injuries, and we saw with the passage of time and various things that would occur in the workplace that there was a need for this law to evolve and develop.

 

It eventually evolved from being elective to compulsory in pretty much every jurisdiction right now; I believe Texas is the only state where a business may elect to be covered in the workers’ comp or to go bare and not have workers’ comp insurance. But the other 49 states as well as the federal government and various other subtype of employments like longshore and harbor workers, like maritime workers under the Jones Act, like federal employees, railroad employees, there are other types of workers’ comp systems.

 

So over the first 50 to 60 or so years we saw a development of workers’ comp. We saw defenses start to arise, going and coming rule, cases where the question is when does workers’ compensation coverage begin? Does it begin when the worker leaves his house in the morning or does it begin when he arrives in the workplace?

 

We saw the development of doctrines such as the personal comfort doctrine, what happens if a worker is injured during a lunch break or a smoking break or a rest period.

 

We saw other types of doctrines creep up, like dual capacity, street-risk doctrine and these all basically came from a variety of cases; people found themselves getting hurt in different ways and ways perhaps not contemplated originally. So over the first perhaps — till the mid part of the 20th Century the workers’ comp law evolved, developed, and as a result it fell behind the times.

 

And I started law school in 1970 and that was right around the time of Richard Nixon’s first term in office; I think he was elected in 1968, and one of his initiatives in 1970 was to pass the Occupational Safety and Health Act, OSHA of 1970. And this would give added federal involvement in areas of workplace safety. And as part of the OSHA statute, there was the creation of a National Commission to study state-based workers’ compensation laws, because it was recognized at that time that perhaps the various states around the country were not uniform and perhaps the benefits were not anywhere near as reasonable as they should be, and the workers’ comp system was not delivering benefits in a consistent, timely, and fair manner across the board.

 

So actually while I was in law school this Commission met for two years, and in 1972 they issued their report; I believe it was July 1 of 1972, their report to President Nixon outlined several dozen recommendations for workers’ compensation laws to change or the threat that the federal government may be involved to somehow take over the workers’ comp system or try to standardize it or maybe bring it within the Social Security system.

 

So in that period of time, right around the time I started working in this system, the National Commission came out with all of these recommendations, of which 19 or so were deemed essential recommendations. And those recommendations which were issued in 1972 served the basis of what has happened since then from really up till today and continuing.

 

Among the recommendations were compulsory rather than elective coverage, all injuries and diseases to be covered if related to employment, benefit levels would be set for duration, no durational limits for permanent disability, maximum weekly benefits equal to 100% of the state average weekly wage, full medical and rehabilitation benefits, safety under OSHA and many others.

 

And as a result of the 1972 report, state by state by state probably beginning in the mid to late ‘70s, but really taking hold in the early ‘80s, led to across the country states bringing their systems up to standard or at least up to the minimum standards that the National Commission had recommended.

 

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And here in Massachusetts, for example, we at that time, I think in 19 — in my memory, I was handling workers’ comp claims in ’72, I think the maximum weekly benefit no matter what the injured worker might collect per week was capped I believe at $95 a week. The state average weekly wage back then was probably closer to $200 a week.

 

But shortly after the National Commission issued its reports back in 1975 and 1976, Massachusetts moved to set the max based on the state average wage. So we went from maybe $95 or $101 a week right up to $211 a week and every year our state average wage is calculated and today the maximum benefit is just over $1,300 a week.

 

So that what we saw in the early ‘80s, right up until probably the early ‘90s, was a state-by-state expansion of coverage benefits, benefit levels, and during that period of time of course we saw a spike in medical costs and medical care so that the end result or one of the results of bringing the workers’ compensation system up to reasonable standards, at least as according to the National Commission, was a significant increase in costs which translated into an increase of premiums to employers. And it led to a crisis in which perhaps the benefits came too quickly and too high and the system could not afford it.

 

And one of the beauties of why and how the workers’ compensation system has evolved over the last 100 and so years is that it has responded to changes, albeit slowly and albeit through the legislative process, but the system has been relatively elastic, so that if the system got clearly out of whack or out of balance, there was usually at some point a legislative correction.

 

Unfortunately, a lot of times the corrections were over-corrections, so that the balance was then shifted like a seesaw; it would go up one end and down the other end. And the same thing happened as a result of all of the enhanced benefits and restructuring of workers’ comp in the late ‘80s to early ‘90s.

 

And I think at this point what I would like to do is take a short break and we will come back and perhaps just as quickly go through the next 45 or 50 years since the National Commission report. So we are going to take a short break and we will be back in just a few minutes.

 

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Alan S. Pierce: Okay, welcome back to Workers Comp Matters. This is Alan Pierce. Where I left off, chronologically at least, was sort of tracing in really a relatively small amount of time, compressing perhaps about 70 or 80 years of the United States workers’ comp history, and I think we sort of got up into the mid to late ‘80s and we were talking about balance and how the workers’ comp system to be effective really needs to be in balance.

 

The employer and the insurer — the insurer should be able to collect a fair premium in exchange for a fair payment to workers and their families as a result of injuries, and when that balance is upset, when the premiums are too high or the benefits are too low, some group or some collection of groups are going to petition their legislators and they are going to make changes.

 

So sure enough, now by the late ‘80s, I am now firmly entrenched as a lawyer. I have been in the system perhaps for 20 to 25 years, now representing only injured workers, and of course I and my colleagues are benefiting from in Massachusetts our major workers’ comp reform which took effect in 1985 and benefit levels and benefit durations changed and increased, much to the benefit of injured workers, much to the detriment of the cost of the system.

 

And instead of taking decades for a crisis to develop, it only took about four or five years, and we saw in 1990 and 1991 in Massachusetts, and Massachusetts was not unlike many other states around the country, we elected a Republican Governor here in Massachusetts. A governor who was very responsive to the complaints and interests of the business community that the workers’ comp premiums were so high, it was discouraging business growth. It was causing some employers to leave or threatening to leave the Commonwealth, it was prohibiting the Commonwealth of attracting employers from other states to locate here.

 

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So the legislature got involved, a comprehensive bill was submitted, it was one of the keystones of Governor Weld’s platform when he ran for governor against what had been a Democratic predecessor. And as a result in 1991-1992 we had a reform of the reform and this time as it occurred here in Massachusetts and has occurred in almost every other state, the reforms were not beneficial to the injured worker. There was a reduction in the amount and formula of weekly benefits, the duration of weekly benefits. There were cost containment controls put in, Utilization Review and treatment guidelines and we have talked about that on past shows.

 

But what we have seen over the past now maybe 25, going on 30 years, has been a systemic across the country reduction in benefits and a change in the way policymakers, legislators and others perceive workers’ compensation. Workers’ compensation is not being perceived as it had been before as a social — a type of social insurance, something different than long-term disability, something different than private health insurance, something that transcends the law, but going back to where I began the show with the grand bargain, this social contract between labor and management.

 

If you really look at the early, early antecedents, the things we talked about, the tablets, the Hammurabi’s Code, the New Testament, the Old Testament, the references to the moral and legal and religious requirements of how people ought to treat workers, what we are seeing is society is getting away from that. They are sort of looking at workers’ comp as just another form of insurance that has a cost and I think the injured worker has been lost in the translation over the last several years, and this sort of gets us to the challenges that are out there today.

 

We have seen legislators either unable or unwilling to increase benefits. There are probably all sorts of reasons for that, mostly political, mostly economic, mostly competition among and between states and even so-called blue states, states with progressive governors, progressive legislators. They are mindful of the need to be able to compete with their neighboring states for business and to make sure that business is vibrant and healthy and workers’ comp costs and premiums remain competitive. So as a result there has been not a whole lot of traction to get back some of the losses that injured workers have sustained over the ensuing 15, 20, 25 years or so.

 

And at the same time we have seen a couple of other phenomena. We have seen more and more people are no longer working under collective bargaining agreements. I think organized labor in the public and private sector perhaps is 15% or less depending on the jurisdiction of the workforce, so that there is not the same perhaps spokesman or group protecting the rights of injured workers legislatively as they had been when organized labor and many more workers were covered under collective bargaining agreements.

 

We have also had changing economies. We are having new types of businesses. We are moving away from factories and other mechanized solutions to robotics, to new types of employment, the so-called gig economy, all of these things we have talked about on other shows here on Workers Comp Matters. And as a result workers’ comp has not been able to remedy what I think are some of the serious defects and what has occurred is that proponents of change, people looking to make the system more equal or more fair have turned to the courts as opposed to the legislators.

 

And I would say over the last three or four years, and we have done a couple of shows on this, we have had various constitutional challenges to a particular state’s workers’ compensation system, going back to the decision in White v. New York Central Railroad, where the court said for a workers’ comp system to be constitutional, it must not be unreasonable in terms of the benefits.

 

(00:29:45)

 

So we have seen across the country perhaps in 8 or 10 or 12 jurisdictions in the last three or four years appellate courts, either appeals courts or the Supreme Courts in various states looking at a particular workers’ comp law that has been amended to the point that the benefit levels are objectively, at least to the court, not satisfying the constitutional requirements that the Supreme Court laid down back in 1917.

 

And perhaps the most recent case is probably about six or seven months old, I think it was at the end of 2018, appeals court in the State of Kansas in the case of Howard Johnson III v. U.S. Food Service sort of looked at a portion of the Kansas statute that had to do with how impairment ratings are measured.

 

It was the position of Johnson that the Kansas statute was so hostile to his rights or to the rights of injured workers that the court actually looked at it, and I am going to quote from the court’s decision finding the Kansas reference to this particular section in the statute unconstitutional.

 

And the court said “In summary, this court struggles with the bottom line figure as to how much a quid pro quo can be amended and still remain an adequate quid pro quo. This court realizes that an original quid pro quo cannot be emasculated to a point where it is no longer a viable and sufficient substitute remedy. The gradual erosion of the fair exchange between rights under the Act – that is the Kansas State Workers’ Comp Act – and common-law rights to tort recovery have, for the injured worker, amounted to death by a thousand paper cuts. What is the last slice that tips the balance from a fair exchange of rights and remedies to one that is unconstitutionally inadequate from the injured worker’s point of view?”

 

So the court looked at the Kansas statute in terms of the benefit levels and made the decision that this was the final cut for the injured workers of Kansas and that the grand bargain, the quid pro quo, the great compromise of an adequate remedy in exchange for the right to sue was no longer being met, and as a result where the legislature could not or did not act, the court acted and said, at least this section of the Kansas Workers’ Comp Act is no longer constitutional and struck it down.

 

There have been similar results in Florida and in Oklahoma and in Utah and Louisiana and several other states, Pennsylvania, so that what we are seeing here is if the legislatures cannot create or maintain that balance between a fair premium and a fair benefit to injured workers, then on the most egregious circumstances, then the courts may step in.

 

So the challenge for me and for my colleagues, those of us who represent injured workers, those of us who represent insurance companies, those of us who represent employers is to me, to be continue to be mindful of the historical antecedents and social imperatives that necessitated workers’ comp and to understand what differentiates workers’ comp from other areas of insurance, be it health insurance or disability insurance or Medicare or some of these other programs and realize that this is something that is for the benefit of injured workers, it’s for the benefit of businesses, that it requires balance, it requires an understanding of what the system is designed to do and what it is designed not to do.

 

So even though I have made my living in the field of workers’ comp, I think what’s important for me and important for my colleagues is in going forward, not only to continue to make a living, but to really continue to make a difference.

 

So to all of you out there that have listened to Workers Comp Matters in the past or will continue to listen to Workers Comp Matters, please do so with the understanding that what we really want to do is just make a difference, make things better for our respective clients, but do so with the understanding that in order for the system to be successful, it has to be balanced, it has to be fair, and it has to be adequate.

 

So having said all that, thank you for listening and look forward to our next show here on Workers Comp Matters.

 

For now, this is Alan Pierce saying, go out and make it a day that matters. Thank you for listening.

 

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Outro: Thanks for listening to Workers Comp Matters today on the Legal Talk Network, hosted by attorney Alan S. Pierce, where we try to make a difference in workers’ comp legal cases for people injured at work. Be sure to listen to other Workers Comp Matters shows on the Legal Talk Network, your only choice for legal talk.

 

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