To have a deep understanding of workers’ compensation, lawyers need to know how it has evolved in our country. In this episode of Workers’ Comp Matters, host Alan Pierce talks to John F. Burton, Jr. about his career as a workers’ compensation expert, which has spanned over 50 years. They discuss the history of workers’ compensation, outlining its legal evolution through different political and economic eras in the United States.
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Workers Comp Matters
History of Workers’ Compensation with John F. Burton, Jr.
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.
Alan S. Pierce: Welcome to Legal Talk Network and Workers Comp Matters. My name is Alan Pierce. I am an attorney at Pierce, Pierce & Napolitano in Salem, Massachusetts. And today we are bringing you yet another edition of Workers Comp Matters with our guest, Professor John F. Burton, Jr.
Before we get into our topic, I want to thank our sponsors.
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Those of you who are listeners to Workers Comp Matters and are familiar with the topic, the broad topic of workers’ compensation, perhaps Professor Burton needs no introduction. I can’t think of anybody who is more widely known and has written more and been an expert on the field of workers’ compensation for probably over 50 years.
I want to just give our audience a little bit of background. John Burton is a Professor Emeritus in the School of Management and Labor Relations at Rutgers University and Professor Emeritus in the School of Industrial and Labor Relations at Cornell. He has conducted research, served as a consultant, assisted with the formulation of public policy, has consulted with many, many states as well as foreign countries in the area of workers’ compensation and even today is still a prolific commentator, writer, scholar and expert in the field of workers’ comp.
He is a lawyer. He started out as he may recollect as we begin our discussion as an engineering student, found in short order that perhaps he wasn’t cut out for engineering and he went into the field of economics and somehow found his way into workers’ comp.
Perhaps Professor Burton is most known for his role as Chair of the National Commission on State Workmen’s Compensation Laws, which was enacted as part of the OSHA legislation under President Nixon in 1970 and the National Commission delivered its report to President Nixon and Congress in 1972.
And that is just a bare tip of the iceberg of the prolific career of Professor John Burton.
And John, I really have looked forward to this show for a long time and I want to thank you for being a guest today on Legal Talk Network.
John F. Burton, Jr.: Well, I am pleased to be here, Al. I have known you for a long time and we have been good friends and it’s fun to do this kind of a program with you.
Alan S. Pierce: Yeah. There is so much area that we could cover in a short period of time, but what I really would like to do is sort of go back in history, your history a little bit and how did Professor John Burton actually come into the field of workers’ comp? And I know you were kind enough to send me a little biographical information. You too were somebody who may have had a brief introduction to workers’ comp with an injury yourself.
John F. Burton, Jr.: Well, that’s true. It’s interesting, I normally don’t put that down, but you kind of forced me to recall all the aspects of this. I was working in a hardware store in high school and the last day of work I was going around and we had a hand-drawn elevator and the procedure was to make sure that the lock was on inside the elevator, the cage that rode up and down. And so I was talking to a friend, a coworker and I backed into the elevator to pull this brake on and turns out the elevator wasn’t on that floor, it was on the floor up, so fell down an elevator shaft and knocked myself out.
But eventually came to and was taken — went home and then I didn’t feel very good at night and they took me to the hospital. I had a check out and I was fine. So never lost any time, but in retrospect, I was damn lucky that I wasn’t hurt more seriously because certainly falling down an elevator shaft was not exactly a way to celebrate your youth.
Alan S. Pierce: No, I guess that’s what we call a med only claim, not a lost time claim.
John F. Burton, Jr.: Yeah, med only claim, exactly, yeah.
Alan S. Pierce: All right, so I gave you kind of a brief introduction and indeed you may have started out in engineering, but what drew you to the field of economics and labor relations?
John F. Burton, Jr.: Well, I transferred from engineering at Case Institute of Technology into Cornell and Cornell has a School of Industrial and Labor Relations. I went into that school. It turns out that I really became very interested in the labor field in general and economics of law and the history was all taught in that school. And when I decided to — when I graduated I tried to figure out what to do and decided I wanted to be a lawyer. I had been on a debate team and I guess that’s a natural place for people to go who are debaters. And so I went off to Michigan Law School.
And I would have to say in all honesty, engineering was not very interesting and law was even worse, so I decided pretty quickly I didn’t want to be a practicing lawyer. However, because of my background on labor, I was working for a law professor who was doing a lot of arbitration and that really appealed to me that I could make a contribution as an arbitrator and so I stayed through law school, got the degree.
For various reasons, my wife was halfway through a graduate program when I graduated from law school and so I stayed on a year to get a master’s degree in economics, the plan was and planned to make that part of my arbitrator’s career, but it turned out that engineering wasn’t my calling and law wasn’t my calling, economics was.
So I stayed in the program, got a PhD in economics, and so I have been kind of a hybrid, if you will, of law and economics through my career. And I got into workers’ compensation kind of by serendipity, which is essentially the way that these other things happened, how I got from Case to Cornell and so on.
I was working on my exams in the PhD field and in the meantime somebody picked up the topic I thought I was going to write on, which was minimum wage laws, and when I got through with my exams and started to go back to the topic, I found this friend of mine had inadvertently picked up the same topic I was. So I was searching around for a topic.
And it turned out that the Upjohn Institute located in Kalamazoo, Michigan, which has been a major publisher of books in the labor relations or unemployment insurance and so on had sponsored a series of studies of the competitive environment of Michigan and they had their sponsored studies on taxes and wages and transportation costs and so on.
And by the time I looked at the list from Upjohn, the only one that was left on the list that hadn’t been chosen by somebody else was workers’ compensation or workmen’s compensation, as it was known then. So even though I had taken a course in workers’ comp to some extent in undergraduate, I didn’t know much about the field. I started reading about workers’ compensation and somehow it just clicked. It was very interesting to me, and it has remained interesting for over, I don’t know, since the 1950s, a long time.
So I wrote a dissertation on the Interstate Differences in Workers’ Compensation Costs and Their Significance and that’s how — it was by sheer luck that I got into workers’ compensation, but once I was in, I was kind of in for a lifetime run in that field.
Alan S. Pierce: In fact, I am looking at the title of your dissertation, The Significance and Causes of the Interstate Variations in the Employers’ Costs of Workmen’s Compensation. That could probably be a title today, because I think as we will get into later in the show, the differences in costs among and between the states are a major factor in what we are seeing now in changes or not changes to workers’ comp statutes. It’s this competition between geographical close states and the desire to attract business or to keep business from going next door.
All right, so let’s get back, you were at Cornell now, was it at Cornell, I believe Professor Arthur Larson, who also probably needs no introduction, the author of the treatise in the very early 50s, which is still the Bible for those of us who practice. Was he at Cornell when you were there?
John F. Burton, Jr.: He had left Cornell and had gone to originally University of Pittsburgh as a Dean and then he went on to the federal government and was working in the Eisenhower administration. When I first heard him speak at Cornell, he came back as a former professor and talked about — he had recently published a book called Modern Republican, looks at his party or something like that.
And I went to hear him speak, as I have indicated in other things I have written, I was on the verge — I was raised as a Republican and have been a Republican all my life, but this is the one time I came close to switching to be a Democrat, because a friend of mine on the Debate Team at Cornell was trying to convince me that I should become a Democrat and vote for Adlai Stevenson.
And I went to hear Larson speak and he so persuaded me that the Republican Party was such a great institution that I decided to stay with the Republican Party. So Arthur Larson essentially was the key person in convincing me to be a Republican all my life, which had an impact later in my life, which we will get into, but the point is that Larson was a very distinguished person. He was Under Secretary of Labor and very well-known in the legal profession, because he had just started this treatise on workers’ compensation, which incidentally I still subscribe to after all these years.
So it is for me — a dominant feature of my education in workers’ compensation has been the Larson Treatise. So that’s how I got started in this. And at Cornell was an undergraduate, let’s say that’s what saved me to be a Republican.
Now, as fate would have it, Larson, after he left the Eisenhower Administration, became a professor at Duke University and law school faculty there, and he was working on his treatise and he was also active in the Republican Party. But in 1964, I believe it was, he became — he was dissatisfied with the Republican nominee for president, who was Barry Goldwater and so Arthur became National Co-Chairman of Republicans for Johnson; Johnson obviously being the Democratic candidate who successfully won that election.
So Arthur, I thought that was in retrospect an amazingly courageous thing to do, because he knew it was going to jeopardize in some way his attractiveness, his ability to do certain things. And it turned out that when we got to 1971, which is when the National Commission’s membership was put together by the White House, as you mentioned, I was Chair there, Chairman, we have to date these things. It used to be called workmen’s compensation when I was there, I was a Chairman and we don’t do that anymore.
But the reason I got picked was Arthur was the obvious candidate to be the person — he should have been the Chair of the National Commission. He was a Republican. He was a leading legal scholar, best known person in the field, but he was blacklisted.
Alan S. Pierce: Yeah, too much of a moderate Republican.
John F. Burton, Jr.: Yeah, because he had come out and supported Johnson. So I was — the statute had list of categories of people who could be on the Commission and one of the categories was educators with expertise in workers’ compensation.
Well, if you looked across the country there were only two of us that were Republicans who were experts in workers’ compensation; I may be exaggerating slightly, but I think that’s probably pretty close to it. There were other scholars in workers’ compensation, but as far as I know Arthur and I were the only Republican ones. He was blackballed and so the choice then came down to — it was pretty easy to pick the one person who was a legitimate Republican, who was also a legitimate scholar in workers’ compensation. So I got picked to be on the Commission and was picked to be Chair.
Alan S. Pierce: Now, this Commission was established as part of the OSHA law in 1970, and if I am not mistaken, it consisted of three cabinet level members of the administration and then 15 members from the industry appointed by the President to do a comprehensive study of the state’s workmen’s compensation laws.
Now, we look at the field of workers’ comp now that we — it’s been over 100 years in the United States, 1911 I think has been credited as the year that it began officially in terms of a constitutionally upheld state workers’ comp law. So if we look at this 107-108 year period, I think we can look at and now look back and see various eras, and I suppose we can look at 1972 and the report as perhaps the end of one era and beginning of the other, of the next era.
John F. Burton, Jr.: Right.
Alan S. Pierce: Tell us what the world of workmen’s comp, workers’ comp was like pre-1972, pre-1970 that would have inspired probably not who you would think would be a progressively labor-oriented president such as Richard Nixon to appoint a National Commission, which I understand was done at the request of Jacob Javits, another Republican perhaps of a more moderate bent in terms of labor relations. So what was the lay of the land pre-1970?
John F. Burton, Jr.: Well, I think there was a lot of concern about workers’ compensation. The program had been the first social insurance program, as you say, started in 1911 and it wasn’t until the 1930s that other social insurance programs became very important. Unemployment insurance had existed perhaps before the 30s, but it was never as dominant as the Social Security system itself.
Alan S. Pierce: Yeah, the New Deal.
John F. Burton, Jr.: Yeah, the New Deal, the New Deal changed things. And one other thing that’s relevant in terms of the story of workers’ compensation is that the legal constraints that existed in 1911 were such that the program had to be started at the state level, because the Supreme Court had interpreted the Commerce Clause in a way that prohibited federal government from regulating interstate commerce so far as it was affected by labor matters.
It wasn’t until the 1930s that Jones & Laughlin Steel case essentially reversed that longstanding doctrine and indicated that the federal government could regulate labor markets. And that’s why, among other things, the National Labor Relations Act, the basic Collective Bargaining Act was possible only because the Supreme Court had changed its view on what was constitutional for the federal government to do.
Now, workers’ compensation was already in place as a state system and could have been presumably from that point on made a federal program, and indeed OSHA, just to follow the point of federal standards, prior to 1970, states were pretty much in control of safety, workplace safety, and OSHA essentially revolutionized the way we handled workplace safety and allowed the federal government to essentially take over the safety programs.
Now states, if they meet certain standards, can take control of their own state program, as subject to, they have to be as good a program as what’s in OSHA. But workers’ compensation stood out as the only program by 1970 that was still basically a social insurance program or protective labor legislation program that was almost exclusively controlled by the states.
And I think what happened was although it had been around for 50 years, at least by then, in the post-World War II period the states had pretty well neglected workers’ compensation, and indeed, if you look at the level of cash benefits in workers’ compensation as of 1972, they were lower relative to the state’s average weekly wage than they had been at the end of the Depression.
So we had gone through, although there were some signs of improvements in our laws; in fact, overall there’s been deterioration and the adequacy of cash benefits in workers’ compensation. And there were some other features of workers’ compensation that were also lagging behind; coverage was nowhere near as extensive as it was in the EUI program, for example, even though the EUI program has a large element of state control, workers’ comp had lagged behind in expanding its coverage to various kinds of employers.
And so I think Javits had picked up essentially a concern that failed through the progressive part of the world and in the country and figured that workers’ compensation deserved a careful look. I think in Javits’ view it probably — his view was they probably should have federalized the program. So that’s where the — that’s the starting point.
Jacob Javits kind of was an interesting figure, it used to be in the early 1970s, you may remember this, Javits was a dominating figure in the Senate. The joke was in a sense that there were four parties in the US Senate; there was northern Democrats, Southern Democrats, Republicans and Javits, and he was a dominant figure in foreign affairs, he was a dominant figure — he was political. And so the fact that Javits was behind this Commission explains why it was created.
Nixon, I think was not enthused about the fact it was the National Commission and indeed, as we can talk about in the moment, the outcome of the National Commission was not something that the Nixon administration necessarily supported. Although, one will have to say it’s interesting, if you look at the Occupational Safety and Health Act itself, when it was passed in 1970, it had very strong support from both Republicans and Democratic parties, carried with large majorities in the House and the Senate and was supported by the White House.
So it’s hard to imagine that kind of environment anymore, where you would have bipartisan support across both Houses, and plus, the president supporting a progressive piece of legislation, but that is in fact what OSHA was.
To be sure, within a couple of years OSHA became much more controversial as it began to be applied and it became obvious what the thing was about. But initially OSHA was strongly supported and one of the things that was hanging over the National Commission when we were appointed was we had representatives primarily from insurance industry, employers, state agencies and so on, a few labor people, but mainly it was dominated by relatively conservative folks. And they were very concerned that the example that had been set by OSHA, which was to federalize the state programs, was going to happen to workers’ compensation, and that was an issue that hung over our heads for that whole year.
Now, what happened during the year was a fascinating experience. We had a dozen hearings and meetings, at least a dozen around the country and also commissioned a lot of studies and had experts come in and talk to us, and I think all of us were surprised at how bad the system was. We knew there were problems with the system, but when we got out and began to hear stories about people being permanently and totally disabled and running out of their benefits after three or four years and then being thrown into welfare because there was no workers’ comp benefits longer than that.
And the fact that, as I say the benefits, cash benefits were not high; in fact, the maximum weekly benefit in most states as of 1970 was below the national poverty level for a family of four. So we had a really interesting experience from that year of people who were on this Commission became very much friends and colleagues and believers that something needed to be done here.
And what we did was end up with a recommendation that there should be some federal standards for the state program, that we had — 19 of our recommendations were designated as essential, and we said that — our recommendation was that the states should be given three years to bring their laws up to compliance with those essential recommendations and if they didn’t, then the federal government should intervene in the form of congressional mandates, federal law that would establish standards for these state programs.
Alan S. Pierce: And this of course is something the insurance industry did not want was federal standards.
John F. Burton, Jr.: Well, I would say the Commission actually had representatives from the insurance industry. I think people were convinced, and this is my own view on this thing, that they were so concerned about how badly the program was operating that something pretty drastic needed to be done and none of us — well, I shouldn’t say none of us, a couple of labor representatives would have supported a federal program that would get rid of all the state programs.
But I think the insurance industry in fact, along with employers on the Commission, voted in favor of these federal standards. We had 18 members. It was an unanimous vote for federal standards in workers’ compensation, again, hard to believe given the current political environment that you could ever get people with diverse viewpoints to support something like this unanimously.
And it obviously caught the attention of a lot of people when our report came out, it was a front page story on the New York Times, and it also pointed out that the same front page also had a little story below our story of talking about the strange break-in at this hotel in Washington that the Democratic National Committee had been burglarized, that led on to the Watergate scandal and as I have often said, it’s the only time in history that workers’ compensation was given more press attention than the Watergate thing.
Alan S. Pierce: Yeah, your story was above the fold and the Watergate story was below the fold in the front page, yeah.
John F. Burton, Jr.: Right, exactly.
Alan S. Pierce: Before we move off the National Commission, you mentioned there were 15 members. There was one member that I personally knew or peripherally knew, and that was a lawyer, a claimant lawyer Sam Horovitz. Sam was from Boston. He was a Harvard trained lawyer. He took up the mantle of representing injured workers back in the 20s when very few people were doing it and if they were doing it, they were doing it pro bono, they were doing it out of law clinics.
And he, without going into elaborate detail, Sam established the National Association of Claimants’ Compensation Attorneys (NACCA) in the late 40s, which really brought the practice of workers’ comp law from the claimants’ perspective really into the 20th Century. It allowed an exchange of information. It published the NACCA Journal. It professionalized the practice and it allowed us to — our parents and grandparents to communicate and learn from each other across state lines for essentially very provincial state laws.
Sam was a member of the Commission. Because I was a claims adjuster back then and I had cases with Sam’s office and I knew what a character he was and I also audited his course on workmen’s comp and admiralty and related fields at Suffolk Law School, he was quite a character.
My memory of him was then an older man, probably in his 70s or maybe even a little older, with this battered briefcase and his brain was working a lot faster. What was he like as a member of the Commission and perhaps the only really you would say progressive, if not socialist, leaning member of the Commission? How did he interact with these other folks, the Liberty Mutual executives and the business and industry folks?
John F. Burton, Jr.: Yeah. I think actually people thought he was a bit of a character and really liked him. One of the things that your comment made me to think about, one of his favorite expression was when somebody would propose something that he didn’t like he would say, that’s a snare and a delusion and he must have said that 50 times or 100 times during the work of the National Commission.
Alan S. Pierce: Yeah, he would say that in law school class as well, I remember that phrase, a snare and a delusion, yeah.
John F. Burton, Jr.: Yeah, that’s a snare and a delusion.
Well, the other thing that — the other person that I think you knew about or knew of certainly was Melvin Bradshaw, who was at the time I think Executive Vice President of Liberty Mutual, the biggest workers’ comp carrier at the time certainly. And if you were to think about supporting of federal standards and what the insurance industry was, we had an interesting history on this, a little digression here, on how the Commission operated.
We had this Commission that would meet in the mornings in Washington and then people would go off — all the members would go off and have lunch with their constituencies and then they would come back after lunch and they would back away from the agreements we made in the morning. And so this became kind of a problem, and when we got to the critical point in the Commission’s life where we had — federal standards issue hadn’t been talked about, I wanted to get into that topic and I didn’t really think it made sense for how people would run off to lunch and get themselves chewed up for even thinking about this.
Dan Doherty was a member of the Commission who was from Delaware — sorry, from Maryland managed to get the Governor’s yacht, and so we had a meeting on the Governor’s yacht and we went out in Chesapeake Bay or whatever it was and ended up going to a little town in Columbia and had lunch there and we were isolated, nobody could talk to their constituents and get their views changed. And so we tentatively reached agreement, we were going to have federal standards.
Now, I often thought about the fact, in this day and age, this is before cell phones or Internet and so on, the fact that we were 100 miles away from Washington and there were hardly any phones, there were no phones on the boat, we made sure of that. Nobody could contact their constituencies to make sure that they were following the party line. And so we agreed tentatively to the federal standards on this trip on the boat. This is our next to last meeting.
The last meeting we had a retreat, a former CIA retreat out in Huntington, Virginia that we had only very few landline phones and of course no cell phones or anything and when we were out there, we were also pretty isolated; it was deliberately done to make sure we could hold ourselves together.
Between the next to last meeting on the boat and the final meeting, the word had gotten back to the White House that we were thinking about federal standards, and so, there was some pressure. Contact was made with several of our members and to try to persuade them that we don’t want federal standards in workers’ compensation. That was just too revolutionary, but idea, the person that held it together was Mel Bradshaw from —
Alan S. Pierce: Liberty Mutual.
John F. Burton, Jr.: Liberty Mutual’s Executive Vice President. So, you know what, this is your earlier point about, the insurance industry didn’t really like federal standards. Mel Bradshaw and the other insurance people on the Commission I think were convinced that to put up my terms the conservative solution here was actually to have federal standards, because if you didn’t do something like that, the system itself was going to self-destruct, because there was this inner — this competition amongst states and as you’ve seen in some things that I’ve sent you, actually, there was an issue that I had identified in my dissertation back in — published in ‘65, that the real fall, if you will, of workers’ compensation in this country is that it is a state-run system, and that employers are constantly trying to convince legislators that if you don’t have low workers’ compensation premiums or rates, the state is going to lose all the employers, they are not going to be able to attract anybody, and those of us who are here are going to run away.
And so, it became a real force, it was in existence before my — I wrote my dissertation in ‘65, it was certainly an issue that was quite aware to the National Commission members when we wrote our report in ‘72, and there is a long discussion of the specter of the vanishing employer in the report and how this was driving legislators to — even legislators who had good intentions about this thing, it’s got — it says a bamboo, and to say if we don’t cut our benefits or cut coverage or something, we’re going to lose all of our employers because they are going to move to state X, state Y. You can always find some other state that had lower rates than yours, pretty much, so that was easy enough to raise that specter.
Now, in my dissertation I had looked at this issue pretty carefully and found that the differences along states and cost after you 00:32:24 for industry mix and so on was really trivial, half a percentage point on average and payroll at most among states in terms of the average employer. Now obviously some extreme cases go beyond that, but by and large I felt then, I felt now and the National Commission felt that there was no reason you couldn’t have a state system under the control of the states without having this runaway employer thing, but the specter was so dominating a factor in state legislators that you had to do something to convince states that they had to have decent laws or you’re going to have this race to the bottom essentially. Every state is going to figure out, they got to keep cutting their benefits or certainly not to increase them or they are going to lose their employers.
So that was an explanation that we gave in the report and it’s — it at the time was persuasive to everybody on the Commission, unanimous report and I think they bought into this because they saw it. I mean, we would run the various states’ 00:33:29 outcome of our hearings that in fact you would find states saying, we’ve got a lousy lawyer, but we can’t increase it because our next-door neighbor state just got even worse laws, and if we increase our laws to make them a decent law, we’re going to lose all of our employers on that other lousy state. So, that’s the rationale for federal standards, and I think it’s still a rationale for federal standards.
There was a period after the Commission report came out for a year or two, I would say, that we had a pretty good consensus among insurance from employers and so on. The federal standards were okay, but that consensus broke down in part ironically because Javits and Senator Williams from New Jersey introduced legislation before our three-year period was up. We said given the states three years in the laws were so overboard in terms of what the federal standards are going to be faith healers, for example. They had to be protective. Every state had a lot of faith healers to operate.
I mean, this is ridiculous and John Lewis was the Vice Chair of the Council of the National Commission and I testified in Congress against the Williams and Javits bill, and then so it kind of floundered there in the 50s — in the 70s.
Alan S. Pierce: 70s.
John F. Burton, Jr.: The administration was since fighting our recommendations in terms of — there was an interdepartmental taskforce that was appointed, that was operating under Ford that rationally assessed it was a way of holding off federal standards and then by the time eventually we got to 1980 the political environment changed so much, so essentially in the 80s, the system held steady, a few states improved their laws, a few cut their laws but costs were going down for the first half of the 1980s.
Alan S. Pierce: Right. John, this might be a good time to take a break and when we come back we’d like to talk about the next era post the ‘72 report, the era. So, right now we’re going to take a quick break for some messages from our sponsors and we’ll be right back with Professor Burton.
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Alan S. Pierce: Welcome back to Workers Comp Matters here on the Legal Talk Network with my guest Professor John Burton.
We left off with the published Commission report, and I guess, if we were to look at the first 40 or 50 or its 50th half century of workers’ comp is the era before the 1970-1972 study. We now have 45 or more years post-1972, and looking back here now at the end of 2018, the beginning of 2019, I think we can identify two significant eras after 1972, and John, I think you might refer to the first period after the Commission’s report as the Reformation period which probably went from 1972ish to perhaps the end of the 80s, beginning of 1990.
In a short amount of time what transpired in this so-called Reformation period insofar as the state of workers’ comp around the country?
John F. Burton, Jr.: I think that the states responded partly beyond a fear that there were going to be federal standards and partly because I think the National Commission laid out a fairly clearer set of recommendations that we considered essential in terms of almost entirely focusing on the adequacy and duration of cash benefits, because that was the main problem we saw at the time and states vastly improved their laws.
I mean, we were — the statistics show that in 1970 the majority of states, the maximum weekly benefit was less than $100 a week, below the national poverty standard, by the late 70s most states had actually improved their maximum weekly benefits so that there were at least a 100% of the state’s average weekly wage, which was vastly greater than it had been a decade earlier.
Alan S. Pierce: Let me give you an example. I was just getting into the fields in 1969-70, ‘71, and my memory was that the state maximum in Massachusetts, keeping in mind, Massachusetts was and is probably a more progressive state labor-wise than many others around the country. Back when I was a claims adjuster and before the Commission issued its report our maximum weekly benefit, the most an injured worker could collect, regardless of what his or her wage was, I think was $77 a week, it might have gone up to $90 or $95 a week.
Once the Commission report came out and one of the essential recommendations was that the maximum benefits should be tied into the state average weekly wage either at a 100% or even 200% of the average wage, Massachusetts’ average wage in the mid 70s, right after the report, was around I think $212 a week.
So we went up as a result of the report of the Commission from just under a $100 a week to $212 a week and then it steadily — being indexed to the state average wage we went from the 200s into the 300s, and of course, now it’s here in Massachusetts over a $1000 a week.
So we had this period of states in an effort to comply with as many of these 19 essential recommendations as possible to stave off the threat of a federal takeover. We saw for the period of maybe the first 15-20 years an increase of benefits around the country. Now, as a result of that I was not great in economics. I did EC 101 and that’s as far as I went, but when you raise benefits something else happens and that became apparent as we got into deep into the 1980s and that was what, rising cost of insurance, correct?
John F. Burton, Jr: That’s right. Although it’s interesting because the first half of the 80s the costs were going down. What happened in the — I don’t think we quite know all of the explanations or what happened from say ‘87 on, but whatever it was cost started going up pretty rapidly. Now, one of the factors was historically workers’ compensation, two-thirds at least of the benefits have been cash benefits and the other was medical benefits.
Alan S. Pierce: And that started to spike.
John F. Burton, Jr: And that started to spike in the late 70s and it was driven in part by the fact that there was a lot of concern about health care cost outside of workers’ compensation, and so you had a whole bunch of reforms that started in the 80s, late 80s in the general health care system limitations of certain deductibles, coinsurance, preferred provider organization, other kinds of managed care, and workers’ compensation didn’t initially have any of those things.
And so, if you had a marginal case, say a back case where remember there is an issue whether it’s work-related or not, there was a lot of pressure on workers to get that case into workers’ compensation because the medical benefits and workers’ comp were still in the old system and kind of paid pretty much a full cost of the medical care. And if it wasn’t work-related, you are going to end up turning on deductible and so on, and it also, it was the case that practitioners, the doctors much prefer to have these cases in workers’ comp because they were good at higher payments to than if it was treated as a non-occupational injury.
So, I think we got a lot of shifting, a cost of health care that really kind of started to drive the system cost up in the late 80s.
Alan S. Pierce: And we saw that in Massachusetts and we saw that the Massachusetts Miracle which brought Mike Dukakis to prominence shortly thereafter have suffered the effects that other states had around the country, and all of a sudden workers’ comp costs and premiums were really high in Massachusetts, it was not unusual and that I guess might have begun the second era. We had the reformation, but now we have the counter-reformation period which —
John F. Burton, Jr: Counter-reformation, right, yeah.
Alan S. Pierce: — yeah, started around 1990. I feel like we’re talking about Christianity, history of Christianity and the Middle Ages here, but I don’t want to take the analogy too far, but there are some parallels there. So, we have been in and we are probably right still in this counter-reformation period. It’s been now maybe 25-28 years that we’ve seen this — the pendulum shift the other way. So, give us a brief overview of the reaction to the 80s.
John F. Burton, Jr: Well, I think that you put your finger on what I would call, what my concern is, is that since about 1990 a combination of factors took place. You had costs going up rapidly in workers’ compensation. You also had in the early 80s a regulated workers’ comp insurance industry which meant that insurance commissioners had a great deal of influence on what rates were going to be approved and it turns out that in a lot of states, insurance commissioners did not approve the rate filings that were necessary to keep the insurance industry solvent, and so for a period of about six, or seven, or eight years in the late 80s, early 90s, the workers’ comp insurance industry was losing money including after you took into account investment income.
And that really set the alarms off, bells off for the insurance industry because they just couldn’t afford to do that, and so you had a shift in the political environment, incidentally also one of the consequences of this is that the insurance industry, workers’ comp, it’s essentially now been deregulated in almost every state so that we no longer would have the possibility of insurance commissioners holding down rates.
If they are going to go up, they go up, and likewise, I can go down as they haven’t in many years. That was a factor. Then you had — there’s another practical factor on this thing, workers’ compensation being a state-run program. Historically this had been an issue that was of central concern to the labor movement at the state level, and so that the state level, number of states with head strong unions, they were able to get laws passed that were relatively favorable and to hold off adverse reforms.
Well, essentially what’s happened since the 1990s is the labor movement has disappeared in a lot of states. I mean, we’ve had a national other than the public sector and essentially we’re now less than — well, less than 10% of the labor force was organized and so the politics of this changed considerably in a lot of states. It stays like historically we are strong even in states like Michigan or Connecticut.
Alan S. Pierce: Massachusetts, we’ve seen it here.
John F. Burton, Jr: Yeah, okay; well, I was waiting for your comment on that one, but yeah, and so there are a few states that still have strong labor movement. We have relatively a strong one in New Jersey and those states have been pretty much immune from this, but essentially you’ve got the natural defender of a decent law wipe out politically, and then you had, in certainly the last ten years or so the fact that we were in this serious recession and a lot of the recession was at the same time you had deregulation taking place in a lot of industries, not just insurance obviously, but transportation and utilities and so on, so that there was a lot more competition at the state level, which I think made employers even more concerned about whether their states will always low enough in terms of cost to allow them to remain competitive.
So, essentially beginning in the late 80s and then into the 90s, and certainly continuing to the present day you’ve had basically a movement that is attempting to keep the cost of workers’ compensation down, successfully keeping it down, but it does so by reducing —
Alan S. Pierce: Reducing benefits.
John F. Burton, Jr: — the adequacy of the cash benefits. It’s not so much that the maximums have been held back because most states pass this law as like you had in Massachusetts, which automatically increases —
Alan S. Pierce: Index to inflation, but yeah, with durational limits.
John F. Burton, Jr: Right. The thing that has happened since the early 90s is that the compensability issue, whether you are eligible for benefits or not, has become the point where state laws have become less and less supportive of workers.
Alan S. Pierce: The changes in causation standards; major cause is the cause of aggravation. You’re right. It makes it much harder especially for the aging workforce to be able to maintain or sustain a workers’ comp claim because all of us, as we age, are subjected to the gradual deterioration of our bodies so that we all have some degree of degenerative disc disease, degenerative arthritis in our joint. So, we have a traumatic injury that produces a disability. We now have an increased standard of showing that the work injury continues to remain as the major cause or a major cause, so it is, it has cut down the amount of claims or the duration of these claims.
So, we are not yet at the end of the counter-reform. We’re still seeing benefits go down, we’re seeing premiums go down. I think the costs are not out of control. We’re now — I see us in another era. We are having trouble getting the state legislatures to react to this pendulum shift of high benefits, low benefits, increased cost, decreased cost, and I just want to touch on this briefly before we end. We’re sort of now in an era at least the last two, three, four years of looking at the courts coming back into this where legislatures are loath to act to increase benefits to a level somewhere between where they were and where they’ve been cut.
We are now seeing a tipping point being reached in many jurisdictions with a constitutional argument that the workers’ comp remedy is no longer a sufficient adequate reasonable necessary remedy in exchange for the exclusive remedy that the employers.
So, we are seeing increased challenges around the country in states where people are now turning to the courts to determine whether a workers’ comp statute is in effect constitutional. Give us your thoughts on that. You’ve been observing this now for the last 4, 5, 6 years.
John F. Burton, Jr: Well, number one, I would have to say another piece — in relation with this is the fact that the compensation of state legislatures has changed in the last 15-20 years.
Alan S. Pierce: That’s less lawyers and less Republicans.
John F. Burton, Jr: So it’s a much more controlled network of Republicans. I say, there is a lot Republicans but realistically it’s been Republican parties that have taken the lead on scaling back the availability of workers’ compensation benefits, and I think the courts have struck back and it’s interesting that some of these decisions are coming out of states that are relatively conservative states. Florida, for example, there were several decisions two or three years ago where the Florida Supreme Court, which is generally considered not terribly progressive as overturn some of the legislative changes as being unconstitutional. One of the more recent examples is Kansas where you had —
Alan S. Pierce: AMA Guides, yeah.
John F. Burton, Jr: The AMA Guides thrown out and you had Oklahoma, which is —
Alan S. Pierce: Yeah, they opt out, yeah.
John F. Burton, Jr: — a very conservative state — yeah, and it’s allowing employers to opt out and set up their own programs that were not workers’ compensation and the Supreme Court in Oklahoma said, that’s unconstitutional. So, I think there’s some kickback from the court system. My own sense is, it’s a minor salvation which puts it in a way.
Alan S. Pierce: It’s a band-aid.
John F. Burton, Jr: In fact, the overwhelming movement of the last 20 years has been, it’s been to make it workers’ compensation less supportive, less adequate, less equitable, and I must say it is my own feeling. I’m kind of back to where I was in 1960, I have been pretty pessimistic about the future workers’ compensation, and essentially it’s almost an accident that we have this problem. The accident being when the program was started at the state level, it’s always remained at the state level even though the Constitution that has changed and would allow it to be a federal program or certainly would allow federal standards, but we’ve been locked into a state system and the inherent in our competitive society is that states are going to be competing and the way they compete is to get cost down and the way you get cost down is to provide benefits that are less adequate and actionable for workers, and I think I’m back to where I was.
As I say in the 60s it really kind of depressed, I guess, it’s the one way I have to put it or certainly pessimistic about the future of workers’ compensation as being a source of protection and adequate protection for injured workers.
Alan S. Pierce: Yeah, and as we close, and again, I don’t like to hear that being somebody who’s invested his career and I want to see this system the 21st Century is much different than the 20th Century in terms of the makeup of our workforce, that you mentioned the demise of the influence of organized labor. We are now seeing a blurring of even the employer-employee relationship with these new, what we would call the changing economy. We’ve certainly lost the factories and industrial jobs. We are now moving into a service-oriented labor force, we’re getting into robotics, we are getting into the gig economy, and we have safety nets in place that weren’t in place a hundred years ago, so that I think the challenge that we have, those of us who want to see this system continue to improve and succeed, is to try to fit basically a 19th-early 20th Century model into a 21st Century economy and workforce; and that is, I think where even if you have a crystal ball, it’s going to be very difficult to predict whether we’re going to be having this conversation 10, 15, 25 years from now. I think 10-15 years from now, yes.
I think of workers’ comp is to go to become an anachronistic in our society. It’s probably going to take a half a generation or more to get there, but any closing words you have aside from maybe a general sense of pessimism about the long term future workers’ comp, at least for, let’s say the near term where are we going, what we are likely to see in the next maybe 10-15 years, whether it’s opt-out or some versions thereof or some other hybrid system?
John F. Burton, Jr: I think the opt-out is the major threat right now because there are some states that although the law was held unconstitutional in Oklahoma. I think there’s a lot of lawyers around who were clever enough to rewrite those statutes in a way that they will be found constitutional; and in Texas, which has always been — it’s been the only state that’s always had —
Alan S. Pierce: An opt-in state, yeah, non-compulsive state.
John F. Burton, Jr: Opt-in, yes, right, but it’s a non-mandatory coverage for employers. Let’s put it that way. There is some evidence now that movement in Texas, lot more employers are now dropping workers’ compensation there, even though if you do that you are subject to tort suits they are willing to take that risk, and so, I’d love to tell you that there are some optimistic things going on.
I do think there are some states, new juries, law is so pretty good. Massachusetts, I think is all right, but boy, there are — it’s going to be harder and harder for these states and then just an example of this thing I’ve been involved in. I have a little bit, looking at what’s going on out there. It was one of the few states that actually passed a law that had the maximum weekly benefit at 200% of the state’s average weekly wage.
We are going to make clear to your listeners that it’s not that everybody gets 200% of the state’s average weekly wage. They would get typically to simplify this, two-thirds of their own pre-injury wage or the maximum, whichever is less. So, for vast majority of workers they don’t get anywhere near 200% or even 100% of the state’s average weekly wage. They get two-thirds of their own wage, which is a lower number.
So, I think there’s — I don’t know whether we’re going to find another solution. I’d like to think that it’s possible that something else would come along, but the most obvious thing for more serious cases would be to broaden the coverage of the Social Security Disability Insurance System, but that seems unlikely because it’s in such bad financial situation itself and Congress is not willing to allow I think a substantial increase in that program for fear of driving the Social Security Disability Insurance Program into further difficulties. We all talk about the old-age system running out of money in 30-40 years. Well, the DI system is already on the running deficits and serious problems. So, I don’t think in the short run that’s going to be a solution.
Alan S. Pierce: Well, John, I want to thank you very much for being a guest. I think we could talk about this for another hour or two without even running out of time. Let’s do this again in about another 10 or 15 years, you promise?
John F. Burton, Jr.: I am all for that.
Alan S. Pierce: If not sooner. All right. Well, I want to thank you for being a guest. I want to thank you for all you’ve done for all of us in the field of workers’ comp, and for those of you who are listening, please tune into next edition of Workers Comp Matters and I just want to say, have a good day and make it a day that matters. Thank you.
Outro: Thanks for listening to Workers Comp Matters today on the Legal Talk Network, hosted by attorney Alan S. Pierce. Will 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.