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1 # - I
Brief overview
All About OSHA
U.S. Department of Labor
Occupational Safety and Health Administration
OSHA 2056
1994 (Ravised)
- inspection different than investigation
atter
accident
- OSHA then housedgebes
18:11 No.004 P.10
Workplace Inspection
notice would produce & more thor-
through normal enforcement proce-
ough or effective inspection.
dures.
Employers receiving advance notice
Serious physical barm is any type of
of an inspection must inform their
barm that could cause permanent or
employees' representative or arrange
prolonged damage to the body or
for OSHA to do so.
A
uthority to Inspect. To enforce its standards, OSHA is authorized
which, while not damaging the body
under the Act to conduct workplace inspections.
If an employer refuses to admit an
on a prolonged basis, could cause such
OSHA compliance officer, or if an
temporary disability as to require in-
Every establishment covered by the
structures, machines, apparatus,
patient hospital treatment. OSHA con-
DEC 20'94
employer attempts to interfere with
Act is subject to inspection by OSHA
devices, equipment and materials
the inspection, the Act permits appro-
siders that "permanent or prolonged
compliance safety and health officers,
therein, and to question privately
priate legal action.
damage" has occurred when, for
who are chosen for their knowledge
any such employer, owner, opera-
example, a part of the body is crushed
and experience in the occupational
tor, agent or employee."
Based on a 1978 Supreme Court rul-
or severed; an arm, leg. or funger is
safety and health field. Compliance
ing (Marshall V. Barlow's, Inc.),
amputated; or sight in one or both eyes
Inspections are conducted without
officers are vigorously trained in
OSHA may not conduct warrantless
is lost. This kind of damage also
advance notice. in fact, alerting an
OSHA standards and in recognition of
inspections without an employer's
includes that which renders a part of
employer in advance of an OSHA
safety and health bazards. Similarly,
consent. k may. however, inspect
the body either functionally uscless or
inspection can bring a criminal fine of
states with their own occupational
after acquiring a judicially authorized
substantially educed in efficiency on
up to $1,000 and/or a six-month jail
safety and health programs conduct
search warrant based upon administra-
or off the job. An example: bones in a
term.
inspections using qualified compli-
live probable cause or upon evidence
limb shattered so severely that mobili-
ance safety and health officers,
There are, however, special circum-
of a violation.
ty or dexterity will be permanently
stances under which OSHA may
reduced.
Under the Act, "upon presenting
indeed give notice to the employer, but
appropriate credentials to the owner,
Inspection Priorities
Temporary disability requiring in-
even then, such a notice will be less
operator or agent in charge," an
patient hospital treatment includes
than 24 hours. These special circum-
OSHA compliance officer is autho-
Obviously, not all 6 million work-
injuries such as simple fractures, con-
stances include:
rized to:
places covered by the Act can be
cussions, burns, or wounds involving
ID:
Imminent danger situations which
inspected immediately. The worst sis-
substantial loss of blood and requiring
"Enter without delay and at reason-
require correction as soon as possi-
uations need attention first. Therefore,
extensive suturing or other healing
able times any factory, plant, estab-
ble;
OSHA has established a system of
aids.
lishment, construction site or other
inspection priorities.
areas, workplace, or environment
Inspections that must take place
Injuries or illnesses that are difficult to
where work is performed by an
after regular business hours, or that
Imminent Danger
observe are classified as serious if they
employee of an employer; and to
require special preparation;
Imminent danger situations are given
inhibit a person in performing normal
"Inspect and investigate during
top priority. An imminent danger is
functions, cause reduction in physical
Cases where notice is required to
regular working hours, and at other
assure that the employer and
any condition where there is reason-
or mental efficiency or shorten life.
reasonable times, and within rea-
employee representative or other
able certainty that a danger exists that
Health hazards may constitute immi-
sonable limits and in a reasonable
personnel will be present; and or
can be expected to cause death or seri-
nent danger situations when they pre-
manner, any such place of employ-
ous physical harm immediately, or
sent a serious and immediate threat to
Situations in which the OSHA area
ment and all pertinent conditions,
before the danger can be eliminated
life or health.
director determines that advance
18:11 P.11
For a health hazard to be considered
officer will ask the employer to volum-
so grave that "2 reasonable person"
nent danger, the employee's name will
an imminent danger, there must be a
tarily abate the hazard and to remove
in the same situation would con-
be withheld from the employer, if the
reasonable expectation (1) that toxic
endangered employees from exposure.
clude there is a real danger of death
employee so requests.
substances such as dangerous fumes,
Should the employer fail to do this,
or serious physical harm; and
Programmed High-Hazard
dusts or gases are present, and (2) that
OSHA, through the regional solicitor,
The employee has no reasonable
Inspections
exposure to them will cause immedi-
may apply to the nearest Federal
alternative to refusing to work
ate and irreversible harm to such a
District Court for appropriate legal
Next in priority are programmed, or
under these conditions (e.g., asking
degree as to shorten life or cause
action to correct the situation. Before
planned, inspections aimed at specific
for reassignment to another area).
reduction in physical or mental effi-
the OSHA inspector leaves the work-
high-hazard industries, occupations or
DEC 20'94
ciency, even though the resulting
place, he or she will advise all affected
Catastrophes and Fatal Accidents
health substances. Industries are
barm is not immediately apparent.
employees of the hazard and post an
selected for inspection on the basis of
Second priority is given to investign-
imminent danger notice. Such action
factors such as the death, injury and
Employees should inform the supervi-
tion of fatalities and catastrophies
sor or employer immediately if they
can produce a temporary restraining
illness incidence rates, and employee
resulting in hospitalization of five or
order (immediate shutdown) of the
exposure to toxic substances. Special
detect or even suspect an imminent
more employees. Such situations
operation or section of the workplace
emphasis may be regional or national
danger situation in the workplace. If
must be reported to OSHA by the
the employer takes no action to climi-
where the imminent danger exists.
in scope, depending on the distribution
employer within 48 hours.
nate the danger, an employee or the
Should OSHA "arbitrarily or capri-
of the workplaces involved. States
Investigations are made to determine
cionsly" decline to bring court action,
with their own occupational safety and
authorized employee representative
if OSHA standards were violated and
the affected employees may sue the
health programs may use somewhat
may notify the nearest OSHA office
to avoid recurrence of similar acci-
Secretary of Labor to compel the
different systems to identify high-haz-
and request an inspection. The
dents.
request should identify the workplace
Secretary to do so.
and industries for inspection.
Employee Complaints
location, detail the bazard or condition
Walking off the job because of poten-
Followup Inspections
the
and include the employee's name,
tially unsafe workplace conditions is
Third priority is given to employee
A followup inspection determines
address and telephone number.
not ordinarily an employee right. To
complaints of alleged violation of
whether previously cited violations
do so may result in disciplinary action
blowst
is
Although the employer has the right to
standards or of unsafe or unhealthful
have been corrected. If an employer
see a copy of the complaint if an
by the employer. However, an
working conditions.
has failed to abate a violation, the
unity
ID:
inspection results, the name of the
employee does have the right to refuse
The Act gives each employee the right
compliance officer informs the
employee will be withheld if the
(in good faith) to be exposed to an
to request an OSHA inspection when
employer that he/she is subject to
employee so requests.
imminent danger. OSHA rules protect
the employee feels he or she is in
"Notification of Failure to Abate"
The OSHA area director reviews the
employees from discrimination if:
imminent danger from a hazard or
alleged violations and may face addi-
information and immediately deter-
Where possible, be or she asked the
when be or she feels that there is a
tional proposed daily penalties while
mines whether there is a reasonable
employer to eliminate the danger,
violation of an OSHA standard that
such failure or violation continues.
basis for the allegation. If it is decided
and the employer failed to do so;
threatens physical barm. OSHA will
the case has merit, the area director
and
maintain confidentiality if requested,
will assign a compliance officer to
will inform the employee of any
Inspection Process
conduct an immediate inspection of
The danger is so imminent that
action it takes regarding the complaint
there is not sufficient time to have
Prior to inspection, the compliance
the workplace.
and, if requested, will hold an infor-
the danger climinated through nor-
officer becomes familiar with as many
mal review of any decision not to
Upon inspection, if an imminent dan-
mal enforcement procedures; and
relevant facts as possible about the
inspect. Just as in situations of immi-
ger situation is found, the compliance
workplace, taking into account such
The danger facing the employee is
12
HOUSTON LAW REVIEW
[Vol. 31:1
support base. When the community gets this information, they
will see what is getting into the air and water. This data is
quite impressive. There are computer programs that almost
instantly take the EPA raw data and break it down into
meaningful categories by states. Citizen Action Organization
provides this service. This information creates more of a com-
FOREWARD
munity health base for the workers inside the factory because
it emphasizes that there are some occupational health prob-
lems that are seamless webs. They are occupational health
problems but are also basically community and environmental
problems.
OCCUPATIONAL SAFETY AND HEALTH:
The key behind all of these recommendations is not just to
give you humanitarian impulses to generate a self interest for
POLICY OPTIONS AND POLITICAL REALITY
safety and health among workers. It imposes powers and tools
to achieve a safer workplace and a more healthful workplace.
Each of these recommendations also seeks to develop vested
Sidney A. Shapiro
interest behind these goals. When people complain that tort
reform issues and plaintiffs' trial lawyers are just vested inter-
Table of Contents
ests, my answer is that I am glad that there is a vested inter-
I.
est behind wrongfully injured and sick people in this country. I
THE POLICY FRAMEWORK
15
doubt whether there would have been any cases brought that
A. Dangerous Workplaces
15
would have broken ground in the common law if there were
B. The Policy Failures
16
not a vested interest, namely the contingent fee lawyers. So,
1. Economic Incentives.
17
the design of any social control system that has a high theo-
2. Humanitarian Incentives
18
retical consensus among the population behind it should also
3. Regulatory Incentives
19
include strategies to develop vested interests behind worker
C. Reform Options
20
health and safety. Just as the contorted, and we hope not pro-
II.
longed, existence of a vested interest in not investing in safety
THE CURRENT POLITICAL ENVIRONMENT
22
in the workplace that has been too long with us historically. I
A. The Political Impact
22
want to suggest that you ask yourselves constantly, "How do
B. Political Resources
24
we get the electric connection between knowledge and action
C. Prospects For Reform
28
moving faster?"
III.
RESHAPING THE POLITICAL ENVIRONMENT
33
A. Issue Redefinition
33
B. Self-Interest
35
C. Fairness
37
IV.
CONCLUSION
42
John M. Rounds Professor of Law, University of Kansas; B.S., 1970, J.D.
1973, University of Pennsylvania. Professor Shapiro thanks Professors Jeffrey Cohen,
Raymond Davis, Richard Levy, and Burdett Loomis for their assistance and acknowl
edges support from the Postlethwaite Fund of the University of Kansas Law School.
13
#2
Brief overview
14
HOUSTON LAW REVIEW
[Vol. 30:13
OCCUPATIONAL SAFETY
15
1994]
Safety and Health Administration (OSHA) estimates that each
Many workplaces are dangerous places. The Occupational
unlikely to be successful in Congress.
day an average of seventeen persons are killed at work and
another 16,000 persons are injured.' The estimated annual
I. THE POLICY FRAMEWORK
billion. This Symposium considers regulations and other $80 in-
cost of occupational injuries and illnesses is in excess of
Employers take steps to reduce workers' workplace acci-
centives for employers to protect employees in order to under-
dents and illnesses because of economic and humanitarian
stand why workers3 are not better protected.
incentives and in response to regulatory mandates,⁷ but
Workers remain unprotected from workplace hazards for
workplaces remain significantly dangerous despite these influ-
tect two reasons. First the regulations requiring employers to
ences.⁸ This section describes the current level of workplace
workers are subject to significant constraints that weaken pro-
accidents and illnesses, the constraints that limit employer
their impact.4 Second although these problems could be
incentives and regulatory requirements, and what reforms
dressed by legislative reforms, workers lack the political influ- ad-
might increase occupational safety and health.
ence to push effective solutions through Congress and
due legislatures.⁶ In other words, the lack of worker protection state
A. Dangerous Workplaces
to both policy and political failures. Existing policies to is
An examination of the available evidence on workplace
protect workers are not strong enough and the political envi-
accidents and illnesses leads to three conclusions First, there
ronment is not conducive to addressing the policy problems.
is no authoritative measurement of accidents and illnesses
The goal of this Foreward is to review these policy failures
and analyze the political hurdles to reform. Part I of this Fore-
and estimates vary by a considerable magnitude.10 Second,
ward outlines the framework of incentives used to
the available data typically understate the number of occupa-
tional accidents and, to a greater degree, the number of occu-
the with this structure. The section also references several policy
flaws employers to ensure worker health and safety and the encourage
pational illnesses. Finally, despite this consistent under-
articles in this issue that discuss aspects of the framework. of
statement of the problem, the evidence indicates that many
workers face substantial risks at work."
Part II of this Foreward examines why the current political
As noted earlier, OSHA estimates that an average of sev-
Part environment is hostile to legislation in favor of workers, and
enteen workers die each day. 13 This number is consistent
ment for their own benefit.
III considers whether workers can change this environ-
with the estimate by Professor Spieler, in her article in this
issue, that the number of occupational fatalities in 1989
This Foreward concludes that in order for workers to
and tain significant reforms, they must redefine occupational ob-
ranged from 3600 to 10,400 persons,14 or between ten and
health in a manner that interests persons who safety
they appeal to the self-interest and altruism of other citizens. cause
directly at risk. Workers can broaden support for their are not if
6
See FRANK R. BAUMGARTNER & BRYAN D. JONES, AGENDAS AND INSTABILITY
However, without strong presidential support, this strategy is
IN AMERICAN POLITICS 241 (1993) (noting that the President can play a key role in
pushing legislation through Congress).
7. Jordan H. Leibman & Terry M. Dworkin, Time Limitations Under State
Occupational Disease Acts, 36 HASTINGS L.J. 287, 362 (1985) (noting that regulatory
systems such as workers' compensation programs seek to balance both economic and
23
Dear Pledges Revitalized OSHA,' Greater Use of Egregious Case
humanitarian objectives).
Q.S.H. 2 Id. Rep. (BNA) No. 25, at 763 (Nov. 17, 1993) (hereinafter Revitalized Penalties, OSHA).
8. Refer to notes 13-16 infra and accompanying text (summarizing estimates of
workplace injuries and occupationally-related deaths).
that present safety and health risks.
3. For purpose of this Foreward, "workers" refers to persons employed in jobs
9. See MCGARITY & SHAPIRO, supra note 6, at 6 (stating that reliable sources
data on occupational health and safety are difficult to locate).
substantive, ry and Legislative Reform, 6 YALE J. ON REG. 1, 4 (1989) Regulato-
Alternatives 4. See Sidney A. Shapire & Thomas O. McGarity, Reorienting OSHA:
10. See id. at 4 (giving, for example, the range of estimates from two million to
deven million nonfatal injuries suffered by American workers per year).
productivity). managerial, legal, and political constraints that adversely affect (noting OSHA's the
11. Id. at 6.
12. See id. at 4-5 (noting statistical evidence indicating the dangerousness of the
ing PROMISE that workers OF THE OCCUPATIONAL SAFETY AND HEALTH ADMINISTRATION 3 THE (1993) FAILED (not-
5. THOMAS O. MCGARITY & SIDNEY A. SHAPIRO, WORKERS AT RISK:
American workplace).
Revitalized OSHA, supra note 1, at 763.
lack sufficient political power to protect themselves).
TC
Emily A. Spieler, Perpetuating Risk? Workers' Compensation and the Persis-
tence of Occupational Injuries, 31 Hous. L. REV. 119, 114 (1994).
16
HOUSTON LAW REVIEW
[Vol. 30:13
1994]
OCCUPATIONAL SAFETY
17
twenty-eight deaths each day. Estimates of injuries range from
and regulatory incentives. Because of various real-world con-
two to eleven million per year.16 Assuming a total of only 2.5
straints, however, the impact of these influences is less than
million injuries per year, this conservative estimate translates
what economic and regulatory theory would predict.
into about 10,000 serious injuries each working day. 16
A 1972 government report estimated that 390,000 new
1. Economic Incentives. The operation of labor markets
cases of disabling occupational disease occur each year, with as
creates economic incentives for employers to reduce employees'
many as 100,000 fatalities a year. Two recent studies esti-
workplace accidents and illnesses." Economic theory predicts
mate that the number of occupational disease-related deaths
that workers will bargain for wage premiums as compensation
ranges from 50,000 to 95,000 deaths annually 18 Other studies
for exposure to workplace hazards and that employers will
place the number of disease-related fatalities between 124,000
abate workplace risks to the extent it is less expensive than
and 210,000 annually." To put these estimates in perspec-
paying higher compensation. In addition, employers have an
tive, occupational disease accounts for a larger percentage of
incentive to protect existing workers whenever the cost of do-
cancer deaths than environmental pollution*⁰ and it kills
ing 80 is less than hiring and training their replacements.26
more persons each year than such other preventable causes of
However, several factors limit the impact of these econom-
death as motor vehicle accidents, diabetes, and homicides.'
ic incentives in labor markets. Workers are not paid adequate
lang.
*
These studies and comparisons indicate that many
wage premiums for more hazardous employment because they
workplaces are unsafe. The following section summarizes the
lack bargaining power or are ignorant of workplace risks.* 27
policy failures responsible for this unfortunate situation.
Moreover, many workers in especially dangerous occupations
sharring. Indicating
are easily replaced."
B. The Policy Failures
Regulation in the form of workers' compensation and tort
law creates similar incentives." Employers have an incentive
Employers take steps to reduce health risks and to in-
to abate occupational hazards to the extent that preventative
crease workplace safety in response to economic, humanitarian,
action is less expensive than paying workers' compensation
claims. Professor Spieler's article in this issue discusses this
16
MCGARITY & SHAPIRO, supra note 5, at 4.
16.
Id.
17. THE PRESIDENT'S REPORT ON OCCUPATIONAL SAFETY AND HEALTH 111 (1972);
reprinted in H.R. Doc. No. 303, 92d Cong., 2d Sess. 111 (1972).
22. See Leibman & Dworkin, supra note 7. at 362 (noting that regulatory
18. See Philip J. Landrigan & Dean B. Baker, The Recognition and Control of
schemes such as workmen's compensation systems balance employers economic and
Occupational Disease, 266 JAMA 676, 676 (1991) (estimating that occupational dis-
humanitarian objectives).
cases account for 50,000 to 70,000 deaths annually); National Safe Workplace Inati-
23. See MCGARITY & SHAPIRO, eupra note 5, at 268 (noting that in an efficient
tute, Beyond Neglect: The Problem of Occupational Disease in the U.S.-Labor Day
labor market, employers will take steps to minimize hezards to the extent that pre-
90 Report 7 (1990) [hereinafter Beyond Neglect) (estimating cases of occupational
vention costs less than compensation).
disease in 1987 at 47,877 to 96,479 persons).
24, See id. at 18.
19. See PETER 8. BARTH & H. ALLAN HUNT, WORKERS' COMPENSATION AND
as.
See Elinor P. Schroeder & Sidney A. Shapiro, Responses To Occupational
WORK-RELATED ILLNESSES AND DISEASES 19 (1980) (citing John M. Peters, Occupa-
Disease: The Role of Markets, Regulation, and Information, 72 GBO. LJ. 1231, 1237
tional Health: Working Yourself Sick, in THE CHALLENGES OF COMMUNITY MEDICINE
(1984) (noting that employers will take preventative actions when they cost less than
262 (Robert L Kane ed., 1974)) (reporting the conclusion of a researcher who had
the consequences of not taking such actions).
surveyed numerous studies and estimates on deaths due to occupationally related
26
See id. at 1241.
disease).
See id. (citing W. KIP Viscusi, RISK By CHOICE: REGULATING HEALTH AND
20. See Richard Doll & Richard Poto, The Causes of Cancer: Quantitative Esti-
SAFETY IN THE WORKPLACE 41 (1983)) (suggesting that workers also fail to demand
males of Avoidable Ricks of Cancer in the United States Today, 66 J. NAT'L CANCER
wage premiums because they lack the information about occupational risk necessary
INST. 1191, 1256-57 (1981) (estimating that occupational exposures account for ap-
take a bargaining position).
proximately four percent of all cancer deaths, while environmental pollution accounts
28 See JAMES C. ROBINSON, TOIL AND TOXICS: WORKPLACE STRUGOLES AND Po-
for approximately two percent of such deaths). Researchers have calculated the inved-
LITICAL STRATEGIES FOR OCCUPATIONAL HEALTH 75-76 (1991) (noting employers' ten-
dence of occupational disease-related cancers to be somewhere between 1 and 15% of
dency to replace highly skilled workers in hazardous work environments with less
all cancers, while government studies have found that the incidence is between 20
skilled workers at lower wages and subject to increased supervision and control).
and 88%. See MCGARITY & SHAPIRO, supra note 5. at 8.
29. See id. at 1245, 1250 (noting that, under workers' compensation and tart
21. See Beyond Neglect, supra note 18, at 12 (drawing this conclusion from -
law schemes, the costs of work-related injuries and illnesses of workers become costs
timates based on 1987 data indicating about 70,000 fatalities due to occupational
for the employer).
disease).
30
Id. at 1245.
18
HOUSTON LAW REVIEW
[Vol. 30:13
1994]
OCCUPATIONAL SAFETY
19
form of regulation. 31 However, as in the case of labor market
workers were killed and fifty-four more were injured. 38 (Sec-
incentives, real world constraints limit the effectiveness of
ond, as Ralph Nader points out in his address published in
these economic incentives in protecting workers. As Professor
this issue, 39 the humanitarian impulse is weakened because
Spieler demonstrates, employers do not respond to increased
corporate decisionmakers are remote from the persons affected
workers' compensation costs by investing in accident and ill-
by their decisions. It is far easier to trade dollars for lives
ness prevention because alternative responses are less expen-
when employees are perceived as statistics and not as real
sive. These responses include purchasing insurance, discour-
people.4
aging workers from seeking compensation, and lobbying legis-
latures to reduce eligibility requirements and the level of com-
3. Regulatory Incentives. OSHA regulation provides the
pensation. 33 Tort remedies do not make up for the inadequa-
final incentive for employers to protect workers' safety. Con-
cies of workers compensation. Such remedies are available
gress enacted the Occupational Safety and Health Act ("OSH
only when the negligence of a third party other than the em-
Act") in 1970 because of the inadequacy of economic incen-
ployer or the worker caused a worker's injury.35
tives to encourage employers to protect workers and because,
unlike economic incentives, health and safety regulation is
2. Humanitarian Incentives. The previous section ex-
preventative. To use Professor Spieler's apt phrase, econom-
plained that economic theory assumes employers will reduce
ic incentives depend on a "feedback loop. "44 Employers will
workplace hazards only if the cost of the investment is less
not take preventative actions until and unless workers obtain
than the consequences of not making the investment. This
wage premiums or compensation. On the other hand, OSHA
dour picture of employer behavior fails to recognize that em-
regulation has the advantage of causing employers to take
ployers also make safety and health improvements out of hu-
manitarian concerns. 87 However, this incentive is constrained
precautions before employee accidents or illnesses occur. Pro-
in two important ways First, not all employers are conscien-
fessor McGarity's article in this issue examines the regulatory
approach to workplace health and safety.
tious. The fatal result of a 1991 fire at the Imperial Food
A thick web of administrative, legal, and political con-
Products plant in Hamlet, North Carolina demonstrates this
straints limit OSHA regulation. Professor McGarity and I dis-
unfortunate conclusion. The plant owners had locked the fire
cussed the nature and impact of these constraints in a
doors to prevent theft and when a fire broke out, twenty-five
31. See Spieler, supra note 14, at Part III.
32. Id. at part III.D.
33. Id. at Part III.
34. Schrooder & Shapire, supra note 26, at 1251. A key reason why tort law
38. See Family of Worker Killed in Imperial Fire Sues Company, Manager for
fails to supplement state workers' compensation achemes in a comprehensive way is
Gross Negligence, 21 O.S.H. Rep. (BNA) No. 16, at 429 (Sept. 18, 1991).
39. Ralph Nader, Address, 31 Hous. L. REV. 1 (1994).
that workers' compensation remedies are generally a worker's exclusive option. See
40. See id. at 4-5.
Mary Becker, Reproductive Hazards After Johnson Controls, 31 Hous. L REV. 43, 91
(1994) (noting that the exclusive remedy provisions of state workers' compensation
41. See generally GUIDO CALABRESI & PHILIP BOBBITT, TRAGIC CHOICES 17-28
schemes preempt tort causes of action).
(1978) (noting that employer trade-offs between the cost of hazard prevention and
35. See Schroeder & Shapiro, supra note 25, at 1251 (stating that injured work.
fiable). worker safety are easier when the employee victime of such decisions are not identi-
ers must find a third party with liability, such as a supplier or raw materials man-
ufacturer, for pursuit in a tort action); ROBINSON, supra note 28, at 1251 (taking
42. Occupational Safety and Health Act of 1970, Pub. L. No. 91-596, 84 Stat.
note that the exclusive remedy provisions of workers' compensation schemes reduces
1590 (1970) (codified as amended at 29 U.S.C. 99 651-78 (1988 & Supp. IV 1992)).
the effectiveness of tort liability as an incentive for employers to provide safe
43. See MCGARITY & SHAPIRO, supra note 5. at 34 (noting that occupational
workplaces). Incidentally. many state workers' compensation schemes give an employ.
safety had become a national problem when finally addressed by legislative action);
or a right of subrogation in a worker's third party suit, so that it is reimbursed for
Sidney A. Shapiro & Thomas O. McGarity, Not So Paradoxical: The Rationale For
Technology-Based Regulation, 1991 DUKE L.J. 729, 739-40 (1991) [bereinafter Ratio-
the amount of workers' compensation benefits paid to the worker. Schroeder &
Shapiro, supre note 25, at 1252 The result is even less of an incentive for an em-
nale for Regulation] (noting that economic incentives sometimes result in employers
ployer to reduce hazards present in the workplace. Id.
avoid risks).
merely compensating victims after death or injury rather than spending money to
36. See also Spieler, supra note 14, at 181-85.
44. See Spieler, supra note 14, at 127.
37. See also Becker, supro note 34, at 57-63 (discussing how employers' humani-
45. See id. at 179-85.
tarian concerns may sometimes be misdirected and result in policies that do more
harm than good).
46. See generally Thomas O. McGarity, Reforming OSHA: Some Thoughts for the
Current Legislative Agenda, 31 Hous. L REV. 99 (1994).
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previous publication. e-concluded that in light of the signif-
pose unreasonable health and safety risks.⁶⁵
icant constraints OSHA faces, the surprise is not that OSHA
would also obtain more protection if employers for
has produced 80 regulation but that it has produced any
Workers a greater share of the costs now borne notes by workers that states
regulation at all.48 Moreover, as Professor Becker's analysis in
this issue of the Johnson Controls case indicates, additional
accidents rejected reforming workers compensation to to promote
paid and illnesses. Professor Spieler take this
complications arise when companies attempt to meet regulato-
have the states instead are using direct efforts and con-
ry obligations by discriminating against women. 50
approach; safety, such as safety and health training un-
workplace programs." She concludes that such programs are or
C. Reform Options
sulting to work and that federal standards for compensation
The previous policy framework indicates the opportunities
federalization likely of workers compensation may be necessary. three
another tack, Professor McGarity proposes types
for reform. If workers are to be better protected, there must be
reforms On concerning OSHA regulation. He advances a "patch
improved economic, humanitarian, and regulatory incentives
of and repair" reform of OSHA by delegating additional reforms regula-
for employers. As Mr. Nader and Professors McGarity and
authority to the agency. He also proposes other when
Spieler emphasize, reformers must identify the factors that
tory make it easier for workers to hold OSHA accountable
have constrained the impact of job safety incentives and re-
to fails to carry out its statutory responsibilities. A final set
move them. The reforms most likely to accomplish this goal,
it of reforms would empower workers to protect themselves main- from
however, are also the most drastic changes from the status
que.
workplace health and safety risks Professor McGarity
that fundamental changes are necessary to make OSHA
Workers would be in a better position to demand wage
tains effective, such as "burden-shifting" devices to reduce the evi-
premiums if they had better information and more bargaining
dentiary burden on OSHA to justify a regulation.
power and better information concerning the risks that they
Mr. Nader also emphasizes the need for fundamental
face. Even if workers gain more information, however, their
change in the current approaches to workplace health and
bargaining power will remain low as long as only twelve per-
safety. He endorses ambitious concepts that would empower
cent of the private workforce is unionized and economic re-
workers to protect themselves, such as the right to have gov-
covery is slow in coming. Rather than depending on the "feed-
ernmental officials dismissed if they do not do their job.
back loop" of wage premiums to encourage employers to pro-
More fundamentally, he predicts that a "major cultural jolt"
vide safe workplaces, a better alternative is to empower work-
will be necessary to create a public expectation that workers
ers to protect themselves directly. Professor McGarity, for ex-
should be better protected. He proposes several innovative
ample, endorses the use of labor-management safety commit-
responses, such as requiring top OSHA officials to spend time
tees that would have the power to shut down operations that
with workers and punishing employers by requiring them to
work at the site of workplace accidents.
The following section considers the potential fate of these
and similar reform proposals in the political system. The
47.
See Shapiro & McGarity, supro note 4, at 4-14 (noting that substantive,
managerial, legal, and political constraints have delayed OSHA's ability to fulfill its
original goal of making every workplace safe).
48. Id. at 3.
49. Becker, supra note 34, at 63-71 (analyzing the decision and import of Inter-
55
See McGarity, supra note 46, at 116.
national Union D. Johnson Controls, Inc., 111 S. Ct. 1196 (1991)).
56.
See Spieler, supro note 14, at 187.
50
See id. at 88-96.
57.
See id. at part IV.B.
51.
See generally McGarity, supra note 46; Nader, supra note 39; Spieler, supra
68. Id. at 264.
4.
59. See McGarity, supra note 46, at 111-13.
52.
Refer to notes 13-16 supra and accompanying text for a summary of evi-
60
Id. at 103-06.
dence as to the prevalence of occupationally-related injury, illness, and death suf-
See, e.g., id. at 113-17.
fered by workers.
62.
Id. at 106-09.
53. See Shroeder & Shapiro, supra note 25, at 1241 (concluding that workers
63. 64. Id. at 8; are id. at 4 (attributing the current malaise to a "pitiless ab-
See Nader, supra note 39, at 10.
currently fail to demand wage premiums for hazardous work because they lack these
prerequisites).
straction" that treats workers as dispensable).
54. Nafta Gotcha, NEW YORKER, Nov. 22. 1993, at 4, 6.
65. Id. at 10-12.
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problem for workers is that the most helpful proposals are the
ones the business community is most likely to oppose." Be-
disciplined, rational process of problem solving.⁷¹
cause employers have greater political influence than workers,
In the context of passing workplace health safety legisla-
the solutions that are the most protective of workers are not
tion, the first step-recognition of a problem-occurs when
likely to be adopted.
Congress elevates a problem to its legislative agenda.⁷² This
agenda is limited because, like other organizations, time and
II. THE CURRENT POLITICAL ENVIRONMENT
resource constraints restrict Congress' ability to consider and
make decisions. 73 Interest groups, agencies, and other political
Policy analysts have recommended various solutions to the
actors compete to convince Congress to take up problems of
problems of occupational accidents and disease. Whether Con-
interest to them, but Congress is unlikely to put a problem on
its agenda absent sufficient political demand for action.74
gress or a state legislature will adopt any solution, or even
Once Congress decides to act, interest groups and political
consider it, depends on the political process. The following
analysis offers a model that explains the impact of the political
actors then compete to influence what solutions will be adopt-
ed by advocating policies that serve their interests. 76 At this
process on proposals for workplace health and safety reforms.
This section then analyzes the greater political influence of
point the policy process and the political process join. Congress'
employers than workers and assesses the likelihood of reform
decisions will depend on the relative merits of the proposals
in light of this disparity.
and on the political influence of the competing parties.⁷⁶
Thus, while it is important for an interest group to have a
A. The Political Impact
credible policy, it is also necessary to build political support in
favor of that solution. As one commentator on the political
Congress is unlikely to legislate until an issue is perceived
process has noted, "Reports to Congress suggesting controver-
as a problem, for which solutions exist, under circumstances
sial action, unaccompanied by political momentum, ordinarily
that generate the political will to act on one of those solu-
move the Congress with all the force of a bulldozer with an
tions.* The convergence of these elements is unpredictable
because each is the product of an independent process. 70 The
result is more often "organized anarchy" rather than a
71, See generally Michael D. Cohen et al., A Garbage Can Model of Organiza-
tional Choice, 17 ADMIN. SCI. Q. 1, 1, 3-4 (1972) (referring to complex yet disorga-
nized decisionmaking systems as "organized anarchies," and dubbing the approach
the "garbage can" method of processing and responding to information).
66. See, e.g., AFL-CIO Urges Congress to Give Workers Same Protection Envi-
72. See KINGDON, supra note 69, at 3-4 (defining "agenda" as the subjects or
ronment, Wildlife, 23 O.S.H. Rep. (BNA) No. 10, at 244 (Aug. 4, 1993) (bereinafter as
problems to which government officials pay serious attention). Setting the agenda is
by AFL-CIO the Urges Congress) (stating that the current OSHA reform package
the first step of public policy making. Id.
Association of Manufacturers, the Associated Builders and Contractors, and the
House of Representatives is opposed by business groups such as the proposed National
73. See id. at 193-95 (noting that the legislative system has a limited capacity
to process agenda items).
American Iron and Steel Institute).
74. See id. at 208 (noting that national mood and elected politicians are likely
67. See, e.g., Labor Committee Approves OSHA Reform Measure; Construction
to prevail over organized interests in setting agendas).
[hereinafter Bills Provisions Incorporated, Daily Lab. Rep. (BNA) No. 181, at A5 (Sept. 17, 1992)
76.) See id. at 52 (observing that interest groups employ positive promotion to
the OSHA Reform] (stating that OSHA reform faced presidential veto from
mobilize support for their solutions as well as blocking initiatives that would reduce
American business).
Bush Administration, which felt that reform would erode the competitiveness of
their position); id. at 53 (noting that even if an interest group succeeds in placing
an issue onto the agenda, it may lose control of the debate and enable another
68. The decisionmaking model discussed in the text does not distinguish be-
group's alternative to be implemented): see also BAUMGARTNER & JONES, supra note
to tween Congress and state legislatures. For the sake of brevity, the text only refers
6, at 29 (stating that policy entrepreneurs want to ensure that once a problem ar-
differs. Congress for the remainder of this Foreward, unless the situation in the states
rives on the national agenda their solutions are adopted to solve it).
76. KINGDON, supra note 69, at 151 (noting that surviving proposals include
69. See JOHN W. KINGDON, AGENDAS, ALTERNATIVES, AND PUBLIC POLICIES
those that are technically feasible and incorporate acceptable values). Once accept-
(1990) (postulating a three step process leading to legislation, involving (1) 92-93
able proposals are elevated to the political agenda, the political stream, composed of
of recognition, (2) the generation of proposals by policy specialists, and (3) assessment problem
the national mood and organized political forces, presses for adoption of a proposal.
the current political environment).
Id. at 170-71.
70. See id. at 93 (finding that the political "stream" or environment is
77. Id. at 52 (observing that interest groups gain the attention of government
posed pendent for factor, responsive neither to the Identification of problems or to policies an inde- pro-
officials by mobilizing support, writing letters, sending delegations. and stimulating
their solution).
allies). One respondent in Kingdon's research concluded that "the louder the squawk,
the higher [the issue) gets." Id.
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empty gas tank.
In summary, an interest group needs political influence in
effectively. An example is the split-enforcement arrangement
order to convince Congress to take up a problem and to adopt
between OSHA and the Occupational Safety and Health Re-
the solution that the group favors. As the following section
view Commission (OSHRC).80
discusses, the problem for workers is that employers have
OSHA was unpopular in Congress almost immediately.8
more political resources and thus more influence.
Graham Wilson explains, "Congress first created an agency
with a mandate for a tough regulatory approach, and then,
B. Political Resources
displeased with the results [it] sniped at the agency, mak-
ing piecemeal alterations in its policies and weakening further
An interest group's political influence is a function of its
its tenuous authority. In particular, Congress passed sever-
political "resources," or in other words, its capacity to influence
al budget amendments which restricted OSHA's jurisdiction.
individual legislators. A group gains influence if it has ac-
However, Congress failed to pass any of the numerous propos-
cess to legislators, sufficient policy expertise to support its
als to amend the OSH Act, including proposals to abolish the
policy positions, or the ability to affect a legislator's chances
agency. OSHA avoided this fate largely because hostile bills
for reelection." Another important resource is having an ally
were assigned to committees in the House and Senate that
in a political actor who occupies a central position in govern-
were packed with labor supporters. These committees blocked
ment such as the President.⁸ The history of the politics of
such legislation even though these proposals might well have
health and safety regulation reveals that business dominates,
commanded a simple majority of Congress.
but does not monopolize, such resources.
Some of the anti-OSHA feeling in Congress died down
The history of the OSH Act supports Terry Moe's observa-
during the Carter administration after Eula Bingham, OSHA's
tion that "public agencies will tend to be structured in part by
administrator, eliminated some of the inspection practices and
their enemies-who want them to fail.' Despite opposition
from the business community, Congress passed the OSH Act
because of the support of President Nixon, who wanted to
wean blue color workers away from their traditional support of
85. See id. at 246 (noting that the Occupational Health and Safety Review Com-
mission (OSHRC) disputed OSHA's interpretation of its own standards, resulting in
Democrats. Nevertheless, workers had to accept procedural
delay of OSHA's efforts to protect workers). OSHRC's inability to keep up with a
arrangements that made it difficult for OSHA to operate
backlog of appeals has also resulted in further delays of corrective action by employ-
ers. Id. at 246-47.
86. Id. at 245. OSHA is responsible for issuing and enforcing health and safety
standards through the Department of Labor. Id. OSHRC is an independent commis-
sion responsible for adjudicating health and safety complaints. Id.
87. Id. at 43. One Senator proposed an amendment to OSHA to exclude small
businesses from safety inspections. Id. Several bills introduced in 1973 required
78. MICHAEL PERTSCHUK, GIANT KILLERS 45 (1986) (describing the Federal Trade
OSHA to pay close attention to employer costs in setting safety standards. Id. Con-
Congress). Commission's attempt to push cigarette labeling and advertising regulations through
gress in fact limited OSHA's jurisdiction in 1976 by exempting small farms from
enforcement. Id.
79. See PHILIP B. HEYMANN, THE POLITICS OF PUBLIC MANAGEMENT 145 (1987)
88. GRAHAM K. WILSON, THE POLITICS OF SAFETY AND HEALTH: OCCUPATIONAL
(defining "resources" as "whatever makes it possible to influence the response of
SAFETY IN THE UNITED STATES AND BRITAIN 43 (1985).
other legislative or executive officials to a proposal").
89. See MCGARITY & SHAPIRO, supro note 5, at 43 (noting Congress' exemption
80. Id. at 150-51.
of small farms, defined as those with ten or less employees, from OSHA's enforce-
erful form of influence).
81. See id. at 148 (identifying the authority of a superior as a central and pow-
ment). A Senator introduced a bill reducing random safety inspections for workplaces
with above-average safety records. Id. at 48. Although the bill was defeated, its goal
82. See DAVID R. MCCAPPREY, OSHA AND THE POLITICS OF HEALTH REGULATION
was achieved through a 1979 appropriations rider, which restricted OSHA inspec-
53 (1982).
tions of "safe" employers with ten or fewer employees. Id. at 49.
83. Terry M. Moe, Political Institutions: The Neglected Side of the Story, 6 J.L.
90. See WILSON, supra note 88, at 48 (noting that Northern Democrate and a
ECON. & ORG. 213, 230 (1990); are id. (finding that because of the necessity of com-
significant number of Republicans support OSHA, thus warding off efforts to abolish
promise, an agency's opponents inevitably influence its organizational structure and
the agency); Michael Lovin, Politics and Polarity: The Limits of OSHA Reform, Rao-
policy direction).
ULATION, Nov.-Dec. 1979, at 33, 33 (noting that between 1973 and 1976 pro-OSHA
84. See MCGARITY & SHAPIRO, supra note 5, at 34 (noting that Nixon's
forces repeatedly blocked attempts to restrict or abolish OSHA).
what reluctant occupational health and safety initiative capitalized on the activist some-
91. See WILSON, supra note 88, at 46-47 (observing the demise of bills to amend
88 miners in West Virginia).
climate of the late 1960s and the interest sparked by a mining disaster that killed
or repeal OSHA assigned to liberal, pro-union committees, such as the Senate Com-
mittee on Labor and Human Resources and the House Education and Labor Com-
mittee).
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Bingham's silly regulations that had angered the business
1994]
cal success, however, did not translate into community.
In 1992, Senators Kennedy and Metzenbaum introduced
legislative support for OSHA.* Labor union leaders did not more politi.
the first comprehensive reform legislation since the creation of
bill reforms at this time because they feared that press for
OSHA, but the bill died in committee.100 Realizing that a
moved out of the committees where labor unions had once a
Republican administration made passage unlikely, the Demo-
bill ence, to legislators gut OSHA.* who 94 supported employers would amend influ- the
crats reported the bill to the entire Senate just prior to the
1992 election in an attempt to make occupational health and
orously mied reform in the 1980s. President Reagan sty-
Opposition legislative by the Reagan and Bush administrations
safety an election issue.101
The following year, comprehensive reform legislation was
paign, criticized OSHA during his first presidential vig.
introduced in both the Senate and the House. 102 From the
ly hostile and his first two OSHA administrators were cam-
perspective of workers, the pending legislation is a strong ef-
not to its mandate. OSHA's subsequent leaders extreme-
fort to reform the regulatory approach to occupational health
legislative wear the same ideological blinders, but they still resisted did
and safety. 108 It gives OSHA significant new powers, grants
proposals for reform.*
workers the ability to force the agency to take more action,
and requires employers to use employee-employer safety com-
mittees. 104 Business groups¹⁰⁶ generally oppose the legis-
responded adopted "low key approach to enforcement" and Carter ad-
ministration 92. See MCGARITY a & SHAPIRO, supra note 5, at 47 (noting that the
requirements for the deletion of approximately 1000 unnecessary Levin, supro note 90,
at 33 (noting to business complaints about enforcement policies); that Bingham quickly
quire employers with 11 or more workers to establish mandatory safety and health
committees with equal employer and employee representation); Labor IG Supports
number of knotholes split toilet seats, coat hooks on bathroom doors, regulations, such as
OSHA Penalty Bill; Scannell Opposes Expansion of Sanctions, 20 O.S.H. Rep. (BNA)
gram became both in wooden ladders). As a result of Bingham's and the maximum
No. 39, at 1439 (Mar. 6, 1991) (noting OSHA Administrator Gerard F. Scannell's
note 5, at 47. more effective and less controversial. MCGARITY & efforts, SHAPIRO, the supra pro-
opposition to including new violations in the category of violations for which criminal
sanctions are imposed, on the grounds that it would decrease voluntary compliance
Bingham's 93. See MCGARITY & SHAPIRO, supra note 5, 48-49
with new regulations).
ous violations). tenure, OSHA the agency's increased efficiency led at to the discovery (noting of that during
99. 8. 1622, 102d Cong., lat Sess. (1991).
tion. Id. at 48. Business began demanding stiffer penalties and more seri-
100. Reform Bill Waiting in the Wings, OCCUPATIONAL HAZARDS, Mar. 1993, at
eventually limited groups responded by mounting political recommending prosecu-
17; see Job Safety, GOP Boycotts Senate Committee Vote on Job Safety Bill Amid
48-49. OSHA's jurisdiction with an appropriations rider challenges, in 1979. Id. and at
Partison Dispute, Daily Rep. Executives (BNA), at 157 (Aug. 13, 1992) (observing
that Senate Republicans blocked a vote on Senate Bill 1622 when they boycotted a
keep 95. 94. bills See to WILSON, amend OSHA supra off note the 88, floor at 49 and (noting in that the unions' strategy was to
Labor and Human Resources Committee meeting, making it unlikely that the bill
would make it to the Senate floor in the 102d Congress).
22 See Unions Applaud Election of Clinton; committees). Business
101. See OSHA Reform, supre note 67, at A5 (stating that proponents of Senate
employers' OSHA influence O.S.H. Rep. (BNA) No. 24, at 1185 (Nov. 11, Braced 1992) for More Aggressive
Bill 1622 hoped for the election of a Democratic President in 1993, knowing that the
Bush and Reagan over the Clinton Administration will be less than (predicting that
bill would face certain veto from the Bush Administration).
labor faced years, thus diminishing the confrontational during the
102. S. 575, 103d Cong., let Sess. (1993); H.R. 1280, 103d Cong., 1st Sees.
Workers to Improve on worker health and safety issues); are also Greater attitude organized
(1993).
1699 (Mar. 10, Enforcement of Safety Rules, 22 O.S.H. Rep. Role Suggested for
103. See UAW Welcomes Formation of Coalition Supporting OSHA Reform, PR
feasor McGarity 1998) [hereinafter Greater Role Suggested for Workers] (BNA) No. 40, at
Newswire, Feb. 9, 1994, available in LEXIS, Nexis Library, PR Newswire File (re-
for a decade, a as "divided stating that although OSHA has been on the (quoting Pro-
porting that the president of the United Auto Workers endorsed the proposed OSHA
Act). government" has precluded substantive "legialative amendment agenda" of the
reform which gives workers an active role in decisions that affect their health and
safety).
invoked 96. MCGARITY OSHA as a & SHAPIRO, supra note 5, at 61 (stating that Reagan "frequently
104. The Senate bill provides for implementation of safety and health committees
97. See id, symbol of intrusive and inefficient bureaucracy").
composed of employer and employee representatives. S. 575, 5 201(a)-(d). The Senate
Therne at 60 (stating that Reagen's first OSHA administrator,
Bill also provides that "interested persons" may by petition recommend that OSHA
old issues and was Auchter, "committed had practically no experience with worker health thirty-six year
promulgate, modify, or revoke health and safety standards, and that they may press
id. 98 (quoting to 'stemming the flow' of health and safety
the Secretary of Health and Human Services to issue prompt responses in the Fed-
second at appointee, Carter's OSHA Administrator Bingham and safety standards");
eral Register. Id. I 401(a). The Secretary's failure or refusal to issue rules is review-
61-104 (describing Robert the effect Rowland, as "anti-worker and anti-people"); as describing see Reagan's
able by a United States Court of Appeals. Id. I 401(d). An action for review may be
with chapter of the Reagan years on OSHA's and generally enforcement id.
brought by any person adversely affected by the Secretary's determination or delay.
98. See, titles such as "Going Backward" and "Inching goals
Id. The House Bill also requires employers to set up committees to review workplace
OSHA e.g., Agency Opposes Mandatory Safety Committees, Forward").
health and safety programs. H.R. 1280, 9 201(a). It alternatively provides that an
(reporting sions, a Deputy Official Says, 21 O.S.H. Rep. (BNA) No. 18, at 494-95 Other (Oct. Reform Provi-
employer may employ mechanisms other than the safety and health committees,
OSHA Administer's criticiam of a bill to amend OSHA 2, to 1991) re-
provided that employees can participate meaningfully in the safety and health activ-
Ities that an employer chooses. Id.
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lation, although some business spokespeople have endorsed
some aspects of the bills. 106
the response is one that workers regard as inadequate. 110
At the time this Foreward was written, both bills were
The policy window will also close if workers lack the political
still in the committee process. The next section examines the
resources to get any reform adopted and legislators move on to
prospects for reform in light of workers' political resources.
other matters. III The history recounted in the previous sec-
tion suggests that unions and their allies will have difficulty
C. Prospects For Reform
passing those reforms that the business community most
strongly opposes, such as employer employee health and safety
President "107 Clinton's election has created a "policy win-
112
committees.
dow, or a change in the political environment, allowing
Other evidence also suggests that workers lack the politi-
occupational 108 health and safety to return to Congress'
cal resources to prevail over significant employer opposition
agenda Congress was reluctant to take up OSHA reform
Organized labor, often the only representative of workers in
during the last twelve years because of the likelihood of a
the political process, is considerably weaker today than it was
presidential veto. 109 The possibility of such a veto meant that
in 1971 when OSHA was established. Whereas 27.3 percent of
unless workers had the support of two-thirds of the members
the total workforce was unionized in 1970, just prior to
of Congress, they could not obtain reforms that the President
OSHA's establishment, only 15.8 percent was unionized in
opposed. In effect, this hurdle eliminated the possibility of
1992. 113 Union representation in the private workforce is
meaningful reform
even less. As noted earlier, only twelve percent of the private
The policy window opened by President Clinton's election
workforce is organized. 114 Moreover, union membership in the
will close once Congress adopts a legislative response, even if
states varies considerably.¹⁶ Although unions are strong in
about twenty states, they are considerably weaker in the
rest. 116 Finally, the least skilled and least organized workers
Role for OSHA, 23 O.S.H. Rep. (BNA) No. 11, at 275 (Aug. 11, 1993) (stating that
105. See, e.g., House Republicans Unveil Legislation, Stressing Incentives, New
that Republican the members of the Labor Committee and the business community
110. KINGDON, supra note 69, at 177 (stating that a policy window closes once
and Democratic bill contains overly rigid requirements for OSHA enforcement charge
participants have acted in some way, regardless of whether they have fully ad-
in its mandates for employee participation); More Funding for OSHA, NIOSH
dressed the problem).
213 Required to Fulfill Mandate, Witnesses Tell Congress, 23 O.S.H. Rep. (BNA) No. 9,
111. See id. (finding that political actors are often unwilling to expend additional
(July 28, 1993) (repeating a comment by a former top OSHA official during the at
time or political capital in support of an action that does not get passed.
Reagan Administration to the effect that there is no proof that OSHA needs
112. Refer to notes 53-65 supra and accompanying text.
despite the Democrate' proposal); AFL-CIO Urges Congress, supra note 66, reform, at 244
113. THE WORLD ALMANAC AND BOOK OF FACTS 141 (1994).
(reporting that a spokesperson for the National Association of Manufacturers
114. See NAFTA Gotcha, supra note 54, at 4, 6.
soned that because OSHA has not been previously amended, it does not need to rea- be
116. See BUREAU OF THE CENSUS, U.S. DEPT OF COMMERCE, STATISTICAL AB-
amended now.
STRACT OF THE UNITED STATES 421 (1992) (Table No. 671) [hereinafter STATISTICAL
106. See Timothy A. Jemal, Reforming OSHA Becomes Exercise in Partisan Poli-
ABSTRACT) (listing percentage of unionized employees by state for the period 1984 to
tics; Occupational Safety and Health Act of 1970, 95 Concrete Prode. (Maclean Hunt-
1989). South Carolina, a right-to-work state, had the lowest percentage of union
er) No. 6, at 12 (June 1992) (stating that the NRMCA supports many of the con-
membership with 2.4% of its workers unionized, while Michigan, with 51.6%, had
cepts proposed by the pending OSHA legislation).
the highest percentage. Id.
107. KINGDON, supra note 69, at 173-74 (defining a "policy window" as brief
116. In 1989, union membership as a percentage of workers employed in manu-
opportunity presented within policy systems when (defining advocates of proposals a
facturing was as follows:
can "push their pet solutions," others can seek action on particular initiatives, and
yet others can focus attention to special problems). A change in administrations will
Number of States
Percentage of Unionized
often open a policy window. Id. at 176.
Employers
nized Clinton Administration has endorsed OSHA reform as a concession to (noting
that sive the Safety Bill, Daily Lab. Rep. (BNA) No. 29, at 29 (Feb. 14, 1994)
108. Job See Health Care Battle Likely to Unite Industry for Battle Over Comprehen-
6
30 or more
labor over the North American Free Trade Agreement, which was opposed orga- by
12
20 30
organized labor).
109. See OSHA Reform, eupra note 67 (noting that reform bill knew
18
10 20
the Democratic White House).
that Bush would veto measures which now enjoy a reasonable chance proponents of success at
14
10
Id.
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are often in the most dangerous jobs.¹¹⁷
protecting wages, the days are gone when they could also bat-
As further evidence that workers are politically weak,
tle management to make mines safe and close down
many reforms that would significantly enhance protection for
sweatshops-let alone push weighty legislation through an am-
workers have not even been proposed in Congress. For exam-
bivalent administration and Congress."125
ple, workers can help OSHA by reporting violations, but
While the political influence of organized labor has de-
OSHA's ability to respond is constrained by its limited resourc-
clined, the business community has become politically stronger.
118 Congress could solve this problem by authorizing pri-
Employers were politically unprepared for the citizen activism
vate citizen suits, as it has done in the environmental area.
of the 1960s and early 1970s, which included passage of the
But Congress has not considered authorizing workers to sue
OSH Act, but they are now more powerful than before. 126
employers to enforce OSHA regulations. 119 Other reforms
One important reason is that companies' political action com-
that could have a significant impact, like an injury tax,120
mittees (PACs) no longer limit their support to Republicans,
are likewise not on the horizon for purposes of this round of
but they also support key Democrats, such as committee chair-
reform.111
persons, which enhances employer access to these Demo-
According to Mr. Nader, workers are further hampered
crats. 126 For this reason and others, the voting patterns of
because some unions are unwilling to fight for worker safety,
key Democrats has become more closely aligned these legisla-
as they have for issues such as the North American Free
tors with business preferences.129
Trade Agreement (NAFTA), which more directly affect wages
These trends reflect what political scholars have known for
and benefits. 123 He notes the AFL-CIO has only one full-time
a long time. Because health and safety legislation produces
staff person assigned to occupational safety and health
widely diffuse benefits and concentrated costs, those who pay
issues. Another view is that because of unions' lack of re-
(employers) are more likely to lobby Congress than those who
sources, they have no choice but to emphasize protection of
benefit (workers). 180 This imbalance is the result of two fac-
wages and jobs. 134 A recent article concludes that "with un-
tors. First, the likelihood of collective action is greater among
ions fading fast, and their limited resources focused on simply
employers than among the much more numerous group of
117. See ROBINSON, supra note 28, at 75-76 (noting that once employers succeed
in reducing union representation in hazardous jobs by reducing the need for highly
skilled workers with more organized processes of production, presumably they bring
in non-unionized, low-skilled workers); see also Carol Kleiman, Projecting Ahead; Who
will be Doing What for the Next 18 Years, CHI. TRIB., Feb. 6, 1994, at C1 (noting
125. Id.
one researcher's concern that unless low skilled workers organize, they will have
126. See generally DAVID VOGET. FLUCTUATING FORTUNES: THE POLITICAL POWER
little chance for better wages).
OF BUSINESS IN AMERICA 193-239 (1989) (documenting the political resurgence of
118. See MCGARITY & SHAPIRO, supra note 5, at 324 (conceding that the number
business due to the efforts of employers to influence the prevailing political and
of OSHA inspectors is woefully inadequate when compared with the task of inspect-
intellectual climate and to the shift in public attitudes toward business and govern.
ing all of the work places subject to OSHA's jurisdiction).
ment).
119. See Greater Role Suggested for Workers, supra note 95, at 1699 (reporting
127. See id. at 209-10 (noting that a major share of business PACe' money went
Professor McGarity's proposal for citizen suite regarding OSHA enforcement).
to liberal Democrate who chaired House and Senate committees in 1976); HAROLD
120. See Case R. Sunstein, Administrative Substance, 1991 DUKE LJ. 607, 640
W. STANLEY & RICHARD B. NIEMI, VITAL STATISTICS ON AMERICAN POLITICS 182-83
(suggesting as a market-based incentive for workplace safety reform a tax on em-
(1992) (indicating an increase in corporate PAC contributions to Democrate). In 1989
ployers that maintain unsafe working conditions). Other prospective reforms could
and 1990, corporate PACe gave $19.1 million to Democrats in the House compared
include greater reliance on workers' compensation, disclosure of risks to workers,
to $17.1 million contributed to Republicans. Id. at 183.
more active bargaining, and employee involvement in monitoring workplace safety.
128. Richard L Hall & Frank W. Wayman, Buying Time: Monied Interests and
Id.
the Mobilization of Bias In Congressional Committees, 84 J. AM. POLI. Sct. REV. 797
121. See Study Finds Plants Inspected and Fined by OSHA Have 22 Percent Drop
(1990).
in Injury Rate, 21 O.S.H. Rep. (BNA) No. 12, at 355 (Aug. 21, 1991) (suggesting an
129. STANLEY & NIEMI, supra note 127, at 214 (indicating that the percentage of
injury tax as an alternative to increased OSHA enforcement to reduce workplace
conservative coalition victories has increased since the 1960s and early 1970s).
injuries).
130. See James Q. Wilson, The Politics of Regulation, in THE POLITICS OF RBGU-
122. Nader, supro note 39, at 6-8.
LATION 857, 370 (James Q. Wilson ed., 1980). Wilson defines "entrepreneurial poli-
123. Id. at 7.
tics" as the situation in which an interest group proposes a policy that confers gen-
124. See Allan Freedman, Workers Stiffed, WASH. MONTHLY, Nov. 1992, at 27
eral but small benefits on a large group with costs borne by a small segment of
(suggesting that the combination of organised labor's inability and OSHA's unwilling-
society. Id. Incentive la strong for the cost-bearing segment of society to oppose the
ness has left many reforms to "gather dust on the shelf").
policy but weak for the beneficiaries. Id.
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workers. 131 Moreover, twelve years of hostile rulings by the
resources used up, and I think that it will not prevail.
National Labor Relations Board (NLRB) during the Reagan
and Bush administrations have significantly raised the cost of
III. RESHAPING THE POLITICAL ENVIRONMENT
union organizing. 132 Second, unions are subject to "free-rider"
behavior, which occurs because workers obtain the benefits of
Employers have traditionally had the upper hand in the
any legislation even if they do not support union lobbying ef-
political process concerning workplace safety and health. After
forts.
133
workers compromised to get the OSH Act, employers were able
Because employers have more political resources, White
to keep occupational health and safety reform off Congress'
House support will be important in determining the extent to
agenda for the next twenty years. Nevertheless, predicting
which labor will have to compromise to get new legislation.
what Congress might do in the current political environment is
Although the Department of Labor has endorsed the compre-
difficult because legislative decisions are the product of unpre-
hensive reform legislation now before Congress,¹⁸⁴ the White
dictable elements. 136 One of the few certainties is that work-
House might not be able to tip the battle in favor of workers.
ers will be more successful if they can gain additional political
The President, who was elected by the smallest plurality of
resources. This section explains how an interest group can
any president this century, has had difficulty in getting Con-
alter a political environment by redefining a policy issue in a
gress to pass other legislation that he has favored. Concerning
manner that attracts additional support for its legislative
the OSHA legislation, an official of the National Association of
goals, and it then considers whether workers can successfully
Manufacturers has warned, "If the administration chooses to
follow this strategy in support of workplace health and safety
go with [the proposed legislation] it will be a fight with lots of
reforms.
A. Issue Redefinition
131. See MANCUR OLSON, THE LOGIC OF COLLECTIVE ACTION: PUBLIC Goons AND
Legislative politics is characterized by long periods of rela-
THE THEORY OF GROUPS 44-45 (1971) (hypothesizing that, in a large group, it is un-
tive stability, in which one group of players dominate, punctu-
likely that the contribution of any one individual will be perceptible, so that any one
ated by abrupt changes in political outcomes, when another
individual lacks inducement to contribute to the common good). Olson concludes that
the number of individuals in a group is determinative of its ability to achieve the
group of interests becomes dominant or at least gains signifi-
collective good. Id. at 45.
cant political power. 137 This pattern is related to the interac-
182. See David L Gregory, Working for a Living, 58 BROOK. L REV. 1355, 1367
tion of policy and politics in influencing Congress' legislative
(1998) (reviewing THOMAS GEOCHEGAN, WHICH SIDE ARE You ON-TRYYING TO BE
FOR LABOR WHEN IT's FLAT ON ITS BACK (1991)) (noting that due to the pro-employ-
agenda.¹⁸⁸ A group can dominate the legislative process con-
or ideology of the NLRB during the Reagan-Bush era, employers found it cost-effi-
cerning a policy issue if it can define the issue in a manner
cient to simply terminate workers who were attempting to organize); Richard B.
that makes it of little or no interest to the public. 139 Chal-
Freeman & Joel Rogers, A New New Deal for Labor, N.Y. TIMES, Mar. 10, 1993, at
A19 (observing that "toothless sanctions on unfair labor practices have proved no
lengers can threaten this dominance if they can redefine the
match for employer resistance to unions."). See generally Paul Weiler, Promises To
Keep: Securing Workers' Rights To Self-Organization Under the NLRA, 96 HARV. L
REV. 1769, 1787-1805 (1983) (describing how the NLRB's remedies of reinstatement
and back pay are inadequate to forestall employers from discharging union activist
135. Employers Meet with Reich, Dear to Discuss Concerns over Democratic Bill,
employees, and that this inadequacy of remedies combined with a significant delay
23 O.S.H. Rep. (BNA) No. 6, at 132-33 (July 7, 1993).
in issuing remedial orders does not deter employers from taking steps to stop the
136. Refer to notes 69-84 supra and accompanying text for a discussion of the
momentum of a union's organizing campaign).
factors at play in legislative action.
183. David G. Summer, Note, Plumbers and Pipefitters: The Need to Reinterpret
137. See BAUMGARTNER & JONES, supra note 6, at 3 (developing a model to ac-
the Scope of Compulsory Unionism, 33 AM. U. L Rev. 493, 497 (defining "free rid-
count for both the long periods of stability when the elites control policy, and the
are" as nonumion employees who benefit from collective bargaining by union co-work-
periods of rapid change during which they find themselves losing in policy arenas).
are without contributing to the costs borne by the union). Business organisations are
138. Authors Baumgartner and Jones employ empirical evidence and historical
less subject to this behavior because they have far fewer members and are in a
comparisons to illustrate that the agenda-setting process influences policy, policy
better position to offer incentives to join See OLSON, supra note 131, at 62 (noting
problems are the fodder for the process of setting political agenda, and stability and
that in a small group members know each other, judge others' contributions, and
rapid change are both vital for a functioning equilibrium. Id. at 4.
can control membership, while in contrast, in a large group members do not know
139. See CHRISTOPHER J. Bosso, PESTICIDES AND POLITICS: THE LIFE CYCLE OF A
each other).
PUBLIC ISSUE 22 (1987) (stating that dominant political institutions can keep issues
134. Reich Outlines Support For Democratic Bill, Terming It "Investment" In Haz-
off the political agenda by preserving a lack of public interest and encouraging the
and Prevention, 23 O.S.H. Rep. (BNA). No. 37, at 1212 (Feb. 16, 1994).
view that the issue does not merit attention).
34
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issue to attract more public attention. 140 Agricultural inter-
preserve the status quo is to exploit the public's general dis-
ests, for example, dominated the politics of pesticide use when
trust of government and opposition to its expansion. 148
the prevailing view focused on the economic importance of
OSHA's critics have consistently used this approach. 149 To
eradicating pests. 141 These interests lost control after envi-
overcome the stasis of the political agenda, those seeking re-
ronmentalists redefined the issue to include not only econom-
form must engage in "entrepreneurial" behavior. A successful
ics, but also the health and environmental damage stemming
policy entrepreneur becomes the vicarious representative of
from pesticide use.¹⁴²
groups or the public at large not generally represented in the
Redefinition changes the political environment by altering
legislative process. 150 The entrepreneur builds political sup-
the political incentives of legislators. Legislators' perceptions of
port for unrepresented interests by mobilizing latent public
voter preferences influence their position on an issue. 148
sentiment, putting opponents of reform on the defensive, and
When legislators anticipate how a roll-call vote might be used
linking the proposed legislation to values widely shared by the
against them by future opponents, they adjust their votes to
public.¹⁸¹
forestall such challenges.¹⁴ Therefore, when reformers gain
If workers are to succeed politically in implementing
public attention by redefining an issue, legislators must consid-
workplace health and safety reforms, they must redefine the
er the possibility that a vote in support of a special interest
issue of occupational health and safety¹⁵² and find allies with
can be used against them in a future election 145 An oppo-
a shared interest in the redefined issue. One approach to
nent can capitalize on the public's new attention to a redefined
redefining workplace safety is to educate the public that it is
issue by pointing out that the legislator voted against the
in their self-interest to reduce workplace risks. Another ap-
public's policy preference.146
proach is to argue that reducing occupational injuries and
However, redefining an issue is not easy. Cooperation of
disease would make our society more fair. The following two
the media is essential to getting the attention of the pub-
sections consider the likelihood that such redefinitions of the
lic.147 Moreover, those who benefit from the political status
issue would be successful.
quo will resist attempts at redefinition. One common ploy to
B. Self-Interest
The problem for reformers is that most Americans are not
140. See id; BAUMGARTNER & JONES, supra note 6, at 35-36 (noting that "losers
in a policy debate" can improve their position by increasing the number of partici-
pants that take their view on the issue).
141. See Bosso, supra note 139, at 32 (explaining how the technology of pesti-
148. See Bosso, supra note 139, at 22 (noting that problems remain non-issues
cides, their economic necessity and convenience for use by the individual farmer
because they are "screened out of the political arena by social norms, traditions, and
"powerfully sculpted" the agricultural community's attitudes, and led to agricultural
commonly held notions about the government's role"); Mark A. Peterson, Political
interests dominating the debates over pesticide regulation).
Influence in the 1990s: From Iron Triangles to Policy Networks, 18 J. HEALTH POL.,
142 See id. at 144, (explaining how the dramatic emergence of an "environmental
POL'Y & L 396, 406 (1993) (discussing the American public's traditional distrust of
public" refocused an issue on the political agenda).
government and how the American Medical Association has used that attitude to
143. JOHN W. KINGDON, CONGRESSMEN'S VOTING DECISIONS 60-88 (1989) (berein-
mold public policy in the health care field).
after CONGRESSMAN'S VOTING DECISIONS) (discussing the decisionmaking processes
149. See, eg., OSHA Tagged With 'Red Tape Award' By Six Republican Vigilante
that precede congressional voting and the factors which influence that process).
Senators', 22 O.S.H. Rep. (BNA) No. 19, at 1036 (Oct. 7, 1992) (describing how
144. See R. DOUGLAS ARNOLD, THE LOGIC OF CONGRESSIONAL ACTION 8-13 (1990)
OSHA critics awarded the first "red tape award" to OSHA to demonstrate their
(describing the effect citizens' influence has on policy judgments and politicians' vot.
opinion that agency regulations strangle American businesses).
ing).
150. See WILSON, supro note 88, at 370. For example, Mr. Nader became a policy
145. See CONCRESSMAN'S VOTING DECISIONS, supro note 143, at 60 (quoting a
entrepreneur, in easence the driving public's vicarious representative, in seeking im-
Congressman who described how a vote on a controversial issue may pass unnoticed,
proved auto safety design. Id. Likewise, Howard Jarvis was a policy entrepreneur
but will certainly be brought to voters' attention by an opponent during the next bid
with respect to Proposition 13 in California, and Senator Joseph McCarthy when be
for reelection).
galvanized the public with his anti-communist crusade. Id.
146. See ARNOLD, supra note 144, at 9 (describing how legislators try to antic-
161. See id. (noting that such efforts require tremendous skill by the policy entre-
ipate how roll-call votes might be used against them when an issue shifts at election
preneur).
time to the forefront of the public's concerns).
162. Refer to notes 137-46 supra and accompanying text for a discussion of why
147. See BAUMGARTNER & JONES, eupra note 6, at 103 (stating that the media's
issue redefinition is necessary to overcome the political agenda's status quo.
role is essential to the agends-setting process because the media directs attention to
158. Refer to notes 75-77 & 150-61 supra and accompanying text (describing how
rent parts of an issue and shifts the public's attention from one issue to anoth-
those secking to influence the agenda-setting process increase their chances of suc-
er).
cess with a greater number of powerful allies).
36
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1994]
directly impacted by workplace health issues, or at least per-
as motor vehicle accidents, diabetes, and homicides. 161 Pre-
ceive that they are not. 154 Only a minority of employees work
venting workplace accidents and disease would therefore sub-
with or near dangerous machinery or are exposed to toxic sub-
stantially reduce the demand for health care.
stances, while others are not even acquainted with anyone who
The recent effort to redefine gun control and the reduction
works in such jobs. 156 Although those who work in offices are
of violence in our society as a public health issue¹e² suggests
not free from workplace risks such as ergonomic injuries, 166
the saliency of this approach. It is also salient because the
employees perceive this work as safe and healthy. 157
linkage between occupational health and safety and health
Yet occupational injuries and disease impact nearly every-
care reform is obvious and should therefore be understandable
one. As Cass Sanstein reminds us, "In a world with Medicare
to the public. 163
and Medicaid the illness of any one of us is a bill for
Nevertheless, workers may have difficulty in redefining
many or even most of us. Although there are no precise
occupational health and safety as a matter of public concern
statistics concerning what these social costs might be, the evi-
because substantial public education is needed. Less than one
dence suggests that they are staggering. OSHA estimates that
half of the public currently believes that it is personally impor-
this cost is $80 billion a year, 159 while another recent esti-
tant that the government increase its regulation of workplace
mate puts the cost at $200 billion a year. 100
health and safety. 164 This statistic shows that "commitment
The argument that the public will gain by a reduction in
to job safety and health does not run deep or wide enough to
occupational injuries and disease is especially timely now that
make the subject a top national priority *166 Moreover, at-
Congress is debating national health care reform. Because the
tempts to educate the public might get lost in the complex
burden that workplace accidents and illnesses place on our
policy debate that surrounds health care reform. Finally, the
health care system is significant, the savings available from a
public is most likely to notice an issue when it is socially sig-
reduction in these risks must likewise be significant. For ex-
nificant, apparently nontechnical, broadly defined, and above
ample, occupational disease accounts for a larger percentage of
all, emotional. 166 The argument that occupational injuries
cancer deaths than environmental pollution, and kills more
and diseases tax the public's health care resources may be too
persons each year than such other preventable causes of death
technical and so lacking in emotional appeal that it will not be
effective in increasing public support for legislative reform.
C. Fairness
154. See WILSON, supro note 88, at viii (noting that OSHA's attempts to deregu-
The strategy of appealing to the public's self-interest faces
late worker safety and health have received little public attention, especially com-
pared to EPA acandale).
significant obstacles. An attempt to redefine occupational
155. Compare, e.g., Ilise L. Feitshans, Hazardous Substances in the Workplace:
How Much Does the Employee Have the "Right to Know"? 1985 DET. C.L. REV. 697,
699 (citing a 1983 National Occupational Hazards Survey that put the number of
workers exposed to chemical source hazards at 25 million, and the number exposed
161. Refer to notes 20-21 supra and accompanying text.
to OSHA-regulated chemicals at 40 to 50 million) with STATISTICAL ABSTRACT, supra
162. See A Balancing Act on Crime Control, U.S. NEWS & WORLD REP., Feb. 28,
note 116, at 881 (indicating that the total number of non-institutionalized employed
1994, at 8, 6 (stating that there is a fervor to attack crime and, although the sides
workers in 1991 was more than 118 million).
are divided, all of Congress wants a crime bill).
156. See, e.g., Harold J. Engel et al., OSHA Crackdown-With More to Come,
163. See Deborah A. Stone, Causal Stories and the Formation of Policy Agendas,
C732 ALI-ABA 483, 494 (1992) (reporting three significant fines, ranging from
104 POL Sct. Q. 281 (1989) (stating that political actors redefine issues by establish-
$243,000 to $990,000, that OSHA imposed on employers for ergonomics related viola-
ing a new explanation of causality).
tions).
164. Lovin, supra note 90, at 39.
157. Cf. Gerger V. Campbell. 297 N.W.2d 183, 186 n.2 (Wis. 1980) (noting that
While recent polls show the public continues to favor government regulation
although the law requires employers to provide safe workplaces, legislatures' enact-
of job safety by a majority of 52 percent to 12 percent, they also show that
ment of workers' compensation statutes focus primarily on the safety of equipment
only 35 percent of workers think such regulation important to them. For
and machinery as opposed to office environments).
environmental protection the figures are 70 percent and 70 percent. Other
168. Cass R. Sunstein, Valuing Life, New REPUBLIC, Feb. 15, 1993, at 36, 88 (re-
polls show citizens willing to spend over $100 more per capita for air and
viewing W. KIP VISCUSI, FATAL TRADEOFFS: PUBLIC AND PRIVATE RESPONSIBILITIES
water cleanups, but less than $10 more for job safety and health
FOR RISK (1993)).
Id
159. Revitalized OSHA, supra note 1, at 763.
165.
Id.
160. NATIONAL SAFE WORKPLACE INSTITUTE, BASIC INFORMATION ON WORKPLACE
166. ROGER W. Cosa & CHARLES D. ELDER, PARTICIPATION IN AMERICAN Pou-
SAFETY AND HEALTH IN THE UNITED STATES 2 (1992).
TICS: THE DYNAMICS OF AGENDA-BUILDING 112-24 (1972).
38
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39
health as a matter of distributive justice, or fairness, may
other is the glue that holds people together as a society. *174
therefore be more productive for workers.
The public's traditional opposition to government programs
The corollary is that letting workers fend for themselves frag-
is not simply a matter of distrust, it is also the product of how
ments society by emphasizing individual differences. Workers,
rather than their communities, are left solely responsible for
citizens think about social responsibility. The strong tradition
occupational health and safety.
of economic and political individualism in this country puts the
burden on those who would regulate health and safety matters
Professor McGarity and I have suggested that the protec-
to justify governmental action. 167 Moreover, because this ide-
tion of workers can and should be defined as a matter of dis-
tributive justice, or in Professor Stone's terms, as a matter of
ology makes the individual the basic unit of analysis, it sup-
ports "a politically conservative predisposition" that avoids
"mutual aid." We contend that decisions about workplace
health and safety, unlike the individualistic decisions that
questioning the basic structure of society and its distributions
consumers make when purchasing goods and services, define
of wealth and power and concentrates instead on questions
about the behavior of individuals within that structure. 168 In
the nature of our society or community. The reason is that
other words, individualism influences how Americans think
such decisions require citizens to define what level of
workplace health and safety is "fair" and "just." *175
about "what ties them together and to whom they have
ties."100 The individualist ideology leads to the sense that no
Worker advocates, such as the National Safe Workplace
Institute (NSWI), are attempting to draw on the
one has an obligation to pay for the risks of workers who incur
injuries and diseases doing dangerous work. 170
communitarian tradition to redefine the issue of workplace
health and safety. For example, NSWI emphasizes that other
Another American political tradition, often described as
countries do a better job of protecting their workers. 176 More-
"communitarianism," emphasizes that individuals share a com-
munity or a common culture, and a way of perpetuating it.¹⁷¹
over, NSWI's director bluntly summarizes that OSHA sanctions
reflect an accommodation with "human expendability" where
As Professor Glendon has recognized, "Buried deep in our
"blue-collar blood pours too easily.' He concludes that fair-
rights dialogue is an unexpressed premise that we roam at
ness demands that workers have legislative reform. 178
large in a land of strangers, where we presumptively have no
Another way to emphasize that workers merely seek fair-
obligation towards others except to avoid the active infliction of
harm. -172 But this individualistic assumption "fits poorly with
ness is to point out that the United States has not made the
same commitment to protecting workers that it has made to
the American tradition of generosity toward the stranger, as
well as the trend in our history to expand the concept of com-
protecting the environment. For example, the government
munity for which we have common responsibility.' *178
spends eleven times more on environmental protection than
workplace health. 179 Furthermore, EPA regulations are stricter on
The key elements of communitarianism are the concept of
mutual aid and the conviction that "a willingness to help each
of individuals as "the essence of community").
174. Stone, supro note 169, at 289; see id. (describing mutual aid among a group
167. SYLVIA N. TESH, HIDDEN ARGUMENTS: POLITICAL IDEOLOGY AND DISEASE
PREVENTION POLICY 160-61 (1988) (hypothesizing that many citizens oppose health
and safety intervention by government because it violates the individualistic ideology
that because health and safety decisions involve distributional issues, such
175. MCGARITY & SHAPIRO, supra note 5, at 296. McGarity and Shapiro explain
that each worker is the best judge of his or her interests).
things more highly than they do when they go to the store As
social policy choices provide an opportunity for citizens to value certain
168. Id. at 161.
169. Deberah A. Stone, The Struggle for the Soul of Health Insurance, 18 J.
sumers, we may dislike paying more for manufactured products because con- of
HEALTH POL., POL'Y & L 287, 289 (1993).
the costs of protecting workers, but as citizens we can rationally vote for
170. See id. at 290 (discussing how the insurance industry, for example, fosters
extremely costly goals. We vote in favor of such costly goals because
fragmentation of society so that the perception of commonalities is lost). The result
they permit us to reaffirm to ourselves that occupational disease is not
merely inefficient-it kills people.
is that the public becomes convinced that "each person should pay for his own risk."
Id.
Id.
171. See id. at 289 (describing communitarianism as what binds communities
together, particularly the sense of shared interests and culture).
Swedish worker, and three times more likely to die than a Japanese worker).
11, (stating that a United States worker is five times more likely to die than at a
176. 11 See Joseph A. Kinney, Why Did Paul Die!, NEWSWEEK, Sept. 10, 1990,
172. MARY ANN GLENDON, RIGHTS TALK: THE IMPOVERISHMENT OF POLITICAL Dts-
177. Id.
COURSE 77 (1991).
178. Id.
173. Id.
179. Beyond Neglect, supra note 18, at 16-18, 38.
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than OSHA standards for the same chemicals¹⁸⁰ and criminal
individuals years after exposure. Better media coverage is
penalties for violation of environmental statutes are signifi-
necessary to publicize the plight of workers ravaged by occupa-
cantly greater than for violations of the OSH Act.181 A union
tionally-related disease. Without it, reformers cannot make
president recently observed concerning the criminal penalties,
their case to the public. 190
"[I]n the twenty-three years [since] the OSHA law was passed,
Workers face additional problems in redefining the issue of
only one employer has gone to jail for willfully violating OSHA
workplace health and safety in a way to capture public atten-
law and killing a worker. In the last ten years, seven people
tion. An important source of altruism is an "emphatic link"
have gone to jail for harassing wild burros on federal
with those being assisted. 191 Yet, many members of the pub-
land.
=162
lic perceive unions as a classic example of a "special interest."
Although these differences reflect the greater political sup-
For example, the public perception concerning issues such as
port for environmental law enforcement, they are not defensi-
NAFTA, is that organized labor seeks to protect the wages of
ble either as a matter of public policy or of human decency.
their members, regardless of the impact on the country as a
After all, the "workers who build our homes, provide our food,
whole. 192 Other members of the public regard union argu-
assemble our appliances, nurse our illness, and dig our graves
ments about fairness as hypocritical. This position stems from
are part of our shared environment and are deserving of pro-
the view that, concerning environmental issues, organized la-
tection. *183 Something is very wrong in this country "when
bor has sided with business and sought to protect jobs instead
the quality of life of a jackass is valued more than the life of a
of cleaning up the environment. 193 It is unclear whether or-
worker.
*184
ganized labor can overcome the lack of empathy for its con-
However, workers' appeals to fairness are not likely to be
cerns prevalent among the general public.
noticed unless they are widely publicized by the media. 185
In light of the foregoing problems, reformers will need
Media attention to workplace safety is most likely if reformers
presidential assistance in order to redefine the occupational
link their message with a scandal or tragedy that can symbol-
safety issue. 194 No other political actor "can focus attention
ize the need for legislation, ¹⁸⁶ such as the fatal 1991 fire at
as clearly, or change the motivations of such a great number
the Imperial Food Products chicken processing plant. 187 As
of other actors."196 The President must use his "bully pulpit"
Mr. Nader cogently notes, however, the media has only a spo-
radic interest in occupational safety and health, usually tied to
some tragedy like the North Carolina fire. 168 Moreover,
workplace accidents do not directly dramatize the issue of oc-
189. Schroeder & Shapiro, supro note 25, at 1234 (noting that the period before
the onset of illness ranges between 4 and 40 years).
cupational diseases because these diseases occur in scattered
190. See GLENDON, supra note 172, at 178 (noting a profound lack of coverage by
the mass media of workers' health and safety issues).
191. Mark Schlesinger & Tae-ku Lee, Is Health Care Different!: Popular Support
of Federal Health and Social Policies, 18 J. HEALTH POL., POL'Y. & L 551, 594
(1993).
192. Cf. William Cunningham & Segundo Mercado-Liorens, The North American
180. Id.
Free Trade Agreement: The Sale of U.S. Industry to the Lowest Bidder, 10 HOFSTRA
181. See MCGARITY & SHAPIRO, supra note 5, at 220 (comparing OSHA's six
LAB. LJ. 413, 414 (stating that organized labor opposes NAFTA because it "is not in
month maximum penalty for a willful endangerment of an employee to the penalty
the best interests of the United States and its labor force"); see id. at 428-31 (find-
for willful endangerment of a fish, a violation of the Clean Water Act which carries
ing that despite optimistic predictions to the contrary, NAFTA will force American
a maximum penalty of fifteen years).
workers to compete with cheap Mexican labor that works under substandard condi-
182. AFL-CIO Delegates Urge Congress to Act on Legislation to Award Workplace
tions and will ultimately produce a contracted domestic workforce).
Safety Law, 23 O.S.H. Rep. (BNA) No. 20, at 527 (Oct. 18, 1993) [hereinafter AFL-
193. Cynthia L Estlund, What Do Workers Want! Employee Interests, Public In-
CIO Delegates] (quoting John Sweeny, President of Services Employees International
terests, and Freedom of Expression Under the National Labor Relations Act, 140 U.
Union).
PA. L REV. 921, 956 (1992) (stating that labor unions oppose stricter environmental
183. MCGARITY & SHAPIRO, supra note 5, at viii.
regulation because workers perceive such regulations as a threat to job security and
184. AFL-CIO Delegates, supra note 182, at 527.
wages). See generally James C. Oldham, Organized Labor, The Environment, and the
185. See BAUMGARTNER & JONES, supra note 6, at 106 (noting that the media la
Taft-Hartley Act, 71 MICH. L REV. 936, 939-80 (1973) (examining worker attitudes to
a key factor in determining which issues receive public attention).
out-plant pollution and other industrial pollution, and unions' response).
186. KINGDON, supra note 69, at 99-100 (stating that such an event focuses the
194. See BAUMGARTNER & JONES, supra note 6, at 241 (drawing on studies of
attention of the public and government).
legislative action with regard to drugs and urban affairs to conclude that a
187. Refer to note 38 supra and accompanying text for a description of the fire.
President's role is essential to getting an issue on the national agenda).
188. Nader, supra note 39, at 6.
195. Id.
42
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[Vol. 30:13
if reformers are to have any chance of focusing the debate on
the fairness of the status quo.
IV. CONCLUSION
This Symposium focuses on why 80 many workers are
ARTICLE
injured by and die from work-related causes, and on what
change in policies will be most effective at stemming the tide
of occupational accidents and diseases. Identifying effective
responses, however, is only part of the workers' battle. They
must also have sufficient political resources to influence Con-
REPRODUCTIVE HAZARDS AFTER
gress and state legislatures to pass the reforms that are need-
JOHNSON CONTROLS
ed. As the political science literature makes clear, the policies
preferred by workers may not be obtainable as a political mat-
ter.
Mary Becker
The problem for workers has been, and continues to be,
too little political influence. This situation is not likely to
Table of Contents
change unless the President strongly intervenes on their be-
half. Even his support, however, may not be enough to push
44
I.
INTRODUCTION
effective reforms through Congress unless legislators perceive
that the public supports strong action. Workers must therefore
45
redefine the issue of occupational safety and health in a man-
II.
CASELAW AND POLICY
A. Decisions in the Federal Courts
ner that galvanizes the public's interest.
46
of Appeals
If assisted by the President, workers can redefine the
51
B. Policy Analysis
workplace safety issue by appealing both to the self-interest
1. The Scientific Evidence
51
and to the altruistic communitarian impulses of the public.
2. "Protection" Only When
Such a redefinition will not be easy. It will require changing
Women Are Marginal Workers
57
strongly-held ideologies and attitudes concerning the role of
C. The Supreme Court Decision in
government in workplace health and safety. Whether the effort
63
Johnson Controls
is successful will have significant ramifications. For workers, it
will determine the level of workplace health and safety. For
III.
PERMISSIBLE DISTINCTIONS BETWEEN EMPLOYEES
71
the rest of us, it will decide the type of society that we wish to
have.
79
IV.
REMAINING PROBLEMS
79
A. Problems for Employees
B. Remaining Problems for Employers
88
Professor of Law at the University of Chicago Law School; B.S., Loyola Uni-
versity, Chicago, 1969; J.D., University of Chicago Law School, 1980. I thank Paul
Bryan, Connie Fleischer, Miriam Hallbauer, Lyonette Louis-Jacques, Elizabeth assis-
Rosemblatt, William Schwesig. and Charles Ten Brink for research and other
tance. Research support was provided by the Jerome S. Weise Faculty Research
Fund and the Jerome F. Kutak Faculty Fund.
43
ARTICLE
REFORMING OSHA: SOME THOUGHTS FOR
THE CURRENT LEGISLATIVE AGENDA
Thomas O. McGarity
Table of Contents
I.
GREATER AUTHORITY FOR OSHA
103
A. Generic Standards
103
B. Shifting the Burden of Proof
106
C. Scope of Judicial Review
109
D. Enforcement
110
II.
BUREAUCRACY FORCING
111
III.
EMPOWERING WORKERS
113
IV.
CONCLUSION
117
One of the stains on the history of the highly productive
American free-market economy is its persistent legacy of occu-
pational injury and disease. Although the cornucopia of goods
and services that the American economy has made available to
American consumers would have been impossible without ex-
posing American workers to some degree of health and safety
risk, too many workers have suffered injury, disease, and
William Stamps Farish Professor of Law, University of Texas School of Law,
B.A. 1971, Rice University: J.D. 1974, University of Texas. The author would like to
acknowledge the contributions of Professor Sidney A. Shapiro to the ideas expressed
in this Article.
99
#3
Good overview
possible points to take into
consideration
100
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death in the pursuit of an attractive return on investor capi-
of Labor called the Occupational Safety and Health
tal.¹
Administration (OSHA) and empowered it to write occupational
We could conclude that current rates of occupational injury
safety and health standards reasonably necessary and
and disease are acceptable because workers voluntarily assume
appropriate" for providing workers with a safe working
the risks of unsafe workplaces by bargaining individually with
environment. To the extent that it relied on economic
their employers over wages and workplace conditions. Under
inducements, the OSH Act primarily held out the direct
this theory, workers will demand higher wages to work under
incentive of avoiding heavy fines or jail.⁷ OSHA inspectors
risky conditions and employers will have a natural incentive to
could issue citations for violations of OSHA-promulgated
install risk-reduction technologies in dangerous workplaces.
standards or for conduct that breached the employers' "general
Over the long haul, the economy should reach an equilibrium
duty" to provide safe and healthful places of employment. By
in which workers who consent to working under risky
creating a full-fledged regulatory regime administered by a
conditions perform the dangerous jobs and employers install
powerful regulatory agency, the OSH Act offered the promise
the optimum amount of risk reduction technology.
of greatly reduced injury and disease rates in the American
Although this callous view of the employment relationship
workplace.
is a fairly accurate characterization of the state of American
Unfortunately. the statute has not lived-up to its promise.
law at the end of the nineteenth century, it clashed so
Although the tortuous and frustrating history of the
radically with the reality of the turn-of-the-century workplace
Occupational Safety and Health Administration is too lengthy
that state legislatures enacted workers' compensation regimes
to tell in these pages," a consensus is rapidly emerging that
to provide some compensation to diseased and injured workers
the regulatory regime created by the OSH Act is broken and
beyond that afforded by the "wage premiums" that they had
badly in need of repair. The roots of OSHA's failure lie in the
theoretically extracted from their employers. Compensation
complex institutional web in which OSHA has always been
was, however, a poor substitute for prevention, and it became
enmeshed, in a lack of forceful leadership through nearly all of
even less satisfying as inflation and legislative inattention
its existence, in a chronic shortage of resources, and,
eroded the value of the awards and reduced the incentives for
ultimately, in the statute itself. During the last twelve years
employers to keep workplaces safe.4 By the late 1960s, the
OSHA has promulgated a pitifully small number of
plight of American workers finally made its way onto the
occupational health standards and not a significantly larger
federal legislative agenda, and on December 29, 1970,
number of occupational safety standards. Although OSHA
President Richard Nixon, with much fanfare, signed the
will never have enough inspectors, its enforcement efforts
Occupational Safety and Health Act of 1970 ("OSH Act").5
during the 1980s dwindled to virtual nothingness," and rose
The statute created a new bureaucracy in the Department
1. See, e.g., Cristine N. O'Brien & Margo E.K. Reder, Strategies for Implement-
6., 29 U.S.C. 59 652(8). 656 (1988).
ing Workplace Reproductive and Health Programs, 19 J. LEGIS. 97, 97-98 (1993) (es.
7. See 29 U.S.C. $ 666 (1988 & Supp. IV 1992). Willful or repeated violations
timating that "20 million jobs in the United States expose workers to chemicals,
are punishable by a civil penalty of up to $70,000 per violation but not less than
metals and other products suspected of causing reproductive injury" at a cost of "$83
$5000 for each willful violation. Id. $ 666(a). Willful violations which cause an em-
billion for medical expenses and lost work-time costs").
ployee death may result in a fine of up to $10,000 or imprisonment for up to six
2. See W. Kip Viscusi, Structuring an Effective Occupational Disease Policy:
months. Id. $ 666(e). Violations determined not to be of a serious nature may result
Victim Compensation and Risk Regulation, 2 YALE J. ON Rsg. 53, 56-57 (1984) (not-
in a civil penalty up to $7000. Id. $ 666(c). The failure to remody the violation after
ing that the theory would only be valid "Tu]nder Ideal conditions of full information
receipt of a citation may result in a civil penalty of up to $7000 per day while the
and voluntary job choice").
violation continues. Id. $ 666(d).
8. See THOMAS O. MOGARITY & SIDNEY A. SHAPIRO, WORKERS AT RISK: THE
8. Id. $ 658(a) (1988).
FAILED PROMISE OF THE OCCUPATIONAL SAFETY AND HEALTH ADMINISTRATION 21-28
9. For a reasonably thorough account of the history of OSHA, are MCGARITY &
(1993) (outlining the history of workers' compensation laws).
SHAPIRO, supra note 8, at 33-177.
4. See id. at 21-23.
10. See Sidney A. Shapiro & Thomas O. McGarity, Reorienting OSHA: Regulato-
6. Occupational Safety and Health Act of 1970, Pub. L No. 91-596, 84 Stat.
ry Alternatives and Legislative Reform, 6 YALE J. ON REC. 1. 2 (1989) [hereinafter
1590 (codified as amended at 29 U.S.C. 69 661-78 (1988 & Supp. IV 1992)); see also
Recrienting OSHA) (noting that as of 1989 the Agency had completed only 24 sub-
BUREAU OF NATIONAL AFFAIRS, INC., THE JOB SAFETY AND HEALTH ACT OF 1970, at
stance-specific health regulations during its 17 year history).
13 (1971) (quoting Senator Jacob K. Javite as stating that passage of the OSH Act
11. MCGARITY & SHAPIRO, supra note 3, at 139-63 (recognizing the weakening
was preceded by "the most bitter labor-management political fight in years").
enforcement during the Reagan years).
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to pre-1980 levels only during the Bush administration. 12
a consequence, workers continue to be injured and contract As
assumed that OSHA administrators and staff would forcefully
diseases at an alarming rate. 13
implement their statutory duties out of a common desire to
This sad record can be changed, but it will require
workers.¹⁷ Sadly, this has not always been the case.
commitment by the Clinton Administration to making a
protect New legislation must therefore contain "bureaucracy forcing"
American workplaces safe for American workers and
provisions that enable outsiders to hold OSHA accountable for
determination by all of us not to be dissuaded by threats that a
failures to perform its statutory obligations. Third the original
companies will move their operations overseas. 14 Reviewing
statute greatly underestimated the capacity for an underfunded
institutions, such as the Office of Management and Budget
OSHA inspectorate to detect and correct violations of OSHA
the courts, must acknowledge that occupational safety and
standards." Because a huge OSHA inspectorate is neither po-
health standard-setting is an exceedingly complex task that and
litically feasible nor desirable, Congress should amend the
will not survive fly specking review and that they must afford
statute to empower workers to protect themselves from unsafe
OSHA a considerable range of discretion. This is particularly
workplace conditions.
standard-setting. true with respect to techniques for regulating, such as generic
I. GREATER AUTHORITY FOR OSHA
No real change is likely, however, until Congress
the statute in a way that frankly acknowledges the failures amends
A. Generic Standards
the past and firmly sets the agency on the road to of
Generic standard-setting is a much more efficient approach
serious beginning. For the first time in its twenty-three year history, a new
to rulemaking than the case-by-case approach that OSHA has
proposals for reforming the OSH Act are
pending in Congress,15 and their sponsors have a reasonable currently
typically adopted in the past. 19 Rather than attempt to
expectation that some form of OSHA reform legislation will
regulate each of the hundreds of toxic chemicals that are found
the enacted in the near future. This Article will examine be
in workplaces, OSHA could adopt a generic approach to
and more important aspects of the pending reform proposals some of
regulate chemical risks on an industry-by-industry* basis or
promulgate broad multi-chemical standards applicable to all
OSHA suggest some additional proposals that could help
workplaces in which workers are exposed to any of the chemi-
century. on the way toward a more successful second quarter send
cals.
For two decades it appeared that OSHA had sufficient
fundamental reasons. First, legislative compromises
The current statutory regime has failed for three
authority to promulgate generic standards, and indeed in its
in facilitated the enactment of the original statute left the that
early years OSHA wrote several important generic regula-
tions. 22 The recent decision of the Eleventh Circuit Court of
a weak position to protect workers." The statute agency
therefore be amended to provide OSHA with "new powers" must
Appeals in AFL-CIO U. OSHA, however, suggests that the
power to set standards generically on the basis of broad
protect workers. Second, the original statute optimistically to
information, rather than chemical-specific information about
toxicity and feasibility, may need to be explicit in the statute.
12. See id. at 158-77.
AFL-CIO involved OSHA's massive "PEL Update" rulemaking
quate protection).
13. See id. at 3-14 (indicating that American workers are still plagued by inade-
14. O.S.H. See OSHA Outlook: Tougher Enforcement, New Legislation Seen in
17. See id.
that Year, new OSHA Daily (BNA), at D4 (Jan. 12, 1994) [hereinafter OSHA Outlook] Coming
18. Refer to notes 66-67 infra and accompanying text.
the stick of Administrator Joseph A. Dear promises that the (stating
19, MCGARITY & SHAPIRO, supra note 3, at 200-02.
workplace"). enforcement action when needed to prod an employer to Agency "will use
20. See id. at 202-03 (discussing the advantages and disadvantages of industry.
Democratic-sponsored It also appears that the Clinton Administration intends to provide a safe
wide standards).
note 15 infra. Comprehensive Occupational Safety Reform Act. Id.; support refer the to
21.
See id. at 203 (noting that OSHA might promulgate standards which regu-
late than one chemical and noting the limits of this approach).
(1993). 16. See H.R. 1280, 103d Cong., lat Seas. (1993); S. 575, 103d Cong., lat Seas.
22
See U.S. OFFICE OF TECHNOLOGY ASSESSMENT, PREVENTING ILLNESSES AND
INJURY IN THE WORKPLACE 363-64 (1985) (listing early OSHA regulations); see also
tive
16. history). See MCGARITY & SHAPIRO, supro note 3, at 34-36 (discussing OSHA's legisla.
MCGARITY & SHAPIRO, supro note 3, at 52-53, 201-02 (discussing OSHA's apparent
authority to promulgate generic regulations and the generic regulations promulgated).
23. 965 F.2d 962 (11th Cir. 1992).
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105
involving 428 air contaminants for which OSHA had previously
degree of exposure to each of the substances in all, or some
promulgated "consensus standards" pursuant to an explicit con-
representative sample, of the thousands of workplaces in which
gressional directive." OSHA had based the earlier permissi-
employees were exposed to those substances. The court held
ble exposure limits (PELs) on recommendations of private
that OSHA's generic determination that the overall standard
standard-setting organizations such as the American
would prevent 55,000 occupational illnesses and 683 deaths
Conference of Governmental Industrial Hygienists (ACGIH)
annually was not sufficient. The court likewise rejected
and the American Standards Association.25 Over the years,
OSHA's generic determination that compliance with the PELs
however, these private entities and the newly created National
was feasible, noting that "OSHA made no attempt to show the
Institute for Occupational Safety and Health (NIOSH) had
ability of technology to meet specific exposure standards in
continued to study the health effects of the contaminants that
specific industries.
were the subject of consensus PELs, and the legally
Although OSHA pressed the Justice Department to appeal
enforceable PEL became outdated." The PEL Update
the Eleventh Circuit ruling to the Supreme Court, the Solicitor
rulemaking represented OSHA's attempt to promulgate a
General declined to do 80.85 The Eleventh Circuit's ex-
single generic standard updating the PELs to reflect more
ceedingly narrow interpretation of OSHA's authority to write
recent ACGIH and NIOSH recommendations." OSHA be-
generic standards therefore stands as a barrier to future
lieved that it could accomplish this relatively uncontroversial
generic rulemaking initiatives Unless OSHA is prepared to
generic update without making individual findings of signifi-
support individualized significant risk and feasibility
cant risk and feasibility for each of the 428 contaminants.
determinations, it should not adopt a generic approach to
The Court of Appeals for the Eleventh Circuit thought oth-
health or safety risks Given the massive resources required to
erwise."
make such individualized determinations and the tiny size of
The court held that although the statute allowed OSHA to
OSHA's rulemaking staff, the agency will be forced to return
engage in generic rulemaking, "the PEL for each substance
to the ponderous chemical-by-chemical approach that it has
must be able to stand independently, i.e., that each PEL must
traditionally adopted. Congress could easily prevent this
be supported by substantial evidence in the record considered
foreseeable abandonment of generic rulemaking by amending
&
as a whole and accompanied by adequate explanation. =80 As a
the OSH Act to clarify OSHA's authority to engage in generic
practical matter, this meant that OSHA was obliged to support
rulemaking without making individualized significant risk and
findings that each of the substances posed a significant risk
and that controls sufficient to achieve each of the PEL were
feasible." Although OSHA had taken great pains to
82. Id. at 975. OSHA had in fact made individual risk estimates for the chemi-
summarize the evidence for each of the 428 substances, it did
cale that it found to be carcinogens, but the court found this to be an exception to
OSHA's general method of risk assessment. Id. at 975 & n.18.
not prepare individual risk assessments for each of the chemi-
83.) Id. at 975-76 (stating that "Tw]hile our deference to the agency is at a peak
cals-an exercise that would have involved determining the
Yes its choices among scientific predictions, we must still look for some articulation of
reasons for those choices." (quoting International Union, UAW V. Pendergrass, 878
F.2d 389, 892 (D.C. Cir. 1989)). The court apparently thought it appropriate to pick
and choose from OSHA's rationales for the 428 substances that the court found to
24. Id. at 968-69. The "consensus standards" were the "start-up" standards that
be least plausible, even though no one had challenged the PELs for those substanc-
Congress, under $ 6(a) of the Occupational Safety and Health Act of 1970, required
es. See id. at 976 (giving examples of the insufficient reasoning used by OSHA in
OSHA to promulgate on an expedited basis without public hearing or comment in
establishing certain PELs): see also Marshall J. Breger, Defending Defenders: Remark
order to improve employee health or safety. Id. at 968. The PELs were the limits
on Nichol and Pierce, 42 DUKE LJ. 1202, 1207 (1993) (noting that although only 23
that OSHA promulgated in 1971 pursuant to that authority. Id.
PELs were challenged, "the Eleventh Circuit, sua sponte, vacated all 428 (PEL's]").
25. Id. nn.5 & 6.
Understandably, OSHA had put fewer resources into standards that it knew were
26. Id. at 974 (noting the arguments made by OSHA to support the new stan-
not likely to be challenged, thus it was unfair for the court to seize on those ratio-
dards).
nales as examples of poor OSHA reasoning.
27.
Id.
34/ 965 F.2d at 981.
28. Id. at 971.
36. See Clinton Administration Will Not Seek Supreme Court Review on OSHA
29. Id. at 972.
Exposure Limits, 54 Daily Lab. Rep. (BNA), at A-7 (Mar. 23, 1993).
80. Id.
86. See Health Harards: Clinton Administration Will Not Seek High Court Re-
31. Id. at 973-80. The court held that "OSHA must provide at least an estimate
view on OSHA Exposure Limits, 16 Chem. Reg. Rep. (BNA), at 2435 (Mar. 26, 1993)
actual risk associated with a particular toxic substance and explain in an
(noting that OSHA argued in support of generic rulemsking because of the slowpace
understandable way why that risk is significant." Id. at 973 (citations omitted).
of its traditional method of setting exposure limits one chemical at a time).
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feasibility determinations.
Protection Agency's (EPA) experience with complex scientific
Both of the existing prominent OSHA Reform bills would
explicitly overturn the Eleventh Circuit holding by directing
rulemaking, After EPA's rulemaking process became bogged
down in the mid-1970s, Congress amended the Clean Air
OSHA to promulgate the same generic PEL Update as an
Act 2 and the Clean Water Act43 to provide several "burden
interim final rule and providing that the rule shall take effect
immediately upon its promulgation." In addition, both bills
shifting" devices under which EPA could put the burden of
would direct OSHA and NIOSH to "modify and establish expo-
justification on the regulated industry." Professor Sidney
Shapiro and I have proposed a burden shifting regime for
sure limits for toxic materials and harmful physical agents" on
OSHA that could similarly relieve OSHA of some of the
a regular three-year basis. Although the bills would subject
burden of justifying standards aimed at protecting workers.45
OSHA to tight deadlines, they would still require the agency
Under this approach, OSHA, or perhaps NIOSH, would
to explain any modifications." The bills also provide that the
promulgate a list of chemicals and other harmful physical
generic standard shall be "in accordance with the requirements
agents that "could reasonably be anticipated to cause
of subsection (b)(5), =40 a curious reference to the current
a
material impairment of health or functional capacity. =46
statutory language that may be interpreted to mean that the
The proposed statute would create three broad categories
required explanation must include individualized determina-
of industrial hazards.⁴⁷ Any industrial category in which an
tions of significant risk and feasibility.4 If so, enactment of
employee was exposed to a substance on the list would fall
either of the bills will do very little to facilitate generic
initially into Class II and would retain that classification until
rulemaking, even in the limited area of PEL updates. Neither
redesignated by OSHA. All industrial categories in Class II
of the bills address OSHA's authority to promulgate generic
would have to install "best available workplace risk reduction
standards in other contexts. Therefore, no real change is likely
technology" (BAT) by a specified deadline. OSHA would
unless Congress amends the Act to provide that OSHA may
promulgate generic standards defining BAT on an industry-
address multiple chemicals or multiple hazards in a single
wide basis prior to some statutory deadline designed to give
rulemaking proceeding without making detailed findings of
regulatees sufficient time to install the required technolo-
significant risk and feasibility on a chemical-by-chemical or
gies.⁶⁰ Personal protective devices could not be considered
hazard-by-hazard basis.
BAT, but variances would be available on a case-by-case basis
B. Shifting the Burden of Proof
to individual companies upon a demonstration that meeting
the standard was technologically infeasible or that the cost per
Congress could bring about a more fundamental change in
worker of meeting the standard greatly exceeded the per
the rulemaking process if it draws upon the Environmental
worker cost of other companies in the industry. 51
OSHA would redesignate an industrial hazard to Class I if
regulation under Class II would leave workers exposed to a
37. H.R. 1280, 103d Cong., 1st Sess. $ 409 (1993); S. 575, 103d Cong., 1st Sess.
$ 409 (1993).
38. H.R. 1280, 9 405; 8. 575, 9 405.
42. 42 U.S.C. # 7401-7671q (1988 & Supp. III 1991).
39. H.R. 1280, I 405(2); S. 575, $ 405(2). Both proposals require that the recom-
48. 33 U.S.C. $5 1251-1376 (1988 & Supp. IV 1992).
mendations include a suggested exposure limit and the basis for the suggested limit.
44. See MCGARITY & SHAPIRO, supra note 3, at 297.99 (discussing the EPA's
H.R. 1280, I 406(2); S. 575, $ 405(2).
burden shifting reforms).
40. H.R. 1280, $ 405; S. 575, $ 405.
41. See 29 U.S.C. 9 665(b)(5) (1988). The statute states that
supra note 3, at 299-304.
45. Reorienting OSHA, supra note 10, at 45-50; see also MCGARITY & SHAPIRO,
[d]evelopment of standards
shall be based upon research, demonstra-
46 Reorienting OSHA, supra note 10, at 47. This test would require much less
tions, experiments, and such other information as may be appropriate. In
justification than "the significant risk" threshold for current OSHA rulemaking. See
id. at 47 n.265. OSHA could add substances to the list based upon their chemical
addition to the attainment of the highest degree of health and safety pro-
properties without regard to the degree of worker exposure.
tection for the employee, other considerations shall be the latest available
scientific data in the field, the feasibility of the standards, and experience
MCGARITY & SHAPIRO, supra note 8, at 299-303.
47. See id. at 47-48. For a more detailed discussion of this proposal, see to
gained under this and other health safety laws. Whenever practical, the
48. Reorienting OSHA, supra note 10, at 47.
standard promulgated shall be expressed in terms of objective criteria and of
49.
Id.
the performance desired.
50. Id. at 47 a.266.
Id
51. MCGARITY & SHAPIRO, supra note 8, at 300-01.
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"significant risk of material impairment to health or functional
privately established "consensus standards. *59
capacity.' For Class I hazards, OSHA would require
Although the above proposal is certainly not the only
employers to reduce exposure to the extent "feasible." This
possible burden shifting device, some kind of procedural vehicle
would require more expensive risk reduction technologies than
to shift the burden of justification is necessary if OSHA is to
BAT. The regulation would allow personal protective devices to
have any hope of accelerating the ponderous pace of its
the extent necessary to reduce risk to a level of insignificance,
standard-setting efforts. It is therefore disappointing that
but they would be phased out as companies installed
neither of the currently proposed bills attempts to adapt the
engineering controls. So long as personal protective devices
burden shifting idea to the OSHA rulemaking context.
were necessary to reduce risk, the companies would have to
engage in engineering research relevant to the risk at issue
C. Scope of Judicial Review
with the goal of developing additional engineering controls.
The Eleventh Circuit's remand of the PEL Update
OSHA would be empowered to identify high-risk operations in
standard is just one of many instances of overly aggressive
Class I industries for which a permit would be required. To
judicial review of OSHA standard-setting. On numerous
secure a permit, a company would be required to submit a
occasions, reviewing courts have imposed additional analytical
health protection plan showing how they would enforce per-
requirements on OSHA and have insisted that OSHA explain
sonal protective device requirements, how they would
every subtle nuance of every challenged aspect of its regulatory
implement medical monitoring and hazard removal, and
rationale. Even though OSHA often prevails in the end,
specifying the additional efforts that the company was
stringent judicial review has had a dramatic impact on OSHA's
undertaking to identify and implement new engineering
standard-setting pace. The prospect of judicial review by a
controls. The permit would have to be renewed on a yearly
judge who demands that every fine nuance of the agency's
basis. Variances would be available from Class I standards,
decision be explained to that judge's satisfaction requires
but not from other Class I requirements, and only on the
delays for additional studies, more detailed explanations, and
ground of technological infeasibility.
thorough responses to each of the arguments that regulatees
A regulated entity or trade association could petition
raise in their blunderbuss attacks on the proposed rules. If
OSHA to redesignate an industry to the least stringently
regulated Class III upon a demonstration that employees in
the industry could not reasonably be anticipated to suffer
59. Id. Private "consensus standards" would connote OSHA's original consensus
"material impairment of health or functional capacity" under
test. Id; refer to note 24 supra (explaining "consensus standards" promulgated by
any realistic exposure scenarios.68 The industry would thus
OSHA).
bear the burden of demonstrating that employee exposure to
60. MCGARITY & SHAPIRO, supra note 3, at 254-64 (discussing the problems
created by "hard look" review and the "substantial evidence" test, and advocating
the listed substance was 80 trivial as to reduce the risk of
greater deference to agency rulemaking efforts); Thomas O. McGarity, Some
harm to acceptable levels. Industries in Class III would be re-
Thoughts on "Deossifying" the Rulemaking Process, 41 DUKE LJ. 1385, 1410-26
quired to reduce employee exposure to levels permitted by
(1992) (discussing the courts' lack of deference to agency rules and arguing that
"judicial review under hard look doctrine has contributed to rulemaking classifica-
tion").
61. MCGARITY & SHAPIRO, supra note 3, at 258.
Sixty percent of the agency's health standards have taken three years or
longer; 48 percent have taken four years or longer; and 40 percent have
taken five years or longer. OSHA has been working three or more years on
52. Reorienting OSHA. supra note 10, at 47. This test would be equivalent to
70 percent of its pending health standards and five years or more on 40
the current significant risk threshold.
percent of its pending health standards. (OSHA) has acted somewhat more
quickly on its safety standards-only 30 percent have taken three or more
53. Id. at 47.
64. Such a requirement would require employers to install the best technology
years-but it has been working four or more years on 57 percent of its
foreseeable on the horison. including technology not yet approved in this country. Id.
pending safety standards.
55. Id. Reducing the risk to an insignificant level would be the ultimate goal.
Id.
62. Id. at 257-58 (outlining the effect of an overzealous review); cf. International
Id.
66. MCGARITY & SHAPIRO, supra note 3, at 302.
Union, UAW V. Donovan, 690 F. Supp. 747, 751-56 (D.C. Cir. 1984) (remanding for
agency reconsideration of its denial to issue emergency formaldehyde standard in
57.
Id.
58. Reorienting OSHA, supra note 10. at 48.
light of current developments presented to the court), order adopted, 756 F.2d 162
110
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the rationale for every rule must be capable of surviving
OSHA inspector. OSHA clearly needs more enforcement
flyspecking judicial review, OSHA will be able to promulgate
resources, but an infusion of personnel is highly unlikely in
very few rules.
the foreseeable future. Although the Reagan Administration
One reason for the stringency with which some reviewing
went to great lengths to squeeze the fat out of the federal
courts review OSHA standards is the anomalous prescription
bureaucracies, the Clinton Administration is apparently
for the scope of review in OSHA's current statute. Whereas the
committed to "reinventing government" by cutting still further
Administrative Procedure Act (APA) subjects informal
the resources available to federal agencies. Although both
rulemaking to the "arbitrary and capricious" review
the House and the Senate OSHA Reform bills substantially
standard, the OSH Act requires the courts of appeals to
stiffen the sanctions available to OSHA once it detects a
review OSHA standards under the "substantial evidence" test
violation, neither bill demonstrates a commitment toward
reserved for agency adjudications under the APA The Fifth
making greater resources available to OSHA.® Enforcement
and Eleventh Circuits have read this anomaly as a conscious
of OSHA standards and the general duty clause⁷⁰ will
signal by Congress to the judiciary to review OSHA rules more
obviously have to come from other institutions. Part III of this
stringently than they would otherwise review agency
Article will examine some suggestions for "reinventing
rulemaking. Congress could require that the federal
government" by empowering workers.
judiciary adopt a less intrusive approach to its review of
OSHA standards by amending the OSH Act to provide for
II. BUREAUCRACY FORCING
"arbitrary and capricious" review of OSHA health and safety
standards, This would comport with the standard of review for
It is a sad commentary on OSHA's recent history that
most other agency rules, and would signal to OSHA that it
nearly all of the occupational health standards it has
need not be 80 concerned with loading up the record and the
promulgated in the last twelve years have come in response to
rulemaking preambles with responses to every conceivable
bureaucracy forcing" lawsuits filed by unions or other
argument that affected parties might level against its rules.
employee representatives." To some extent this passivity on
Neither of the current reform bills, however, addresses the
OSHA's part is attributable to the Office of Management and
scope of judicial review of OSHA standards.
D. Enforcement
67. Bill on Sanctions Should Bar Pre-emption of State Actions by Federal law,
One of OSHA's greatest frustrations is the disparity
Panel Told, 17 O.S.H. Rep. (BNA) No. 26, at 979 (Nov. 25, 1987).
between its very limited enforcement staff of about 1000
68. See generally AL GORE, FROM RED TAPE TO RESULTS: CREATING A GOVERN.
MENT THAT WORKS BETTER & COSTS LESS, at III (1993) (stating that the Clinton
employees and its responsibility for the safety of workers in
Administration is recommending changes to several governmental agencies which
millions of workplaces. The approximately 60,000 inspections
would reduce spending by $108 billion over a five year period).
that OSHA has conducted annually represents a mere drop in
69. H.R. 1280, 103d Cong., let Seas. $ 512 (1993); S. 675, 103d Cong., let Sees.
$ 512 (1993).
the bucket of inspections that should be made. Only about
70. See 29 U.S.C. $ 664 (1988). Section 654 places general duties on both the
one of every twenty-five job sites has ever been visited by an
employer and the employee. Id. The employer must furnish a safe work environment
and comply with all standards promulgated under the Act. Id Likewise, the employ-
00 must comply with all standards, rules, and regulations issued pursuant to the
Act. Id.
71. See, e.g., United Steelworkers of America V. Rubber Mfr. Ass'n, 783 F.2d
(D.C. Cir. 1985).
1117,1119 (D.C. Cir. 1986) (unions filed a writ of mandamus to compel OSHA to
63. 6 U.S.C. 9 706(2)(a) (1988).
expedite rulemaking on bensene); International Union, UAW V. Donovan, 756 F.2d
64. 29 U.S.C. $ 655(f) (1988).
162, 163 (D.C. Cir. 1985) (labor organizations sought an order directing OSHA to
65. AFL-CIO V. OSHA, 965 F.2d 962, 970 (11th Cir. 1992); National Grain &
regulate exposure to formaldehyde in the workplace); Public Citizen Health Research
Feed Ass'n V. OSHA, 866 F.2d 717, 728 (5th Cir. 1988), enforcement denied and stay
Group V. Auchter, 702 F.2d 1150, 1153 (D.C. Clr. 1983) (non-profit organization
lifted by 903 F.2d 808 (5th Cir. 1990); are also MCGARITY & SHAPIRO, supra note 8,
at 256-57 (discussing the application of the "substantial evidence" test under the
sought an order compelling OSHA to issue an emergency standard regulating
workplace exposure to ethylene oxide). A "bureaucracy forcing" lawsuit is an action
OSH Act).
brought by an "interested person," whereby a court finds that an agency has been
66. OCCUPATIONAL SAFETY & HEALTH ADMIN., U.S. DEPT OF LABOR, REPORT OF
too slow in responding to a petition and issues a writ of mandamus, thereby requir-
THE PRESIDENT TO THE CONGRESS ON OCCUPATIONAL SAFETY AND HEALTH FOR CAL-
ing the agency to make a decision within a specified time period. See MCGARITY &
ENDAR YEAR 1987, at 44 (1988) (using 1987 statistics).
SHAPIRO, supra note 3, at 310.
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Budget's adamant resistance to OSHA regulations during the
proposed rule, the agency must promulgate a final rule.83 The
Reagan and Bush Administrations.⁷² Yet even during the
bills would allow adversely affected persons to challenge in
Carter Administration, outsiders resorted to judicial remedies
court a decision not to promulgate a rule. Affected persons
to nudge the agency along, and they are likely to continue that
would also be allowed to challenge OSHA's failure to adhere to
pressure during the Clinton Administration.
the statutory deadlines. Thus, the current reform bills adopt
Although the bureaucracy forcing lawsuit is one of the few
the rather hard line approach that Congress has used to
effective tools that workers have to induce OSHA to do its job,
stimulate the EPA. Despite its generally greater commit-
the procedure is very convoluted.⁷⁴ The statute presently
ment to worker safety than its predecessors, the Glinton
requires the outsider to file a petition for a temporary
Administration will no doubt vigorously oppose these
emergency standard and then convince a reviewing court that
constraints on its rulemaking discretion.
the agency unreasonably delayed in promulgating the emer-
Some system of enforceable deadlines, like those
gency temporary standard. The statute does not clearly
established in the proposed bills, is essential to improving
provide for judicial review of OSHA's negative response to a
OSHA's rulemaking productivity.* A suitable middle-ground
petition to promulgate an ordinary occupational safety or
solution may be to amend the OSH Act to require OSHA to
health standard.
set its own deadlines and then adhere to them.80 Congress
In the context of the EPA, Congress has prescribed dozens
could place a cap, perhaps three years, on those deadlines and
of statutory deadlines within which that agency must
allow agency-set deadlines to be extended only for good cause.
promulgate rules. If the EPA fails to meet a deadline,
Congress could then give the courts explicit authority to
outsiders may sue to force the agency to adhere to a judicially
enforce the OSHA-set deadlines. This approach would allow
monitored timetable." The fact that OSHA is not subject to
the agency to set its own agenda while at the same time
similar statutory deadlines may help to explain why it promul-
providing a vehicle for the beneficiaries of OSHA regulations to
gates so few rules. Statutory deadlines, however, pose huge
hold the agency to its own schedule.
implementation problems and can divest the agency of control
over its own agenda." Yet without deadlines, a lethargic
III. EMPOWERING WORKERS
agency or one not committed to worker safety can very easily
justify doing nothing.
Even more fundamental changes in occupational safety
Both of the OSH Act reform bills require OSHA to
and health could result from changing the law to empower
publish, in the Federal Register, a response to any standard-
workers to protect themselves." / Under the current statute,
setting petition within ninety days of its receipt. If OSHA
workers play only a very modest role in enforcing OSHA
refuses to publish the rule, it must provide reasons for its
standards and the general duty clause. For example, although
decision." If the response is in the affirmative, OSHA must
the OSH Act allows employees to accompany OSHA inspectors
publish a proposed rule within twelve months of the deci-
on their rounds," they rarely participate in the settlement
sion.82 Within eighteen months of the publication of the
83. H.R. 1280, 5 401(e); S. 575, § 401(e).
84. H.R. 1280, $ 401(d); S. 575, 9 401(d). The same procedure applies to recom-
72. MOGARITY & SHAPIRO, supra note 3, at 310.
mendations from NIOSH, EPA, and OSHA advisory committees.
73. See id.
85. H.R. 1280, $ 401(a): S. 575, $ 401(d).
74. Id.
86. See MCGARITY & SHAPIRO, supra note 8, at 312-14 (comparing the EPA's
75. Id. at 310-11.
statutory framework with OSHA's).
76. Id. at 312.
87. See generally OSHA Outlook, supra note 14 (reporting that the new OSHA
77. Id.
Athainistrator, Joseph Dear, has pledged to increase enforcement efforts and improve
78. Id. at 312-13 (noting that the existence of deadlines forces an agency to
standard setting).
promulgate rules too quickly).
88. Refer to notes 87-39 supra and accompanying text
79. See id. at 818.
89. MCGARITY & SHAPIRO, supra note 3, at 313.
80. H.R. 1280, 103d Cong., lst Sees. $ 401(a) (1993); S. 575, 103d Cong., 1st
90 90 Id. at 314.
Seas. 0 401(a) (1993).
91 See generally id at 321-29 (examining how Congress might enable greater
81. H.R. 1280, 5 401(a): S. 575, 4 401(a).
employee participation in OSHA enforcement).
82. H.R. 1280, 9 401(e); 8. 575, $ 401(a).
92. Id. at 322.
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invariably negotiations between the employers and OSHA officials
the past, these precede the final assessment of civil penalties. that
1994] by empowering employees or their representatives OSHA and to to
always include informal settlement conferences, which In
result to any modification of a citation issued by and Health
though dramatic reductions in penalties. In have
resulted in the inspector who issued the citation, do not
object a hearing before the Occupational Safety validity of the
secure Review Commission to challenge the
workers employers and are entitled to contest OSHA addition, al-
penalty their representatives have no right to citations,
dtation. could, however, go further and empower their
send the on the ground that it was not sufficiently challenge a
Congress to file citizen enforcement actions against that
may only appropriate message to the employer harsh to
employees much like the citizen enforcement actions control
time fixed challenge in a citation on the ground that "the /Employees
statutes. environmental an age of reduced governmental
employers, groups may file under the pollution enforcement
unreasonable. the citation for the abatement of the violation period 1s of
resources, workers as private attorneys general to enforce
one way to "reinvent government" is to deputize OSHA
Employees may reasonably wonder whether OSHA
closed-door employers are attempting to hide something by and the
standards. 103 There is a risk, however, that employees or
mately fear settlement negotiations, and employees engaging in
their representatives would abuse this power to secure other
store." On that the agency officials may "give may legiti-
concessions in labor negotiations.¹ This potential for abuse
employees Congress could amend the OSH Act best of
disinfectants, the 97 assumption that sunlight is the away the
enforcement actions to standards that OSHA had 106 promulgated
could be reduced to some extent by limiting worker
observe and their representatives the unqualified to give
through full notice and comment procedures. This would
give settlement negotiations In addition, Congress right to
prevent workers from seizing upon trivial consensus standards
judge employees that the power to persuade an administrative could
in enforcement actions to extract other concessions. If this
enforcement the ability to secure an order to continue and
provide particular settlement terms were too lenient law
limitation proved insufficient, Congress could address the prob.
lem directly by providing for sanctions that could be levied in
resources, proceedings. Given OSHA's extremely the
the event an employee threatens a worker enforcement 106 action
the threat of an employee challenge is a limited
for purposes unrelated to worker health and safety.
the counterweight to the employer's ever present threat to necessary
Empowering workers to take action to protect themselves
assessed penalty. 100 Both of the reform bills achieve litigate this
presumes that they are likewise protected from retaliation by
the employer. The current statute contains anti-retaliation
provisions, but in the past OSHA has not been a diligent
protector of employee whistle-blowers.107 Under Section 11(c)
SIGHT: 93. HEARINGS HOUSE COMM. ON ON EDUC. & LABOR, 100TH CONG., 2D
of the OSH Act, only OSHA may challenge adverse action 108
Assistant Secretary CONFERENCES 208 (Comm. Print 1988) (testimony ROLES IN
SETTLEMENT FIRE BRIGADE STANDARD AND EMPLOYER/EMPLOYEE SESS., OSHA OVER.
taken in retaliation for the exercise of employee rights. To
OSHA official has discretion for Occupational Safety and Health) (noting of that John the Pendergrass,
for informal conferences participate); are 29 C.F.R. $ 1903.19 employee's repre-
sentative shall be allowed to regarding whether an employee or an conducting
citation, notice of with employees to discuss issues raised (1993) an "inspection, (providing
101. H.R. 1280, 108d Cong., 1st Sees. $ 509 (1993); S. 575, 103d Cong., 1st Sess.
94. See proposed penalty, or notice of intention to by
$ 509 (1993).
reduced fines MCGARITY by 71% in & settlement SHAPIRO, supra negotiations). note 3, at 217 (noting contest"). that in 1988 OSHA
102. See, eg., Clean Air Act Amendments of 1977, 42 U.S.C. 5 7604(a) (1988)
96. Id. at 323.
(allowing any person to commence a civil action to enforce emission standards); Wa-
ter Quality Act of 1967, 83 U.S.C. I 1365(a) (1988) (allowing any citizen to com-
96. 29 U.S.C. $ 659(c) (1988).
mence & civil action to enforce effluent standards).
light IT the most (stating efficient that policeman"). "Te]unlight is said to be the best of disinfectants; BANKERS electric USE
97. 62 (1933) LOUIS D. BRANDEIS, OTHER PEOPLE'S MONEY: AND How THE
103. MCGARITY & SHAPIRO, supra note 3, at 324-29 (discussing the possibility of
"deputizing" employees).
104. Id. at 308.
allow Change?," employees N.K. "a L more REV. 177, 186 (1989) (discussing a number Act: of Is It Time for
98. See 17 Sy Holsman, The Occupational Safety & Health
105. Id. at 327.
106. Id. at 329.
been cited for violations). defined role" in settling cases where their employer proposals has to
107. Id. at 337 (referring to OSHA's inaction during the Reagan years).
108. 29 U.S.C. $ 660(c)(2) (1988); see MCGARITY & SHAPIRO, supra note 3, at 337
100. Id.
99. MCGARITY & SHAPIRO, supra note 3, at 324.
(discussing this as $ 11(c)'s "most serious drawback"); see also 29 C.F.R. I 1977.15(d) be
(1993) (stating that "Section 11(c)(2) provides that an employee who believes that
has been discriminated against in violation of Section 11(c)(1) 'may, within 80 days
116
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117
the extent that OSHA is not willing to take up an employee's
injury and illness records, as well as conduct inspections in
cause, the retaliation goes unpunished.¹⁰
response to employee complaints. 115 The committees could
The proposed legislation would change this situation by
also make recommendations to the employer for health and
extending Section 11(c) to cover employee reporting of injuries
safety improvements. 116 Once again, however, it is important
and unsafe conditions, and employee refusals to perform duties
that employees serving on these committees be protected
if the employee has a "reasonable apprehension that
against retaliation.
performing such duties would result in serious injury to the
employee or other employees. =110 The new bills would empow-
IV. CONCLUSION
er employees to seek relief on their own if the secretary does
not act within ninety days after finding reasonable grounds to
The average American workplace is a much safer and
believe that an unlawful retaliation has occurred. 111 The bills
more humane place than it was a century ago. Yet, even at
would provide that a violation is established if an employee
the threshold of the twenty-first century, American workers
shows that the exercise of a protected right is a contributing
still suffer needlessly from workplace-related injuries and
factor to the action. 112 However, if the employer can show by
diseases. The fire that killed twenty-five poorly paid workers
clear and convincing evidence that it would have taken the
on September 3, 1991 in a Hamlet, North Carolina chicken
same action in the absence of the employee's exercise of the
processing plant focused the nation's attention on the plight of
protected right then no relief can be ordered."¹³
American workers like few other events since the famous
Finally, numerous labor leaders and employers have
Triangle Shirtwaist Company fire of March 25, 1911. 117 The
suggested that employees be empowered to operate
plant, which was in flagrant violation of numerous OSHA
cooperatively with employers in labor-management safety
safety standards, had never, in its eleven year history, been
committees, which have the power to shut down operations
inspected by state or federal officials. 118 The law has a
that pose unreasonable health and safety risks to em-
limited capacity to modify human conduct, and no statute can
ployees. 114 The reform legislation adopts this idea and
prevent all workplace injuries and diseases. Yet the law is the
requires employers to establish safety and health committees
vehicle through which society channels many of its aspirations.
that would have the power to review the employer's health
The Occupational Safety and Health Act of 1970 was in many
and safety plan, incidents resulting in accidents or illness, and
ways a good starting point, but American workers can rightly
aspire to more. The Hamlet tragedy should serve as a wake-up
call, announcing that the time has come to amend the OSH
after such violation occurs,' file a complaint with the Secretary of Labor").
Act to guarantee more effective health and safety protections
109. See MCGARITY & SHAPIRO, supro note 3, at 337 (noting that if OSHA de-
for American workers.
cides not to act on the employee's behalf, there is no remedy for the employee and
that some courts even find the employee's common law remedy is preempted). See,
e.g., Platt V. Jack Cooper Transp. Co., 959 F.2d 91, 95 (8th Cir. 1992) (holding that
the employee's wrongful discharge suit is preempted and noting the "obvious and
substantial" risk of interfering with the jurisdiction of the National Labor Relations
Board); Washington v. Union Carbide Corp., 870 F.2d 957, 962 (4th Cir. 1989) (not-
ing that discharged employees in West Virginia typically do not have an action in
tort unless the discharge contravenes a substantial public policy); Hines V. Elf
Atochem N. Am., Inc., 813 F. Supp. 550, 552 (W.D. Ky. 1993) (stating that both the
federal and Kentucky OSHA statutes preempt wrongful discharge claims due to
these statutes' imposed structure for pursuing such claims); Braun V. Kelsey-Hayes
Co., 635 F. Supp. 75, 80 (E.D. Pa. 1986) (holding that the OSHA statutory remedy
for pursuing wrongful discharge claims is exclusive and preemptive of any state tort
action); King v. Fox Grocery Co., 642 F. Supp. 288, 290 (W.D. Pa. 1986) (concluding
115. H.R. 1280, § 201; S. 576, I 201.
that the courts of appeals have not found a private right of action under OSHA).
116. H.R. 1280, I 201; S. 575, § 201.
110. H.R. 1280, 103d Cong., let Seas. § 601(b)(2) (1993); S. 575, 103d Cong., 1st
117. See DANIEL M. BERMAN, DEATH ON THE JOB: OCCUPATIONAL HEALTH AND
Sees. 5 601(b)(2) (1993).
SAFETY STRUGGLES IN THE UNITED STATES 9 (1978); Family of Worker Killed in Im-
111. H.R. 1280, 5 601(b)(4); 8. 575, § 601(b)(4).
perial Five Sues Company, Manager for Gross Negligence, 21 O.S.H. Rep. (BNA) No.
112. H.R. 1280, $ 601(b)(6)(A); 8. 676, § 601(b)(6)(A).
16, at 429 (Sept. 18, 1991).
113. H.R. 1280, I 601(b)(6)(B); S. 575, § 601(b)(6)(B).
118. AFL-CIO Petitions OSHA to Withdraw State Plan Status For North Carolina,
114. See MCGARITY & SHAPIRO, supra note 3, at 340-45.
21 O.S.H. Rep. (BNA) No. 16, at 428 (Sept. 18, 1991).
ARTICLE
PERPETUATING RISK? WORKERS'
COMPENSATION AND THE PERSISTENCE
OF OCCUPATIONAL INJURIES
Emily A. Spieler
Table of Contents
comments below,
1.
INTRODUCTION
121
II.
THE PARADOX
129
A. Costs
130
B. Injuries
140
C. Costs/Injuries
147
1. Explanations for Cost Escalation
147
a. Persistence of workplace hazards.
147
b. Attributes of the workers'
compensation system.
147
Professor of Law, West Virginia University College of Law; J.D., Yale Law
School; B.A. Harvard-Radcliffe College. My thanks go to John Kosak, Gregory Wag-
ner, Jim Weeks, Judith Greenwood Wilbur Yahnke, Paul Becker, and Robert Finger,
for the time that they have apent with me, pussling over the issues discussed in
this Article, both during my tenure as West Virginia Workers' Compensation Com-
missioner and thereafter. In West Virginia, where fatality and injury rates vastly
exceed national norms in most industries, this inquiry is not merely academic. My
thanks also go to Gregory Wagner and Bob Bastress who undertook thoughtful re-
view of portions of this manuscript; to Jeff Lewin who exhibited extraordinary pa-
tience in educating me about the relevant issues in the field of law and economics;
to Mark Rothstein, who gave me the opportunity to think through issues which have
bothered me for some time by inviting me to participate in the New Challenges in
Occupational Health Conference, sponsored by the University of Houston Health Law
and Policy Institute in Houston on March 4 and 5, 1993; and to Jeff Blaydes, An-
drew Kats, and Natalie Sal for their able research assistance.
119
I've read thru chis unticle but
not marked it OSHA
article ustead, its in worker
was prior is re. vamping C repair traly,
thought that 11 downling but Hot
250, button Read this If you In -
1,
120
HOUSTON LAW REVIEW
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PERPETUATING RISK
121
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c.
Worker behavior
150
D. Ignorance, Doctors, Lawyers, and Other
Transaction Costs
238
d. Demographic and industrial
changes
151
e.
Reporting variability/data
IV.
SOLVING THE PARADOX? THE NEW SAFETY
244
validity
152
RHETORIC
2. Employer and Insurer Responses to
A. Legislative Responses to Rising Workers'
152
Compensation Costs
246
Costs
a. Changes in the insurance market
152
B. State Workers' Compensation Safety and
Health Reforms
251
b. Enterprise and insurer attempts
to contain costs
153
1. Premium Discounts
251
C. Political attempts to constrain
2. Safety and Health Training and
systemic costs
154
Consultative Programs
253
154
3. Safety and Health Committees
254
3. Successful Ventures into Cost Control
4. Safety and Health Enforcement
III.
EXPLORING THE PARADOX
161
Activities
256
A. The Workers' Compensation Paradigm
162
C. The Implication of Safety and Health
Reforms for Injury Prevention
259
1. The Rise of Workers' Compensation
Programs
162
2. The No-Fault System as a Shield to
V.
CONCLUSION
263
Employer Responsibility
168
3. Workers' Compensation Laws and the
I. INTRODUCTION
Movement for Industrial Safety
173
4. The Workers' Compensation Paradigm
In 1992, state and federal workers' compensation
Today
179
programs¹ consumed over sixty-two billion dollars.2 This
B. Distributing Cost
185
figure dwarfs, by a factor of over 100, the combined budgets of
1. The Workers' Compensation Insurance
the three federal agencies whose primary focus is on the
Pricing Scheme and Market
187
a. Rate setting methodology
189
b. Rate setting and safety
incentives
193
C. The effect of special funds
and the residual market
201
1. These include state workers' compensation programs which provide wage
2. Externalization of Costs
205
replacement (temporary total and permanent disability benefits). permanent partial
disability benefits, and medical and rehabilitation treatment related to occupational
C. The Effect of the Employment Relationship
211
injuries or illnesses arising out of employment, as well as equivalent federal pro-
1. Roots of the Worker-at-Fault Paradigm
211
grams such as those under the Federal Employees' Compensation Act, 5 U.S.C. §§
a. Workers-at-fault I: unsafe
8101-8193 (1988) (providing compensation to federal government employees). the
Black Lung Benefits Act, 30 U.S.C. §§ 901-945 (1988) (providing compensation for
worker behavior
212
lung diseases associated with coal mining), and the Longshore and Harbor Workers'
b. Workers-at-fault II: claims
Compensation Act, 33 U.S.C. §§ 901-950 (1988) (providing compensation for ship,
filing behavior
214
harbor, shipyard, railroad, river, and other workers).
2. John F. Burton, Jr., Workers' Compensation Costs, 1960-1992: The Increases,
2. Factors Affecting Workers' Decisions
The Causes, and The Consequences, JOHN BURTON'S WORKERS' COMPENSATION MONI-
to File Claims
217
TOR, Mar.-Apr. 1993, at 1, 1 [hereinafter Burton (1993)]. This 1992 figure is an esti-
3. The Influence of Employment Law on
mate; final data were not yet available. Id. Other sources put the figure higher.
Workers' Claims Filing Activity
220
E.g., Richard W. Palczynski, Coping with the Crisis, BEST'S REV., Nov. 1992, at 69,
69 (stating that the amount was $65 billion in 1992 and that it grows by 10% each
4. The Ability of Employers to Influence
year); Cecily Raiborn & Dinah Payne, The Big Dark Cloud of Workers' Compensa-
Workers' Decisions
231
tion: Does It Have A Silver Lining?, 44 LAB. LJ. 554, 554 (1993) (setting the
amount in 1991 at $70 billion, or double the cost in 1985).
122
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occupational safety and health of American workers. In fact,
reduction in aggregate workers' compensation costs; and the
workers' compensation, designed to compensate victims of
work-related injuries, illnesses, and fatalities, represents our
high cost of this social insurance program expends resources
which might better be applied elsewhere. American workers
primary allocation of publicly mandated funds to safety and
and enterprises are therefore paying a price for both the
health in the workplace. Not surprisingly, the dramatic and
persistent levels of injury and disease and the growing costs of
persistent increases in these costs in recent years' have not
workers' compensation.
been welcomed by employers (who must pay them), by
It would seem reasonable to expect that rising
politicians (who must confront the political pressure which
compensation costs would stimulate employers to engage in
accompanies them), or by workers and labor unions (who must
efforts to prevent occupational injury and disease. There is no
defend benefit levels in the political arena).
persuasive evidence that this is so, however. Neither aggregate
At the same time, available data appear to indicate that
safety data nor more focused empirical studies give strong
injury rates, and in particular injuries which result in lost
support to the notion that the high costs of workers' compen-
work time, have not declined during this period of exploding
sation in the aggregate, or enterprise-specific costs, have
costs. We are thus confronted with two inescapable and
motivated large numbers of employers to take injury
obvious facts: the persistence of occupationally-induced
prevention activities seriously. This is remarkable, in view of
morbidity and mortality continues to prevent substantial
the fact that empirical studies do show that enterprises with
aggressive safety programs often exhibit lower, sometimes
substantially lower, workers' compensation costs, and that the
3. In 1992, the budgets for key federal occupational safety and health agencies
reduction in these costs more than offsets the cost of safety
were: Occupational Safety and Health Administration (OSHA). $297.08 million; Mine
initiatives.⁷
Safety and Health Administration (MSHA). $182.04 million; and National Institute
There is no consensus with regard to defining the socially
for Occupational Safety and Health (NIOSH). $103.45 million; for a total of $582.57
million. BUDGET OF THE UNITED STATES GOVERNMENT: FISCAL YEAR 1993, apps. One-
optimal level of safety in the workplace.8 Public health
691 to One-694; NIOSH budget information provided by Jennifer Ballew, Acting
Principal Management Official, NIOSH, October 18, 1993. The Congressionally ap-
proved budget for NIOSH is reduced to an allocation of $99.259 million within the
6. Refer to notes 136-41 infra and accompanying text.
Centers for Disease Control and Prevention (CDC). Ballew, supra. OSHA, MSHA.
7. See ROCHELLE V. HABECK ET AL., DISABILITY PREVENTION AND MANAGEMENT
and NIOSH are the only agencies whose exclusive jurisdiction relates to occupational
AND WORKERS' COMPENSATION CLAIMS, at V-15 (1988) [hereinafter Upjohn Report];
safety and health; this does not, however, represent the total outlay for health and
CYNTHIA ROBINSON, OFFICE OF POLICY RESEARCH, CALIFORNIA DEPARTMENT OF IN-
safety nationally. Twenty-three states have approved state plans and therefore on-
SURANCE, LOWERING WORKERS' COMPENSATION INSURANCE COSTS BY REDUCING INJU-
force the general occupational safety and health standards; state allocations to these
RIES AND ILLNESSES AT WORK 11 (1993) [hereinafter California Insurance Study].
agencies' budgets are not tallied anywhere. In addition, numerous federal agencies
WORKERS COMPENSATION: STRATEGIES FOR LOWERING COSTS AND REDUCING WORKERS'
are charged by other laws with specific occupational health and safety enforcement
SUFFERING (Edward M. Welch ed., 1989) [hereinafter Welch]. It is thus not at all
and related activities. For example, the Environmental Protection Agency (EPA) pre-
surprising that the failure of deterrence in this field has been previously noted. See,
scribes regulations to protect workers engaged in hand labor operations in fields
e.g., FELICE MOROENSTERN, DETERRENCE AND COMPENSATION: LEGAL LIABILITY IN
treated with pesticides pursuant to the Federal Insecticide, Fungicide, and Rodenti-
OCCUPATIONAL SAFETY AND HEALTH 65, 65 (1982); Robert S. Smith, Have OSHA and
cide Act Amendments of 1988, 7 U.S.C. § 136w (1988). The EPA is also directed to
Workers' Compensation Made the Workplace Safer?, in RESEARCH FRONTIERS IN IN-
manage asbestos contractor accreditation and testing pursuant to the Asbestos Haz-
DUSTRIAL RELATIONS AND HUMAN RESOURCES 557, 571-72 (David Lewin et al. eds.,
ard Emergency Response Act of 1986. 15 U.S.C. §§ 2646(b)-2655 (1988). The Occupa-
1992); Geoffrey C. Beckwith, The Myth of Incentives in Workers' Compensation Insur-
tional Safety and Health Administration (OSHA) and the EPA regulate conditions for
ance, 2 NEW SOLUTIONS 52, 52 (1992): Burton (1993), supra note 2. at 1. These prior
workers engaged in hazardous waste and emergency response operations under the
analyses have not fully explored the particular impact of the workers' compensation
Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. § 9651(f) (1988).
liability paradigm on employer behavior. They have also not recognized the impor-
The Nuclear Regulatory Commission (NRC) is responsible for safety and regulation
tance of the attributes of the employment relationship and the resulting effects on
involving all facilities and materials associated with the processing. transport, and
the behavior of both employers and employees within this compensation system.
handling of nuclear materials pursuant to the Energy Reorganization Act of 1974, 42
U.S.C. $ 5844 (1988). The Department of Transportation enforces occupational stan-
8. "A thing is safe if its risks are judged to be acceptable
Safety is obvi-
ously a highly relative attribute that can change from time to time and be judged
dards under the Federal Railroad Safety Act of 1970, 45 U.S.C. § 431 (1988). The
Department of Transportation now enforces the Motor Carrier Safety Act of 1990, 49
differently in different contexts. Knowledge of risks evolves, and 60 do our personal
social standards of acceptability." WILLIAM W. LOWRANCE, OF ACCEPTABLE RISK: SCI-
U.S.C. §§ 2501-2521 (1992), which covers commercial motor vehicle safety vehicle
ENCE AND THE DETERMINATION OF SAFETY 8-9 (1976). While risk is assessed through
operators. No federal office maintains a total record of the relevant budget alloca-
empirical, scientific activity and 16 a measure of the probability and severity of
tions.
harm, safety involves judging the acceptability of risks, a "normative, political activi-
4. Refer to part II.A infra.
ty." Id. at 75-76. "Equity of distribution of risks, benefits, and costs is a judgment of
5. Refer to part II.B infra.
fairness and social justice." Id. at 95 (emphasis omitted).
124
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advocates maintain that no worker should be seriously im-
of the debate on risk and safety, economists argue that op-
paired or killed by a controllable hazard9 and that risks are
timal conditions are achieved when the marginal benefit of
best controlled, to the extent possible, through application of
providing safety is equal to its marginal cost.¹² These differ-
engineering principles which eliminate the possibility of
ent paradigms reflect fundamentally different views regarding
individual human error.10 Congress echoed this view in 1970
the value of worker health.
in the Occupational Safety and Health Act.11 At the other end
This argument over optimization should not, however, be
controlling when discussing the current status of workers'
compensation and occupational risk: Both public health advo-
9. "[Plreventing all preventable accidents may not be economically efficient, but
cates and industry representatives agree not only that injuries
may be justified on equity grounds." NICHOLAS A. ASHFORD, CRISIS IN THE
WORKPLACE: OCCUPATIONAL DISEASE AND INJURY, A REPORT TO THE FORD FOUNDA-
at work are largely preventable but that enterprise-specific
TION 390 (1976). The slogan of the National Safety Workplace Institute is "Job safe-
activities can substantially reduce an employer's workers'
ty for everyone, with no one left out.'' William J. Maakestad & Charles Helm. Pro-
compensation liability, often with a net economic gain to the
moting Workplace Safety and Health in the Post-Regulatory Era: A Primer on Non-
OSHA Legal Incentives that Influence Employer Decisions to Control Occupational
enterprise.¹³ Although this may not be universally true for all
Hazards, 17 N. KY. L. REV. 9, 15 n.29 (1989); see also Centers for Disease Control
risks or all employers,14 it is true for a sufficient number of
& Prevention, Occupational Injury Panel, Occupational Injury Prevention, in INJURY
these risks to raise substantial questions about this apparent
CONTROL IN THE 1990s: A NATIONAL PLAN FOR ACTION 329 (1992) [hereinafter CDC
market failure. It in fact appears that we have failed to
Injury Report] ("[O]ccupational injuries should not be regarded as inherent in the
workplace, nor should they be acceptable. Occupational injury is an enormous and
costly problem. Most incidents resulting in worker injuries are preventable and could
be averted if known prevention strategies were more widely implemented."); Edward
opinion in Industrial Union Department, AFL-CIO V. American Petroleum Institute,
L. Baker & J. Donald Millar, Foreword to AMERICAN PUBLIC HEALTH ASSOCIATION,
448 U.S. 607, 639 (1980) held that the promulgation of a new standard must be
PREVENTING OCCUPATIONAL DISEASE AND INJURY xi (James L Weeks et al. eds.,
based on findings that the standard is reasonably necessary and appropriate to rem-
1991) [hereinafter PREVENTING OCCUPATIONAL DISEASE AND INJURY] (stating: "The
edy a significant risk of material health impairment. But see American Textile Mfrs.
mission of public health is to 'fulfill society's interest in assuring conditions in which
Inst., Inc. V. Donovan, 452 U.S. 490, 512 (1981) (holding that the Act does not re-
people can be healthy.' In the workplace, the mission of occupational health can be
quire OSHA to demonstrate that its standard reflects a reasonable relationship be-
viewed similarly") (citation omitted). For books which espouse public health as the
tween the costs and benefits associated with the standard).
primary concern in health and safety, see generally DANIEL M. BERMAN, DEATH ON
12. See John D. Worrall & Richard J. Butler, Experience Rating Matters, in
THE JOB: OCCUPATIONAL HEALTH AND SAFETY STRUGGLES IN THE UNITED STATES
WORKERS' COMPENSATION INSURANCE PRICING: CURRENT PROGRAMS AND PROPOSED
(1978); JOSEPH A. PAGE & MARY-WIN O'BRIEN, BITTER WAGES (1973); LAWRENCE
REFORMS 81, 82 (Philip S. Borba & David Appel eds., 1988) [hereinafter Worrall &
WHITE, HUMAN DEBRIS: THE INJURED WORKER IN AMERICA (1983).
Butler, Experience Rating Matters] (noting that firms in perfectly competitive worlds
10. "The most effective intervention to date for reducing injuries have been
provide safety to the point where the marginal benefit of such provision is equal to
those involving engineering, biomechanics, and environmental designs, the mainstays
its marginal cost). For a discussion of marginal benefits and costs, see RICHARD A.
of the safety science approach to injury prevention." CDC Injury Report, eupra note
POSNBR, ECONOMIC ANALYSIS OF LAW 163-64 (4th ed. 1992) (explaining that "expect-
9, at 330; see also PREVENTING OCCUPATIONAL DISEASE AND INJURY, supra note 9, at
ed accident costs and accident costs must be compared at the margin, by measuring
55.
the costs and benefits of small increments in safety and stopping investing in more
There is a hierarchy of technical controls derived from a conceptual model
safety at the point where another dollar spent would yield a dollar or less in added
that consists of a hazard source, an environment into which the hazard may
safety"); see also George L Priest, The Current Insurance Crisis and Modern Tort
be released, and the worker. From most to least effective, technical controls
Law, 96 YALE LJ. 1521, 1537 (1987) (discussing general tort liability and insurance
include positive engineering that prevents generation of the hazard at its
models and noting "[r]egardless of context, the accident prevention question is
source, environmental controls that are implemented in the work environ-
whether it was cost-effective for the provider or for the consumer to have made
ment, and personal protective devices that individual workers can wear or
greater investments to prevent the loss").
use Personal protective devices are less effective than the other two
13. Refer to notes 7.9 supra; see also William D. Hager, Loss Costs and Beyond,
kinds of controls and should be used only as temporary measures or when
BEST'S REV., Nov. 1990, at 44, 48 (focusing on Texas, the author, who was president
positive engineering or environmental controls are not feasible.
of the National Council on Compensation Insurance, noted: "When things go wrong,
Id. at 8-9. OSHA has generally adhered to this approach. MARK A. ROTHSTEIN, Occu.
we have the spectacle of Texans arguing about the fine points of their workers' com-
PATIONAL SAFETY AND HEALTH LAW § 74 (3d ed. 1990).
pensation law as a cure for rising costs even as industry engineers try to confront
11. Occupational Safety and Health Act of 1970, 29 U.S.C. §§ 651-678 (1988). In
what the Wall Street Journal described as 'a recent rash of petrochemical and oil
its legislative findings, Congress stated that its purpose was "to assure so far as
refinery blasts that has prompted closer scrutiny of plant operations by government,
possible every working man and woman in the Nation safe and healthful working
industry and union officials and tough enforcement of safety rules.' It's true that the
conditions and to preserve our human resources." Id. § 651(b). The Act further im-
Texas workers' compensation law could use improvement [but] [t]he Phillips and
poses a general duty on an employer to "furnish to each of his employees employ-
ARCO disasters are man-made catastrophes, and some of the fault lies not in our
ment and a place of employment which are free from recognized hazards that are
laws but in ourselves. After all, no matter how generous the benefit levels or absurd
causing or are likely to cause death or serious physical harm to his employees." Id.
the jury verdicts, if fewer people get injured or killed, costs will contain themselves.
5 654(a). The courts have been somewhat less aggressive, however, when reviewing
As every public health official knows, prevention is always cheaper than the cure.").
OSHA's standards than this statutory language would appear to imply. The plurality
14. Refer to part III.B.1 infra (discussing insurance rating schemes).
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126
[Vol. 31:119
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achieve an optimal solution from the standpoint of public
workplace morbidity. 16 To what extent is it reasonable serious to ex-
health advocacy and economic efficiency and social utility.
a system of no-fault compensation to have of the
By preventing workplace morbidity and mortality, we
pect deterrent effects? What are the particular attributes
would avoid more than the individual suffering of injured
workers' compensation model, and the friction and transac- This
workers or the costs paid by employers. We would also escape
tional costs inherent in it, which diminish deterrence?
the rancorous and unending political debates regarding
discussion is drawn from existing empirical studies, historical
distribution of costs and adequacy of compensation, and we
sources, legal developments, and personal observations. Despite
would minimize the tensions between employees and employers
occasional lip service to the safety objective, there is a serious
which accompany both the occurrence of injury and the filing
question as to whether workers' compensation was ever The
of compensation claims. The superior value of prevention-over
designed in a manner likely to promote prevention. be
compensation-is obvious.
particular history and design of the program must
Why then have these costs not motivated more employers
examined in light of other factors: remarkable ignorance,
to implement aggressive safety practices? This article attempts
political hysteria, a view of workers as opportunistic or
to explore this apparent paradox. In Part II, I review the
fraudulent abusers, and the inequality of the underlying
current costs of workers' compensation, trends in injury data,
employment relationship. Moreover, the design of the program
and the relationship between injuries and costs. To what
encourages motivated employers to attempt to prevent workers'
extent are costs, in the aggregate, the result of increasing
compensation costs by reducing the filing of claims instead of
incidence of injury and disease? To what extent are these costs
the occurrence of injuries. Together, these factors create a
a reflection of expanding definitions of compensable injury and
system in which the "feedback loop," which should alert
disease, increases in benefit levels, or medical price inflation?
employers to the financial and labor-management advantages
Are injured workers reaping the benefit of the increasing
of aggressive primary prevention, fails.
resources poured into workers' compensation programs and
Part IV looks to the future. The consequence of the failure
simply pursuing more claims?¹⁸ Can management practices at
of this feedback loop to change the underlying health and
the enterprise level actually impact compensation costs-or are
safety conditions in workplaces has been to focus much of the
the costs a reflection of conditions which are not within
current political debate regarding workers' compensation on
management control? Although the data are faulty, available
ways to reduce costs by limiting benefit levels or eligibility:
information appears to suggest that the level of occupational
that is, to make injured workers pay for our failure to reduce
risk present in modern workplaces remains high and is a
injuries. But recently prevention and safety rhetoric has
substantial, although not the sole, cause of the current
reemerged within the context of workers' compensation
explosion of costs.
political debates. State legislatures in at least thirteen states
Part III explores the possible explanations for the failure
have passed amendments to their workers' compensation or
of these rising costs to promote primary prevention of
state safety and health laws expanding the direct and indirect
connections between compensation and deterrence." Given
15. The availability of insurance may lessen the incentive of an insured person
to take precautions. As the individual's incentive to avoid losses declines, the size of
the losses will increase. For example, if someone with theft insurance leaves à valu-
Primary prevention is the prevention of the occurrence of a disease or inju-
able possession in plain view on the seat of an unlocked parked car, the likelihood
16. Immunizations are a method of primary prevention of infectious disease. Accord- of dis-
that the possession will be stolen increases; absent insurance, the individual would
ry. to one public health source, "primary prevention is the preferred means PREVENTING
(presumably) have locked the object in the trunk. This phenomenon is referred to in
ing case control. In the workplace. this is largely an engineering activity."
the economics and insurance literature as "moral hazard." A. MITCHELL POLINSKY,
OCCUPATIONAL DISEASE AND INJURY, supra note 9, at 8.
AN INTRODUCTION TO LAW AND ECONOMICS 56 (2d ed. 1989). In workers' compensa-
17. See, e.g., ALASKA STAT. §§ 18.60.010 to 18.60.105 (1991); CAL. LAB. CODE ANN. §
tion, the term is applied most commonly in studies showing that workers appear to
6401.7 (West Supp. 1994); 1993 Conn. Acts 228, § 28 (Reg. Sess.); MINN. STAT. NEB.
file more claims for compensation as the level of benefits rises. E.g., Richard J. But-
ler & John D. Worrall, Claims Reporting and Risk Bearing Moral Harard in Work-
§ REV. STAT. $ 48-443 (Supp. 1993); NEV. REV. STAT. ANN. $ 618.383 (Michie 1992);
182.653 (West 1993); MONT. CODE ANN. 99 39-71-1501 to 39-71-1504 (1993);
ere Compensation, 53 J. RISK & INS. 191, 192 (1991) [hereinafter Butler & Worrall,
N.C. GEN. STAT. ! 95-251 (1993); OR. REV. STAT. §§ 654.097, 654.182 (Supp. 1992);
Moral Hazard). It can also be used to describe the failure of the insured employer,
PA. STAT. ANN. tit. 77, §§ 1038.1-2 (Supp. 1994); TEX. LAB. CODE ANN. §§ 411.001- W. VA.
who is immunized by workers' compensation from common-law liability, to take ade-
.092 (Vernon Supp. 1994); WASH. REV. CODE ANN. § 49.17.060 (Weat 1990);
quate precautions to prevent injuries and illnesses.
CODE §§ 23-2B-1 to 23-2B-3 (Supp. 1993).
128
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what we know about the failure of workers' compensation to
I therefore feel compelled to make what appears to be an
affect employers' aggregate behavior in the past, can these new
obvious point: The primary purpose of workers' compensation
efforts be expected to have significant impact? More
is distribution of social insurance benefits, not deterrence of
importantly, what is the best way to design these safety
injuries.¹⁹ Failure in deterrence does not argue in favor of
initiatives in order to achieve decreased occupational mortality
program failure; it merely tells us that alternative approaches
and morbidity and, therefore, decreased workers' compensation
to deterrence may be preferable if we believe that adequate
costs?
compensation of victims of workplace injuries and illnesses is
Raising questions regarding the deterrent value of workers'
essential and that injuries in the workplace are preventable
compensation should not be interpreted as an argument
and should be prevented.20
against continuing to provide adequate compensation to injured
While the country gears up to expand the rights of
workers. Sometimes those who have argued in favor of
disabled workers to work under the Americans with
deterrence, upon finding that the system does not effectively
Disabilities Act,21 we appear to have been unable to achieve
encourage prevention, have thence been driven to argue that
an optimal level of prevention of disability caused by work.
workers' compensation has failed: that increasing the adequacy
This article is an attempt to contribute to a discussion which
of benefits primarily results in socially sub-optimal behavior. 18
will hopefully yield cost-effective means to achieve the goal of
"lowering costs and reducing workers' suffering. *22
18. In particular, studies have noted a correlation between increasing benefits
II. THE PARADOX
and increasing numbers of claims filed. See Ronald G. Ehrenberg, Workers' Compen-
sation, Wages, and the Risk of Injury, in NEW PERSPECTIVES IN WORKERS' COMPEN-
SATION 71, 81-86 (John F. Burton, Jr. ed., 1988) (summarizing nine prior studies
There are three essential conclusions which can be drawn
which conclude that higher workers' compensation benefits are associated with high-
from the available data regarding workers' compensation costs
er frequency of claims' filing): see also Butler & Worrall, Moral Hazard, supra note
and injuries. First, the aggregate cost of workers' compensation
15, at 191; Richard J. Butler & John D. Worrall, Work Injury Compensation and the
Duration of Nonwork Spells, 95 ECON. J. 714, 722-23 (1985); Richard J. Butler, Wage
programs is rising rapidly.2 Second, frequency of injuries,
and Injury Rate Response to Shifting Levels of Workers Compensation, in SAFETY
particularly those which involve lost work time, is not declin-
AND THE WORKPORCE: INCENTIVES AND DISINCENTIVES IN WORKERS' COMPENSATION
ing.24 Third, despite a variety of other factors that contribute
supra, at 61; Richard J. Butler & John D. Worrall, Workers' Compensation: Benefits
and Injury Claims Rates in the Seventies, 65 REV. ECON. & STAT. 580 (1983); James
to the increasing costs of workers' compensation, the frequency
R. Chelius, The Incentive to Prevent Injuries, in SAFETY AND THE WORKFORCE: INCEN-
TIVES AND DISINCENTIVES IN WORKERS' COMPENSATION, supra, at 154, 160 [hereinaf-
ter Chelius, Incentive to Prevent Injuries]; James R. Chelius, The Influence of
Workers' Compensation on Safety Incentives, 35 IND. & LAW REL REV. 241 (1982)
ence of Illness, 64 MILBANK Q. 622, 637 (1986) (concluding, in a study of workers
[hereinafter Chelius, Influence of Workers' Compensation] (suggesting that one way to
who applied for Social Security Disability Insurance, that wage replacement rates do
manage the apparent conflict between prevention and benefits is to raise injury tax-
not correlate with withdrawal from work and that "even extreme replacement rates
es on employers but not to make the whole tax payable to employees); James R
do not appear to suppress the will to work.") This issue is discussed at greater
Chelius, The Control of Industrial Accidents: Economic Theory and Empirical Evi-
length in part II.C infra.
dence, 38 LAW & CONTEMP. PROBS. 700 (1974) [hereinafter Chelius, Control of Indus-
19. Stephen Sugarman characterizes social insurance as an "extreme
trial Accidents); Georges Dionne & Pierre St-Michel, Workers' Compensation and
distributional" type of liability system and argues for disengaging compensation and
Moral Hazard, LXXIII REV. ECON. & STAT. 236 (1991); John D. Worrall, Compensa-
deterrence: "Society should promote safety with different instruments from those
tion Costs, Injury Rates, and the Labor Market, in SAFETY AND THE WORKFORCE:
used to pay compensation." Stephen D. Sugarman, Doing Away with Tort Law, 73
INCENTIVES AND DISINCENTIVES IN WORKERS' COMPENSATION 1 (John D. Worrall ed.,
CAL L. REV. 555, 658 (1985): see also OFFICE OF TECHNOLOGY ASSESSMENT, PRE-
1983); Digests of Important Publications, JOHN BURTON'S WORKERS' COMPENSATION
VENTING ILLNESS AND INJURY IN THE WORKPLACE 12 (1985) [hereinafter OFFICE OF
MONITOR, Sept.-Oct. 1992, at 14-16 (summarizing JOHN A. GARDNER, BENEFIT IN-
TECHNOLOGY ASSESSMENT).
CREASES AND SYSTEM UTILIZATION: THE CONNECTICUT EXPERIENCE (1991)) (finding
20. Terence Ison argues even more broadly that the result of any attempt to
longer duration and higher numbers of claims filed in Connecticut after a statutory
promote deterrence through more clear cost incentives in workers' compensation,
benefit increase in 1987). As a result of this observed phenomenon, some have ar-
such as experience rating, will primarily have the unintended consequences of re-
gued that benefits should not be increased. See, e.g., Ehrenberg, supra, at 95 (con-
pressing claims, not injuries, and should be avoided. Terence G. Ison. The Signifi-
cluding that the "trick, then. is to alter existing policy to increase employers' incen-
cance of Experience Rating, 24 OSGOODE HALL LJ. 723, 725-26 (1986).
tives to improve safety without altering employees' incentives. One possibility is to
21. 42 U.S.C. §§ 12101-12113 (Supp. IV 1992).
hold benefit levels at their current real levels but to increase the extent of experi-
22. This is the subtitle to Welch, supra note 7 (emphasis added).
ence rating
An alternative is to increase the payroll tax but not the level of
23. Refer to part ILA infra.
benefits
.); ECONOMIC REPORT OF THE PRESIDENT 197 (1987). But c.f. Edward
24. It is lost time claims which are most likely to result in claims for workers'
Yelin, The Myth of Malingering: Why Individuals Withdraw from Work in the Pres-
compensation benefits. Refer to part II.B infra.
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130
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of reported injuries and the cost of injuries can be
far less than these increases in workers' compensation.29
substantially affected by managerial decision-making within
Prior to 1970, workers' compensation attracted little
enterprises.25
attention: relatively steady and low costs for employers meant
It appears paradoxical that despite increasing costs, injury
that insuring against workers' injuries, diseases, or death was
rates have not declined significantly. The following discussion
stable proposition for both the property/casualty insurance from
summarizes the existing literature and data which
industry a and employers.⁸⁰ Employers benefitted greatly
substantiate these three points. The implications of these
this arrangement; workers' compensation insurance provided
conclusions are discussed more fully in Part III of this Article.
them with broad immunity from tort liability for workplace
injuries and illnesses. 31 Workers received benefits that might
A. Costs
otherwise not have been available. Despite the evident
inadequacy of the benefit structure, 32 workers and their
The announcement in 1993 that the national cost of
workers' compensation had reached sixty-two billion dollars
reflects a continuation of the workers' compensation "crisis" in
Edward D. Berkowitz & Monroe Berkowitz, Challenges to Workers' Compen-
cost escalation. Compensation programs cost $2.1 billion in
29. An Historical Analysis, in WORKERS' COMPENSATION BENEFITS: ADEQUACY,
1960, $5.2 billion in 1971, $20.3 billion in 1979, $53.1 billion
sation: AND EFFICIENCY 158, 172 (John D. Worrall & David Appel eds., 1985) (here-
in 1990, and $57 billion in 1991.27 Expressed as an average
EQUITY. Berkowitz & Berkowitz (1985)). The rate of increase in workers' compensation and
inafter 1950 to 1980 was, however, consistent with the growth in the total public The
cost per $100 of payroll, and thereby adjusting for aggregate
from cash benefits for disability. Robert J. Lampman & Robert M. COMPENSATION Hutchens,
payroll increases, costs rose from $1.11 per $100 in 1970 to
private Future of Workers' Compensation, in NEW PERSPECTIVES IN WORKERS'
$2.27 per $100 in 1989. The rate of increase of costs in
113, 119 (John F. Burton, Jr. ed., 1988).
30. For example, from 1953 to 1972 workers' compensation costs rose from 0.94
other social insurance programs, albeit significant, has been
1.14 per $100 of payroll, a 21% increase in a twenty year period; in contrast,
to 1973 to 1980, costs rose from 1.17 to 1.94 per $100 of payroll, a 66% increase
from in seven years. Worrall, Compensation Costs, Injury Rates, and the Labor Market, from
supra 0.586% of payroll in 1958 to 0.772% in 1972. Burton & Schmidle, supra note 28,
note 18, at 9. John Burton, using his own data, showed an increase at
1, 9-12 & tbl. 8.
31. For a more extensive discussion of the issues related to this extensive im-
25. As discussed in part III.C. infra, the reduction of costs may not always be
munity, refer to notes 216 & 247 infra.
32. Benefit levels were, by modern standards, remarkably low. See THE REPORT
associated with an actual reduction in the rate of illness and injury; it may simply
THE NATIONAL COMMISSION ON STATE WORKMEN'S COMPENSATION LAWS 13-14
be associated with different claims filing behavior by workers or changed manage-
ment practices which affect claims costs.
OF (1972) [hareinafter COMMISSION REPORT) (stating that Congress declared in the Occu-
26. Refer to note 2 supro.
pational Safety and Health Act of 1970 that serious questions had been raised about low
27. Burton (1993), supra note 2, at 1. These figures are not adjusted for infla-
the adequacy of workers' compensation laws). This may well explain both the in
tion
frequency of claims and the politically acceptable low level of cost of the program from
28. 1992 SOCIAL SECURITY BULLETIN, ANNUAL STATISTICAL SUPPLEMENT 313 tbl.
the pre-World War II years. Compensation systems generally excluded claims accidents
9.B1 (hereinafter 1992 STATISTICAL SUPP.); see also John F. Burton, Jr. & Timothy
eligibility which involved injuries which were the result of expected events;
were narrowly defined to include only the unexpected. For example, "[i]f a man
P. Schmidle, Workers' Compensation Insurance Rates: National Averages Up, Inter-
strained his back while doing regular work in the usual fashion. it was to be expect-
state Difference Widen, JOHN BURTON'S WORKERS' COMPENSATION MONITOR, Jan-Feb.
ed." Id. at 45. In addition, most occupational disease and injury claims unrelated to
1992, at 1 (estimating the rate in 1989 at 2.225% of payroll utilizing adjusted rates
observable single traumatic events were excluded from coverage. See id. at 50. Dis-
based on 44 selected industrial classifications). It should be remembered that this is
cases of everyday life, which could have been the result of non-occupational expo-
on average; the percent of payroll paid for workers' compensation varies enormously
sures, were generally not compensable. Id. Statutes of limitation excluded other
from one industrial group to another, ranging from over $40 per $100 of payroll for
claims because they began to run within a short time of the worker's last exposure
loggers in the timbering industry in many jurisdictions to under $1 per $100 for
to the disease-causing agent, rather than when a disability developed or a diagnosis
employees in finance and insurance. The spreading of risks and costs among differ-
was made. See W.W. Allen. Annotation, When Limitation Period Begins to Run
ant employer groups is discussed more fully below, Part III infra. Note that the
Against Cause of Action or Claim for Contracting of Disease, 11 A.L.R.2D 277. 283-89
number expressed as a percent of payroll is more useful than the aggregate costs of
the total programs. Both the number of workers and the percent of the covered
(1950).
On those claims which were approved, the amount that was paid was quite
workforce has grown in recent years: The number of workers covered by workers'
low. In many states, statutes contained no automatic escalation of the maximum
compensation programs rose from 45 million in 1960, representing 80% of the
weekly benefit payments. COMMISSION REPORT, supra, at 60. Maximum weekly bene- As
workforce, to 94 million in 1989, or 87% of the workforce. John F. Burton, Jr.,
fit levels therefore did not rise in the absence of direct legislative intervention. a
Workers' Compensation Coverage: National Trends, State Differences, JOHN BURTON'S
result, in some states the maximum weekly benefit amount remained static for
WORKERS' COMPENSATION MONITOR, July-Aug. 1992, at 1. Obviously. the aggregate
cost figures, unadjusted for workforce growth or for inflation, can be misleading.
years. Id. Most states initially set a limit on weekly benefits of 50% of lost wages.
132
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representatives accepted this system; low expectations in gen-
eral with regard to rights at work may have contributed to
from industry, labor, universities, state compensation pro-
this acquiescence. Employers' costs did increase prior to 1970,
grams, and the insurance industry, reached consensus that the
but at a relatively slow rate, despite a substantial increase in
state programs were seriously deficient. 38 In its 1972 report,
reported injury rates during the 1960s.
the Commission set five general objectives: broad coverage of
In the 1960s, public criticism began to focus on these
employees and work-related injuries and diseases, substantial
programs and particularly on the inadequate level of benefits
protection against interruption of income, sufficient medical
offered to injured workers by most states. This criticism was
care and rehabilitation services, encouragement of safety,39
and effective delivery of services.
voiced in a political environment in which Congress was taking
aggressive steps to address excessive workplace injury and
Rather than endorsing federalization of the program or
illness rates by regulating workplace hazards. Responding to
advocating that remedies for work injuries be sought outside
the criticisms regarding compensation programs, Congress
the compensation system, the Commission recommended
created the National Commission on State Workmen's
retaining the boundaries of the program. While ac-
Compensation Programs as part of the Occupational Safety
knowledging the need to improve workplace safety, the
and Health Act in 1970. The Commission's purpose was to
Commission did not address this goal in its nineteen
"essential" recommendations, which were all directed to the
investigate alleged inadequacies in the state compensation
systems and to address calls to federalize workers' compensa-
expansion of benefits and eligibility and improvement of the
administrative design of the program.
tion programs.8 The members of the Commission, drawn
In the event that these recommendations were not adopted
by 1975, the Commission suggested that Congress enact
legislation which would "guarantee compliance. The goal
Id. In 1972, a majority of claimants still received less than two-thirds of their lost
wages and, on average, maximum weekly benefits were capped at 55% of the state's
was to increase the level of compensation protection offered to
average weekly wage. John F. Burton, Jr., The Twentieth Anniversary of the Nation.
injured workers in all states and to decrease the level of
al Commission on State Workmen's Compensation Laws: A Symposium: Observations
variation among state programs. The resulting public debate
of John F. Burton, Jr., JOHN BURTON'S WORKERS' COMPENSATION MONITOR, Nov.-Dec.
and improvements in mandated benefit levels, which were
1992, at 1, 5 [hereinafter Burton, Twentieth Anniversary). In a majority of states in
1972, the maximum weekly benefit was equal to or less than the poverty level for a
enacted in many states, contributed to substantial and rapid
family of four. COMMISSION REPORT, supra, at 56. No state allowed more than ten
increases in total program cost as both worker awareness of
years of recovery for . permanent total disability; most set the limit at below six
years. See id. at 65. In 1972, in eleven states the maximum permanent total disabil-
ity award was less than $25,000, an amount less than the average American worker
earned in four years. Id. Medical benefits for injuries were often limited and did not
provide for the full cost of care for serious injuries; initially, no program provided
38. Id. at 24-25.
for more than 90 days of medical benefits for an injury. ASHPORD, supra note 9, at
389. Furthermore, most states endorsed a system of settlement of claims which al-
39. of The report stated, rather emphatically, that "[t]he encouragement of safety is
lowed insurance carriers to settle a claim with an injured worker (or his or her
one the basic objectives of a modern worker's compensation program." Id. at 87.
40. Id. at 35-40.
attorney) for amounts less than the full statutory benefit.
41. Id. at 25.
33. Worrall, Compensation Costs, Injury Rates, and the Labor Market, supra note
42. Id. at 126-27.
18, at 7-9.
43. Id. at 127.
34. Major concerns about benefit levels and eligibility criteria, particularly for
occupational diseases, had been raised in well documented monographs in the 1940s
44. This focus on interstate variability was fueled both by concerns about
and 1950s. See generally ARTHUR H. REEDE, ADEQUACY OF WORKMEN'S COMPENSA-
knowledge that employers can (or think that they can) attain lower workers'
uities between jurisdictions and the resulting political concerns which are fed by ineq- the
TION (1947); HERMAN M. SOMERS & ANNE R. SOMERS, WORKMEN'S COMPENSATION:
PREVENTION, INSURANCE, AND REHABILITATION OF OCCUPATIONAL DISABILITY (1954).
These concerns did not hit public attention, however, until the renewed movement
tion organizations during political debates regarding changes in state workers'
pensation costs in other states. This is a concern which is often voiced by employers' com-
for workplace health and safety also focused on the issue of compensation.
ty in programs. Despite this attempt by the National Commission, interstate compensa- variabili-
35. In 1969, Congress passed the Federal Coal Mine Health and Safety Act of
ton & insurance rates continues to plague workers' compensation programs. See Bur-
Schmidle, supra note 28, at 6-9.
1969, Pub. L No. 91-173, 83 Stat. 742 (1969) (superseded by the Federal Mine Safe-
ty and Health Act of 1977, 30 U.S.C. $ 801 (1988), which expanded regulation to all
metal and non-metal mining). In 1970, Congress passed the Occupational Safety and
in of Commission increased from 6.8 in 1972, when the Report was issued, 12.0
45. the The average state compliance with the nineteen essential recommendations
Health Act, 29 U.S.C. 99 651-678 (1988).
1980. Burton, Twentieth Anniversary, supra note 32, at 5. Compliance with to the
36. COMMISSION REPORT, supra note 32, at 13-14.
recommendations would be then slowed as costs escalated and states realized that no
37. Id.
12.7 taken to federalize the program. Id. The average compliance reached action only
(out of the possible 19.0) by 1992. Id.
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benefit eligibility and actual benefit levels rose. Thus, the
refer to the "death spiral"⁵² and "nightmare" of workers'
National Commission, the most concerted attempt to reform
compensation. In one industry survey, seventy percent of
workers' compensation since its inception, was at least
employers reported that workers' compensation costs were
partially successful in its own terms: it contributed to
threatening their financial results;54 in another, five of the
increases in the adequacy and availability of benefits. As costs
fifteen most highly ranked public policy concerns related to
increased, however, the primary focus of political activism
workers' compensation and workplace safety issues. 55
shifted from the inadequacy of benefits to the impact of
This perception of crisis is the direct result of increasing
continued interstate variations in cost on each state's economic
aggregate, as well as enterprise-specific, costs. Because of cost
development and the overall cost of the program to employers,
escalation, insurance carriers press for increases in rates
which some viewed as excessive.
charged to employers;66 rate increases are, however, seen as
Nevertheless, employers' costs did not rise steadily after
antithetical to business development in each jurisdiction in
1978. A rapid plunge in insurance prices (and therefore
which they are sought. Political and regulatory pressure is
employer costs) from 1980 to 1984 reflected the condition of
brought to bear to restrain rate increases; insurers respond
the financial market: high interest rates led to aggressive price
that the rates are inadequate to support the costs and
cutting by insurance carriers.47 After 1984, however, the rapid
threaten to leave the jurisdiction unless the state legislature
upward climb in employers' costs resumed, causing the average
enacts programmatic changes which will restrain costs,
percent of payroll paid for workers' compensation to climb by
generally by reducing benefit levels, restricting eligibility for
13.3 percent per year from 1984 to 1990.48 Needless to say,
this growth rate outdistanced both the rate of growth of the
civilian payroll49 and the rate of inflation for this period. 50
The aggregate cost of the program and its rate of increase
years."); Barry Meier, Some 'Worker Leasing' Programs Defraud Insurers and Em-
players, N.Y. TIMES. Mar. 20, 1992, at A1, (discussing worker leasing fraud directed
have met with rising hysteria. Insurance trade articles carry
against state workers' compensation pools, a lawyer for the National Council on
titles such as "Workers' Comp: 24 Months to Meltdown" and
Compensation Insurance (NCCI) said, "This is just one more factor contributing to
the overall meltdown of the workers' compensation system." Louisiana Tries New
Path, ENGINEERING NEWS-REC., Nov. 11, 1991 (quoting Derrell D. Cohoon of the
Louisiana Associated General Contractors claiming: "We were nearing meltdown
46. The national cost of workers' compensation doubled from 1970 to 1978. Mar-
when companies would no longer be willing to write new [workers' compensation]
tin W. Elson & John F. Burton, Jr., Workers' Compensation Insurance: Recent Trends
coverage in [Louisiana].' "); Firms Flee Comp. System; Decision Could Benefit, Back-
in Employer Costs, MONTHLY LAB. REV., Mar. 1981, at 45-47.
fire on Texas Employers, BUS. INS., June 10, 1991, at 19 (stating that Texas' system
47. John F. Burton, Jr., Workers' Compensation Benefits and Costs: New Records,
is "in meltdown" because of excessive litigation and pro-claimant court rulings").
JOHN BURTON'S WORKERS' COMPENSATION MONITOR, Mar.-Apr. 1992, at 1, 2 (herein-
52. Robert W. Klein, Regulation, Competition, and Profitability in Workers' Com-
after Burton (1992)].
pensation Insurance, JOHN BURTON'S WORKERS' COMPENSATION MONITOR, Mar.-Apr.
48. Burton (1993), supra note 2, at 2. The specific figures for workers' compen-
1992, at 7.
sation cost as a percent of payroll vary somewhat from one source to another. Bur-
53. Catherine A. Novak, With Loss Control in Mind, BEST'S REV., Apr. 1993, at
ton estimated the 1984 rate at $1.66 per $100 in 1984, and $2.27 in 1989. Burton
32, 35.
(1992), supra note 47, at 2 tbl. 1. Federal reports, which do not make the adjust-
54. In this 1991 study, 70% of the 576 employers who participated said workers'
ments in Burton's data and which include federal compensation programs, estimated
compensation costs are threatening their bottom line; 30% said workers' compensa-
the rates as $1.66 in 1984 and $2.36 in 1990. 1992 STATISTICAL SUPP., supra note
tion costs would be out of control in the next five years. See David M. Katz, What
28, at 324 tbl. 9.B1.
Employers Can Do About the Workers Comp. Crisis, NAT'L UNDERWRITER, PROP. &
49. Between 1984 and 1990, covered payroll increased by a total of about 67%,
CASUALTY/RISK & BENEFITS MGMT. EDITION, Jan. 7, 1991, at 21 (citing a study by
from $1516 billion in 1984 to $2250 billion in 1990. "Covered" refers to total wages,
Tillinghast, a New York based risk management consulting firm).
earnings, and salaries in employment governed by workers' compensation. 1992 STA-
55. ALEXANDER & ALEXANDER, U.S. RISK MANAGEMENT SURVEY 5 (1992) (on file
TISTICAL SUPP., supra note 28, at 131 tbl. 3.B2.
with author). In this 6th annual survey, questionnaires were sent to 1900 risk man-
50. From 1984 to 1990, the average annual increase in the general Consumer
agers who were asked to rank, in importance to their companies, 74 legislative and
Price Index was about 4.5%. U.S. BUREAU OF THE CENSUS, DEPT OF COMMERCE,
regulatory issues. Most respondents were executives at companies with sales of $500
STATISTICAL ABSTRACT OF THE UNITED STATES 469 (1992).
million or more. Id. at 7. "Workplace health and safety topics, including five work-
51. William Hager, Workers' Comp.: 24 Months to Meltdown, NAT'L UNDERWRIT-
ers{'} compensation issues, dominate Allexander) & Allexander]'s findings." Id. at 2.
ER PROP. & CASUALTY/RISK & BENEFITS MGMT. EDITION, Oct. 29, 1990. at 13. The
In the overall ranking of categories, workplace health and safety issues placed first.
notion that workers' compensation is in meltdown status is common in these articles.
Id at 6. Workers compensation was projected to remain a critical issue in the next
See, e.g., Diane Levick, Investments Keep Insurers Profitable; Investments Net Insur-
three to five years. Id. at 2.
ere Profit Despite Disasters, Best Makes Estimates for 1992, HARTFORD COURANT,
56. See Marian Freedman, Residual Markets: Bloated and Beleaguered, BEST'S
Jan 12, 1993, at B1 (stating: "A 'system meltdown is in the making' if meaningful
reforms aren't made in workers' compensation insurance during the next several
REV., Dec. 1991, at 20, 20. For a discussion of the residual market, refer to part
III.B.1.c infra.
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benefits. or expanding fraud units.57
nature and degree of risk in covered industries, the size of the
The price of workers' compensation insurance to insured
workforce covered by workers' compensation, the earnings of
employers is largely, but not exclusively, dependent on the
the covered workers, levels of wage rates, severity and
aggregate cost of benefits. 58 In 1989, the ratio of benefits to
frequency of paid claims, costs of medical and rehabilitative
costs stood at a comparatively high 0.70: that is, about seventy
treatment, the likelihood that injuries will result in claims, the
percent of the amount paid by employers was paid in benefits
liberality of the review process when claims are litigated, the
on claims. The cost of benefits has increased steadily over
administrative handling by state and federal agencies
the last twenty years: $1295 million in 1960; $3563 million in
(including the likelihood of settlement below full mandated
1971; $12,027 million in 1979; $30,733 million in 1988. 60
benefit costs prior to completion of litigation), and the
Expressed in more useful form as a percent of payroll, benefits
mandated benefit rates. Benefits are divided among four
rose from 0.59% of covered payroll in 1960, to 0.66% in 1970,
primary categories: temporary total disability, paid while a
1.07% in 1980, 1.58% in 1989, and 1.70% in 1990. Thus, the
worker is off work recovering from an injury or acute episode
total cost to employers, 2.27% of payroll in 1989, 62 was (not
of a chronic illness; permanent partial disability, for
surprisingly) considerably higher than the cost of benefits in
permanent disabilities which do not prevent the worker from
that same year. Unaffected by the vagaries of the financial
remaining in the active workforce; permanent total disability,
and insurance markets, benefits, unlike employer costs, do not
for workers who are unable to return to work or to perform
decrease in response to high interest rates.
work which is comparable to that which they performed prior
Aggregate benefits paid by all state and federal workers'
to the injury;68 and medical and physical rehabilitation
compensation programs are affected by numerous factors: the
benefits, largely paid directly to providers of health and reha-
bilitative services who provide services to workers for their
occupational injuries and diseases. Numerically, about three-
57. See Freedman, supra note 56, at 20 (describing this process).
fourths of claims involve temporary total disability86 although
58. Benefits include all monies paid out in order to meet the insurer's obligation
the majority of money is expended on permanent disability,
to the insured. In workers' compensation claims, this will include any money paid
directly to the claimant and fees paid to health care and rehabilitation providers.
including both partial and total cases; most, but not all claims
Other factors influencing cost for employers include: the insurance pricing mecha-
involving permanent disability have their genesis in "lost time"
nisms which assign employers to industrial classifications and then determine the
claims.
67
apread of risk through each class; the insurer's administrative costs, including legal
costs; the state of the financial market, particularly as it affects the interest rate
A substantial portion of the total benefits paid goes to
earned and projected to be earned on reserves; and the rate of return paid to inves-
health care providers and lawyers, not to injured workers,
tors or, in the case of mutual funds, to insureds.
59. This ratio has shown some historical fluctuation, but remained at approxi-
mately the 70% level from 1983 through 1989. Burton (1992), supra note 47, at 2
tbl. 1. It was at a low of 54% in 1980; since 1982 it has fluctuated between 67 and
64. See Lampman & Hutchens, supra note 29, at 121. A significant component
71%. William J. Nelson, Jr., Workers' Compensation: Coverage, Benefits, and Costs
of the increase in benefits attributable to benefit rates was the result of increases in
1989, Soc. SEC. BULL, Spring 1992, at 51, 56. Fluctuation in this ratio is primarily
weekly benefits. The National Commission on State Workmens' Compensation Laws
the result of changes in the insurance and financial markets. See id. at 2. Of course,
report in 1972 recommended that all states set the maximum weekly benefit at least
refusals by state insurance agencies to approve requested rate increases for the reg-
at the level of that state's average weekly wage. Burton (1993). supra note 2, at 4.
ulated workers' compensation insurance market force the ratio of benefits to costs
Prior to 1972, states had paid, on average, 55% of this average wage; by 1980, this
upward. See Klein, supra note 52, at 7-8 (noting that only half of the rate increases
had grown to an average of 91%, and many states had enacted automatic annual in-
filed by the National Council on Compensation Insurance, the rating organization in
creases which tracked the state's average weekly wage. Id.
the majority of states, have been approved). It is important to note that as the total
65. In many jurisdictions, age, education, and skill of the injured worker will be
amount paid by employers for workers' compensation insurance coverage rises, and
considered, in addition to medical impairment, in making a determination regarding
this benefit to cost ratio remains constant, the amount of money retained by the
permanent total disability. See 1C ARTHUR LARSON, WORKMEN'S COMPENSATION LAW
insurance carriers increases. Note also that efficiency in any insurance market would
§ 57.60, at 10-389, § 67.61(c), at 10-437 to -438 (1993).
argue in favor of reducing these non-benefit costs. This can be done: The West Vir-
66. In 1986, 72% of all cases were those in which the workers suffered a tempo-
ginia Workers' Compensation Fund, for example, pays out over 90% of its collected
rary total disability. Nelson, 1984-88 Benchmark, supra note 60, at 44.
premium in benefits on claims.
67. The percent of all benefits which are paid for temporary disability cases rose
60. William J. Nelson, Jr., Worker's Compensation: 1984-88 Benchmark Revisions,
from 18% in 1982 to 25% in 1986. Id. at 44. These figures appear to include the
Soc. SEC. BULL, Fall 1992, at 41, 45 [hereinafter Nelson, 1984-88 Benchmark].
cost of medical treatment for the injury. Payment for permanent disability cases,
61. 1992 STATISTICAL SUPPLEMENT, supra note 28, at 313.
both partial and total, accounts for one fourth of the cases but almost three-fourths
62. Refer to note 48 supra and accompanying text.
of the cash payments. Id. Examples of cases in which lost-time benefits are not paid
63. Id.
but permanent disability results include many occupational disease claims.
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however. The medical component of workers' compensation
from the benefit amount paid directly to workers.73
benefits has risen from 33.6% of total workers' compensation
As litigation and medical costs have grown, the relative
benefit costs in 1960, to 40.9% in 1990, to 50% in 1993.
proportion of benefits paid to workers has declined and the
In every recent year, the rate of inflation for medical costs
component paid to others-including medical providers,
within the workers' compensation programs has exceeded the
lawyers, rehabilitation specialists, third party claims
already alarming rate of increase in U.S. health care
administrators-has risen. Thus, while the amount of total
expenditures generally.
benefits paid has increased as a percent of payroll, the amount
Notably, the level of litigation over claims has risen as
that is paid directly to individual injured workers may not be
benefit costs have grown. Payments to health care providers
increasing or may be doing so at a much slower pace.⁷⁴
who perform evaluations and to lawyers have been
Workers' compensation costs can no longer be
increasing." The medical cost component can be easily
characterized as modest and stable. Presumably, the incentive
quantified because health care providers are paid directly by
to reduce claims should have risen with these costs.
the insurer. The cost of lawyers is more difficult to determine,
Unquestionably, escalation in costs has provoked a steady and
however. Defense of claims is generally included in the
insistent call for new reform of the workers' compensation
administrative costs charged by insurance carriers,⁷² but the
system. While states continue to amend their workers'
cost of legal representation to workers is almost always taken
compensation laws, often on an annual basis, the OSHA
reform bill pending in Congress now calls for a second Nation-
al Commission to study the adequacy and efficacy of the
68. Burton (1993), supra note 2, at 19 tbl. A6; Regaining Control of Workers'
current workers' compensation system."
Compensation Costs, MED. BENEFITS, Aug. 15, 1993, at 1 (citing a Towers Perrin
Publications Report published on July 15, 1993). This translates into $15,067 million
in workers' compensation medical costs in 1990. The increasing level of concern
about this cost can be found in the growing number of monographs and articles
73. States often regulate the fees that can be charged by claimants' representa-
focusing on it. See, e.g., WORKERS' COMPENSATION HEALTH CARE Cost CONTAINMENT
tives. See, e.g., W. VA. CODE $ 23-5-5 (1993) (limiting claimant's attorney's fees to
(Judith Greenwood & Alfred Taricco eda., 1992) [hereinafter Greenwood & Taricco];
20% of 208 weeks of benefits).
Silvana Pozzebon, Do Traditional Health Care Cost Containment Practices Really
74. The numbers available on this are somewhat contradictory. According to one
Work?, JOHN BURTON'S WORKERS' COMPENSATION MONITOR, May-June 1993, at 17.
source, National Council on Compensation Insurance statistics show that workers'
69. Regaining Control of Worker's Compensation Costs, supra note 68, at 1.
compensation delivered the same direct economic compensation, on average, to an
70. Burton (1993), supra note 2, at 18 tbl. A7 (Health Care Expenditures, US
injured worker in 1989 ($6049) as it did in 1980 ($6044), but that the amount paid
and Workers' Compensation, 1972-1990). As a result of this troubling inflationary
to medical services providers rose by 63%, from $2188 to $3564, on average, during
spiral, President Clinton's Health Security Act (HSA) proposes that health care relat.
the same period. Michael Pritula, Starting Over in Workers' Comp., 92 BEST'S REV.,
ed to workers' compensation claims be included in the cost containment strategies to
Jan. 1992, at 22, 24 (numbers adjusted for inflation). If these numbers are accurate,
be applied to the health care system generally. In the proposal, health care costs
then it is difficult to accept the assertion that increasing levels of benefits are exac-
related to workers' compensation claims would be managed and approved through
erbating the problems of moral hazard as workers file claims in increasing numbers.
the regional health alliances and health plans. The costs themselves will ultimately
Refer to note 16 & 18 supra. Nevertheless, Pritule indicates that the number of
be paid, however, by the workers' compensation insurance carrier. S.1757/H.R. 3600,
claims grew from 21 to 28 per 1000 workers in the period from 1984 to 1989, not-
103d Cong., Reg. Seas. $ 10002(a)(1) (1993). States or regional health alliances may
ing that this occurred at least in part because employers failed to emphasize safety
develop alternative payment methodologies for treatment of compensable conditions
programs. Pritula, supra. In contrast, only a slight increase in compensable cases
or the workers' compensation carrier may negotiate alternative payment arrange-
per covered worker was observed between 1950 and 1980. Lampman & Hutchens,
ments directly with the health plan. Id. § 10002(b). If the final version of health
supro note 29, at 124. In any event, the total cost per claim has undoubtedly been
care reform resembles this proposal, workers' compensation premiums will not drop;
increasing. Estimates of this trend vary somewhat. One source asserts that the aver-
medical costs will continue to be paid through these premiums. The HSA mandates
age cost per claim, when not adjusted for inflation, has tripled over the last decade.
a study and report regarding the workers' compensation provisions within two years
Raiborn & Payne, supra note 2, at 554. The important conclusion to be drawn here
after implementation. Id. $ 10022. As a result of cost containment efforts generally,
is that the primary component of increasing cost may be the cost of medical and
the hope is that the rate of increase of workers' compensation medical costs will
other services.
decline.
75. H.R. 1280, 103d Cong., lat Sess., Title XIII, $ 1301 (1993). The bill would
71. LESLIE I. BODEN, REDUCING LITIGATION: EVIDENCE FROM WISCONSIN (1988).
establish a 15 member Commission which would have the following duties: to review
Obviously, the increased tendency to challenge claims has not succeeded in reducing
the recommendations of the prior National Commission to determine the extent to
the overall costs of the system: some employers assort, however, that the aggregate
which they were implemented and the barriers to implementation; to study the fea-
costs would be even greater if litigation were not pursued.
sibility of utilizing worker's compensation data to target loss prevention activities on
72. There are some exceptions to this, of course. Self-insured employers must
high risk occupations; to study workers' compensation laws to determine whether
pay the litigation costs associated with challenged claims themselves. In addition,
they effectively meet financial and medical needs of injured workers, whether the
some state funds (e.g., West Virginia) do not provide legal assistance on defense of
administrative systems under the laws are adequate, and whether they provide ade-
all claims.
quately for occupational injuries and illnesses, including sufficient recuperative time
140
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B. Injuries
National Safety Council reported 10,400 fatalities in 1989.
In that same year, the National Traumatic Occupational
Public concern about the persistence of occupational
Fatality (NTOF) study conducted by the National Institute for
injuries is almost always spurred by the occurrence of
Occupational Safety and Health (NIOSH) reported 5714
workplace catastrophes. The fire at Imperial Foods in Hamlet,
deaths8¹ and the Bureau of Labor Statistics (BLS) reported
North Carolina, which killed twenty-five workers and injured
3600. Despite these numerical discrepancies, all of the
another fifty-six, recently stimulated another round of
concern. 76 Mainstream professional publications, such as the
Journal of the American Bar Association, joined the voices of
80. NATIONAL SAFETY COUNCIL, ACCIDENT FACTS 37 (1991) [hereinafter ACCIDENT
health and safety activists and labor unions in expressing
FACTS). According to National Safety Council (NSC) figures, the workplace death rate
declined steadily from 1938 to 1990. Id. The figure of 10,500 covers both the public
concern about the persistence of serious workplace hazards.
and private civilian work force but excludes deaths due to homicide or suicide, de-
The fact that this expression of public concern and outrage
spite the increasing level of occupational homicides reported by the Bureau of Labor
Statistics. Refer to note 82 infra.
tends to dissipate between catastrophes does not mean that it
is not justified: Rates of reported occupationally-induced
81. The figure of 5714 represents a traumatic fatality rate of 5.6 per 1000 civil-
jan workers. The NTOF program, which began to study occupational fatalities for
injuries and illnesses have simply not declined in recent years.
the year 1980, is based on a study of death certificates, not employer reports.
Quantifying workplace morbidity and mortality is not easy.
NIOSH collects death certificates when the decedent was 16 years of age or older
When the Centers for Disease Control and Prevention (CDC)
and the death certificate has a positive response to the injury at work item. Unpub-
lished data from the NTOF study which covers the period 1985-89 was supplied to
convened an expert panel, chaired by a well-regarded injury
the author by Elinor Jenkins, Division of Safety Research, National Institute for
epidemiologist,78 to discuss prevention of occupational injuries,
Occupational Safety and Health. Aug. 15, 1993. NTOF data for the period 1980-85
a considerable amount of its early discussions focused on the
can be found in NATIONAL INSTITUTE FOR OCCUPATIONAL SAFETY AND HEALTH. NA-
TIONAL TRAUMATIC OCCUPATIONAL FATALITIES, 1980-1985 (1988). As the 1988 publica-
lack of reliable data and the discrepancies among various
tion notes:
reporting systems.⁷⁹ The panel was ultimately forced to admit
The accuracy and completeness of death certificate data depends upon the
that there was not even an accurate count of traumatic
knowledge and accuracy of those who fill out death certificates. It is likely
that some cases are missing from NTOF. For example, it is suspected that
occupational fatalities, presumably the most objective and
NTOF excludes some occupational motor vehicle fatalities and some occupa-
easily counted events among occupational injuries. Estimates of
tional homicides because these fatalities may not always be identified as
'injury at work.'
deaths due to traumatic occupational injury vary widely. The
Id. at 1-2.
The NTOF data for the period 1980 through 1989 indicates that 62,289 civilian
workers died from injuries sustained while working during this period. CENTERS FOR
DISEASE CONTROL & PREVENTION, NATIONAL INSTITUTE FOR OCCUPATIONAL SAFETY
before an injured worker returns to full duty; to investigate the relationship between
AND HEALTH, FATAL INJURIES TO WORKERS IN THE UNITED STATES, 1980-1989: A DE-
worker's compensation, safety and health programs, and insurance rates and servic-
CADE OF SURVEILLANCE X (1993). The leading causes of these fatalities were motor
es; to determine the feasibility of preempting state workers' compensation laws with
vehicle crashes (23%), machine-related incidents (1496), homicides (12%), falls (10%),
a national program; and to evaluate the factors responsible for interstate differen-
electrocutions (7%), and being struck by falling objects (7%). Id. It is interesting to
tials in premiums for high hazard occupations. Id. § 1301(c)(1)-(4).
note that the fatality rate for male workers (9.8 per 100,000 workers) was 12 times
76. Peter T. Kilborn, In Aftermath of Deadly Fire, A Poor Town Struggles Back,
higher than for women (0.8 per 100,000). Id. The average annual fatality rate
N.Y. TIMES, Nov. 25, 1991, at A1.
Id. at xi.
100,000 civilian workers decreased from 8.9 in 1980 to 5.6 in 1989, a 37% decrease. per
77. Jon Jefferson, Dying for Work, A.B.A. J., Jan. 1993, at 46. Although noting
that "safety today is better than ever," Jefferson also notes:
82. BUREAU OF LABOR STATISTICS, U.S. DEPT OF LABOR, BUIL No. 2399, Occu.
[T]hings may be getting worse again: In 1990 alone, injury rates rose by 6
PATIONAL INJURIES AND ILLNESSES IN THE UNITED STATES BY INDUSTRY 1990 (1992)
percent, and occupational illness rates jumped by 17 percent
Why
are
[hereinafter BLS 1990]. This figure represents the BLS annual survey of occupation-
80 many U.S. workers hurt or killed on the job? The main reason, according
al fatalities for private sector employers with 11 employees or more. However, BLS
to many workplace-safety advocates, is a serious lack of government commit-
admits that "fatalities are difficult to measure in an establishment survey, and,
ment and resources.
therefore, the Bureau believes that the count of fatalities presented is signif-
Id. at 47.
icantly understated." Id. at 7. It appears that the differences in the numbers be-
78. Susan P. Baker, Professor at Johns Hopkins University School of Public
Health served as chair of the panel; she is the first editor of Injury Fact Book (2d
fatal injuries in several high risk industries in the BLS data. Nancy Stout-Wiegand,
tween the NTOF and BLS reported fatality rates represent an underreporting of
ed. 1991) as well as author of numerous articles in the area of injury epidemiology.
Fatal Occupational Injuries in US Industries, 1984: Comparison of Two National
79. As a member of the panel, I had the opportunity to listen to the serious
Surveillance Systems, 78 AM. J. PUB. HEALTH 1215, 1216 tbl. 1 (1988).
concerns raised by epidemiologiste and other public health professionals regarding
BLS has, however, recently revised its reporting of occupational fatalities. In
the abysmal state of data in this field.
its first National Census of Fatal Occupational Injuries, BLS reported 6083 fatalities
due to work injuries in 1992; about one-third of these resulted from highway acci-
142
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commentaries on these numbers agree on the following: the
number and rates of occupational fatalities have certainly
data collection process itself and potential employer incen-
declined over time;83 the documentation of these deaths is
tives to underreport87 influence the final counts. One recent
inadequate; and, irrespective of the final tally, these fatalities
report estimated that BLS numbers understate the seriousness
can be prevented and, therefore, occur too frequently.
of workplace injuries by a factor of four to nine times.88 Nev-
Statistics on the incidence and severity of non-fatal work-
ertheless, this data base is the primary one which provides a
related injuries and illnesses are maintained by the Bureau of
glimpse into the current status of occupational morbidity-and
Labor Statistics (BLS), based upon reports supplied by
it is not an encouraging picture.
employers under the mandatory reporting requirements
Over six million occupational injury and illness cases were
instituted pursuant to the Occupational Safety and Health Act
of 1970.88 Questions continuously arise regarding the validity
of the statistics developed in this program as well: both the
86. For example, length of time off work in these numbers is affected by the
way in which BLS closes the reporting period and other specific aspects of the meth-
odology underlying the data. Arthur Oleinick et al., Current Methods of Estimating
Severity for Occupational Injuries and Illnesses: Data From the 1986 Michigan Com-
prehensive Compensable Injury and Illness Database, 23 AM. J. INDUS. MED. 231
(1993). A National Academy of Sciences report concluded there was considerable
dents or homicides (each of which accounted for over 1000 deaths). BUREAU OF LA-
underreporting in the BLS annual survey. COUNTING INJURIES AND ILLNESSES IN THE
BOR STATISTICS, U.S. DEPT OF LABOR, USDL-93-406, U.S. DEPT OF LABOR NEWS,
WORKPLACE: PROPOSALS FOR A BETTER SYSTEM (Earl S. Pollack & Deborah
Oct. 1, 1993, at 1 (hereinafter U.S. DEPT OF LABOR NEWS). In comparing occupation.
Gellerman Keimig eds., 1987).
al fatality figures from the above three sources, investigators have concluded that
87. During the 1980s, several large employers were subjected to substantial
substantial undercounting of fatal work injuries results from relying on a single
fines by OSHA for their failure to report injuries accurately. Burton (1993), supra
source for data. Of 582 work fatalities identified from two or more source documents
note 2, at 8. Some commentators postulate that these fines may have increased the
in Colorado and Texas in 1990, 562 (97%) were identified in death certificates, 361
likelihood that employers are currently reporting more accurate numbers. Id. Others,
(62%) were identified in workers' compensation reports, and 191 (33%) ware identi-
based upon the low likelihood that OSHA will ever inspect most workplaces (because
fied in the fatality reports employers submitted as required by OSHA. Digests of
the OSHA budget supports far too few inspectors to ever reach most enterprises),
Important Publications, JOHN BURTON'S WORKERS' COMPENSATION MONITOR, Mar.
maintain that employers continue to have "enormous incentives" to underreport.
Apr. 1992, at 25 (citing Guy Toscano & Janice Windau, Further Test of A Census
Telephone Interview with James Weeks, Sc. D., Occupational Health Research Scien-
Approach to Compiling Data on Fatal Work Injuries, MONTHLY LAB. REV., Oct. 1991,
tist, George Washington University (Aug. 10, 1993). Dr. Weeks suggested that the
at 33-36). The new BLS National Census, which draws on multiple sources of data,
BLS numbers are so inadequate as to be "garbage." Id. The reporting problems are
presumably represents a more accurate count. See Guy Toscano & Janice Windau,
compounded in the case of occupational diseases; the disease may be linked to an
Fatal Work Injuries: Results From the 1992 National Census, MONTHLY LAB. REV.,
exposure which occurred many years earlier, sometimes at another workplace. Occu.
Oct. 1993, at 39 (noting that the elderly, workers in farming, transportation, mining,
pational disease data also suffers from the lack of experience of many primary care
and construction have higher risk of workplace fatalities).
physicians in the diagnosis of occupational disease. Additionally, company medical
83. The National Safety Council data, for instance, show deaths to have declined
departments may be disinclined to provide such diagnoses to workers who will then
from 14,500 in 1933 to 10,500 in 1990. ACCIDENT FACTS, supra note 80, at 37. Some
become eligible for compensation benefits. See, e.g., Johns-Manville Prod. Corp. V.
hazardous industries have shown a substantial decline in fatalities. In coal mining,
Contra Costa Sup. Ct., 612 P.2d 948, 953-55 (Cal. 1980) (finding corporate liability
for example, 1000 miners were killed annually in the 1930s and 1940s; that number
when the company medical department failed to disclose to workers that their X.
had declined to about 100 deaths per year by 1982. COMMITTEE ON UNDERGROUND
rays revealed asbestos-related lung abnormalities, when the workers continued to be
COAL MINE SAFETY, COMMISSION ON ENGINEERING AND TECHNICAL SYSTEMS, TOWARD
exposed to asbestos in the workplace, resulting in aggravation of the workers' condi-
SAFER UNDERGROUND COAL MINES 43 tbl. 4 (1982).
tion). The legislature in California later codified this holding to create liability when
84. The failure to have some certainty about the numbers affects not only dis-
an employer fraudulently conceals the existence of an injury and its connection with
cussions about compensation but also makes it impossible for epidemiologists to fol-
employment. CAL LAB. CODE 8 3602 (West 1992); see also Millison V. E.I. duPont de
low trends and set priorities for prevention. The CDC Injury Report comments: "De-
Nemours & Co., 501 A.2d 505, 507 (N.J. 1984) (stating that the plaintiff's recovery
spite the limitations, existing data indicate that the magnitude of occupational injury
was not limited to workers' compensation where the employer fraudulently concealed
is staggering. Ideally, all occupational injury should be considered unacceptable,
injuries from the employee); Martin V. Lancaster Battery Co., 606 A.2d 444 (Pa.
especially severe traumatic occupational injury resulting in death: objectives that call
1992) (allowing the plaintiff to recover when the employer fraudulently withheld
for reductions should be considered minimal goals." CDC Injury Report, supra note
information from the employee, preventing the employee from taking action to re-
9, at 331, 348. Notably, current BLS statistics indicate that 40% of occupational
duce the severity of his condition). The same incentive that can lead employers and
fatalities occur in transportation accidents and 20% involve assaulta or violent acts.
insurers to attempt to reduce hazards can also lead them to hide information.
U.S. DEPT OF LABOR NEWS, supra note 82, at 3. Known preventive strategies, such
ASHFORD, supra note 9, at 404. Thus, the issue of data in this area is tied not only
as safety devices for motor vehicles (e.g., airbags) and effective gun control might
to the various economic incentives, but also to the complex interrelationship between
therefore result in significant reductions in workplace deaths.
employers and workers. Refer to part III.C infra.
85. 29 U.S.C. $ 657(c) (1988); are 29 C.F.R. $ 1904 (1994) (regulating the record-
88. Arthur Oleinick & Jeremy V. Gluck, Faulty Data Play Down Job Injuries,
ing and reporting of occupational injuries and illnesses).
tant N.Y. TIMES, Aug. 15, 1993, at F13 (noting that "this gross inaccuracy about impor-
health and safety data carries ominous implications for public policy").
144
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reported in private industry in 1991. Of these, almost 2.8
of time lost as a result of these injuries has steadily
million were serious enough for the worker to lose work time
increased.
or experience restricted work activity,80 resulting in 60
Second, reports of occupational diseases involving
million reported lost workdays in that year.91 The incidence
cumulative trauma have skyrocketed. Injuries are generally
rate for injuries in 1991 averaged 7.9 per 100 full time private
defined as the result of a single traumatic event.99
sector workers, ranging from an average of 2.3 in finance and
Occupational diseases comprise everything else: acute and
insurance industries to a high of 12.8 in construction. The
chronic illnesses including those caused by inhalation,
rate of injury for the service sector (6.4) was, not surprisingly,
absorption or ingestion of substances, and repeated exposure to
lower than the rate for goods producing industries, which
a particular hazard. 100 In general, occupational diseases are
averaged 11.3 cases per 100 full time workers.83
consistently underreported in all data systems; uncertainty
In addition to the sheer volume of the numbers of reported
regarding causality, existence of these diseases in the general
injuries, which public health officials and advocates view as
population, long latency periods before symptoms appear, as
"largely preventable, three aspects of the data reported by
well as scientific disagreement, mean that illnesses caused by
the BLS are particularly troubling. First, while the incidence
work are much less likely than injuries to be reported by
of all reported illnesses and injuries declined somewhat from
employers on OSHA forms or to be reported by workers to
1972 to 1982, it has edged upward in recent years. 95 It is
workers' compensation programs. 101 The recent phenomenal
true that the total count of injury cases in the BLS data base
growth in the reporting of musculoskeletal problems resulting
involve a considerable number of minor injuries. More
from cumulative or repetitive trauma is significant from
troubling, therefore, is the fact that the rate of injuries
several vantage points. The sheer numbers are alarming: of
involving time lost at work (injuries which are presumptively
the 368,000 new cases of occupational disease reported by
more severe) has not declined⁷⁷ and that the average length
89. BUREAU OF LABOR STATISTICS, U.S. DEPT OF LABOR, BULL. 2424, INJURIES
note 9, at 334.
AND ILLNESSES IN THE UNITED STATES BY INDUSTRY 1991, at 2 (1993) [hereinafter
98. Lost workdays per case rose from 47.9 in 1972 to 86.5 in 1991. BLS 1991,
BLS 1991]. This is a rate of 8.4 per 100 full time private sector workers. Id.
supra note 89, at 1.
90. Id. The National Safety Council, which counts only injuries which result in
99. For example, OSHA defines occupational injuries as "any injury such as a
lost time, reported 1.8 million disabling injuries for 1990. ACCIDENT FACTS, eupra
cut, fracture, sprain, amputation, etc., which results from a work accident or from a
note 80, at 34. A disabling injury is defined in this report as one which results in
single instantaneous exposure in the work environment." Id. at 42.
death, permanent disability, or any degree of temporary total functional disability
100. This is the BLS categorization. Some workers' compensation programs classi-
beyond the day of the injury. Id. at 105.
fy any health effect of an acute event as an injury. For example, an acute exposure
91. The National Safety Council estimated lost workdays at 75 million for 1990;
to chlorine resulting in respiratory damage may be characterized as either an injury
in this figure, fatalities are included at an average loss of 150 days per case and
or an illness, depending upon the system.
permanent impairments are included at actual days lost plus an allowance for lost
101. Several empirical studies confirm that diseases are grossly underreported in
efficiency resulting from impairment. ACCIDENT FACTS, supra note 80, at 35.
workers' compensation data. For example, only 24% out of over 600 individuals diag-
92. BLS 1991, supra note 89, at 2.
nosed with severe work-related silicosis in state-based surveillance programs in Mich-
93. Id.
igan and New Jersey. ever filed for workers' compensation benefits. Ken D.
94. Refer to note 9 supra.
Rosenman et al., Mortality Rates Among persons with Silicosis Reported to Two State
95. BLS 1991, supra note 89, at 1 tbl. 1. Total cases declined from 11.0 per 100
Based Disease Surveillance Systems, in PROGRAM SYLLABUS, SECOND INTERNATIONAL
workers in 1973 to a low of 7.6 in 1983 and then rose to 8.8 in 1990. Data for 1991
SYMPOSIUM ON SILICA, SILICOSIS, AND CANCER 174-87 (1993). Similarly, in a study of
shows a slight drop (to a rate of 8.4); it is too early to say that this represents a
238 people with work-related carpal tunnel syndrome, only one-third filed claims for
reversal of the earlier trend. Id.
compensation. Rebecca S. Miller & Donald C. Iverson, Carpal Tunnel Syndrome
96. Recordable injuries for BLS purposes include all injuries-such as cuts, frac-
Study in ASPN: Final Report (1990) (on file with the author). A 1980 report esti-
tures, sprains, amputations, etc. which result from work-related events-which in-
mated that 3% of occupational diseases, and 43% of occupational injuries, received
volve loss of consciousness, restriction of work or motion, transfer to another job, or
compensation in 1971. U.S. DEPT OF LABOR, AN INTERIM REPORT TO CONGRESS ON
medical treatment (other than first aid). Id. at 73.
OCCUPATIONAL DISEASE (1980); see also ASHFORD, supra note 9, at 416 (noting that,
97. Lost workday cases were reported at a rate of 3.3 cases per 100 workers in
at the time his book was written, occupational disease accounted for only 1% of
1972 and 4.1 in 1990. This figure also dropped in 1991, to 3.9 cases per 100 work.
workers' compensation payments; Ashford also provides a general discussion regard-
ars. Id. This is despite the fact that the use of lost workdays as a criterion for "re-
ing the underreporting of occupational diseases); WHITE, supra note 9, at 43 (esti-
porting injuries or as a proxy for severity may be misleading because of the
mating that 5% of occupational diseases result in compensation claims). These esti-
employer's incentive to return injured workers to the workplace to avoid 'reportable'
mates regarding the extent to which diseases are compensated are obviously guesses,
injuries, even if they cannot perform their usual tasks." CDC Injury Report, supra
based upon suppositions regarding the true underlying rate of disease.
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1994]
employers in 1991, 223,600 were cumulative trauma cases. 102
Repetitive trauma cases rose from eighteen percent of reported
C. Costs/Injuries
occupational illnesses in 1981 to sixty-one percent in 1991; 103
Three issues must be addressed in exploring the
in fact, almost all of the increase in reported occupational
illness is in this category.¹⁰⁴ These claims are coming from
relationship between compensation cost escalation and high
both goods-producing and service industries. 105 This means
occupational morbidity and mortality. First, what are the
that the anticipated decline in illnesses associated with work
possible explanations for increasing workers' compensation
is not occurring because of increases in reported cases in the
costs? Second, how have employers and insurers responded to
relatively less hazardous industries.
escalating costs? Third, is there any evidence that employers
Third, the industries identified by BLS to be "high impact"
can effectively decrease compensation costs?
(i.e., industries reporting 100,000 or more injury cases in 1991)
1. Explanations for Cost Escalation. Explanations
included primarily service sector industries with large numbers
of workers. 106 Although the rates of injury and of severe
regarding the escalation in workers' compensation costs and
the persistence of injuries cluster into five categories:
injury in these industries are lower than the rates for most
manufacturing and mining jobs, the number of injuries in non-
persistence of workplace hazards, attributes of the workers'
hazardous industries has important implications for the
compensation system, worker behavior, demographic and
industrial changes, and reporting variability and data validity.
persistence of occupational injuries.
Finally, and perhaps most troubling, the vast majority of
a. Persistence of workplace hazards. Although internal
reported injuries involve old and familiar hazards, not new
inflation of costs due to legislatively mandated benefit levels
ones. The largest number of reported injuries result in mus-
and rising medical costs account for a substantial portion of
culoskeletal disorders. Workers file claims for strains and
the cost escalation in workers' compensation, the remainder of
sprains, being hit by or struck by objects, falls, and machinery
the escalation is closely linked to the number and severity of
and motor vehicle mishaps. These injuries involve well known
reported injuries. 108 The rate of reports of relatively severe
hazards for which there is a substantial literature that
explores preventive techniques. 107
injuries which are costly to compensation systems climbed
through the 1980s 109 Workers are still getting injured;
In short, the available data demonstrate a troubling
compensation costs are rising as a result of the incidence of
persistence of occupational injuries and illness, in both goods-
reported injuries and illnesses.
producing and service jobs. The incidence of illnesses and in-
juries which require time off from work and significant medical
b. Attributes of the workers' compensation system. Wide
treatment has not declined as health and safety regulation has
variations in costs, injury rates, and benefit levels among
expanded, compensation costs have risen, and the economy has
states make it difficult to assess the impact of changes in
shifted from goods to service-producing jobs.
definitions of compensable conditions and of structural changes
in workers' compensation systems. In fact, there is remarkably
little correlation among rates of reported injuries, state rank-
102. BLS 1991, supra note 89, at 5.
103. Id. at 5 tbl. 5.
ing by liberality of benefit levels, and employer costs for
104. Id. at 5 cht. 5.
105. Id. at 6.
106. Industries reporting more than 100,000 injury cases in 1991 were: eating
and drinking establishments; hospitals; grocery stores; trucking and courier services;
nursing and personal care facilities; department stores; motor vehicles and equip-
ment manufacturing; hotels and motels. Id. at 2 tbl. 3.
108. The occurrence of injuries or illnesses and the filing of claims (or reporting
107. The strains and sprains result primarily from material handling such as
of injuries) are not equivalent. Refer to note 101 supra. To the extent that claims
lifting and carrying heavy objects. Falls often occur because of slippery floors. Cali-
are not filed, even if an injury has occurred, costs will be reduced despite the per-
fornia Insurance Study, supra note 7, at 1-6; see also CDC Injury Report, supra
sistence of injuries. For some employers, whose interest focuses solely on the costs
note 9, at 340-43 (stating that the top 10 injury categories were selected because
associated with compensation claims, the goal therefore becomes to limit the frequen-
they occur frequently, are often severe and often preventable; they include injuries,
cy of the filing of claims rather than to limit the injury rate. For a full discussion
such as burns and lacerations, and external causes, such as falls and motor vehicle
of this issue, refer to part III.C infra.
mishapa).
109. Refer to notes 80-82, 97-98 supra and accompanying text.
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compensation. 110 States with high aggregate costs report both
has risen dramatically,115 workers' compensation systems
high and low rates of injury.
have expanded their willingness to compensate for illnesses
Nevertheless, certain changes in the workers' compensation
caused by non-acute events. This expansion of the flexibility of
systems have unquestionably contributed to increasing costs.
the definition of compensable conditions, and the accompanying
The recognition of the work-relatedness of health conditions
growth in claims filing, causes some employers and insurers to
has expanded dramatically over the last thirty years. Not
be highly suspicious about the diagnoses. 116
surprisingly, recognition of new compensable conditions
Even with the large number and size of compensation
expands compensation costs. At their inception, workers'
claims currently associated with repetitive trauma, these
compensation programs focused on providing benefits to those
claims are probably vastly underreported in the compensation
individuals who were injured in "accidents"-traumatic,
systems. In one study, twenty percent of people afflicted with
unexpected, observable events.¹¹ This led, for example, to
cumulative trauma disorders became unable to work and
the exclusion both of occupational diseases and musculoskeletal
another thirty-five percent required modified work activities,
injuries resulting from repetitive trauma. Over time, this
but only about one-third of the workers with occupationally-
definition expanded to include diseases caused by exposure to
caused disorders filed claims for compensation. 117 The impli-
both physical and non-physical agents such as dusts, fumes,
cation of trends in cumulative trauma disorders and claims is
and noise. 112
troubling: the changing nature of work does not promise either
For example, a 1992 article in an insurance trade journal
reduced injury rates or fewer compensation claims. 118 In fact,
noted that Aetna Life and Casualty had found that forty-five
the pandemic nature of some cumulative exposure diseases
percent of its claim payments were for cumulative trauma
could bring massive costs to compensation systems if the rate
disorders. 113 Thus, at the same time that new technology has
of claims filing actually reflects the incidence of the
diseases.
119
contributed to these injuries,¹⁴ and their reported incidence
110. See ELEVENTH ANNUAL GRANT THORNTON MANUFACTURING CLIMATES STUDY
115. Refer to notes 102-05 supra and accompanying text.
152-53 (1990) [hereinafter GRANT THORNTON STUDY (showing wide variation in rank-
116. This suspicion has been applied to cumulative trauma disorders. Similarly,
ing of states with regard to statutory benefit levels and employer premium costs);
insurers are now expressing concern about diagnoses of reflex sympathetic dystrophy
Burton & Schmidle, supra note 28, at 10. Ashford notes that "there does not appear
(RSD) syndrome, a relatively rare condition in which a simple injury may trigger
to
be
a
relationship
between the level of benefits and the safety
significant and persistent pain. "While RSD is a very real and debilitating condition,
record in systematic the State." ASHFORD, supra note 9, at 398. Furthermore, there is a sur-
insurers are concerned that increased knowledge about it is causing an increase in
prisingly poor correlation between premium rates and average benefits across states.
the number of RSD diagnoses and claims. Costs associated with RSD can be
enormous as patients and doctors search for answers to the pain." New Workers'
Id.
111. Refer to note 32 supra.
Comp Claims, MED. BENEFITS, Aug. 30, 1993, at 10-11.
112. Problems with determining compensability of occupational diseases are com-
117. Miller & Iverson, supra note 101, at 9-10 tbl. 18. There were a total of 552
pounded by the fact that many workers' compensation systems historically excluded
people with carpal tunnel syndrome in this study. Id. at 9. The disorder was job-
diseases of everyday life (even if arguably occupationally-caused) or set statutes of
related for 43% of these, or 238. Id. at 9. Of the 552, 14% filed workers' compensa-
limitations based upon time of exposure, which may have occurred years before the
tion claims. Id. Therefore, if only people whose disorder was job-related filed claims,
worker developed the disease and discovered its work-relatedness. Difficulties in
one-third of those who could legitimately file claims did so. Lawrence Fine, M.D.,
proving "work-relatedness" also result in increased litigation over the compensability
Director of the Division of Surveillance, Hazard Evaluation, and Field Studies
of conditions. As noted above, the vast majority of occupational diseases are probably
(DSHEFS) of the National Institute for Occupational Safety and Health, reported on
not compensated. Refer to note 101 supra.
this study at the New Challenges in Occupational Health conference in Houston on
113. Aetna Ergonomics Workbook Now Available to Employers, NAT'L UNDERWRIT-
March 4, 1993. For other similar findings, refer to note 101 supra.
KR, PROP. & CASUALTY/RISK & BENEFITS MGMT. EDITION, Oct. 5. 1992, at 15; see
118. California Insurance Study, supra note 7. at iii.
also Junius C. McElveen, Jr., Recent Trends in Workers' Compensation, 18 EMP. REL.
119. Noise-induced hearing loss (NIHL), for example, probably afflicts a majority
LAW J. 255 (1992) (noting large increase in repetitive trauma claims); Ruth Gastel,
of older industrial workers and miners. See generally 1B LARSON, supra note 65, §
Occupational Disease: Insurance Issues, INS. INFO. INST. REP., Jan. 1993 (indicating
41.61 (discussing the potentially pandemic nature of hearing loss claims). However,
that "[s]ome insurance industry data support the BLS figures. However, several in-
NIHL rarely results in lost time from work. Because hearing loss is also attributable
surers believe that a much greater proportion of workplace injuries than is indicated
to aging, most compensation systems have been reluctant to provide any, or very
by the BLS data are due to cumulative trauma. In an informal survey of its nation-
much, compensation for this well-documented, occupationally-caused, objectively deter-
al accounts. one large national insurer found that about 45 percent of injuries and
minable impairment. See id. § 41.54. The underreporting of occupational diseases
63 percent of workers' compensation claim payments were due to repetitive motion
(which involve cumulative exposure to workplace hazards rather than traumatic
events) to workers' compensation programs is a frequent subject of study and com-
injuries.").
114. California Insurance Study, supra note 7, at 35.
mentary. Refer to note 101 supra. Professor Larson notes, with regard to this, that
150
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In addition to expanding the definitions of compensable
attentiveness to safety as a result of increasing adequacy of
conditions, legislatures in many states have also increased
benefits, and increased claims filing behavior independent of
levels of statutory benefits, expanded medical benefits, and, in
increasing injury rates-are discussed in more detail in part
some places, broadened the definition of covered workers. 120
III.C of this Article. Some of the authors of these studies have
As noted above, the National Commission's Report in 1972
concluded that benefit rates should be curtailed in order to
precipitated an expansion of benefits during the 1970s. 121
control this perceived (negative) phenomenon;¹ their focus is
The combination of expanded benefit levels, increases in the
therefore on the potential inducement to workers offered by
covered workforce, expansions in the definitions of compensable
the availability of more adequate benefits, rather than upon
conditions, and increasing friction costs have contributed
establishing a benefit which provides economic adequacy to
significantly to cost escalation.
workers who are partially or totally disabled from working.
C. Worker behavior. While workers and their
d. Demographic and industrial changes. Demographic,
representatives point to the persistence of occupationally-
wage, and industrial changes influence costs as well. First, and
caused morbidity and mortality, some employers and
most obviously, total cost is associated with increased covered
economists argue that worker behavior is the primary cause of
payroll. Increasing numbers of workers and legislative
increased costs. Several studies conclude that workers file
expansion of the categories of covered employees meant that
more claims when benefit levels rise: that increases in statuto-
covered payroll increased ten-fold from 1960 to 1990. 124
ry benefit levels are associated with rising numbers of lost-
Again, although this provides a partial explanation for the rise
time claims and with lengthening duration of claims. 122 The
in costs, it cannot account for the rise in the percent of payroll
estimated magnitude of this increase in claims varies. The two
paid in workers' compensation premiums.
explanations that are offered for this phenomenon-decreased
Second, the shift to a service-sector economy does not
appear to be providing the anticipated major shift away from
occupational morbidity. The relative decline in more hazardous
the early workers' compensation laws made no serious attempt to address compensa.
goods-producing jobs and increase in service-sector jobs has not
tion for occupational diseases, in part because the "heavy incidence of certain diseas-
meant that the reported injury and illness cases in either the
as in particular industries or areas would make their full coverage an impossible
burden on the compensation system." 1B LARSON, supra note 65, § 41.20, at 7-488.
declined. BLS data 125 set or in workers' compensation programs has
Similarly, with regard to restrictions imposed on compensation for respiratory diseas-
es, Larson speaks of "the fear that the compensation system could not bear the fi-
Third, the increasing duration of lost time claims is
nancial impact of full liability for dust diseases simply because they were so wide
associated at least in part with the aging of the workforce:
spread in particular industries." Id. $ 41.81, at 7-685. Legal barriers to awarding
compensation for occupational diseases were therefore established; some of these
while more experienced workers generally have fewer
persist today. E.g., id. § 41.80, at 7-681, 7-684.
injuries, 126 injuries of older workers tend to be more severe
120. See 1 LARSON, supra note 65, $ 5.30, at 2-21 to 2-24 (discussing increases in
and require a longer healing period. 127 The number of lost
percentage of employees covered and maximum benefits); ANNE TRAMPOSH, AVOIDING
THE CRACKS: A GUIDE TO THE WORKERS' COMPENSATION SYSTEM 16-20 (1991) (dia-
cussing the commonalities in the compensation benefits in many states, including
medical benefits, wage loss benefits, and death benefits).
123. See, e.g., Ehrenberg, supra note 18, at 77; Chelius, The Influence of Workers'
121. For example, medical benefits are now provided so that the injured worker
Compensation on Safety Incentives, supra note 18, at 155.
will receive lifetime treatment for his or her occupational injury or disease. See gen-
124. Payroll covered by workers' compensation programs increased from $220
erally U.S. CHAMBER OF COMMERCE, 1993 ANALYSIS OF WORKERS COMPENSATION
318 tbl. 9.B1.
billion in 1960 to $2250 billion in 1990. 1992 STATISTICAL SUPP., supra note 28, at
LAWS (1993) (hereinafter U.S. CHAMBER OF COMMERCE]. States have raised minimum
and maximum benefit levels, so that in the majority of states injured workers will
125. Refer to note 106 supra and accompanying text.
receive two-thirds of their pre-injury gross wage (to a maximum, generally. of 100%
of the state average weekly wage). Id. Minimum and maximum benefit levels are
126. California Insurance Study, supra note 7, at 18 (citing a four year study of
now tied to the state's average weekly wage so that the maximum weekly benefit
construction accidents showing that a greater percentage of accidents occur during
the first year of work for an employee, regardless of the workers' age); see also
now increases automatically in at least 45 states. Id. In addition, the majority of
Upjohn Report, supra note 7, at V-6 to V-7 (stating that low claims employers tend
jurisdictions have expanded the availability of permanent total disability benefits so
to have employees with more years of experience).
that these benefits are awarded to people who, as a result of occupational Injuries,
127. See Alan E. Dillingham, Demographic and Economic Change and the Costs
become totally disabled through . combination of factors. including age, education,
of Workers' Compensation, in SAFETY AND THE WORK FORCE: INCENTIVES
and the state of the labor market. Refer to note 65 supra.
DISINCENTIVES IN WORKERS' COMPENSATION, supra note 18 at 163; Nelson, 1984-88 AND
122. Refer to note 18 supra (listing some of these studies).
Benchmark, supra note 60, at 46 (stating that although older workers have a lower
152
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workdays per claim is expected to continue increasing as the
states have moved to deregulate this portion of the insurance
median age of workers rises. 128
market and to allow competitive pricing of workers' compen-
sation insurance. 131 Not surprisingly, deregulation results in
e. Reporting variability/data validity. Data validity
competitively lower pricing for employers who are favorable
problems raise separate questions about the interpretation of
risks. 132 As a consequence, higher risk employers are forced
trends in the reports of occupational injuries. To the extent
into the residual (high risk) market to purchase this
that neither employers' reports nor workers' compensation
mandatory insurance. 133 There has been an explosion na-
claims provide us with an accurate picture of the true level of
tionally in both the number of employers in the residual
occupational morbidity and mortality, it is impossible to assess
market and the extent to which the residual market operates
the interaction between claims and costs. 129 The fact is that
at a deficit. 134
changes in claims or reports of injuries may reflect nothing but
changes in reporting.
b. Enterprise and insurer attempts to contain costs. There
is no question that insurers, and to a lesser extent employers,
2. Employer and Insurer Responses to Costs. Increasing
are aware that compensation costs are not immutable and can
costs have not been ignored by either employers or their
be affected by their own behavior. Three variables affect
insurers. Many of their reported responses have not been
workers' compensation costs: the occurrence of injuries, the
focused on primary prevention, however.
filing of claims, and the cost of claims once filed. Employers
and insurers recognize, and can influence, all three of these
a. Changes in the insurance market. Increasing costs have
variables.
had significant effects on the workers' compensation
First, they have, of course, attempted to reduce both the
commercial insurance market. Self insurance has increased as
number and severity of injuries and the numbers of claims
employers attempt to extricate themselves from the additional
filed after injuries have occurred. 135 Private insurance
costs incurred through insurance and, in return, assume the
carriers expend between one and two percent of their gross
risk of loss themselves. 130 At the behest of insurance carriers,
revenue on "loss control" efforts;138 these efforts include both
frequency of injuries, their injuries tend to be much more severe).
128. Nelson, 1984-88 Benchmark, supra note 60, at 46.
escalating rapidly, most notably health insurance.
129. For example, if claims were historically underreported because of benefit
131. Workers' compensation rates were traditionally regulated through adminis-
inadequacy or other factors in the employment relationship, the frequency of current
tered pricing systems. Burton (1993), supra note 2, at 11. Deregulation was imple-
claims may be a better reflection of true underlying injury rates. Similarly, the cur-
mented in many states during the 1980s. Id. Open competition removes all regula-
rent BLS statistics indicate that injury rates are highest in medium size firms and
tion on pricing and was adopted in Arkansas in 1981; 16 other states followed by
lowest in very small (under 50 employees) and large firms (over 1000 employees).
1990 (Colorado, Connecticut, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maine,
BLS 1991, supra note 89. at 2-3. Other studies raise serious questions as to whether
Maryland, Michigan, Minnesota, New Mexico, Oregon, Rhode Island, South Carolina,
the low reported incidence of injuries in small establishments can be accurate. See,
Vermont). Id. at 20 tbl. All.
e.g., Katherine L. Hunting & James L Weeks, Transport Injuries in Small Coal
132. See, e.g., H. Allan Hunt et al., The Impact of Open Competition in Michigan
Mines: An Exploratory Analysis, 23 AM. J. INDUS. MED. 391, 398-99 (1993) (stating
on the Employers' Costs of Workers' Compensation, in WORKERS' COMPENSATION IN-
that reporting in larger mines may be more complete). According to this study, inju-
BURANCE PRICING: CURRENT PROGRAMS AND PROPOSED REFORMS 140-41 (Philip S.
ries occur at a disproportionate rate at smaller mines. Id. at 398.
Borba & David Appel eds., 1988) (describing the decrease in costs for some em-
130. Workers' compensation insurance is compulsory for almost all employers in
ployers after the deregulation of the workers' compensation insurance industry in
all states except New Jersey, South Carolina, and Texas. Nelson, 1984-88
Michigan).
Benchmark, supra note 60, at 41, 42. In most states, workers compensation coverage
133. For the nature and effects of the residual market. refer to part III.B.1.c
has generally been obtained through the purchase of insurance from private carriers.
infro.
Larger employers, however, are often permitted to self insure; that is, rather than
134. Burton (1993), supra note 2, at 11. For the resulting problem of subsidy for
buying insurance and transferring the risk to an insurance carrier, the employer
high risk employers, refer to part III.B.1.c infra.
retains the risk. Self insurance is a regulated option requiring proof that the em-
135. Refer to part III.C.3 infra.
ployer is financially able to assume the risk; often, bonds or letters of credit are
136. Telephone Interview with Barry Llewellyn, Vice-President, National Council
used to guarantee the claims costs. As insurance costs have increased, the percent-
on Compensation Insurance (Feb. 26, 1993) (stating that insurance carriers expend
age of employers who self insure has risen substantially: from 18.1% of the workers'
less than one percent). Members of the National Association of Casualty & Surety
compensation market in 1980, to 20.0% in 1985, 25.9% in 1990, 29.0% in 1991, and
Agents expend about two percent of annual revenue on loss control services. Novak,
30.3% (projected) in 1992. Burton (1993). eupra note 2, at 14 n.27. This move to
supra note 53, at 32. Loss control includes any activity by an insurer which will
ward self insurance is also evident in other lines of insurance in which costs are
reduce the amount paid out to an insured. In this context, it may include, for exam-
154
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cost containment strategies and safety efforts. Loss control
safety goals supported by management.¹⁴⁰ An automobile
initiatives in the private insurance market are also utilized as
marketing tools and for purposes of competitive pricing. Part
parts manufacturing company implemented revised material
handling procedures in 1986 and experienced a seventy-three
III.B of this Article discusses these efforts in greater detail.
Second, employers and insurers have focused efforts on
percent reduction in annual injury-related workers'
compensation claims. Cord Moving and Storage Company
costs incurred in claims, particularly medical cost containment
in California reportedly made a concerted effort to improve
devices and early return-to-work programs. 137 These efforts
safety by hiring a safety manager, establishing training
are directed not at the underlying rates of injuries but are,
programs, performing equipment maintenance, investigating
instead, a post hoc approach focusing on the cost of a claim
accidents, and developing an incentive program; after three
after these injuries occur.
years, workers' compensation losses were reduced 116 percent,
even though the company had grown over ten percent. 142
C. Political attempts to constrain systemic costs. Finally,
Weyerhauser Company instituted a combined safety and post-
the political hysteria surrounding workers' compensation has
injury control program and trimmed workers' compensation
grown with the increase in workers' compensation costs. 138
costs from $700 per employee in 1984 to $300 in 1990. 143
Political solutions focus on three areas: medical cost
And the stories go on. 144
containment; benefit reductions, restrictions on eligibility of
In 1988, the W.E. Upjohn Institute for Employment
claims, and increased system-vigilance against fraud; and an
Research completed a major study of workers' compensation
attempt to reintroduce safety and prevention into workers'
claims for the State of Michigan. 145 Michigan, like most
compensation legislation. The nature and success of these
states in the country, was beset by charges that workers'
responses are discussed in Part IV of this Article.
compensation costs exceeded those in neighboring states and
created a negative economic development climate. 146 At the
3. Successful Ventures into Cost Control. Thus, costs are
same time, employers in the same industries paid widely
rising, injuries are not declining, hysteria is growing, and
divergent insurance rates for compensation coverage, based
there is little evidence that costs motivate employers or
upon experience rating factors. 147 The Upjohn Report studied
insurers to act aggressively to decrease injuries. Evidence does
intrastate variations in insurance rates among employers,
indicate, however, that if employers take prevention seriously,
attempting to explain why some insured employers achieved
the cost savings can be substantial.
such substantially better experience, and therefore
Anecdotal accounts of such success abound. Mennen
substantially lower rates, in the workers' compensation
Company claims to have cut back injury claims by ninety
percent after instituting an aggressive safety program. 139
John Deere Company attributes a seventy-four percent
decrease in their OSHA recordable injury rate from 1975 to
1984 to development of facility-based occupational health and
140. CDC Injury Report, eupra note 9, at 338 (citing F.W. Lanclanese, Training:
Vital to Safety's Success, 1984 REKINDLE 11, 13 (Oct. 1984)).
141. Id. (citing D.M. Oleske et al., An Epidemiologic Evaluation of the Injury
Experience of a Cohort of Automotive Parts Workers: A Model for Surveillance in
ple, any advice which reduces the number of claims filed against the insured or the
Small Industries, 10 J. OCCUP. ACCID. 239, 239-53 (1989)).
costs of those claims once filed. It is not limited to efforts to reduce injury, illness,
142. California Insurance Study, supra note 7. at 62-63.
and fatality rates.
143. Richard W. Palezynski, Coping with the Crisis: Examining Workers' Compen-
137. See generally Greenwood & Taricco, supra note 68.
nation, BEST'S REV., Nov. 1992, at 69, 94.
138. Refer to part II.A supra.
144. See, a.g., Martha H. Miller, A Corporate Safety and Health Program: The
139. Safety Program At Mennen Co. Cuts Claims More Than 90 Percent, 3
First Line of Defense, in Welch, supra note 7. at 57-63; James C. Soule, Commitment
Workers' Comp. Rep. (BNA) 169 (1992). The effort at Mennen to reduce back inju-
at Steelcase, in Welch. supra note 7, at 65-71; Kevin M. Meade, An Attitude Prob.
ries resulted in a 92% reduction in workers' compensation claims at five plants be-
lem, in Welch, supro note 7, at 73-80.
tween 1989-91. The program included safety audits and subsequent design of a safe-
145. Upjohn Report, supra note 7. The report was submitted to the Bureau of
ty program, including training. minor engineering changes (including reducing size of
Workers' Disability Compensation, Michigan Department of Labor. Id.
shipping boxes), an aggressive light duty program. creation of safety committees, and
146. Id. at I-2.
weekly safety meetings.
147. Id. at I-4.
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program. 148 The purpose of the study was to identify
systematically different patterns of behavior to prevent and
organizational variables associated with employers with high
manage work related disabling conditions. In its introduc-
and low workers' compensation claims experience "in order to
tion, the report noted that accident prevention is the key
provide guidance to employer initiated actions that may
element in controlling occupational injuries. 157 With regard to
favorably impact their workers' compensation experience. *140
safety programs, low claims employers showed significantly
The study concluded that considerable variation exists in
higher ratings of achievement on the safety and prevention
claims incidence among employers even within the same
subscale. 158 Low claims employers also demonstrated more
industry and that a "significant portion of the variance
aggressive approaches to disability management, including
among employers is due to policy and behavioral
return-to-work programs. 159
differences that are under company control."151 As in other
Equally telling were the findings with regard to corporate
studies, the largest companies (over 500 employees) tended to
culture. Low claims employers consistently showed less suspi-
be in the low claims group. High claims employers had
cion of both injured workers and the compensation system. 160
significantly more employees with less than two years of
They were more likely to treat their employees as
seniority, were much less likely to provide training to their
"stakeholders"; they were less likely to feel that the rate of
new employees, and had more turnover among their
absenteeism in the enterprise was unfavorable, even though
workers. 153 High claims employers were somewhat more
there was no significant difference in absence rates between
likely to be unionized, although the report notes that forty
the two groups of employers. 162 They achieved significantly
percent of the low claims employers were also unionized. 164
higher scores in a variety of self assessment evaluations
Somewhat against conventional wisdom, a wide variety of
regarding organizational behavior, including safety and
factors were found not to be significant in predicting
prevention activities, employee participation in problem solv-
compensation experience. These included geographic location,
ing, and information and communication transfer. 163
type of insurance (including self insurance), age of the
The Upjohn study indicates that workers' compensation
workforce, rurality, gender breakdown of the workforce, and
costs and claims experience are within the autonomous control
use of part time workers or routine overtime. 165
of enterprises. The study does not attempt to explore why the
Most importantly, "low claims employers engage in
corporate culture and safety practices of some employers differ
so markedly from others. There is no indication in the report
that the cost of workers' compensation was a primary
148. The study was designed as follows. Researchers identified employers in four
motivator for low claims employers. It appears (although this
industries (food production, fabricated metals, transportation equipment, and health
services) which were in the top 15% and bottom 15% in terms of workers' compen-
sation claims experience. Id. at II-2 to II-3. The identification of the study group did
not rely upon the modification factors assigned for experience rating purposes but,
156. Id. at V-9.
rather, on the actual claims experience. The study included both self insured and
157. Id. at I-9 (noting that "this requires the establishment of an effective safety
insured employers. Only firms with 50 or more employees which had at least one
program that has the capacity to identify hazardous conditions, ensure proper design
closed case for the relevant period were studied. The researchers note that the em-
of facilities and machinery, train employees, ensure safe work practices and motivate
ployers with the very best claims experience may have been excluded from the
employee safe behavior").
study. High and low firms were drawn from homogeneous populations relative to
158. Under this category, low claims employers reported
accident exposures. Id. at II-3. Identified firms were asked to complete an extensive
increasing employee awareness through the use of incentives, recognition,
questionnaire; the self-reported responses to the questionnaire form the basis for the
rewards and peer influence for individual and departmental achievements in
conclusions in the report. A total of 63 firms agreed to participate in the study and
safety and lost time control. Pre-employment screenings, including back
returned questionnaires. Id. at II-1 to 11-9. The participating employers represented
exams and physicals for health and disability, as well as counseling and
a cross-section of employers in the chosen industries. See id. at II-4.
training for those experiencing accidents and injuries were also noted. Ergo-
149. Id. at 14.
nomic work site modifications also appeared to be frequently employed or
150. Insurance costs for the employers studies varied within the same industry
planned as strategies.
by a factor of six. Id.
Id. at V-13. Several of these strategies may result in reductions in claims filing, and
151. See id. at I-3 to I-4 (emphasis added).
therefore cost reduction, without reducing injuries. Id. at V-14 to V-15.
152. Id. at III-2.
169. Id. at V-11.
163. Id. at III-21, V-6 to V-7, V-9. Seventy-five percent of low claims employers
160. Id. at V-10 to V-11.
provided safety training to new employees. Id. at III-21.
161. Id. at V-10.
164. Id. at V-5 to V-6.
162. Id. at III-8 to III-9.
165. Id. at III-3 to III-6, V-6 to V-6, V-8.
163. Id. at V-9 to V-10.
158
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is certainly not verifiable) that the differences in corporate
legislature directed the State Department of Insurance to
culture spawned the differences in workers' compensation
investigate workers' compensation claims in 1989 169 Many of
experiences, rather than the reverse. 164
the anecdotal stories about fraudulent claims have emanated
The Upjohn study also does not distinguish between
from California;170 the system is expensive, while benefits are
managerial techniques which prevent the occurrence of injuries
comparatively low. 171 The legislature directed the Department
and those which might simply discourage the filing of
of Insurance to study the types and causes of injuries and
claims;¹⁶⁶ it is not clear that the decrease in costs in low
illnesses which resulted in significant proportions of workers'
claims firms is necessarily associated with improved safety in
compensation losses; to determine whether employer size or
all of these firms. Although low claims employers clearly dem-
insurance experience rating contributed to significant
onstrated a higher score on safety and prevention
differences in types of injuries; and to identify investments em-
activities, 166 the study also notes that "low claims employers
ployers could make which would be most effective in reducing
also showed a very interesting differences [sic] in the number
the injuries causing major proportions of the losses. 172 Fi-
of injuries that turned into compensable claims. It appears
nally, the Insurance Department was asked to recommend
that low claims employers are somehow able to prevent many
methods to encourage employers to make investments
accidents from becoming lost work day injuries. #167 In other
identified as most likely to reduce workers' compensation
words, low claims employers may have both prevented injuries
losses.
173
and successfully encouraged workers not to file claims. 168
The study, completed in February 1993, concluded:
Motivated by similar concerns which led to the Upjohn
Employers can minimize the rate and severity of injuries
study and alarmed by the substantial increases in costs in the
by as much as forty percent. 174
California workers' compensation system, the California
Cost effective actions were often identified by
employees.
175
The primary causes of large claims were commonplace
164. This impression is confirmed by Kevin Meade, a Michigan businessman, who
writes,
It is clear to us that by making our organization and our management at
the plant level responsive to people's concerns about safety and health is-
sues, we were able to effect a change in employee attitudes that was reflect-
ed in workers' compensation costs. Some of our attempts at change were
certainly successful; grievances went down, lost-time accidents diminished,
169. See CAL INS. CODE § 11745 (Deering 1989) (repealed 1992) (directing the in-
and workers' compensation costs decreased dramatically
I think there
surance commissioner of California to review workers' compensation claims and pre-
is
an interrelation between employee attitudes and things that indicate
vention strategies); California Insurance Study, supra note 7, at XV (stating that the
employee attitudes and workers' compensation. I think they go hand in hand
Senate Bill was enacted because of concern with the rate of injuries and the cost of
and I think you can control and influence workers' compensation costs in
compensation).
your facilities without concentrating specifically on workers' compensation. In
170. See, e.g., Peter Kerr, Vast Amount of Fraud Discovered in Workers' Compen-
fact, if you concentrate on workers' compensation, I think you are at the
sation System, N.Y. TIMES, Dec. 29, 1991, at L1, L14 (reporting that in California as
wrong end of the problem. Your company's safety record and your people's
much as 20% or more of claims may involve cheating, and recounting stories about
opinion of how you respond to and deal with safety problems in the plant
the encouragement of fraudulent claims by pitchmen working for doctors and law.
are what are going to cause attitudes to improve, opinions to change, and
yers).
accidents and costs to go down.
171. GRANT THORNTON STUDY, supra note 110, at 152-53 (showing, out of 50
Meade, supra note 144, at 80.
states, California with the 4th lowest statutory average cost per case and third high-
165. Cf. Ison. supra note 20, at 726 (discussing practices that have been adopted
est premium cost for employers); see also Burton & Schmidle, supra note 28, at 10;
to reduce recorded claims costs including discouraging workers from reporting
John F. Burton, Jr. & Timothy P. Schmidle, Comparing States' Benefits: Multiple
claims).
Choices, JOHN BURTON'S WORKERS' COMPENSATION MONITOR, Nov.-Dec. 1991, at 6
166. Upjohn Report, supra note 7. at III-17.
(showing that in 1989 California ranked 47th of 50 jurisdictions in average benefits
167. Id. at V-14.
provided by statute for all types of cases).
168. This is consistent with a study conducted by Boeing that indicated that
172. California Insurance Study, supra note 7. at i.
employees who disliked their jobs and their supervisor were more likely to "injure"
173. Id. This study looked only at serious indemnity claims, which were deter-
their backe-i.e., file claims for back injuries. See Pritula, supra note 74, at 80. Suc-
mined to account in California for 20% of claims but 85% of incurred losses in any
ceseful strategies to discourage claims may reflect an employer's greater willingness
policy year. See id.
to accommodate workers who are injured. Lower claims filing experience may, on the
174. See id. at iii (noting individual employers committed to having a healthy
other hand, be the result of implicit coercion which makes workers perceive that the
workplace have reduced injury rates by up to 40%).
filing of a claim will result in adverse employment consequences. Refer to part II.C
175. See id. at iii-iv (citing Ford Motor Company's use of ergonomics committees
infra for a full discussion of this issue.
at each plant for nearly a decade as an example of soliciting employee input).
160
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injuries and not new or unknown risks.¹⁷⁶
Not all effective primary prevention actions require
the enterprise. There is little evidence, however, to show that
spending large amounts of money.¹⁷⁷
the costs themselves are the predominant reason that these
Changes which improve health and safety also improve
managerial techniques are adopted; general corporate culture
productivity. 178 In fact, changes in material handling were
appears to be the primary determinant of compensation
most often motivated by productivity, not safety, concerns.179
activity. Thus, at the July 1993 conference on the future of the
The most significant causes of injuries were known
U.S. workplace sponsored jointly by the Departments of Labor
hazards with proven prevention strategies. 180 For example,
and Commerce, the characteristics of high performance
the high incidence of injuries among carpenters and roof-
workplaces were found to include commitment to total quality,
ers¹⁸¹ was the result of familiar hazards of construction
ongoing training for workers, employee participation, work
which "have changed little over time";182 a study of burn
organization centered around self-managing, innovative
injuries concluded that "lack of compliance with safety orders
compensation systems, emphasis on diversity, a safe and
was a major cause of the injuries. In the trucking
healthy workplace, and sensitivity to family issues. 186 Safety
industry, in which one in six drivers reported work-related
and health appears to be an integral component of successful
injuries in 1989, two-thirds of the accidents resulted from
corporate culture, not a byproduct of high workers'
compensation costs.
overexertion, falls or slips, or motor vehicle accidents.
The report concludes:
III. EXPLORING THE PARADOX
Although requirements to improve working conditions are not
acceptable if they unduly burden employers, the evidence
The resulting question is inescapable: If it makes both
suggests that employers can minimize the risk and severity of
injury in a cost-effective manner. In fact, strategies to
economic and managerial sense, why would more employers not
minimize the risk of injury have been found to increase
adopt the strategies observed among low claims employers in
productivity and profit.¹⁸⁵
the studies in California and Michigan? The following sections
explore four interrelated explanations for the failure of high
In sum, there appears to be no question that employers can
workers' compensation costs to promote effective deterrence of
decrease costs of compensation by efforts which are internal to
workplace injuries.
Part A examines the history and consequences of the no-
fault design of the workers' compensation system. 187 This no-
176. See id. at 6 tbl. 3. Strains, aprains, fractures, contusions, punctures, concus-
sions and lacerations comprised two-thirds of the injuries (66.8%). Another 14% were
fault design often results in the view that the root cause of
for claims filed for cumulative trauma injuries. Psychiatric claims constituted 3.7% of
claims. All other types of claims were 1% or less of the total. These data also con-
misbehavior). compensation claims does not lie in employer behavior (or
firm the continuing allegation that occupational dissases-particularly occupationally-
caused hearing loss and respiratory disease-are rarely compensated. Id. at 11.
Part B looks at the distribution of costs among employers
177. Some inexpensive investments, such as supplying personal fall arrest system
and the impact of insurance pricing on deterrent effects in
to a five person crew of roofers or slip resistant soled shoes to employees, have a
workers' compensation.¹⁸⁸ Not only has the general insur-
pay-back period of less than one year. Even more costly investments have rapid pay-
back periods. For example, a conveyor belt to reduce carrying injuries had a two
ability of risks limited the deterrence value of the liability, but
year payback. Job rotation, requiring almost no investment, can have significant
the particular pricing mechanisms and subsidies within the
impact on repetitive trauma disorders. See id. at iv.
workers' compensation insurance market dilute any deterrent
178. See id. at iv-v. For example, a company with a high incidence of carpal tun-
nel syndrome (CTS) began a program of morning calisthenics, five-minute hourly
effect. Moreover, despite the apparent internalization of costs by
breaks, and frequent job rotation. Their productivity increased from two-thirds to
employers, significant components of these costs are borne by
95%, and their incidence of CTS "almost disappeared." Id. at iv.
179. Id. at 88.
populace. workers, other social insurance programs, and the general
180. Id. at 11.
181. One in six carpenters and one in five roofers were injured in 1989. Id. at
13.
182. Id.
183. Id. at 17.
399-400 (July 26, 1993).
186. Conference Showcases Innovative Employers, 143 Lab. Rel. Rep. (BNA), at
184. Id at 56-57, 65-66 tbl. 1.
185. Id. at V.
187. Refer to notes 192-261 infra and accompanying text.
188. Refer to notes 262-372 infra and accompanying text.
162
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Part C explores the impact of the employment relationship
catastrophes (including the deaths of 361 miners in a coal
and the law governing that relationship on the behavior of
mining explosion in West Virginia" and of 164 women in
employers and employees within this social insurance struc-
New York City in the Triangle Shirtwaist Fire¹⁹⁴) and muck-
ture. 189 The inherent inequality of the bilateral employment
raking fiction (such as Upton Sinclair's mesmerizing account of
relationship engenders a prevalent view that behavior of
work in the meatpacking plants in Chicago¹⁹⁵) combined to
employees is the primary cause of increased costs and should
change the way people thought about injury at work.
therefore be the primary focus of employer activity and
One sign of the rising tide of concern came in the form of
program redesign. The problem is perceived to be either unsafe
dramatic changes in the way courts and juries responded to
activity on the part of workers or the filing of unnecessary
injured workers' lawsuits against employers. Perhaps
claims by workers. Increases in internalization of costs may
encouraged by public opinion which blamed capitalists and
result in unintended pressure on employers to decrease claims
industrial enterprises for the extent of their misery, increasing
cost independent of injury rates instead of stimulating efforts at
numbers of employees brought tort actions against their em-
prevention. This behavior confounds the process of assessing
ployers, seeking damages for work-related injuries. 196 Injured
both the extent of injuries and the appropriateness of costs.
employees undoubtedly were bucking the system: employers had
Part D reviews the transactional costs which are generated
been aggressively shielded from legal liability for workplace
as a result of the particular structure of workers' compen-
injuries by preindustrial notions of their duty of care; common-
sation. 190 Employer ignorance about the extent to which
law defenses which evolved in the latter part of the nineteenth
prevention may influence expenditures contributes to these
century appeared to offer an almost impregnable shield to
transaction costs. The ability to blame legislators, doctors, and
successful lawsuits. 197 But workers brought suit; judges,
lawyers (in addition to workers) for the escalation in costs
perhaps acceding to growing public pressure, allowed the cases
creates a barrier to employer self-scrutiny. Interstate variations
to be heard by juries; 198 and juries, reflecting the changing
reinforce the view that the problems lie in the legislative de-
views of the times, began to bring in verdicts that, more and
sign of the program, not with conditions within workplaces. The
more frequently, were a resounding statement that industry
end result is a "rush to the statehouse door"191 instead of an
internal safety audit.
193. BRIT HUME, DEATH AND THE MINES 4 (1971).
A. The Workers' Compensation Paradigm
194. See SOMERS & SOMERS, supra note 34, at 32. The fire occurred on March
25, 1911, the day after the New York court found the first mandatory workers' com-
1. The Rise of Workers' Compensation Programs. Suffering
pensation law to be unconstitutional in Ives V. South Buffalo Ry. Co., 201 N.Y. 271
and death from industrial work jolted the American social con-
(1911), on grounds that the workers' compensation law was "plainly revolutionary"
and amounted to an unconstitutional taking.
sciousness at the turn of the twentieth century. Spectacular
195. UPTON SINCLAIR, THE JUNGLE (1906).
industrial expansion in the latter half of the nineteenth century
196. See Friedman & Ladinsky, supra note 192, at 59-69 (noting that industrial
resulted in an explosion of work-induced disability. Real
injury litigation increased because of the larger number of injuries due to technologi-
cal change and providing an historical account of the rise of popular hostility against
financial institutions, the railroads, and corporations).
197. During the nineteenth century, workers injured at work were unlikely to
prevail when they brought suit against their employers. Their difficulties were rooted
189. Refer to notes 273-460 infra and accompanying text.
in two problems. First, proving negligence hinged upon a showing that the employer
190. Refer to notes 461-82 infra and accompanying text.
had violated its very limited duty of care to its employees. Second, plaintiffs had to
191. Telephone Interview with Anthony W. Skiff, Director, Division of Worker
overcome judicially-developed defenses of assumption of risk, the fellow servant rule,
Education, Connecticut Workers' Compensation Commission and Chairman, Safety
and contributory negligence. Workers who knew of the risks inherent in the work
Committee, International Association of Industrial Accident Boards and Commissions
before accepting employment, or whose injuries were in some part the result of their
(Feb. 15, 1993).
own or co-worker negligence, could not prevail. Professor Richard Epstein argues
192. Peak industrial injury rates were reached during the first decade of the
that the development of these defenses in fact represented an expansion of the duty
twentieth century. In the year ending June 30, 1907. 4534 railroad workers were
of care owed by employers to employees (rather than a retraction). Richard A. Ep-
killed; mine injuries resulted in the deaths of 2534 men in that same year. See
stein, The Historical Origins and the Economic Structure of Workers' Compensation
SOMERS & SOMERS, supra note 34, at 7-9. An estimated 35,000 deaths and two mil-
Law, 16 GA. L REV. 775, 776-79 (1982). In any event, the common-law defenses
lion injuries occurred each year during this period; one quarter of the injuries pro-
significantly impeded recovery by workers. See Friedman & Ladinsky, supro note
duced disabilities lasting longer than one week. The railway injury rate doubled
174, at 53.
between 1889 and 1906. See Lawrence M. Friedman & Jack Ladinsky, Social Change
198. See Edward Berkowitz & Monroe Berkowitz, The Survival of Workers' Com-
and the Law of Industrial Accidents, 67 COLUM. L. REV. 50, 60 (1987).
pensation, 68 Soc. SERV. REV. 259, 260-61 (1984).
164
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would be held culpable for the hardship of its workers. Plain-
commentators reiterated this theme. The courts presented
tiffs won awards in growing numbers; the number of cases,
the same motif:204 irrespective of any efforts at safety regula-
and of reported cases, increased substantially.200
tion, the "price of our manufacturing greatness will still have to
Industrial carnage was almost universally viewed as an
be paid in human blood and tears. #205 President Theodore
inevitable, albeit unfortunate, consequence of modern industrial
enterprise. Commissions established to study the issue,
preambles to state laws,202 and contemporaneous
203. Jeremiah Smith, Sequel to Workmen's Compensation Acts, 27 HARV. L REV.
235, 241-42 (1914).
Whence arose the movement for such revolutionary legislation? It is largely
due to the introduction, in recent times, of new methods of industry. The
use of modern agencies, especially steam and electricity, led to great chang-
es in the modes of manufacturing and transportation. Workmen are now fre.
199. See id. at 261 (stating that most injury cases turned on whether the worker
quently employed in large masses, so that the personal supervision of the
was negligent, but most juries were very hesitant to find that the employee was at
employer is no longer possible. The danger of serious harm to the workman
fault).
in some modern undertakings was at first much greater than under the old
200. During this period, exceptions developed to the traditional defenses. For
forms of industry; and it was more difficult to prove fault on the part of the
example, the duty to furnish a safe place to work, safe tools, and safe appliances
employer
The accidents are not unfrequently [sic] due to the dangers
developed as an exception to the fellow servant rule. See Friedman & Ladinsky,
inherent in the method of work; and the damaging results may be viewed
supra note 192, at 62. Employer liability laws, including the Federal Employer Lia-
as "inevitable" in the broad sense of the term.
bility Act of 1908, 35 Stat. 65 (codified as amended at 45 U.S.C. § 51 (1988)), pro-
Id; see also Honnold, supra note 202, at 264 (noting the following:
vided statutory modification to the common- law defenses as well. See SOMERS &
[A]ccidents and injuries to employes, particularly those engaged in hazardous
SOMERS, supra note 34, at 318. As a result, workers began to prevail in civil ac-
employments, or working about dangerous machinery, were inevitable. In
tions. For example, in Wisconsin, of 307 personal injury cases involving workers that
fact, it could approximately be determined in advance what would be the
were reviewed by the state supreme court in 1907, nearly two-thirds had been decid-
number of accidents in any particular employment. With each succeeding
ed in favor of the worker in the lower courts (although some of these were reversed
year, the number of these accidents increased. Breakage of the human ma-
on appeal). See Friedman & Ladinsky, supra note 192, at 61. Between 1818 and
chine was just as certain to occur as breakage of the machinery used in car-
1873, the Illinois Supreme court ruled on only 25 cases involving master-servant
rying on industries.)
law; by 1910, that number had grown, on average, to 13 cases per year. Berkowitz
(emphasis added).
& Berkowitz, supra note 198, at 261-62. In a study of industrial conditions in Pitts.
204. See Mulhall V. Nashua Mfg. Co., 115 A. 449 (N.H. 1921).
burgh between 1908 and 1913, families of workers who died in industrial accidents
These statutes have been enacted in response to public sentiments and be.
received some compensation in 216 of 304 cases. See id. at 262. In another study,
liefs, widely prevalent, that the burdens, delays, inadequate relief and un-
involving 604 fatalities before 1911 in three states, 32.5% received no compensation
equal operation of the common-law remedies as applied to industrial acci-
and 19.7% received over $500. See SOMERS & SOMERS, supra note 34, at 24. In fact,
dents rendered them unsuited to modern conditions. The evils of the com-
a study by Richard Posner showed an average award in cases in which the employ.
mon-law remedies, which were not noticeable in the days of small and scat-
be lost a limb or had an equivalent injury in 1905 of $10,138, at a time when the
tered shops, few employees, and simple tools, became intolerable in the days
average earnings were about $500 per year. See WHITE, supra note 9, at 69 (citing
of crowded factories, equipped with complicated and dangerous machinery.
Richard Poener, Theory of Negligence, 1 J. LEGAL STUD. 29 (1972)). On the other
The changes incident to this industrial development had not only largely
hand, a New York study in 1910 showed that of 48 fatality cases in Manhattan
increased the opportunities for avoidable injury, but had multiplied the dan-
which were studied, 18 families received no compensation, only four received over
gera of inevitable accidents.
$2000, and most received less than $500. See Friedman & Ladinsky, supra note 192,
Id. at 451. (emphasis added). As late as 1943, in a case arising under the 1939
at 66.
amendments to the Federal Employers' Liability Act, the U.S. Supreme Court opined:
201. For example, the Report of the House of Representatives accompanying the
Assumption of risk is a judicially created rule which was developed in re-
bill providing for the appointment of a Congressional Commission on Employers' Lia-
sponse to the general impulse of common law courts at the beginning of this
bility and Workmen's Compensation noted: "One of the most pressing problems of
period to insulate the employer as much as possible from bearing the "hu-
interstate commerce that today demands the attention of congress is that of wisely
man overhead" which is an inevitable part of the cost-to someone-of the
and equitable (sic] adjusting the loss to workmen of life and earning power which is
doing of industrialized business. The general purpose behind this develop-
the certain and inevitable consequence of modern methods of transportation." REPORT
ment in the common law seems to have been to give maximum freedom to
OF THE WEST VIRGINIA EMPLOYERS' LIABILITY LABORERS COMPENSATION COMMISSION,
expanding industry. The assumption of risk doctrine for example was attrib-
PART I: LIABILITY AND COMPENSATION LAWS 255-56 (1911) [hereinafter WEST VIRGIN-
uted by this Court to "a rule of public policy, inasmuch as an opposite doc-
LA REPORT).
trine would not only subject employers to unreasonable and often ruinous
202. The Washington statute, for example, stated: "Injuries in such works, for-
responsibilities, thereby embarrassing all branches of business," but would
merly occasional, have become frequent and inevitable." See Arthur B. Honnold, The
also encourage carelessness on the part of the employee.
ory of Workmen's Compensation, 3 CORNELL L.Q. 264, 266 (1918). Similarly, the
Tiller V. Atlantic Coast Line R.R. Co., 318 U.S. 54, 58-59 (1943) (citations omit-
Maryland statute stated: "Whereas, the common law system governing the remedy of
ted).
workmen against employers for injuries received in extra hazardous work is inconsis-
205. Borgnis V. Falk Co., 133 N.W. 209, 215 (Wis. 1911). This was the first case
tent with modern industrial conditions, and injuries in such work, formerly occasion-
to hold a state workers' compensation statute constitutional. The full quote from
al, have now become frequent and inevitable." Id. at 267.
Borgnis is instructive:
166
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Roosevelt joined the call for reform, noting in 1907:
employees in an attempt to avoid other liability. 208 Both the
[I]t is neither just, expedient, nor humane; it is revolting to
size and the unpredictability of jury awards in lawsuits brought
judgment and sentiment alike that the financial burden of
by injured workers, and the apparent trend toward ever-
accidents occurring because of the necessary exigencies of their
expanding liability, made employers and their organizations
daily occupation should be thrust upon those sufferers who
uncomfortable with the status quo;²⁰⁹ the leadership of the
were least able to bear it. 206
National Association of Manufacturers called insistently for a
The primary concern was the destitution and poverty caused by
compensation system for injured workers. 210
the injuries and, ultimately, who should pay the resulting costs.
At the same time, workers and their families were facing
Some European countries, following Germany's lead,
injury, death, and economic destitution. Economic recovery
established social welfare programs to address the developing
through litigation was equally uncertain for them and often
demands of displaced and disabled workers during the
failed to provide adequate compensation for the loss of the
nineteenth century. 207 The United States, in contrast, did not
primary breadwinner for the family. 211 The visible presence of
develop any national social welfare agenda before the turn of
large numbers of people who were displaced from work due to
the century. Nevertheless, public opinion galvanized around this
injuries-not due to lack of desire to work-called attention to
issue. Industrialists were faced with a rising level of
the magnitude of the problem.
uncertainty and potential liability for injuries. Employers
The perceived inevitability of significant harm and the
occasionally even offered "lifetime" contracts to injured
uncertainty regarding the distribution of its attendant costs
underlay the political consensus which emerged to support the
workers' compensation bills which were introduced in state
after state. 212 The political movement for a social insurance
It is matter of common knowledge that this law forms the legislative re-
sponse to an emphatic, if not a peremptory, public demand. It was admitted
208. See, e.g., Rhoades V. Chesapeake & Ohio Ry. Co., 39 S.E. 209 (W. Va. 1901)
by lawyers, as well as laymen, that the personal injury action brought by
(following the amputation of the plaintiff's leg as a result of an industrial injury, he
the employe against his employer to recover damages for injuries sustained
threatened to sue the employer for negligence but released his claim in return for a
by reason of the negligence of the employer had wholly failed to meet or
promise of continued employment; this lawsuit was brought in response to his subse-
remedy a great economic and social problem which modern industrialism has
quent termination). This case was recently cited in Williamson V. Sharvest Mfg. Co.,
forced upon us, namely, the problem of who shall make pecuniary recom-
415 S.E.2d 271, 275 n.4 (W. Va. 1992) as an example of sufficient consideration for
pense for the toll of suffering and death which that industrialism levies and
a lifetime employment contract.
must continue to levy upon the civilized world. This problem is distinctly a
209. See Berkowitz & Berkowitz, supra note 198, at 262 (observing that "the laws
modern problem. In the days of manual labor, the small shop, with few
can be seen as the means by which employers protected themselves against an im-
employes, and the stagecoach, there was no such problem, or, if there was,
pulsive and hostile legal system").
it was almost negligible. Accidents there were in those days, and distressing
210. Representatives and officers of the National Association of Manufacturers
ones; but they were relatively few, and the employe who exercised any rea-
(NAM) publicly called for the creation of a compensation system which would provide
sonable degree of care was comparatively secure from injury. There was no
payment to injured workers on a no-fault insured basis. John Kirby, President of
army of injured and dying, with constantly swelling ranks marching with
NAM at that time, called for creation of a system "that will eventually distribute
halting step and dimming eyes to the great hereafter. This is what we have
the burden over the community and which will insure the employer immunity from
with us now, thanks to the wonderful material progress of our age, and this
liability other than the payment into a fund, properly controlled, of a predetermined
is what we shall have with us for many a day to come. Legislate as we
per capita sum upon the workmen in his employ." WEST VIRGINIA REPORT. supra
may in the line of stringent requirements for safety devices or the abolition
note 201, at 258. A committee of the National Association of Manufacturers polled
of employers' common-law defenses, the army of the injured will still in-
25,000 manufacturers to learn their attitude toward compensation; of those who re-
crease, and the price of our manufacturing greatness will still have to be
plied, more than 95% were favorable. See DOMENICO GAGLIARDO, AMERICAN SOCIAL
paid in human blood and tears. To speak of the common-law personal injury
INSURANCE 395 (1949).
action as a remedy for this problem is to jest with serious subjects, to give
211. Although some verdicts were large, many cases settled for very limited
a stone to one who asks for bread. The terrible economic waste, the over-
amounts and large numbers of workers received nothing at all. Refer to note 197
whelming temptation to the commission of perjury, and the relatively small
supra.
proportion of the sums recovered which comes to the injured parties in such
212. See MONROE BERKOWITZ, WORKMEN'S COMPENSATION: THE NEW JERSEY Ex-
actions, condemn them as wholly inadequate to meet the difficulty.
PERIENCE 5 (1960). Berkowitz notes that workers' compensation legislation was de-
Id. at 215.
signed to reduce the uncertainty surrounding recovery amounts and to provide a no-
206. Friedman & Ladinsky, supra note 192, at 68 n.69 (emphasis added).
fault social insurance program. stating, "(s)uch a drastic change can be rationalized
207. Paul R. Gurtler, Note, The Workers' Compensation Principle: A Historical Ab-
only in terms of social welfare principles. Industrial injuries are conceived of as the
stract of the Nature of Workers' Compensation, 9 HAMLINE J. PUB. LAW & POL 285,
inevitable by-product of modern industry." Id: see also Friedman & Ladinsky, supra
288-93 (1989).
note 192, at 65-70 (discussing the economic impact on industry from the unpredict-
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168
system, ultimately supported by progressives, trade unions, and
by injured employees, was (and continues to be)
employer organizations,²¹³ focused on the need to provide
remarkable.216 Whether the risk was inevitable or preventable
certainty both to employers and workers. Workers' compensa-
at little cost, employers were shielded by the exclusivity pro-
tion was thus born out of an historic compromise in which
visions in these laws from any action for damages by employees
workers relinquished their right to sue their employers in
or any on-going obligation to the workers after they were
exchange for guaranteed (but limited) cash benefits from a no-
injured. Immunity provided under the workers' compensation
fault system. Despite the lack of federal guidance in the
compromise allowed employers full rein to be negligent or even
development of social insurance models, most states passed
reckless in their approach to safety; injuries were, after all, an
legislation between 1910 and 1920 mandating employer-
financed insurance to provide workers' compensation benefits,
replacing common law negligence actions and employer liability
statutes. All of these state statutes focused on the need to provide
216. The exclusivity doctrine has protected employers even in extreme cases in.
certainty for both workers and employers in a world in which
volving reckless and wanton disregard for workers' lives. See, e.g., Brigga V. Pymm
injuries or death were an expected part of the industrial
Thermometer Corp., 537 N.Y.S.2d 553, 556 (N.Y. App. Div. 1989). This case was a
landscape. The compromise system which emerged provided this
suit by employees against the employer to recover for injuries caused by excessive
exposure to mercury. Id. at 554. The employer had previously been convicted of as-
certainty. Workers' compensation was intended to be a self-
sault. Id. at 566. Plaintiffs charged that the employer had concealed a clandeatine
contained system for dealing with the social, economic, and
mercury recovery operation from OSHA inspectors and exposed workers to deadly
levels of mercury, resulting in significant injuries and that the employer knew of the
legal problems associated with workplace injuries.
danger and knew that workers, if they had understood the danger, would have re-
fused to continue working. Id. He did not explicitly intend to cause the death, how-
2. The No-Fault System as a Shield to Employer
ever. He was therefore protected by the exclusivity provisions of the New York com-
Responsibility. The availability of workers' compensation
pensation law. Id. For background on the Pymm case, see People V. Pymm, 563
benefits effectively discharged any further obligation that an
N.E.2d 1, 2 (N.Y. 1990) (upholding state conviction of Pymm for assault in the first
and second degree and rejecting employer's argument that remedies under OSHA are
employer had to an injured worker. Four legal doctrines
exclusive and preempt state's ability to act under state's criminal code), cert. denied,
combined to shield employers from any additional liability.
498 U.S. 1085 (1991).
First, the workers' compensation remedy was explicitly made
Workers' compensation exclusivity has even been extended by a few courts (al-
beit a minority) to immunize employers from lawsuits involving statutorily created
exclusive. 216 The breadth of this exclusivity, and therefore the
employee rights, including state law claims of illegal discrimination on the basis of
resulting employer immunity from common law actions brought
disability or handicap. See, e.g., Karst V. F.C. Hayer Co., 447 N.W.2d 180, 186
(Minn. 1989) (following the reasoning of the Schachtner court that the Workers'
Compensation Act barred the disability discrimination claim because the act provided
a remedy for an employer's refusal to rehire); Norris V. Wisconsin, Dep't of Indus.,
Labor & Human Relations, 455 N.W.2d 665, 667 (Wis. Ct. App. 1990) (stating that
the Workers' Compensation Act provides the exclusive remedy for an employer's
able costs of industrial accidents and suggesting that the existing tort system even-
refusal to rehire because a job-related injury creates a perceived disability);
tually represented a net economic loss to the industrial establishment, prompting
Schachtner V. Dep't of Indus., Labor & Human Relations, 422 N.W.2d 906, 909-10
industry to play a positive role in shaping new workmen's compensation law).
(Wis. Ct. App. 1988) (ressoning workers' compensation is designed to provide the
tion movement eventually gained the support of the American Association for Labor
213. See GAGLIARDO, supra note 210. at 395 (stating that the workers' compensa.
exclusive remedy for job-related injuries); see also Deborah A. Ballam, The Workers'
Compensation Exclusivity Doctrine: A Threat to Workers' Rights Under State Employ-
Legislation, the National Civic Federation, the National Association of Manufacturers,
ment Discrimination Statutes, 27 AM. Bus. LJ. 95, 102 (1989) (characterizing the
the American Bar Association and the American Federation of Labor).
exclusivity doctrine as the "sacred cow" of workers' compensation). After a brief peri-
ed in which the exclusivity dam developed chinks, Professor Larson declared that
214. See Friedman & Ladinsky, supra note 174, at 70.
215. Professor Larson argues that there are "two central purposes to exclusive- in
the assault on employer immunity had failed. Arthur Larson, Tensions of the Next
first, to maintain the balance of secrifices between employer and employee litiga-
Decade, in NEW PERSPECTIVES IN WORKERS' COMPENSATION supra note 18, at 23
ness: substitution of no-fault liability for tort liability, and second, to minimize 13-
(concluding that "the doctrine of exclusiveness is in better health today than it was
the litigation of undoubted merit." 2A LARSON, supra note 65, 5 68.15, be shield- at
a few years ago"). Thus, the exclusivity doctrine remains part of the bedrock founda-
tion, 65. Employers even not covered by workers' compensation would not, of course, 482 (W.
tion of the workers' compensation political compromise, despite occasional court deci-
ed from tort liability. See, e.g., Jones V. Rinehart & Dennis Co., 168 S.E. for
sions which have appeared to weaken this doctrine. See generally David B. Harrison,
1933) (holding that the failure of workers' compensation to provide benefits could
Annotation, What Conduct is Willful, Intentional, or Deliberate Within Workmen's
Va. silicosis meant that victime of the notorious Hawks Nest Tunnel disaster 2A
Compensation Act Provision Authorizing Tort Action for Such Conduct, 96 A.L.R.3D
acute bring civil actions). For a general discussion of the exclusivity doctrine, see
1064 (1979) (summarizing the status of laws in various states); refer to note 247
infra.
LARSON, supra note 65, $ 65.
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inevitable component of the new technological age.21 The
this arena that liability insurance first became
compensation laws provided employers with two critical
commonplace. 221 Insurance solved a critical element of the
components of legal armor: they exempted enterprises from
workers' compensation puzzle by spreading costs and protecting
liability for the exercise of their continued complete managerial
individual employers from excessive losses. It thereby made the
control over safety risks and guaranteed a predictable, and for
cost of industrial injuries more predictable and allowed employ-
many years quite low, level of cost. 218
ers to pass these costs directly to consumers in the pricing of
Second, benefits were paid to injured workers whether or
products; 222 thus emerged the frequently quoted slogan, "the
not the employer was at fault. 219 While expanding the num-
cost of the product should bear the blood of the workman."223
ber of employees to whom benefits would be due, this no-fault
The later development of liability insurance for most fault-
principle also served to shield employers from any legal
based torts was often viewed unfavorably by many commen-
obligation to eliminate workplace hazards²²⁰ and from any
tators. To the extent that the tort system was expected to
psychological sense of fault. The view that these compensated
provide deterrence as well as compensation, insurance was
injuries were an inevitable consequence of industrialization
initially viewed as allowing "antisocial conduct and a relaxation
combined with the no-fault nature of the system to absolve em-
of vigilance toward the rights of others, by relieving the actual
ployers from blame.
wrongdoer of liability. *225
Third, the new programs were specifically designed to allow
In the workers' compensation paradigm, however, liability
employers to insure the risk of workplace injuries. The
insurance made perfect sense. Since employers were to bear the
combination of the enormous, growing, and apparently
costs without having committed any legal wrong, the natural
inevitable numbers of injuries and the declining protection from
liability for employers led to the development of a
comprehensive system of liability insurance in order to manage
221. W. PAGE KEETON ET AL., PROSSER AND KEETON ON THE LAW OF TORTS $ 82,
the costs associated with workplace injuries; it was, in fact, in
at 585 (5th ed. 1984). Liability insurance "developed first as a means of protecting
employers against the increased litigation and liability resulting from employers'
liability and workmen's compensation acts. As the experience with this proved satis-
factory, new demands were made for protection against other risks." Id. In fact,
most employers were insured for liability for workers' injuries by private casualty
217. This did not substantially change until federal regulation of occupational
companies before the passage of workers' compensation laws. REEDE, supra note 34,
safety and health expanded significantly after 1970. More recently, several states
at 233.
have experimented with an expansion of criminal prosecution in cases involving
222. One of the early advocates for workers' compensation in Massachusetts, Wil-
gross employer diaregard for worker safety. See People V. Chicago Magnet Wire
liam W. Kennard, Chairman of the Commonwealth of Massachusetts Industrial Ac.
Corp., 534 N.E.2d 962, 968 (III. 1989) (stating that conduct identical to that subject
cident Board, said in 1918 that "the Workmen's Compensation Act is not a regula-
to federal regulation can also be regulated by state criminal law), cert. denied, 493
tion of any substantive duty; it is exclusively an economic readjustment of the bur-
U.S. 809 (1989); Pymm, 563 N.E.2d at 6 (stating that workers' compensation does
dens of industrial accident from the shoulders of the employees to the shoulders of
not preempt state criminal laws or federal occupation and health standards, in the
the consuming public." Beckwith, supro note 7. at 72.73 n.63 (quoting a Letter to
workplace).
Governor Samuel McCall, published in REPORT OF THE SPECIAL RECESS COMMITTEE
218. Refer to notes 30-33 supra and accompanying text.
ON WORKMEN'S COMPENSATION, Massachusetts General Court, Boston, Feb. 1919, at
219. "[1]t must be remembered once again that this is a no-fault system as to
23).
both employer and employee. Unjust' results, by conventional standards, are com-
223. KEETON ET AL., supra note 221, § 80, at 573 (quoting a campaign alogan
monplace." 2A LARSON, supra note 65, $ 68.15(e), at 13-108.
attributed to Lloyd George). Prosser and Keeton note:
220. It has been a frequent criticism of no fault systems that the removal of
The human accident losses of modern industry are to be treated as a cost of
fault based liability determinations avoids any possibility of effective deterrence. See,
production, like the breakage of tools or machinery. The financial burden is
e.g., Thomas A. Ford, The Fault with "No Fault". 61 A.B.A. J. 1071, 1072 (1975)
lifted from the shoulders of the employee, and placed upon the employer,
(stating that the no fault system undermines responsibility and does not compel
who is expected to add it to his costs, and so transfer it to the consumer.
businesses and industries to review their standards, methods, and practices);
In this be is aided and controlled by a system of compulsory liability insur-
Elisabeth M. Landes, Insurance, Liability, and Accidents: A Theoretical and Empiri-
ance, which equalizes the burden over the entire industry. Through such
cal Investigation of the Effect of No-Fault Accidents, 25 J.L. & ECON. 49, 49-50
insurance both the master and the servant are protected at the expense of
(1982) (explaining that removing liability for damages to others permits malfeasors
the ultimate consumer.
to shift some of the costs to potential victims. thereby limiting deterrence). Although
Id. at 554-55.
the level of the actual payroll tax or premium paid by an employer does vary
224. See id. § 82, at 585 (stating that "[l]iability insurance was attacked as a
somewhat as a result of increased claims experience, this variation is often suffi-
form of maintenance, by which professional litigants were provided to replace the
ciently attenuated and so obscured by ignorance that it tends to shield employers
true defendants").
from a strong financial incentive to remove hazards. For a discussion of this issue,
225. Id. As Prosser and Keeton note, this system led to observations by
refer to part III.B infra.
tortfeasors such as: "Don't worry, I carry insurance." Id. at 586.
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172
solution was to distribute the costs in a manner which would
third party beneficiaries of a social aid contract, not as
best incorporate those costs into the price of the products 226
recipients of make-whole relief arising from a legal wrong.
Thus, consumers were ultimately to pay for the costs of
Moreover, modern notions of adequacy, which assume that
workplace injuries. Since the imposition of costs on employers
wage replacement should approximate pre-injury income, 231
was a product of social policy, not blame due to wrong-doing,
were not prevalent at the time these laws were passed. The
the intent was that cost ultimately would be spread, not fully
laws provided really limited, 232 but theoretically certain, 233
internalized. To the extent internalization of costs was achieved
compensation to workers for some but by no means all of their
at all, it was dependent upon insurance pricing decisions which
industrial risk. Workers either returned to work quickly or
were made by insurance carriers, primarily to maintain price
were "paid off" and displaced from employment.
equity.2
Fourth, employers retained full managerial control over
3. Workers' Compensation Laws and the Movement for
internal enterprise decisions. Workers' compensation legislation
Industrial Safety. Despite the persistent rhetoric of inevitability
was not, and was not intended to be, a substantive legal
which surrounded the development of workers' compensation
intervention into the employment relationship. 228 At the time
remedies, there was nevertheless a contemporaneous growth of
workers' compensation legislation was passed, employers owed
advocacy for industrial safety, which recognized that at least
no general duty to employees to provide safe work or to
many deaths and injuries could, and should, be prevented;23
accommodate workers who were absent or disabled as a result
this view unquestionably provided a counterweight to notions of
of occupational injury. An employer's duty was thus clearly
inevitability of risk. Apparently enlightened industrialists
circumscribed: the obligation was to buy insurance to make
combined with others to form the National Safety Council in
provision for the workers who were rendered destitute by inevi-
1912 and began to campaign for voluntary workplace-based
table "accidents' at work. From their inception, workers'
changes. 235 This voluntary safety movement, assisted by
compensation laws were designed to be a carefully cir-
technological developments which changed workplace processes,
cumscribed system to provide benefits, not safe jobs, to workers
claimed responsibility for significant reductions in occupational
who were injured as a result of exposure to occupational
injuries over the ensuing decades. 236
hazards. Deborah Stone notes that the development of workers'
compensation, "however fortunate for the injured worker in the
short run, was also symbolically and politically a denial =230 of
231. See, e.g., COMMISSION REPORT, supra note 32, at 56 (recommending that
responsibility of employers to prevent occupational injury.
workers' weekly benefits be at least 80% of their spendable weekly pre-injury earn-
The compensation levels provided to cushion this
ings).
232. Refer to note 32 supra.
destitution were intentionally minimal. Workers' compensation
233. Substantial questions about the efficiency and certainty of the system grew
was a cash transfer program designed to help the obviously
over time, however. See COMMISSION REPORT, supra note 32, at 99-110.
destitute. Victims of no-fault based harm were really seen as
234. SOMERS & SOMERS, supra note 34, at 198-210. The authors cite 1907-1912
as the birthdate of the modern safety movement. Around this time, employers began
to acknowledge that, although legally an injury may not have been their fault, they
could have prevented it. Id.
226. See id. § 80, at 573 (stating that "human accident losses" were just part of
235. Id. at 201-02. Of course, the rising concern about safety, and the growing
threat of substantive workplace regulation, may have contributed to the eagerness
the cost of doing business).
227. For a full discussion of the distribution of costs and pricing mechanisms
with which industrialists sought to promote voluntary improvements.
236. One frequently cited example of this is the experience of U.S. Steel, which
within workers' compensation, refer to part II.B infra.
228. The nature of the general duty owed by the employer to the employee is
invested $5 million in equipment and worker education. saw its injury rate fall 40%,
and reduced its injury-related costs by 35%. BERMAN, supra note 9, at 77; see also
discussed in part III.C infra.
229. The word "accidents" appears in quotation marks because injury
SOMERS & SOMERS, supra note 34, at 202 (describing the general success of the
epidemiologists believe that the environmental causes of adverse events can be iden-
safety movement in its early years). Some commentators attribute the decline in
tified and removed, much as immunizations can prevent childhood illnesses. Gordon
fatalities to the development of the workers' compensation system during this period.
S. Smith, Injuries as a Preventable Disease: The Control of Occupational Injuries
Cf. Robert C. Ellickson, Bringing Culture and Human Frailty to Rational Actors: A
from the Medical and Public Health Perspective, 30 ERGONOMICS 213, 213 (1987)
Critique of Classical Law and Economics, 65 CHI.-KENT L. REV. 23, 42 (1989) (citing
(comparing passive protective devices, such as airbags, to immunizations). Injuries
one empirical study which draws this connection). The empirical evidence is limited,
and fatalities therefore do not have the completely random character which "acci-
however, to the contemporaneous occurrence of reductions in fatalities and institution
of workers' compensation. Therefore, the conclusion that workers' compensation was
dent" implies. Id.
230. DEBORAH A. STONE, THE DISABLED STATE 191 (1984).
the cause of this decline may be fallacious.
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Despite the early voluntary discussions of safety and
people who were viewed as in particular need of protection
removal of hazards in the workplace, attempts to require safety
(primarily women and children). These were exceptions,
improvements through direct legal intervention into the
however, to the general rule which resisted any serious legal
employment relationship were consistently challenged by
intrusion into the at-will employment relationship. Until the
industry and thrown out by the courts. Not only were state
New Deal, the courts considered substantive legal regulation of
laws which created the new workers' compensation systems
the employment to be a presumptively invalid intrusion into a
initially struck down, 237 but laws which were designed to
private contractual relationship. It was not until the Supreme
promote general safety in industrial workplaces were held to be
Court, confronted with massive misery and economic turmoil,
unconstitutional. 238 Thus, the judiciary, which had consis-
upheld New Deal legislation that such intervention became con-
tently protected the employment-at-will doctrine after its
stitutionally acceptable. 242 This did not, of course, put an end
development in the late nineteenth century, continued to
to employer challenges to workplace safety regulation. 243
support industrial attempts to protect managerial prerogative in
Although direct regulation was met with resistance from
the early twentieth century. In limited decisions, the courts
employers, the safety movement did imbue the early compensa-
endorsed the exercise of traditional state police powers in the
tion movement with the rhetoric of safety. A majority of the in-
arena of public safety,230 for regulation of extremely
vestigating commissions established by states as a prelude to
hazardous work,240 and for oversight of working conditions of
the drafting of workers' compensation statutes concluded that a
primary result of the laws would be a reduction in injury
frequency and severity. 244 Nearly every monograph and
treatise that has been written on workers' compensation has
237. See, e.g., Ives V. South Buffalo Ry. Co., 94 N.E. 431, 448 (N.Y. 1911)
included what appears to be an obligatory chapter or section
(holding the New York law on workers' compensation unconstitutional); Cunningham
V. Northwestern Improvement Co., 44 Mont 180 (1911) (invalidating the 1909
dedicated to prevention. 245 The substantive provisions of most
miners' compensation act); Franklin V. United Rys. & Elec. Co., 2 Baltimore City
of the workers' compensation statutes, however, made little or
Rep. 309 (1904). After the decision in Ives, seven states amended their constitutions
no explicit provision for safety incentives or for employer
to specifically authorize compensation legislation. SOMERS & SOMERS, supra note 31,
at 32. Nine states circumvented the Ives decision by adopting non-compulsory laws
which permitted employers to elect coverage or forfeit common-law defenses. Id.
Compulsory laws did, however, receive judicial endorsement in 1917 from the U.S.
Supreme Court. See New York Central R.R. V. White, 243 U.S. 188 (1917) (uphold-
241. See, e.g., Muller V. Oregon, 208 U.S. 412, 416 (1908) (upholding a statute
ing New York's new compulsory law and noting: "In excluding the question of fault
that was designed to protect the health, safety, and welfare of female employees).
as a cause of the injury, the act in effect diaregards the proximate cause and looks
But cf. Adkins, 261 U.S. at 554 (rejecting a minimum wage law for women and chil-
to one more remote-the primary cause, as it may be deemed-and that is, the em-
dren enacted by Congress to regulate employment in the District of Columbia; the
ployment itself."); Hawkins V. Bleakley, 243 U.S. 210, 212-13 (1917) (upholding
Court noted that the law, in protecting women, was protecting those "who are le-
Iowa's elective law); Mountain Timber Co. V. Washington, 243 U.S. 219, 239 (1917)
gally as capable of contracting for themselves as men").
(upholding Washington's exclusive state insurance fund).
242. NLRB V. Jones & Laughlin Steel Corp., 301 U.S. 1, 30 (1937) (upholding the
238. See, e.g., Lochner V. New York, 198 U.S. 45, 61 (1905) (holding a maximum
constitutionality of the National Labor Relations Act); West Coast Hotel Co. V.
hour law for bakers, designed to promote safety in bakeries, unconstitutional "as an
Parrish, 300 U.S. 379, 400 (1937) (upholding the constitutionality of Washington
illegal interference with the rights of individuals, both employers and employees, to
statute setting minimum wage for women). This has been described, quite appropri-
make contracts regarding labor upon such terms as they may think best").
ately, as "a watershed constitutional event." Fran Analey, Standing Rusty and Roll-
239. The initial narrowly drawn occupational safety legislation does not appear to
ing Empty: Law. Poverty, and America's Eroding Industrial Base. 81 GEO. LJ. 1757,
have been challenged in the courts with the same vigor as the wage and hour laws.
1787 (1993).
See SOMERS & SOMERS, supra note 34, at 200 (stating that constitutionality of nar-
243. See, e.g., Industrial Union Dep't, AFL-CIO V. American Petroleum Inst. 448
row safety laws was not seriously challenged, unlike other labor legislation). These
U.S. 607, 630-52 (1980) (invalidating the benzene standard in a case brought by the
specific laws were "detailed, inflexible, and rapidly obsolete." Id. Industry feared that
petroleum industry); American Textile Mfrs. Inst. V. Donovan. 452 U.S. 490, 541
more general statutes would give too much discretion to individual factory inspec-
(1981) (rejecting a challenge, in which industry argued that the cotton dust standard
tors; they therefore successfully opposed them. Id. When challenged. the narrowly
should be replaced with less stringent environmental standards and mandated use of
drawn laws appear to have frequently been upheld by the courts. See Adkins V.
respirators); Marshall V. Barlow's Inc., 436 U.S. 307, 311-25 (1978) (restricting
Children's Hosp., 261 U.S. 525, 669 (1923) (Holmes, J., dissenting) (listing a series of
OSHA's right to perform non-consensual searches or inspections in the absence of a
cases in which the Supreme Court had upheld limited intervention in private con-
search warrant). See generally ROTHSTEIN, supra note 10 (discussing cases in which
tractual relations). The specific safety legislation of the nineteenth century was, in
employers challenged workplace safety regulation).
fact, largely "cosmetic." ROTHSTEIN, supra note 10, at 2.
244. REEDE, supra note 34, at 321.
240. See, e.g., Holden V. Hardy, 169 U.S. 366, 398 (1898) (refusing to invalidate
245. See, e.g., id. at 321-76 (discussing the safety movement and its prevention of
law governing hours of work in mines, smelters, and refineries on public safety
injuries); SOMERS & SOMERS, supra note 34. at 197-235 (discussing prevention of
injuries).
grounds).
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penalties for perpetuation of unnecessarily hazardous work. 246
The compensation laws which did provide some increased
liability for employer misconduct were of two types. Some
tions from the employee and the employee's doctor); Millison V. E.I. duPont de
Nemours & Co., 501 A.2d 505, 516-17 (N.J. 1985) (holding actionable allegations that
states simply exempted intentional torts from the exclusivity
defendants fraudulently concealed knowledge of already contracted diseases); Martin
provisions of the law. In general, these provisions were strictly
V. Lancaster Battery Co., 606 A.2d 444, 447-48 (Pa. 1992) (holding that the
construed; their application was limited to situations in which
employer's fraudulent misrepresentation resulting in a delay which aggravated a
work related injury did not fall within the exclusivity provision); see also Gary T.
the worker could prove that the employer intended, not simply
Schwartz, The Beginning and the Possible End of the Rise of Modern American Tort
the existence of the hazardous conditions, but the occurrence of
Law, 26 GA. L. REV. 601, 679 (1992) (discussing some of the implications of these
the injury itself.247 Other states, instead of removing
cases). See generally Harrison, Annotation, supra note 216 (providing a comprehen-
sive review of intentional tort cases involving occupational injuries).
For a brief period, as a result of these state explorations with loopholes to the
exclusivity bar, it appeared that the exclusivity doctrine was being eroded by the
246. Several states did, however, give the agency established to administer the
expansion of the intentional injury exceptions. This trend in judicial decisions
workers' compensation system the additional responsibility of developing safety rules
seemed to be largely motivated by concerns that wanton disregard of workplace safe-
and regulations. REEDE, supra note 34, at 322-23. Yet even when this occurred, this
ty should not be protected by the mantle of immunity bestowed by workers' compen-
authority carried little real weight.
sation.
247. Workers' compensation statutes explicitly provide for a common-law right to
In the first three states in which the courts reinterpreted the statutes, the
sue for intentional injury committed by employers in Kentucky, Oregon, Washington,
state legislatures moved rather quickly to close this potential hole in employer im-
and West Virginia; for wilful misconduct in Arizona; and for a wilful act or gross
munity. In Ohio, the expansion of the common-law remedy was limited to situations
negligence resulting in death in Texas. 2A LARSON, supra note 65, § 69.10, at 13.
in which the employer acts with deliberate intent to cause an injury, and damages
334 to 13-335. In addition, a few states have judicially developed limited exceptions
were capped at $1,000,000. OHIO REV. CODE ANN. § 4121.80 (Anderson 1991). This
to exclusivity based upon findings that an injury was the result of intentional con-
legislative response was held to be unconstitutional under state law. Brady V. Safe-
duct, rather than an "accident" and, therefore, did not fall within the exclusive
ty-Kleen Corp., 576 N.E.2d 722, 730 (Ohio 1991). The current law in Ohio retains a
ambit of workers' compensation. See, e.g., Blankenship V. Cincinnati Milacron
common-law remedy for workers who can show that their injuries were substantially
Chems., Inc., 433 N.E.2d 572, 576 (Ohio) (finding that injuries received as the result
certain to occur. See, e.g., Jones, 472 N.E.2d at 1052.
of intentional acts do not arise in the course of employment, and therefore exclusivi-
In West Virginia, the legislature adopted a statutory definition of intentional
ty does not apply), cert. denied, 459 U.S. 857 (1982).
injuries which allowed employees to pursue common-law remedies when they could
Nevertheless, the exclusivity doctrine has remained strong. Refer to note 216
prove that the employer maintained excessively dangerous conditions that the em-
supra. Until recently, even those states which allowed common-law actions for in-
ployer knew to be dangerous and which violated safety and health standards or
tentional injuries limited the applicability of this exception to situations in which the
standard business practice. W. VA. CODE § 23-4-2(c)(2) (Supp. 1993). Although it was
worker could prove that the employer intended the specific injury to be the outcome;
the stated purpose of the legislature to reinforce the exclusive nature of the workers'
these suits were therefore generally limited to physical assaults by employers on
compensation remedy. this statute appears to have codified the West Virginia court's
employees. 2A LARSON, supra note 65, § 69.22, at 13-343 to 13-349. Thus, workers
adoption of a reckless and wanton standard for intentional injuries which the court
could not pierce an employer's common-law immunity in situations involving aggra.
had articulated in Mandolidis. 246 S.E.2d at 914. At the same time, the statute lim-
vated negligence, breach of safety regulations, or failure to correct a hazard after
ited the availability of punitive damages to actions involving the older, more restric-
several injuries had occurred. Id. The commitment to safety, which appeared to have
tive, intentional torts in which the employer intended the specific injury to result.
been embodied in the original legislative provisions allowing for common-law suits in
See W. VA. CODE §§ 23-4-2(b), 23-4-2(c)(2)(ii)(A) (Supp. 1993). Subsequent judicial
limited circumstances, was not evident in the subsequent interpretations of these
opinions interpreting this statute have permitted injured workers to prevail when
provisions. See id.
employers have allowed known dangerous conditions to persist, resulting in a
More recently, however, some state courts have carved out exceptions to the
worker's injury. See, e.g., Mayles V. Shoney's, Inc., 405 S.E.2d 15, 27-28 (W. Va.
exclusivity rule in order to allow workers to sue their employers in extreme situa-
1990) (holding that the employer acted with deliberate intention in causing the
tions in which there appears to be disregard for fundamental safety principles. Id. at
employee's injuries and was subject to liability).
13-353 to 13-362. These cases have relied on one of two theories. First, the statutory
In Michigan, after the decision in Beauchamp, 398 N.W.2d at 882. the legis-
provision allowing workers to sue for intentional injuries is interpreted to allow com-
lature adopted language restricting common-law actions to situations in which the
mon-law actions in situations involving conduct that meets a higher standard than
employer had actual knowledge that an injury was certain to occur and willfully
mere negligence but which is less restrictive than the earlier interpretation of inten-
disregarded that knowledge. MICH. COMP. LAWS $ 418.131(1) (Supp. 1993). The chal-
tional harm. See, e.g., Beauchamp V. Dow Chem. Co., 398 N.W.2d 882, 893 (Mich.
lenges to this statute have been unsuccessful. See Smith V. Mirror Lite Co., 492
1986) (holding that the exclusivity provision does not apply if the employer knew
N.W.2d 744, 745-47 (Mich. Ct. App. 1992) (applying the Michigan statute); Pawlak V.
that the injury was substantially certain to occur and intended the act which caused
Redox Corp., 453 N.W.2d 304, 308 (Mich. Ct. App. 1990) (analyzing the action under
the injury); Jones V. VIP Dev. Co., 472 N.E.2d 1046, 1055 (Ohio 1984) (holding that
the exception to exclusivity in the Michigan statute but holding that the employee
an act committed with the knowledge that an injury was substantially certain to
could not recover because he had failed to prove intent).
occur results in liability); Mandolidis V. Elkins Indus., 246 S.E.2d 907, 914 (W. Va.
The current status of these judicial re-interpretations of intentional injury is
1978) (holding that reckless and wanton misconduct results in liability).
as follows. When the employer knows that hazardous conditions existed and were
Second, injured workers have prevailed when their injuries were aggravated
substantially certain to result in workplace injuries, at least four states (Louisiana,
by the employer's fraudulent failure to disclose known safety risks. See, e.g., Johns-
North Carolina, Ohio, and South Dakota) allow injured workers to circumvent the
Manville Prod. Corp. V. Contra Costa Superior Ct, 612 P.2d 948, 956 (Cal. 1980)
exclusivity provision of the state statute. See Bazley V. Tortorich, 397 So. 2d 475,
(holding that the employer was liable for fraudulently concealing hazardous condi-
482 (La. 1981) (stating that the exclusive remedy rule is inapplicable to situations in
178
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intentional torts entirely from the exclusivity bar, provided for
directed specifically at safety practices appear to have been uti-
increased benefits as a penalty for employer misconduct. These
lized infrequently. 250 In any event, the penalties themselves
penalties were imposed in such circumstances as when an
were (and are) small enough to have no impact on the direct
employer employed a minor below legal working age248 or, in
cost to most insured employers.
a few states, when the employer was guilty of reckless and
wanton or intentional misconduct, particularly if this conduct
4. The Workers' Compensation Paradigm Today. Workers'
violated accepted safety practices or rules.24 The penalties
compensation laws today retain the same fundamental
structure as they had when first enacted. Eligibility criteria
and adequacy of benefits have expanded without changing the
basic no-fault paradigm. Historically, attempts to alter this
which the employers believe the results of their actions to be substantially certain to
occur); Woodson V. Rowland, 407 S.E.2d 222, 228 (N.C. 1991) (stating that when an
paradigm by providing return-to-work and rehabilitation
employer engages in misconduct knowing it is substantially certain to cause injury,
programs for injured workers252 or expanding employer
the employer is liable to the injured employee); Fyffe V. Jeno's, Inc., 570 N.E.2d
1108, 1111-12 (Ohio 1991) (explaining that an employee can recover if the employer
knew with substantial certainty that harm would result); VerBouwens V. Hamm
Wood Prode., 334 N.W.2d 874, 876 (S.D. 1983) (stating that if the known danger
states allowing limited common-law actions. Id. Intent was generally very narrowly
poses a foreseeable risk and a substantial certainty of injury, then the employee can
construed, so that penalties were rarely assessed. See, e.g., Gibbs Automatic
recover from the employer). Although some other states have softened the definition
Moulding Co. V. Bullock, 438 S.W.2d 793, 794 (Ky. 1969) (denying additional com-
of intentional torts to some degree, only West Virginia appears to have maintained a
pensation for employer's intentional breach of safety regulation because there was no
standard which is somewhat, although not substantially, more lenient. See Mayles,
showing that the employer had actual knowledge of the regulation). If any pattern
405 S.E.2d at 24 (allowing employees to recover from employers when they could
at all can be discerned, it appears that the leaser the penalty, the lower the stan-
prove the employer maintained excessively dangerous conditions, which the employer
dard applied to intent. 2A LARSON, supra note 65, $ 69.22. at 13-343 to 13-349.
knew to be dangerous and which violated safety and health standards or standard
Although violation of a safety standard appears to be adequate to create a founda-
business practice).
tion for a charge of wilful misconduct, it is not necessarily adequate for an inten-
There does not appear to be any continuing threat to the exclusivity doctrine;
tional injury. Id. 95 69.22-24, at 13-343 to 13-370. Violation of federal or state
plaintiffs' attempts to expand employer immunity in a substantial way have appar-
OSHA regulations is not, in all states, grounds for penalty. Id. $ 69.24(b), at 13-361
ently failed. Nevertheless, some commentators continue to argue in favor of expand-
to 13-362.
ing tort liability in order to promote safety incentives. See generally Kenneth
250. Given the magnitude of the number of reported cases arising under state
Matheny, Achieving Safer Workplaces by Expanding Employers' Tort Liability Under
workers' compensation laws, the number which address the question of increased
Workers' Compensation Laws, 19 N. KY. L REV. 457 (1992) (arguing that exclusivity
penalties is remarkably few. See 2A LARSON, supra note 65, § 69.22, 13-343 to 13.
provisions often result in injustice).
349. This can be viewed in one of three ways: that few injuries are the result of
Interestingly, there is no evidence that expanded employer liability in the
misconduct by employers; that misconduct is very narrowly defined; or that employ-
above states has resulted in a relative decrease in occupational morbidity and mor-
ces are unlikely to press claims for penalty compensation.
tality rates. No epidemiologic or statistical study has been done of injury and fatali-
251. The penalties were generally established as a percentage of the workers'
ty rates in these states to investigate whether the expansion of liability can be asso-
compensation award. See id. § 69.10, at 13-340 (ranging from a 100% increase in
ciated with any reduction in injuries or illnesses. A review of the available data on
Massachusetts to much less in other states). Because of the rate-making methodolo-
fatality rates from the National Institute for Occupational Safety and Health Nation-
gies used to determine premiums, this amount is unlikely to have a substantial
al Traumatic Occupational Fatality study does not appear to indicate that, in the
impact on most employers' costs. Refer to part II.B infra.
aggregate, fatality rates declined at a relatively greater rate subsequent to the
252. A brief attempt during the 1950s to reform workers' compensation in order
change in the law in any of these states. Of course, this type of relatively cursory
to provide effective rehabilitation opportunities for injured workers was abandoned.
review of aggregate data lacks statistical validity; further study deserves to be done.
Berkowitz & Berkowitz, supra note 198, at 170-71. Regarding this failure, commen-
tators concluded that workers' compensation programs were unable to assist injured
It is also important to note that the excess risk associated with this expanded
employees in returning to work; they noted in particular that workers' compensation
liability is generally insurable. ROBERT E. KEETON & ALAN I. WIDISS, INSURANCE
systems were simply not designed to reach into and alter the relationship between
LAW: A GUIDE TO FUNDAMENTAL PRINCIPLES, LEGAL DOCTRINES AND COMMERCIAL
employers and injured workers. Id.
PRACTICES § 5.3(g), at 494-96 (1988). Although some states impose limitations on the
Interestingly, the failure of workers' compensation programs to develop effec-
availability of insurance for punitive damages, compensatory damages, even those
tive rehabilitation efforts in the past is now the subject of considerable criticism.
associated with employer misconduct, are always insurable.
See, e.g., Peter S. Barth, The Twentieth Anniversary of the National Commission on
248. 1B LARSON, supra note 65, 5 47.52(a), at 8-396 to 8-398.
State Workmen's Compensation Laws: A Symposium: Observations of Peter S. Barth,
249. Arkansas, Connecticut, California, Illinois, Kentucky. Massachusetts, Missou-
JOHN BURTON'S WORKERS' COMPENSATION MONITOR, Nov.-Dec. 1992, at 10-11. Peter
ri, New Mexico, North Carolina, Ohio, South Carolina, Utah, and Wisconsin are
Barth, who was Executive Director of the National Commission on State Workmen's
states where a penalty is imposed for certain employer misconduct, such as reckless
Compensation Laws, wrote the following on the twentieth anniversary of the
or intentional acts. 2A LARSON, supra note 65, § 69.10, at 13-335 to 13-340. These
Commission's Report:
penalties were generally an alternative to allowing common-law suite for intentional
1 want to turn to what ] now believe was the core problem with the report.
or reckless misconduct by employers. Intentional misconduct under these penalty
In my view, we loat sight of the absolutely central purpose of the compensa-
provisions was equivalent to the intent required to evade exclusivity entirely in the
tion, i.e., to restore the injured worker to his or her pre-injury status as
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liability²⁵³ did not meet with any significant or continuing
Eligibility for compensation is based upon the occurrence of an
success.
Workers' compensation is a social insurance program which
event-an injury or illness-but not upon the perpetration of a
differs in important ways from traditional liability systems.254
wrong. As a "no-fault" system, the victims, injured workers, are
not presumptively the victims of wrongful harm; instead, they
are simply the victims of workplace mishap.
In contrast, when redistribution is based upon the
promptly as possible, including a return-to-work
Since 1972. state laws
occurrence of harm, it is primarily derived from traditional tort
have been judged by many in terms of the number of essential recommends.
tions that they comply with, yet reemployment is not one of these essential
liability schemes which link the availability of compensation to
recommendations. Progressive states are so described because they have a
notions of wrong: the victim of the harm receives compensation;
high maximum weekly benefit level, not because of their return-to-work
the perpetrator of the wrongful harm is charged with the cost
policies.
(W]hen an injured worker takes a lump-sum payment in settle.
ment of a claim, everyone (the attorneys, the Insurer, the employer, and the
of compensation. This appears "just," in the distributive sense,
state's workers' compensation agency) views their responsibility as having
because the victim is compensated and the wrongdoer, rather
ended. Ask them, as I have. By focusing on benefit adequacy, those of
than innocent bystanders or victims, is forced to pay the costs
us involved with the commission's report probably allowed everyone to think
of the injury. Moreover, it appears "just" in the normative sense
that the job of workers' compensation is simply one of paying benefits
How did the National Commission let this omission occur? To understand
because the internalization of costs is often viewed as providing
that, one needs to recognize how awful state workers' compensation laws
an important incentive to deter repetition of the wrong.
were in 1972
In 1972, the problems were obvious, the benefits inade-
Like tort liability systems, workers' compensation provides
quacies were all too simple to recognize and impossible to defend, and in
the minds of many, all could be remedied with a little bit of political will.
payment to victims because of the occurrence of harm. As in
What we do need are imaginative ways to provide incentives to the prin-
tort systems, it is hoped that the payment of the costs by the
cipal parties, that is, the worker, the employer, and the insurer, to restore
employer will ultimately result in the minimization of both
the person as a worker. Perhaps that will be the legacy of the next national
commission.
total costs and human suffering by providing the necessary
Id. Barth may have been ignoring the true roots of workers' compensation in this
incentive to prevent injuries. 255 The presumption is that
statement, but he certainly schood the rising concern about displacement of injured
workers. See Emily A. Spieler, Injured Workers, Workers' Compensation, and Work:
New Perspectives on the Workers' Compensation Debate in West Virginia, 95 W. VA. L.
REV. 333, 340-41, 354, 375 (1992-93).
can society, apparently rooted both in bias against recipients and in resistance
253. As noted previously, attempts through litigation to break down the exclusiv.
redistribution financed by broad-based contributions from those who work. The result to
ity of workers' compensation and expand employer common-law liability enjoyed
is that recipients of these programs must almost always prove worthiness by show-
some initial success in the 1970s and 1980s; there has been no further erosion of
The ing membership in a sub-class of needy people who meet other eligibility criteria.
the exclusivity principle in recent years, however. Refer to note 247 supra.
common standards for this redistribution focus on poverty coupled with
254. Social insurance programs are built on the assumption that benefits have
ability of the recipient to work. Therefore, these programs provide redistribution an for in-
been paid for and become vested; this is true even when the programs are, like
beneficiaries those with disabilities (e.g., the Supplemental Security Income Program, in which
Social Security, funded on a "pay as you go" basis. They are intended to reduce (or
prevent) poverty in "nonstigmatizing ways." Jeffrey S. Lehman, To Conceptualize, To
Act, U.S.C. § 1381 (1988)), or for those engaged full time in the sustenance Security of
42 must meet dual eligibility of disability and need, The Social
Criticize, To Defend, To Improve: Understanding America's Welfare State, 101 YALE
601 young children (e.g., Aid to Families with Dependent Children (AFDC). 42 U.S.C.
LJ. 685, 692 (1991). Social insurance programs guarantee future benefits to benefi-
fite (1988)). As in social welfare programs, recipients of workers' compensation 5
ciaries when specific non-need-based eligibility requirements are met. Participation in
have not provided any visible cash payment to create their interest in the bene.
these programs is based on prior participation in the workforce or on direct financial
ty-based gram. Many employers and others tend to view with suspicion recipients of disabili- pro-
contribution to the program. THEODORE MARMOR ET AL., AMERICA'S MISUNDERSTOOD
WELFARE STATE: PERSISTENT MYTHS, ENDURING REALITIES 99 (1990). Eligibility for
often Perhaps as a result, injured workers, like social welfare beneficiaries, adequately
"needy." benefits if these recipients do not have the appearance of being
benefits can be based on such factors as age or disability, as in the case of social
the stigmatized if they apply for benefits. Workers' compensation is also beset are
security, or disabilities suffered as a result of injuries or illnesses arising out of
bates political backlash against the payment of benefits which characterizes policy de- by
over payment of social welfare benefits.
employment, as in the case of workers' compensation Workers undoubtedly pay for
their workers' compensation benefits, both by working. often receiving lower wages
than would have been available in the absence of compensation costs, as well as
ticularly length elsewhere and has been seriously questioned, as both expanded liability at great (par-
255. The efficacy of tort law as a deterrent has, of course, been explored
through their statutory waiver of other remedies against the employer.
Perhaps as a result of the no-fault nature of the workers' compensation sys.
AS e.g., TERENCE G. ISON, THE FORENSIC LOTTERY: A CRITIQUE ON TORT landscape.
See, strict liability) and insurance availability have changed the tort
tem, workers' compensation has taken on some of the political trappings of social
has A SYSTEM OF PERSONAL INJURY COMPENSATION 81-89 (1967). One LIABILITY
welfare programs. In contrast to compensation associated with social insurance
deterrence: identified at least eleven factors which contribute to the failure of commentator
(which is deemed to be vested) or that which is associated with legal wrong (which
tence; ignorance (of both law and facts); individual and organizational tort-based
is viewed as making the victim whole), social welfare programs mandate redistribu-
ties; discounting of the threat; high stakes in behaving dangerously; small incompe-
tion based upon need. There is strong antipathy for need-based programs in Ameri-
tart damage poverty of the wrongdoer (making them unable to pay damages); inadequacy penal- of
awards; market imperfections; and the availability of liability insurance.
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employers will invest in safety to the extent that the marginal
discussions of tort liability. The no-fault legal paradigm tends
costs of prevention are less than the marginal gain-and that
to legitimize 258 some employers' views that the fault lies
relationship is understood. As costs rise, prevention should
elsewhere.
become more financially attractive; that is, the balance should
be achieved through more effective prevention 256
But the no-fault, insured nature of workers' compensation
258. In the workers' compensation literature it is sometimes forgotten that moral
impedes this process. Employees are entitled to limited
hazard can occur either ex ante or ex post the occurrence of the loss. Priest, supra
compensation because of their status as workers injured at
note 12, at 1547; refer to note 15 supra (defining moral hazard). "Ex ante moral
hazard is the reduction in precautions taken by the insured to prevent the loss.
work, not because of their status as victims of fault-based harm
Ex post moral hazard is the increase in claims against the insurance policy beyond
at work. The amount of the compensation is limited; this
the services the claimant would purchase if not insured." Priest, supra note 12, at
limitation is, in part, justified on the basis that high levels of
1547. The workers' compensation social science literature focuses to a significant de-
compensation create incentives for workers to stop working. 257
gree on the moral hezard created for workers in the compensation system because of
the economic security which is presumed to increase either workers' carelessness or
Limitations on benefits are also, however, a reflection of the
filing of claims. Refer to note 18 supra.
assumption that full compensation is based upon application of
Investigation of employer behavior has generally focused on assessing the ef-
notions of fault, which are presumptively irrelevant to workers'
fectiveness of merit-rating insurance pricing schemes in inducing greater preventive
efforts by employers. See, e.g., JAMES R. CHELIUS & ROBERT S. SMITH, Experience-
compensation liability.
Rating and Injury Prevention, in SAFETY AND THE WORKFORCE: INCENTIVES AND
Employers are charged with the cost, but not because they
DISINCENTIVES IN WORKERS' COMPENSATION, supra note 18, at 128, 130; Chelius,
are defined as the perpetrators of wrongful harm; there is, by
Influence of Workers' Compensation, supra note 18, at 235, 237; Chelius, Incentive to
Prevent Injuries, supra note 18, at 154, 155; Ehrenberg, supra note 18, at 18-20;
definition, no wrongful harm in a no-fault system. The no-fault
Alan B. Krueger, Incentive Effects of Workers' Compensation Insurance, 41 J. PUB.
nature of the system masks, or perhaps obliterates, the
ECON. 73, 74 (1990); see also John W. Ruser, Workers' Compensation and Occupa-
commitment to individual corrective justice which imbues
tional Injuries and Illnesses, 9 J. LAB. ECON. 325, 326 (1990) (discussing the effects
of experience rating pricing on the business' safety investments). All of these studies
conclude that experience rating fails to significantly increase employers' preventive
efforts. See, e.g., CHELIUS & SMITH, supra, at 137 (stating that the effects of experi-
once rating on employers' safety expenditures were negligible): Ehrenberg, supra note
Sugarman. supra note 19, at 565-73.
18, at 19 (supporting the conclusions of Chelius and Smith). But see MICHAEL J.
Similarly, Professor Guido Calabresi has argued that the tort system failed as
MOORE & W. KIP VISCUSI, COMPENSATION MECHANISMS FOR JOB RISKS: WAGES,
a mechanism for internalizing costs for three reasons: imperfect insurance pricing,
WORKERS' COMPENSATION, AND PRODUCT LIABILITY 134-35 (1990) (concluding that in
imperfect information, and a system of transfers which results in charging others for
the context of fatal injuries workers' compensation plays a "constructive role
the costs of any injury. GUIDO CALABRESI, THE COSTS OF ACCIDENTS: A LEGAL AND
[W]orkplace fatalities could double in the absence of this program. Worker's compen-
ECONOMIC ANALYSIS 244-49 (1970). All of these are painfully present in the workers'
sation thus represents by far the most influential governmental program for reducing
compensation system and are addressed in this Article. For a summary of
workplace fatalities. Worrall & Butler, Experience Rating Matters, supra note 12,
Calabresi's thinking on this issue, see Keith N. Hylton & Steven E. Laymon, The
at 92 (finding that in 15 industries studied in the period 1940-1971, a 10% increase
Internalization Paradox and Workers' Compensation, 21 HOFSTRA L. REV. 109, 126-29
in firm size led to a 4.95% decrease in the permanent partial injury rate and a
(1992) (explaining Calabresi's theory of externalities, but rejecting his concerns re-
10.17% reduction in the all indemnity claims rate). These studies in part are an
garding the impact of insurance because of trust in the market incentives in insur-
attempt to investigate the potential positive effects on employer preventive activities
ance arrangements). As the discussion of workers' compensation pricing in part II.B
that may be derived from merit rating systems which make an individual employer's
illustrates, it is not clear that trust in market incentives is merited.
cost responsive to that employer's own claims experience. Some of the investigators
256. When commentators argued for increased compensation for victims of occupa-
note that employers' preventive activities may be obscured by the increased filing of
tional hazards prior to the 1972 Commission Report, supro note 32, they assumed
claims by workers as benefits rise, or that employers' preventive efforts may decline
that increased compensation would result in increased deterrence. As Arthur H.
when pricing schemes fail to make an employer's costs responsive to the costs in-
Reede wrote, "(aldequate compensation makes safety more imperative. Increased safe-
curred by that enterprise. See, e.g., Chelius, Incentive to Prevent Injuries, supra note
ty makes adequate compensation possible." REEDE. supra note 34, at 371. This Arti-
18, at 155 (stating that injury prevention by employers is influenced by the level of
cle had its genesis in the fact that, at least up until now, this reciprocity has ap-
benefits given to the employee).
parently failed to develop.
The workers' compensation paradigm poses a moral hazard for employers as
257. The National Commission, while noting the inadequacy of benefits in 1972,
well as employees; both employers and employees are insured by the program. The
also warned that "[a]s the proportion of wages replaced is increased, the worker is
existence of a no-fault workers' compensation system undoubtedly depresses
assumed to have less incentive to return to work." COMMISSION REPORT, supra note
employers' incentives toward prevention in two ways. First, it provides an economic
32, at 56. This is the issue of moral hazard: that, as benefits rise, workers will take
cushion for workers so that employers can feel that they have discharged any re-
fewer precautions, and thus file more claims. Refer to notes 15 & 18 supra. The be-
sponsibility to injured workers. Second, the mechanisms for the distribution of costs
havior of workers is discussed at greater length in part III.C. Obviously, this tension
and the maintenance of benefits below full costs of injuries (which are discussed at
plays out in the political arena, with those more concerned about the adequacy of
greater length in part II.B) mean that employers' liability may not always increase
benefits for injured workers on one side, and those who are more concerned about
as the incidence or, particularly the severity, of injuries increases. See ASHFORD, au.
work disincentives on the other side.
pra note 9, at 417 (arguing that because employers do not pay the full social cost of
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Advocates of prevention, relying upon the apparently
certain costs of injury which the compensation laws created, be-
prevention is obvious or even that the system itself is designed
lieve that employers' enlightened self-interest should force them
to induce improved safety as a result of increased costs. Even
to engage in aggressive preventive practices. 259 Their
in theory, internalization of costs will only promote deterrence
arguments presume that the forced internalization of cost will
if costs and the payer's control over the occurrence of the harm
affect employers' practices, even if the employers are not
are related, and the payer understands the relationship.
charged with wrongful behavior, and even if there is a general
B. Distributing Cost
belief that many injuries are inevitable There is, however,
an internal, paradoxical tension between the presumptions of
In order to maximize the potential deterrent effect from the
inevitability (which are supported by the no-fault insurance
imposition of liability, two initial objectives must be met: costs
paradigm) and assumptions of preventability (supported by the
must be charged to, and internalized by, the entity responsible
financial incentives). Arguably, this tension contributes to the
for the harm; and the costs must fluctuate with the degree or
political controversy surrounding compensation, as employers
amount of harm. Aggregate cost, which does not fluctuate with
fight the costs of compensation without investigating the cause
individual experience, is unlikely to provide the necessary
of the injuries.
incentive to induce preventive activities. This section explores
The fact that employers have not committed a legal wrong
the extent to which workers' compensation achieves effective
does not obviate the fact that the employer may nonetheless
internalization of costs 262
have both control over the conditions leading to injuries and
As noted above, our current system of liability insurance
superior knowledge regarding strategies for prevention. 261 It is
had its roots in employer liability for workplace injuries and
not, however, at all clear that the relationship of costs to
grew with workers' compensation systems. 263 The first
statutes which mandated employers to carry insurance created
a state fund to provide the coverage. 264 States later
each additional disability. their incentive to reduce hazards is too low, and that the
established requirements either for purchase of private in-
"problem of moral hazard is inevitable").
259. Current commentators continue to view the costs of workers' compensation
surance or, in some jurisdictions, for proof of financial
as a source of incentive for safety. See, e.g., Paul C. Weiler, Workers' Compensation
responsibility for purposes of self-insuring. 265
and Product Liability: The Interaction of a Tort and a Non-Tort Regime, 50 OHIO
The requirement that employers purchase insurance to
ST. LJ. 825, 843 (1989) (explaining that if employers have substantial financial re-
sponsibility for all workplace injuries, they will be sufficiently motivated to invest in
cover workers' compensation claims provided protection to both
precautions that will prevent their occurrence).
workers and employers. The desire for reliable protection was
Workers' compensation was expected to induce employers to provide greater
substantial enough to overwhelm any concern that insurance
workplace safety because each firm would assume the costs of its workers'
injuries more predictably than under tort liability. The costs of industrial
would dampen the deterrent effects of these costs. This
injuries thus would be included among other business costs, and employers
insurance guaranteed that compensation would be available to
would be motivated to reduce them by increasing job safety.
the extent that it was required by law, irrespective of the
ECONOMIC REPORT OF THE PRESIDENT, supra note 18, at 197. Other commentators
have noted that the strict liability workers' compensation rules adopted by the states
financial status of the employer. Then, and now, employers
were supported by Calabresi's argument that "other things being equal, liability
incurred penalties for failing to obtain insurance. 266 In addi-
should be placed on the party best able to recognize a relationship between caretak.
tion, the insurance mandate, when combined with the general
ing and costs, and to use this information to reduce accidents." Hylton & Laymon,
supra note 255, at 128. This view echoes that of earlier workers' compensation com-
mentators. Arthur H. Reede, for example, insisted that "[all] available evidence sup-
ports the view that workmen's compensation is a stimulus to prevention of industrial
262. This exploration is undertaken as an exercise that is independent of the
injuries." REEDE, supra note 34, at 324.
concern raised in the next section: that increased internalization of enterprise-specific
260. The presumption is, I think, that the pricing of workers' compensation in-
Without costs may encourage perverse cost-containment strategies on the part of employers.
surance will provide a sufficient incentive to trigger preventive activities. This is the
abandoning the notion that unintended consequences may overwhelm the
focus of part II.B of this Article.
socially useful and intended consequences of cost internalization, it is nevertheless
261. This calls for an analysis of the difference between a legal wrong which
workers' compensation system.
instructive to review the degree to which internalization has been achieved in the
causes harm and action which is not a legal wrong but which is known in advance
263. KEETON ET AL, supra note 221, $ 82, at 685.
to result in harm. Clearly, not all actions which are known to cause harm, even on
a regular basis, are actionable as legal wrongs. It is precisely the process of drawing
(upholding 265. Washington's exclusive state insurance fund for workers' compensation).
264. See, e.g., Mountain Timber Co. V. Washington, 243 U.S. 219, 246 (1917)
these lines which makes the problem of deterrence in workers' compensation DO diffi-
See REEDE, supra note 34, at 231-32.
cult.
266. 2A LARSON, supra note 65, § 67.22, at 12-132 to 12-140.
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limitations on liability inherent in the system, guaranteed the
Despite the high aggregate level of workers' compensation
economic stability of firms by protecting employers from both
the full cost of injuries and major fluctuations in costs
costs, the current methodology for the distribution of costs
associated with these injuries.
associated with occupational hazards fails to encourage
The general implications of insuring a risk have become
improved safety practices among many employers for two
much more obvious in the years since the first enactment of
reasons. First, costs are not spread in a manner which provide
financial incentives to many employers to engage in primary
workers' compensation statutes. Insurance is fundamentally an
arrangement that allows for the transfer and distribution of the
prevention. The insurance pricing scheme, which provides some
costs associated with risk. 267 Insurance provides an
fluctuation of rates based upon the experience of individual
established prospective cost ("premium") which quantifies the
employers and classes of employers, maintains the appearance
of an incentive-based system. To the extent that insurance
future risk and which protects the insured from any further
losses. The risk, and any incentives associated with assuming
premiums are merit-based, the market would tend to reward
the risk, are transferred to the insurer. 268
low-risk employers with lower costs and penalize high-risk
employers with higher costs. The particular nature of the
Insurance by its very nature requires the spreading of the
costs of risks through a population; it is the law of large num-
pricing of workers' compensation premiums, however, tends
both to attenuate the relationship between cost and risk for
bers which creates a sufficiently high probability that
many employers, particularly smaller high risk employers, and
predictions regarding the total losses for the pool will be
to obfuscate the connection that does exist.
correct. As one commentator has noted, "the purpose of the
Second, despite the apparent internalization of costs,
insurance is to protect the person liable from the consequences
employers do not pay the full costs of injuries. A system of
of his liability; in 80 far as this protection can be bought at a
"sensible compensation*270 means that costs are transferred,
reasonable price, the economic deterrent effect of liability disap-
*269
directly and indirectly, to the injured workers, their families, to
pears.
administrative agencies, and to others. These two issues are
explored more fully in the following subsections.
267. KEETON & WIDISS, supra note 247, at 3. "For a price, usually referred to as
1. The Workers' Compensation Insurance Pricing Scheme
a premium, an insured transfers to an insurer the risk of loss or the responsibility
for certain costs that may arise
and Market. The nature of insurance means that costs
(Thus) an insured will be able to avoid sus.
taining further losses." Id. at 11.
associated with risk are shared. Generally, to the extent that
268. The effect of the insurance contract is, therefore, to transfer any incentives
rates are set based upon a group or community risk and are
to decrease claims costs from the insured employer to the insurer. The employer's
not adjusted for individual experience, those who make more or
premium costs are set at the beginning of a policy year. If the insurer can reduce or
assist the employer in reducing the actual costs of claims during that year, the in-
larger claims against the insurance will be subsidized by those
surer will receive the benefit. Employers' gains will not appear until subsequent
who make smaller ones. This effect can be partially corrected
policy years in which their premiums are adjusted to reflect past claims reductions
by rate-making processes which adjust the rates of individuals
through the merit rating process that is discussed below. It is therefore surprising
that insurers have not pursued loss prevention more aggressively as a strategy. Re-
within the group in order to reflect individual experience more
for to part III.C.2 supra. More recently, as state insurance regulators have resisted
accurately. The goal in the adjustment of rates is to pool that
rate increase applications, loss prevention has become more of a focus. See, e.g., Loss
portion of the risk that involves uncertain or random events,
Control and Prevention, IV NCCI DIGEST, Dec. 1990, at 1 (studying the possibilities
for loss prevention). "Insurers are no longer content to share the risk; they are com-
and to individualize rates to the extent that the risks, and
mitted to decreasing risks as well In the area of workers' compensation, this
therefore the costs, are predictable.
means the establishment of a safe workplace." Id. The article notes further that "[i)t
Alternatively, the subsidization characteristic of insurance
is unclear whether the experience rating system has any effect on the average
employer's workplace injury rate." Id. at 9.
can be decreased by reducing the size of the risk pool, 80 that
269. MOROENSTERN, supra note 7. at 65. Or, stated another way, "the existence
those in it will be closer to each other in experience, making
of liability insurance tends to undermine both the corrective justice and deterrence
the community rate charged closer to the actual experience of
rationales for the imposition of tort liability." Kenneth S. Abraham & Lance
Liebman, Private Insurance, Social Insurance, and Tort Reform: Toward a New Vi-
sion of Compensation for Illness and Injury, 93 COL. L REV. 75, 86 (1993). See gen-
erally KENNETH S. ABRAHAM, DISTRIBUTING RISK: INSURANCE, LEGAL THEORY, AND
and deterrence were not foundation blocks of the workers' compensation system.
PUBLIC POLICY (1986) (explaining the relationship between corrective justice and
Refer to part III.A.4 supra.
liability insurance programs). Of course, as 1 have previously noted, corrective justice
270. Weiler, supra note 234, at 840.
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each member of the group. As experience-rating increases or
pools become smaller, however, the advantages which flow from
a. Rate setting methodology. Employers' workers'
the sharing of risk decline.271 The result is that, in the
compensation insurance requirements can be met in most states
workers' compensation market, there is a tension between more
either by purchasing insurance or by self insuring.
accurate merit rating, which should promote safety incentives,
Employers who self insure pay all of their own costs associated
and class rating, which helps employers share financial risks
with the mandated workers' compensation benefits, as well as
related to occupational hazards in their industries. 272
the costs of litigating any claims which they may choose to
In workers' compensation today, as costs and premiums
contest. 276 These employers may also be required to contribute
have risen, questions of affordability, solvency, cost contain-
to various administrative costs of the state agency which over-
ment, equity and adequacy of benefits, and accuracy of pricing
sees the workers' compensation program. 277 Self insurance re-
have all merited attention from the insurance industry. 273 In
sults in the purest form of experience rating: self insured
order to understand the current concerns and their relationship
employers' costs are tied absolutely to their incurred costs. As
to safety promotion, it is necessary to understand the
the number of employers who self insure has grown, 278 the
mechanisms used by insurers to price employers' workers' com-
number of employers and employees who operate in an envi-
pensation premiums.
ronment in which payment reflects true workers' compensation
cost has risen. 279 It is, in fact, these employers who are most
often credited with aggressive safety or, at least, claims-re-
271. ABRAHAM, supra note 269, at 218. From insurers' perspectives, as the size of
ducing programs. 280
the pool grows, the amount of predictive uncertainty declines and less capital is
Employers who purchase insurance have their individual
needed to fund the future risk adequately. Telephone Interview with Robert Finger,
premium rates determined through a three-step process of rate-
Consulting Actuary, Milliman & Robertson, Inc. (Oct. 23, 1993). Insurers themselves
are more concerned with issues of funding and marketing than with social policy
making. 281 First, the average premium rate for a state is
implications of rating decisions.
calculated. Second, rates are calculated for separate industrial
272. Kenneth Abraham characterizes this tension as follows:
classes into which all employers are grouped. 282 Based upon
Stress on loss prevention in insurance obviously tends to reflect a focus on
individual responsibility. In contrast, emphasis on risk distribution under-
scores the social consequences of loss. Both loss prevention and loss distribu-
tion, of course, are methods of avoiding the effects of injury and loss. But
pool. It is important to remember that rate-making methodologies are developed by
they do 80 from very different perspectives. Increased stress in the future on
actuaries with concern for adequacy and equity of rates based upon the predictive
risk distribution could indicate an evolving recognition of the inevitability of
value of past experience; actuaries are not, in general, concerned about the efficacy
a certain amount of injury in a society as technological and industrial as
of insurance rate-making in achieving other goals, including safety. The summary
ours. At some point it would symbolize a very significant change in social
provided here does not attempt to explain the precise justification for the resulting
perceptions: a collective acceptance of the current-and perhaps ulti-
rate methodologies. For more information regarding rate-making methodologies, see
mate-imperfectability of our world. Increased stress on loas prevention, on
generally WORKERS' COMPENSATION INSURANCE PRICING: CURRENT PROGRAMS AND
the other hand, would reflect the dominance of more traditional ideas about
PROPOSED REFORMS, supra note 132; Beckwith, supra note 7. at 58-60; C. Arthur
individual responsibility for loss and a continuing belief in the possibility of
Williams, Jr., Workers' Compensation Insurance Rates: Their Determination and Regu-
progress toward a safer. more secure world. Stress on loss prevention
lation, in CURRENT ISSUES IN WORKERS' COMPENSATION 209 (James Chelius ed.,
through insurance devices might indicate as well that more public forms of
1986).
loss prevention, such as direct regulation and the promulgation of mandatory
275. Beckwith, supra note 7, at 52.
safety standards, had failed to live up to their promise.
276. Id. at 59.
ABRAHAM, supra note 269, at 218. This underlying tension between acceptance of the
277. See, e.g., W. VA. CODE § 23-2-9 (Supp. 1993).
inevitability of risk (which Abraham characterizes in a positive light) and prevention
278. Refer to note 30 supra.
are, of course, precisely what underlie workers' compensation discussions. Of course,
279. Workers' compensation costs are limited in a variety of ways. Not only are
there is always a middle ground which acknowledges both the imperfectability of our
all injuries and illnesses not compensated, but the level of compensation itself re-
world and our ability to achieve reductions in risks.
sults in externalization of costs from the system. The issue of this externalization is
273. David Appel & Philip S. Borba, Costs and Prices of Workers' Compensation
discussed below. Refer to part III.B.2 infra.
Insurance, in WORKERS' COMPENSATION INSURANCE PRICING: CURRENT PROGRAMS AND
280. See, e.g., Beckwith, supra note 7, at 69 (stating that self-insurance provides
PROPOSED REFORMS, supra note 132, at 1.
the greatest incentive to the employer to provide a safe working environment for
274. The brevity of this summary requires some generalizations. The process de-
employees).
scribed is that used by the National Council on Compensation Insurance (NCCI). a
281. Appel & Borba, supra note 273, at 5.
national rate-making bureau, that prepares rate analyses for the insurance industry
282. Id. NCCI uses more than 600 industrial classifications in calculating rates,
in 32 states. A similar, but not identical, rete-making methodology is utilized in
although only about 300-400 of these may be in active use in any particular state.
every state, whether the insurance is provided through a monopolistic state fund, a
Id. Telephone Interview with Robert Finger, supra note 271. Other rate making enti-
competitive state fund, a private insurance carrier, or from a separate high risk
ties may use fewer. For example, the West Virginia Workers' Compensation Fund, a
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the aggregate claims experience in that class, generally over
premium per year are required to pay the base or manual rate,
the preceding three year period, the size of payroll in that
irrespective of their own claims experience. The size of these
class, and the insurer's administrative and related expenses,
non-rated employers varies depending upon the base rate in
the insurer calculates a base or manual rate for the entire
their industry; in an industry with a $10 per $100 base rate,
class. This manual rate, expressed as an amount per $100
the minimum amount will be reached with fewer employees
of payroll, reflects the total predicted costs that the insurer
and less payroll than in an industry in which the base rate is
anticipates employers in that class will incur during the
$0.50 per $100.2 Because of the small pool of employees,
subsequent policy year. Third, the insurer may adjust the
and the resulting low frequency and small numbers of claims,
employer's premium from the manual rate based upon that
the injury experience of these employers is generally viewed by
employer's claims loss experience.
actuaries as too random to have any predictive value;
Manual rates vary widely from one industry to another,
prospective adjustments to rates would therefore not make
reflecting the variation of the experience of different groups of
sense. Any effort by these employers to improve their own
employers. The highest rate in a state "will routinely exceed
safety records will therefore not be recognized by the workers'
the minimum by a factor of 100, and in extreme cases can
compensation rate-making process.
exceed the minimum by a factor of 1000. This grouping of
In contrast, larger employers' rates are individualized and
employers lessens or eliminates cross-subsidization between
therefore deviate from the manual rates of their industries. The
industries as long as rates are adequate to cover the incurred
merit rating process is designed to create rates which better
costs in any policy year. 286 Obviously, manual rates rise as
reflect the individual employer's experience in relation to the
the average experience of an industrial group worsens, and fall
entire class. Three different methods are used for merit rating
as the average experience improves. In the majority of states,
purposes: schedule rating, retrospective rating and dividend
changes in these rates must be approved annually by the state
plans, and, most commonly, experience rating.289
insurance department or an equivalent oversight agency. 287
Schedule rating involves the prospective adjustment of the
Small employers who pay below a certain amount of
manual rate at the beginning of the policy year in order to
reflect the employer's internal practices. Individual employer's
rates are based, at least in part, on a prediction about
monopolistic state fund, uses 91 such classifications. These classes are established
anticipated future claims, but this prediction is not based on
based upon the level of risk in an industry, not upon the product that is produced;
they therefore do not coincide with the Standard Industrial Code (SIC) classifications
the actual past claims experience of the employer. For example,
utilized for other employment data-gathering. This further complicates the data prob-
in the early years of workers' compensation, this prediction
lems discussed in Part I of this Article.
might have been based on safety audits of the enterprise's
283. Appel & Borba, supro note 273, at 5-6.
284. In theory, the manual rate should represent a true average. Because of
operations. 290 This approach to rate-making was common until
some aberrations in the rate-making processes, however, the manual rate in some
1934, at which time it was largely, although temporarily,
instances deviates from the actual average of employers' calculated rates. This is the
abandoned as the industry came to view it as actuarially
result of the distribution of employers after the application of the experience rating
formula and is referred to as the "off balance." The precise nature of aberrations
unsound. Schedule rating has recently reappeared in some
like this in the rate-making process are beyond the scope of this discussion.
285. Appel & Borba, supra note 273, at 6.
286. Workers' compensation rates must be adequate to cover the expected losses
288. The minimum premium amount for merit rating is currently set at $5000
which are allocable to the particular industry. The failure to adhere to this princi-
per year in a typical state. Telephone Interview with Robert Finger, supra note 271.
ple can cause unintended interjurisdictional, interindustry and interfirm cross-subsidi-
This means that employers paying $10 per $100 will be experience rated when their
zation, which can have far-reaching and adverse implications." Id. When inadequate
payroll reaches $55,000 (or about two to three employees earning $15,000 to $20,000
rates are charged, the resulting deficit may require crosa-subaidization between in-
per year). In contrast, employers paying $0.50 per $100 will need a payroll of
dustries in subsequent years. See Robert Finger & Robert Briscoe, Workers' Compen-
$1,100,000 or 56 employees earning $20,000 in order to be experience rated. The
sation Insurance Arrangements in West Virginia, JOHN BURTON'S WORKERS' COMPEN-
minimum amount of premium which triggers experience rating has, of course, in-
SATION MONITOR, May-June 1991, at 3. To the extent that the payroll in high risk
creased over time. Williams, supra note 274, at 211. In 1983, it was $2500. Id.
industries declines, the funding is likely to be drawn from other industries. Id.
289. Id.
287. Historically, most states had administered pricing systems in which changes
290. SOMERS & SOMERS, supra note 34, at 106.
in manual rates for industries were subject to review and approval by a state regu-
291. Id. at 106-07 (noting that in this early form,
latory body. Klein, supra note 52, at 7-8. Since 1982, sixteen states have instituted
(d)ebita or credits were given to the insured employer, in advance of actual
competitive (rather than regulated or "administered pricing") rating for workers' com-
experience, on the basis of plant safety inspection (sic] Gradually,
pensation. Id
however, the inherent limitations of the [schedule rating] plan determined
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states in the form of legislatively-mandated prospective
multiplying the industry's base rate by the specific calculated
premium discounting, which is designed to provide an
inducement for employers to engage in cost-cutting or injury
modification factor. Thus, employers with better than average
preventing practices. 292
claims experience pay less than the manual rate; employers
with worse than average experience pay more than the manual
Retrospective rating, introduced in 1936 after schedule
rate.
rating was abandoned, adjusts the employer's premium at the
end of the rating period based upon that employer's actual
All merit rating schemes serve several purposes. First, they
experience during the policy year. 293 In general, retrospective
are a device for correcting rate inequities through modifying
rating is a device used by insurers to market insurance to
manual rates. 298 Second, schedule-rating and dividend plans
provide a weapon of competition for different insurance carriers
larger employers who might otherwise self insure. In essence,
the insurance carrier agrees, within formal negotiated bound-
in a largely regulated environment. Third, merit rating is
aries, to rebate premium to employers who perform better than
prevention. viewed, by some, as an important stimulus for injury
anticipated during the policy year. 294 Dividend plans similarly
rebate premium at the end of the policy year; these plans,
although actuarially similar to retrospective rating, do not
b. Rate setting and safety incentives. The merit rating
guarantee the end-of-year return and are more clearly driven
system is the cornerstone to arguments that workers' compen-
by market factors. 296 Retrospective plans offer to employers
sation costs create safety incentives. In theory, the rate-setting
characteristics of workers' compensation should increase safety
an intermediate solution between simple experience rating,
effects in two ways. First, by increasing the overall unit cost of
which operates on a prospective basis only, and self insurance,
labor relative to capital in hazardous industries, the rate
which requires the employer to bear the entire risk.
setting process should contribute to an economy-wide reduction
Prospective experience rating is the most common form of
in injuries by reallocating labor from more dangerous to safer
merit rating in workers' compensation. Experience rating
industries. 299 This reallocation from more hazardous goods-
formulas generally look at an individual employer's claims costs
producing employment has, of course, occurred. 300 Needless to
over the preceding three years in comparison to the average
claims costs in the industrial classification. The insurer then
say, it is difficult to attribute this change to workers'
compensation costs, nor is there any evidence that the most
calculates an "experience modification rate" or "modification
risky operations within an industry are the ones that close. 801
factor," based upon the employer's relative experience. For low
Second, the experience rate setting system should increase the
claims employers, this modification factor will be less than one;
costs for more 302 hazardous firms within an industry, relative to
for high claims employers, it will be greater than one. The
safer ones. The incentive for the more dangerous firms to
individual employer's rate is adjusted prospectively by
its demise. Most important were its reliance on physical or engineering fac-
tore as the sole criterion of safe operation to the exclusion of morale and
other human factors, its inapplicability to many occupations, and the impos-
sibility of creating satisfactory inspection standards).
298. The insurance industry "has always viewed the [experience rating)
292. See, e.g., MASS. GEN. LAWS ANN. ch. 152, $ 53A (West 1989); Mo. ANN.
as one primarily intended to produce equity, by more closely tying an individual program
STAT. 9 287.125 (Vernon 1986); W. VA. CODE $ 23-2B-3 (Supp. 1993). For a full dis-
risk's price to expected costs." Appel & Borba, supra note 273, at 13.
299. Smith, supra note 7, at 571.
cussion of this recent development, refer to Part IV infra.
293. SOMERS & SOMERS, supra note 34, at 107.
300. The relative decline in manufacturing and mining jobs over the past two de-
294.
Id.
cades has been substantial. In 1972, goods-producing jobs constituted 39% of private
295.
Id.
employment; by 1992, they had fallen to 26% of private employment. See BUREAU OF
296. Telephone Interview with Robert Finger, supra note 271. Dividend plans are
[hereinafter EMPLOYMENT AND EARNINGS 1993).
LABOR STATISTICS, DEPT OF LABOR, EMPLOYMENT AND EARNINGS 47 tbl. B-1 (1993)
less highly regulated and generally do not have to be filed with state insurance
departments. Appel & Borba, supra note 273, at 8.
301. In fact, the high risk residual market in workers' compensation may be res-
297. On the other hand, this rating system may decrease the insurer's incentive
III.B.I.c. infra.
cuing some of these excessively hazardous enterprises from extinction. Refer to part
to provide loss control services to an employer-client, because the partial transfer of
risk to the employer decreases any potential gain for the insurer in providing loss
302. "Each insured should expect to pay for the loss exposure it brings to the
management services.
NCCI DIGEST, Dec. 1992, at 51.
system." Robin Gillam, Some Issues in Workers Compensation Experience Rating. VII
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reduce claims costs, and hopefully injuries, is thereby
which have led to a call to employers to pay attention to safety
increased.303
in order to control their costs. 307
Employers' rates within the same industrial classifications
The actual experience rating methodology dampens the
can indeed vary tremendously based upon experience rating
incentive effects, however; the relationship between claims costs
calculations. The Upjohn Study was in part instigated by
and experience is not as simple as the general contours of the
the existence of variations in intrastate rates paid by employers
rate-making process would make it appear. First, the
in the same industry. In West Virginia, employers' rates in the
calculation of an individual employer's modification factor does
same industry vary by a factor of six or more. 305 This pattern
not include any adjustment for the relative wages paid to
is common throughout the country.308 It is these variations
employees in the same industry; the total workers'
compensation premium for an employer is the product of total
payroll multiplied by that employer's calculated rate. 308 This
has the troubling consequence of penalizing high wage, safe en-
303. RICHARD B. VICTOR ET AL., WORKERS' COMPENSATION AND WORKPLACE SAFE-
TY: SOME LESSONS FROM ECONOMIC THEORY (RAND REPORT) x-xi (1982) [hereinafter
terprises and rewarding low wage enterprises in the same
VICTOR, WORKERS' COMPENSATION AND WORKPLACE SAFETY) (concluding, based on a
industry. Thus, if relatively safe employers pay wages that are
simulated model, that the experience rating system may increase safety incentives
higher than average, their total premium paid for each full
for large firms and decrease it for small firms. Firms with as few as 25 employees
in hazardous industries may, however, have significant financial incentives to reduce
time worker may be higher than in firms with higher injury
claims costs); Smith, supra note 7. at 671. But see the various experience rating
rates but lower wage rates. In some industries, particularly
studies, supra note 258, which have failed to find any relationship between safety
construction, the failure to correct for wage differentials may
and experience rating.
also encourage the hiring of less skilled, lower paid, workers.
304. Refer to note 7 supra.
305. The following are examples of rates, modification factors, and calculated
Second, the use of a three year average for the calculation
rates per $100 of payroll for West Virginia employers with high and low modifica-
of individual employers' rates results in a significant lag time
tion factors (1989 data, information drawn from files of the author). "A" and "B" in
before improvements in injury rates yield substantial reductions
each industry represent different employers with substantially different claims expe-
rience. The base rates in West Virginia during this period were artificially depressed
in workers' compensation premiums. A single year
and therefore, although the relationships among classes and employers are instruc-
reduction in claims costs is generally not viewed as actuarially
tive, the actual amounts are not actuarially sound. See Spieler, supra note 252, at
credible for rate making purposes. Employers who have
347.
achieved claims cost reductions may, however, have a difficult
time understanding this delay.
Industry
Base Rate
Mod Factor
Assigned Rate
Third, and perhaps most importantly, not all of an
Hospitals
0.83
A. 0.66
0.55
employer's experience "counts" in the calculation of modification
B. 3.38
2.81
Coal
16.80
A. 0.35
5.88
B. 3.76
63.17
Contractor A has an EMR of 0.60
His workers' compensation insurance premium is:
General
6.71
A. 0.66
4.43
$10,000,000/$100 X $15.00 X 0.60 = $900,000
Construction
B. 2.47
16.57
Contractor B has an EMR of 1.40
His workers' compensation insurance premium is:
Clarical
0.38
A. 0.68
0.26
$10,000,000/$100 I $15.00 X 1.40 = $2,100,000
B. 6.64
2.52
The safety dividend to Contractor A is $1,200,000 ($2,100,000 less
$900,000)-12 percent of direct labor cost!
The very high modification factors on this chart may, however, represent errors in
THE BUSINESS ROUNDTABLE, THE WORKERS' COMPENSATION CRISIS SAFETY EXCEL-
the ratemaking process. According to Robert Finger, consulting actuary to the West
LENCE WILL MAKE A DIFFERENCE 12 (1991) [hereinafter THE BUSINESS ROUNDTABLE].
Virginia Workers' Compensation Fund, modification factors should rarely rise above
307. See generally Welch, supra note 7 (citing empirical studies showing that
2.0. Telephone Interview with Robert Finger, supra note 271. Higher modifications
employers with aggressive safety programs tend to exhibit lower workers' compensa-
may, therefore, reflect the fact that an employer has been classified into the wrong
tion costs).
308. Appel & Borba. supra note 273, at 6.
industrial class. Id.
306. The Business Roundtable's publication for the construction industry gives the
309. Richard B. Victor, Experience Rating and Workplace Safety, in WORKERS'
COMPENSATION BENEFITS: ADEQUACY, EQUITY, AND EFFICIENCY, supra note 29, at 71,
following example:
[C]onsider two contractors with different EMRs [experience modification rat-
76 [hereinafter Victor, Experience Rating and Workplace Safety} (stating that because
ings) bidding a job with $10,000,000 direct labor costs and a manual rate of
insurers base the experience modification factor computation on data collected from
the previous three years, current prevention will not yield instantaneous savings).
$15.00.
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factors. The extent to which an employer is rated as a result of
As employers' size, hazardousness, and wage scale, and
its own experience depends on the credibility or predictive
therefore annual premium, grow, the credibility of that
value of that employer's experience.310 As employers' total
employer's experience with more severe claims is also presumed
premium amounts grow, reflecting both larger payroll and the
to grow (reflecting increasing levels of actuarial certainty that
level of general hazard in the industry, the credibility of their
past experience will be replicated in the future). The rate
past experience also grows. About ten to fifteen percent of
therefore becomes more sensitive to the employer's actual
firms, in which ninety percent of employees work, are
experience.314 Although manufacturing firms with as few as
experience rated. 311 Because experience rating cutoffs rely on
three to four employees may be experience rated, the size of
size of total premium, not on size of payroll, the more hazard-
the firm's workforce would have to be 1000 or more before the
ous the industry, the more that experience rating reaches
firm is fully experience rated. 315 The result of this process is
smaller firms.
that relatively smaller employers' premium rates cluster around
The degree of experience rating varies, however. Workers'
the manual rate; their rates can only change significantly as
compensation insurance rate-making assumes that the severity
the experience of the entire class changes.316
of an injury is less predictable than injury frequency. 312 The
most important factor is therefore the frequency, not the size,
of claims; an employer's rate may be affected more by two rela-
mary loss cutoff). Because the excess loss is viewed as less predictable, it in given
tively minor injuries (e.g., sprains) than by one injury resulting
relatively less weight, particularly for smaller employers. The amount of the excess
in permanent total disability or death.313
loss that affects an employer's rate depends on a variety of factors, including
amount of premium paid in the last benefit period. There is also an upper limit for
the amount of the excess loss that counts in the rate-making process; losses above a
certain amount are, thus, always viewed as random for purposes of rate-making. Id.
Therefore, irrespective of the size of an employer, no employer will be charged fully
310. Although the incentive value of experience rating appears to indicate that
for an extremely severe claim or for catastrophic events in which multiple workers
more is better, insurance industry researchers argue that "it would be unfair to
are severely injured or killed. This means that mine disasters or fires resulting in
insureds to charge back losses that were random and essentially unpredictable."
deaths are not fully recognized by the experience rating system. This is true irre-
Gary Venter, Experience Rating-Equity and Predictive Accuracy, 11 NCCI DIGEST.
spective of the level of employer culpability. In other words, the fact that workers
Apr. 1987, at 27, 28.
died because the doors of the Imperial Foods' chicken plant were locked might not
311. Appel & Borba, supra note 273, at 6 (discussing the impact of experience
result in significantly increased workers' compensation rates.
rating in NCCI jurisdictions). This distribution is reasonably consistent with the
314. For example:
general distribution of workers by employer size, which shows that 15% of employees
Employer A has a poor experience rating, with losses double the industry
work in firms with nine or fewer employees. Small firms constitute 76% of total es.
average, yet its credibility factor is only 25 percent. Employer B has a bet-
tablishments. BUREAU OF LABOR STATISTICS, U.S. DEPT OF LABOR, BULL. 2419, EM-
ter injury record, 50 percent lower than the industry average, with the same
PLOYMENT AND WAGES, ANNUAL AVERAGES 532-33 (1993).
25 percent credibility factor. With no credibility factor used, experience rat-
312. This assumption is based on historical experience. Telephone Interview with
ing would double Employer A's premium. and give a 50 percent discount to
Robert Finger, supra note 271. Injury frequency is apparently viewed as a reflection
Employer B. With the credibility factor, Employer A is charged only 25 per-
of underlying conditions in the workplace, while severity is tied more to the behav-
cent above the industry average, and Employer B receives a discount of just
ior and characteristics of the individual worker who is injured. The particular
12 1/2 percent
[T]he effect of the credibility factor is to reduce finan-
individual's reflexes, age, overall conditioning, level of work motivation, access to
cial incentives for injury prevention, and to blunt financial disincentives for
quality to medical care, etc. may affect the size (i.e., the severity) of the claim. Id.
firms that accrue poor industrial accident records.
313. In other words, the employer with a single claim of $150,000 is presumed to
Beckwith, supra note 7, at 59.
be a better risk for an insurer than an employer with ten claims of $2000 per
315. Worrall & Butler, Experience Rating Matters, supra note 12, at 85. Thus, a
claim. This may in part explain the energy with which some relatively knowledge.
continuum exists along which employers can be experience rated. The weight given a
able employers seek to deter the filing of smaller claims through a variety of strate-
firm's own experience increases with the firm's size. Smith, supra note 7, at 571-72.
gies, including having injured workers report for work (and pay) without assigning
For example, a 50% reduction in injury costs would result in no decline in premi-
them work. This particular strategy may benefit workers in the short run, since
ume for a firm of seven employees. Id. at 591-92. However, the same 50% reduction
they will collect full wages during the period of temporary disability, but may disad-
in a firm of 10 employees would result in a 5% drop in premiums; the reduction
vantage them in the long run, as they lose both permanent partial and medical
would equal a 17% decline for a firm of 75, a 36% decline for a firm of 750, and a
benefits related to the injury.
full 60% decline only for firms with 1750 or more employees. Id. at 572.
This weighting toward frequency is accomplished by dividing each actual loss
316. In reviewing the experience modification of employers with risks of $20,000
into primary and excess components. Victor, Experience Rating & Workplace Safety,
to $50,000 expected losses, employers with no losses had modification factors in one
supra note 309, at 75. Although both losses are adjusted based upon the credibility
state between 0.70 and 0.80; employers with a single loss or a small number of
of an individual employer's experience, the primary loss (currently set at $5000) is
minor losses had modification factors of 0.80 to 1.10. See Gillam, supra note 302, at
given greater weight for all individually rated employers, irrespective of size. Venter,
51, 53. In contrast, larger employers, with expected loases between $200,000 and
eupra note 310, at 33. This figure also has changed periodically. Victor, Experience
$500,000, end up with a distribution of modification factors which looks like a bell-
Rating and Workplace Safety, supra note 309, at 75 ($2000 was previously the prt-
shaped curve. Id. at 67.
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Several other problems result from this experience rating
incentives for loss prevention for some employers. 320 While
process. Relatively high risk smaller employers tend not to pay
these quirks appeared to provide substantial safety incentives
for the full cost of their individual experience, thereby
to employers, they also contributed to the level of confusion and
attenuating any incentive effects to increase worker safety. The
resulting hostility engendered by the complexity of the rate-
clustering of rates around the manual rate appears to result in
making process. Thus, the relationship between prevention and
a subsidy of high claims employers by low claims
cost savings may be confusing, even when it in fact offers
employers. 317 In addition, low claims employers may not be
maximal safety incentives.
fully rewarded for their superior experience; their rates will
Finally, experience rating and the rate-making process in
remain close to the manual rate even after years without any
general can only effectively reflect the incidence of injuries and
injuries or claims.
illnesses for which compensation is actually paid or
Not surprisingly, many employers do not understand the
approved. 321 As a result, the process fails to reflect any
rate-making system. Because of its approach to limiting the full
injuries which have occurred but which have not appeared in
impact of losses, the experience rating system can yield higher
the compensation system. In particular, occupational diseases,
modification factors, and consequently higher insurance rates,
as a class, tend to be inadequately reflected in insurance rates.
for employers with relatively lower claims costs. A Business
Because of long latency periods, uncertainty in diagnosis, and
Roundtable publication provides the following example. A very
obstructions to eligibility found in many compensation systems,
small contractor, with minimum expected losses, cannot have a
they may never be compensated at all. 322 Moreover, because
modification rate of less than 0.90 in one state's workers'
of their latency periods, the costs of many diseases cannot be
compensation system. 318 A larger contractor with a worse
charged against an employer in the period in which the
overall safety record may have a modification factor of 0.6,
exposure to the disease-causing agents occurred; if these
because the larger employer's past experience is seen as having
diseases are ever reflected in the rates, their impact generally
greater predictive value; the larger payroll therefore provides
does not occur contemporaneously with the existence of hazard.
this employer with the potential for a lower rating. 319 The
Therefore, the experience rating process fails in three ways
larger contractor will therefore pay a substantially lower in-
to send a clear message to employers regarding the benefits of
surance rate than the smaller employer, despite the smaller
improved safety. First and perhaps most obviously, the process
employer's better experience. Even with complete information,
does not reflect any of the externalized costs associated with
employers would have a difficult time understanding this
occupational morbidity and mortality which are not included in
result; although this process may be actuarially justifiable, the
the workers' compensation system. Second, for many employers,
result certainly appears illogical.
it fails to respond to true underlying injury and illness costs.
These problems are compounded by certain anomalies in
the rate-making process which, until recently, tended to reward
certain employers excessively. In some instances, these rate-
320. See generally VICTOR, WORKERS' COMPENSATION AND WORKPLACE SAFETY,
making quirks may have resulted in providing very strong
supra note 303; Victor, Experience Rating and Workplace Safety, supra note 309, at
79. According to Victor. NCCI's prior rating plan produced both debits and credits
that were too high for large accounts and too low for smaller insureds, although it
worked well for risks whose expected losses fell in the middle range. As a result of
these anomalies, some employers actually made more than $1 for each $1 saved in
claims costs through the experience rating process. At the same time, "(flirms with
greater than expected losses are penalized with premium increases that exceed the
additional losses. This world is quite symmetric." Id.
317. In fact, this is not a true subsidy. Small employers' rates cannot drop be.
The NCCI has recently revised the rate setting methodology to correct for
cause their prior experience lacks sufficient predictive value. Id. at 56. They there-
these aberrations. See Venter, supra note 310, at 31-35 (noting that the new plan
fore remain in B. pool of insureds who may have worse experience in the coming
"builds in a little less sensitivity to actual loss experience" for the group for whom
policy year. Since rates are established prospectively, the rates of these employers
the rating system bad previously shown excess sensitivity). The new methodology
remain relatively high. This can happen year after year. This effect extends to em-
was adopted by NCCI in July 1990. See Hager, supro note 13, at 44.
ployers with risks (i.e., annual premiums) in the $200,000 to $500,000 range. Id. at
321. The ratemaking process thus provides employers significant incentive to
57. The fundamental question is whether the experience of these smaller employers
reduce the number of claims that are filed or paid, either through pressuring injured
is as uncertain as NCCI rating methodology would appear to indicate.
employees not to file claims or through challenging the eligibility of claims once they
318. THE BUSINESS ROUNDTABLE, supra note 306, at 10-11.
are filed. This problem is the focus of the discussion in part 111.C infra.
319. Id. at 11.
322. Refer to note 101 supra.
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Third, to the extent that it does reflect these costs, the rate.
making process tends to obscure this message, making it dif.
investigators who have concluded that experience rating
ficult to discern the relationship between costs and injury and
"matters" have primarily found an association between larger
illness rates.
firms and better safety records.328 Because larger employers'
There is good reason to believe that many employers have
premium rates more closely reflect their true experience, these
no idea of the interrelationship between their workers' com-
studies have concluded that experience rating is the cause of
pensation premium rates and their underlying rates of injury.
improved safety. Given the wide number of variables which
The findings in the Upjohn Report were particularly troubling
may cause a larger employer with greater financial and person-
on this subject. 323 The survey asked the 124 respondent
nel resources to achieve better safety, the drawing of this
employers to report their current cost level and to indicate the
causal link may be fallacious. It is nevertheless interesting to
trend in these costs over the preceding three years. Only 17
note that experience rating studies confirm information
employers actually provided an estimate of their costs, and, ac-
collected elsewhere: larger firms do tend to have, or to report,
cording to the report, "many of these were not credible
fewer injuries.
responses. #324 The conclusion reached was unavoidable:
"[M]any if not most employers did not know their current WC
C. The effect of special funds and the residual market. The
[sic] cost level. *325 Employer ignorance of both the amount
evidence is, therefore, not strong that the distribution of costs
paid and the reasons for it, may explain one of the report's
through the experience rating process is an effective stimulant
for safety. To the extent that smaller high risk employers have
accompanying observations: that high claims employers are
likely to blame either workers or the workers' compensation
their experience discounted through the rate-making process (or
system for their high costs. 326
do not understand that process), the likelihood that workers'
This level of ignorance also helps to explain the results of
compensation costs will encourage them to improve workplace
studies which have investigated the effectiveness of the
safety inevitably declines. Moreover, high risk employers have
the effects of their own experience further dampened as a
experience rating process in promoting safety. In general, these
result of two other components of workers' compensation cost
studies have failed to demonstrate a clear relationship between
distribution: special funds and the rate structure in the
experience rating and increased safety efforts. Those
residual high risk insurance market.
Special funds in workers' compensation are explicitly
designed to create a large, non-merit-rated insurance pool for
323. Refer to note 7 supra.
324. Upjohn Report, supra note 7, at III-13 (emphasis added).
certain risks. 329 Most commonly, second injury funds subsidize
325. Id. This conclusion is certainly consistent with my own experience as West
injuries that occur to employees who have preexisting
Virginia Workers' Compensation Commissioner. Between 1985 and 1989 manual
disabilities. 330 These funds have a laudable goal: to encourage
rates in West Virginia were frozen. Many employers nevertheless continued to
the continued employment of previously injured workers by
proach legislators to complain about increases in workers' compensation costs. During ap-
this period, an individual employer's rate could only have gone up if that employer's
modification factor had increased; an increase in the modification factor could only
have occurred if the particular employer's experience had worsened in comparison to
that of the other employers in that industrial classification. That is, increases in cost
workers' compensation crisis is the fault of workers, who make inappropriate or ex-
during this period were all attributable to relatively worsening claims experience.
cessive claims upon the system. Refer to part III.C infra.
These employers not only had no idea that this was true; many of them would not
328. See, e.g., Worrall & Butler, Experience Rating Matters, supra note 12, at 91-
believe it was true after being shown documentation.
92 (noting an association between firm size and safety and concluding that larger
326. Upjohn Report, supra note 7. at IV-2, V-11.
firms' comparatively better safety record is derived from the workers' compensation
327. Refer to note 258 supra. The findings of these studies are somewhat blurred
experience rating system). This conclusion is consistent with the simulation model
by the fact that several of them conclude that any "real" safety effects may be ob-
developed by Richard Victor which projected greater incentives for larger insured
scured by the observed phenomenon that workers file more claims when benefits
firms. VICTOR, WORKERS' COMPENSATION AND WORKPLACE SAFETY, supra note 303, at
rise. See Smith, supra note 7. at 581 (noting "(e)vidence that OSHA and workers'
51-54.
compensation have reduced injuries in the workplace is minimal
329. See Lloyd W. Larson & John F. Burton, Jr., Special Funds in Workers' Com-
workers' compensation, real safety effects are clearly swamped by reporting In the effects."). case of
pensation, in WORKERS' COMPENSATION BENEFITS: ADEQUACY, EQUITY, AND EFFICIEN-
The specter is therefore raised that if claims increase with benefit increases, and
CY, supra note 29, at 117; Hylton & Laymon, supra note 255, at 167-70.
efforts at safety fail to offset these increased costs, then "marginal benefit of safety
330. Some states require these preexisting disabilities to be of a particular type
provision falls and the number of injuries could rise." Worrall & Butler, Experience
or to be work-related; others do not. Most states require that the combined injuries
Rating Matters, supra note 12, at 83. This further stimulates charges that the
result in permanent total disability. See Larson & Burton, supra note 329, at 123-
25.
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removing any direct liability for reinjury from the individual
individuals cannot obtain insurance in the private voluntary
employer. The funding for these injuries is usually drawn from
market, the government may be forced to establish a high risk
all employers without regard to claims which are made against
pool. As insurers perceive rate adequacy to decline, the need for
the fund and without regard to where the original injury OC-
governmental intervention grows. In the case of workers'
curred. 331 The result is that the costs of claims paid by these
compensation, the National Council on Compensation Insurance
funds are not internalized by individual employers; instead,
(NCCI) has alleged that state regulators, who must approve
they are paid through the fund without any effect on the
increases in manual rates, are inappropriately suppressing
employer's premium rates. 332 An unintended consequence of
rates for political reasons. 336 Finding that workers' compen-
this is that both experience-rated and self-insured employers, as
sation is a less profitable line of insurance,337 insurers have
well as insurers, have an incentive to "dump" claims into a
either withdrawn from states entirely or have limited their
second injury fund to avoid any financial responsibility for the
voluntary market share to those employers who are good
risks.
338
costs of the claim. 833 This dumping results in further ex-
pansion of administrative review of claims to weed out those
Since employers must carry this insurance, states have
which are improperly filed against the special funds. 334
mandated the creation of high risk nonvoluntary or "residual"
The functioning of the residual market in workers'
pools (often administered by NCCI)³ or have legislatively
compensation further subsidizes high risk employers. As costs
created state funds to serve the residual high risk market. 340
rise at a rate greater than payroll, manual rates should
As insurance carriers have become increasingly unwilling to
increase. If rates are prevented from rising as experience
provide insurance to relatively high risk firms in the voluntary
worsens by either market or regulatory forces, insurers will
market, the residual market has grown from 5.5 percent of the
only write private voluntary insurance for those potential cus-
workers' compensation market in 1984 to 24.1 percent in
tomers who have better than average experience. In systems
1990. 341 NCCI estimates that operating losses for the residual
which do not require an enterprise or individual to purchase
market have grown from $223 million in 1983 to $4.2 billion in
insurance, high risk individuals will often forego buying
1990. 842 The insurance industry blames rate inadequacy,
insurance if the merit rating system makes the insurance
resulting from denial of rate increases by regulatory bodies, for
prohibitively expensive. This phenomenon has, for example,
this growth in the residual pool. 343
been observed in the health insurance market and is a contrib-
uting element to the current reform attempts.336
On the other hand, if insurance is mandatory and
336. Ronald C. Retterath, Regulation, Competition, and Profitability in Workers'
Compensation Insurance: A Response, JOHN BURTON'S WORKERS' COMPENSATION
MONITOR, Mar.-Apr. 1992, at 21-22 (Retterath was Senior Vice President and Actu-
ary for the NCCI at the time this article was written). In 1991, regulators approved
331. The basis for the funding can be a surcharge on benefits, premium, or a flat
less than the requested increase in 24 out of 28 states in which increases were
amount. Id. at 127-28.
sought. NCCI had filed for an overall 16.4% increase in the 32 states in which it
332. Id at 127 (listing the various ways in which the funds are financed).
acts as an advisory body; only a 7.6% increase was approved. Klein, supro note 52,
333. Experience with dumping was particularly acute in West Virginia, where the
at 10. Notably, the original rate requests ranged from a decrease of 12.2% in Oregon
second injury funds premiums were grossly inadequate to cover the incurred costs
to an increase of 44.6% in Alabama. Id. at 11-12 tbl. 2. Refer to Part IV infra for
for permanent total disability claims, particularly those claims which arose from
more on the Oregon story.
declining hazardous industries like coal mining. See Spieler, supra note 252, at 354.
837. Profits declined steadily from 1985 to 1990; the estimated rate of return
55.
dropped from 13.7% in 1985 to 4.8% in 1990. Klein, supra note 52, at 15.
334. Often, this is accomplished by requiring employers to notify the workers'
338. Freedman, supra note 56, at 20-21.
compensation administrative agency regarding the disabled status of individual em-
339. The National Workers' Compensation Reinsurance Pool, administered by the
ployees when they are hired. Needless to say, this in turn led to a rather complex
NCCI, is now the largest writer of workers' compensation insurance in the nation.
discussion regarding the interrelationship of this process to the hiring procedures
Appel & Borba, supra note 273, at 16 n.l.
under the Americans with Disabilities Act. See EQUAL EMPLOYMENT OPPORTUNITY
340. Freedman, supra note 56, at 20.
COMMISSION, A TECHNICAL ASSISTANCE MANUAL ON THE EMPLOYMENT PROVISIONS
341. Klein, supra note 52, at 15-16 (for states administered by the NCCI). In
(TITLE I) OF THE AMERICANS WITH DISABILITIES ACT 9 9.5 (1992) [hereinafter EEOC
1989, 38 states had a residual market loss, led by Texas, whose $551 million loss
TECHNICAL ASSISTANCE MANUAL] (suggesting that an employer may make the nec-
represented 22% of the total countrywide loss, followed by Massachusetts, Florida,
essary inquiries and require a medical examination after a conditional offer of em-
Maine, Louisiana, and Rhode Island. These six states accounted for 63% of the total
ployment).
residual market loss in 1989. Huff, supra note 335, at 24.
335. See generally William H. Huff III, Deep in the Heart of Reform, 92 BEST'S
342. Klein, supra note 52, at 16.
REV., Dec. 1991, at 24.
343. Freedman. supra note 56, at 22.
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The problem is not the existence of this residual pool per
engaging in excessively risky activity; no state is willing to
se, but the fact that the premium rates charged to the
close an enterprise because of its high risk status. 348 Nor
employers in this pool are not adequate to insure the covered
have most states, in the past, required safety inspections or
risks. In those states without state-run funds which insure the
other loss prevention measures by employers in order to obtain
high risk market, these underwriting losses in the residual
insurance in the residual market. 349 Imperial Foods in
markets are passed to insurers participating in the voluntary
Hamlet, North Carolina, was in the residual market at the
market through assessments based upon their share of the
time of its fire that killed twenty-five people; it was,
voluntary market. 344 Employers who have obtained insurance
therefore, receiving a subsidy from safer employers for its
in the voluntary market pay for the underwriting losses in the
reprehensible, and ultimately deadly, activities.
form of a surcharge on rates. 345 The extent of this problem
varies considerably from one state to another. 346 According to
2. Externalization of Costs. The underlying workers'
the insurance industry, a "death spiral" results as insurers pull
compensation paradigm never intended that workers be fully
out of voluntary markets; in Maine, it led to the collapse of the
compensated for the cost of their injuries. Because all
voluntary market. 347
occupational injuries are supposed to be compensated in this
This system means that lower risk employers in the
system-not only those that are the result of a wrong
voluntary market are forced to subsidize the costs of high risk
committed by the employer-workers simply have no funda-
employers in the residual market; this hardly makes sense if
mental legal claim to full compensation. Therefore, injured
one believes that deterrent effects are enhanced by appropriate
workers themselves, their families, and the public are expected
internalization of enterprise-specific costs. In fact, no employer
to contribute to the costs of workplace injuries.
appears to be forced from the market entirely as a result of
This sharing of costs occurs in numerous ways. First, many
occupational injuries and illnesses are simply never com-
pensated at all. As noted above, workers do not receive
compensation for many occupational illnesses. 351 In addition,
344. According to one source, there is a lack of price differential between the
voluntary and involuntary markets despite the fact that the experience of the em-
to the extent that injured workers are discouraged from filing
ployers in the involuntary market is "wildly different." Id. Thus, "if both groups are
claims for eligible injuries, or choose not to file them, they are,
paying the same price, the voluntary market inevitably is paying part of the cost of
in effect, choosing to absorb directly the costs associated with
the involuntary market." Id. This phenomenon of depressed rates in the residual
market may, however, be changing. Telephone Interview with Robert Finger, supro
note 271.
345. According to the NCCI, this residual market "burden" has grown from 4.3%
of voluntary premiums written in 1983 to 16.8% in 1990. Klein, supra note 52. at
16; see also Burton (1993), supra note 2, at 10-11 (noting the same trend).
348. In this kind of mandatory market, when the primary goal is to assure com-
346. "In 1990, the residual market share ranged from 3.1 percent in Arizona to
pensation to victims, "denying coverage for losses caused by breach of safety stan-
87.1 percent in Maine. Similarly, the residual market burden for policy year 1990,
dards could be viewed as undesirable." ABRAHAM, supra note 269, at 60. As a result,
as calculated by NCCI, ranged from 1.3 percent in Arizona to 304.8 percent in
the residual market provides the insurance coverage; once insured, the enterprise's
Rhode Island." Klein, supra note 52, at 16.
right to continue operating is also assured.
847. Independent Panel Issues Plan for Rescuing State Comp System Workers'
349. In 1990, Texas adopted workers' compensation reform that allows the can-
Compensation Report, in EMERGING TRENDS IN WORKERS' COMPENSATION AND SAFETY
cellation of policies of employers in the residual pool if they fail to carry out safety
21 (1992) (noting that in Maine, the major insurers in the voluntary market with-
recommendations of the assigned carrier's safety engineer. Huff, supra note 335, at
drew; the residual market has a $547 million deficit; self insurance and the high
25. Note, however, that Texas is one of the few states in which workers' compensa-
risk pool comprise 90% of workers' compensation insurance in the state; and Maine
tion insurance is not mandatory.
leads the nation in the number and duration of workplace injuries). The situation in
350. William Hager, Time to Act: Examining Workers' Compensation, 93 BEST'S
Maine spawned aggressive litigation by the insurance industry. First, insurers unsuc-
REV., Nov. 1992, at 47, 48 (noting also that
cessfully challenged the refusal of the insurance department to approve rate increas.
the chicken-processing company apparently had little interest in employee
es. National Council on Compensation Ins. V. Superintendent of Ins., 481 A.2d 775
safety: It had no fire-prevention equipment, conducted no fire drills and
(Me. 1984). After the legislature passed a new rate statute in 1985, which mandated
lacked an evacuation plan. Moreover, the company was in the residual
reduction in insurance rates, required participation in an assigned risk pool, and
workers' compensation market-it was unable to find an insurer willing to
placed a limit on future rate increases, insurers again went to court, arguing that
underwrite its coverage. By being in the residual market, this unsafe em-
the revised statute was unconstitutional and confiscatory. They did not prevail. Na.
ployer got the insurance industry and, indirectly, other employers to sub-
tional Council on Compensation Ins. V. Superintendent of Ins., 538 A.2d 759 (Me.
sidize its risk.)
1988) (holding that appeal of adverse lower court judgment was moot as a result of
the legislative repeal of the law which was the subject of the complaint).
351. Refer to notes 89-93 supra and accompanying text.
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the injury themselves. Obviously, costs associated with
replacement for temporarily disabled low wage workers may
uncompensated occurrences are entirely externalized; workers
approach net wages in many states, 355 the adequacy of wage
or other social benefit programs absorb these costs.
replacement as a percent of pre-injury earnings declines as
Second, even for those injuries and illnesses which are
wage rates rise. In the most common benefit structure, workers
compensated, a worker's full pecuniary losses are not replaced
receive two-thirds of their pre-injury gross earnings up to a
by compensation benefits. 353 To the extent that compensation
maximum of 100% of the state average weekly wage;358 as a
is inadequate, and higher wages have not already provided
result, workers who earn more than 150% of the state's average
compensation for the risk of injury at work, injured workers
wage will collect less than two-thirds of their own wage. The
themselves absorb the costs of injuries. Although wage
level of wage replacement is therefore least adequate for the
highest wage workers, who may work in the most dangerous
jobs. The traditional high risk construction and mining jobs are
352. Refer to note 101 supra. The general issue of underreporting of claims is
all in this category. 367 For example, in 1992, construction
discussed in part III.C infra.
353. Workers' compensation provides partial wage replacement plus medical coats.
workers earned, on average, $537.70 per week³⁵⁸ and miners
Lost income itself only constitutes elightly over half of a worker's pecuniary loases.
earned $638.31 per week; these workers would have
Priest, supra note 12, at 1654.
collected a maximum of $400 in weekly temporary total dis-
354. To the extent that workers' wages are reduced when employers assume the
costs of compensation, workers always pay, indirectly, for the cost of workers' com.
ability benefits in Alabama, $328 in Arizona, $252 in Arkansas,
pensation benefits; therefore, employers only nominally pay for the system. The theo.
$250 in Georgia, $336 in Idaho, and so on. 360 Thus, the
retical basis for the argument that workers actually benefit only minimally (if at all)
degree of adequacy of compensation for an injury declines as
from compensation benefits lies in an analysis of market equilibrium. To the extent
the overall wage-and often the level of hazard of the
that wage levels reflect hazards and costs of injuries, then compensation for injuries
may have been provided on an ex ante basis to workers. In the perfect world, alter-
industry-increases.
ation of the liability scheme should cause a renegotiation, in this case of wage rates,
Moreover, despite the fact that the aggregate amount spent
which will yield an equivalent equilibrium without an increase in costs to either
on permanent disability is high,* permanent partial
participant in the bargain. See Ronald H. Coase, The Problem of Social Cost, 3 J.L.
& ECON. 1, 8 (1960) (stating Coase's original theorem that, in the absence of trans.
disability payments rarely approximate the full amount of loss
action costs, changes in liability schemes should not result in a change in the under-
lying bargain). However, transactional costs generally overwhelm this equilibrium;
the task then becomes to identify and analyze these costs. See generally Robert C.
Progressive Law & Economics-And the New Administrative Law. 98 YALE LJ. 341.
Ellickson, The Case for Coase and Against "Coaseanism", 99 YALE LJ. 611 (1989)
355-57 (1988) (arguing that the differential is inadequate and that other forms of
(noting the operation of transaction coats in the context of employment).
regulation of workplace hazards are needed). Certain highly hazardous industries,
In the context of workers' compensation costs, the role of compensating wage
particularly in the agricultural sector, exhibit low wage scales despite the high level
differentials which may be paid for hazardous work becomes a central concern. See
of risks for workers. Job scarcity and worker ignorance regarding hazards are prima-
MOORE & VISCUSI, supra note 258, at 60-68, 162 (concluding that a substantial wage
ry factors which decrease the likelihood that adequate wage premiums will fully
offset is generated by the provision of benefits and that wage offsets exceed premi-
compensate for hazardous work. To the extent that combined wage premiums and
um costs so that the workers' compensation system "does not place a financial bur-
workers' compensation costs fail to provide full compensation, then costs are
den on firms"); Smith, supra note 7. at 572 (noting studies which question whether
externalized.
er ante payments fully compensate for ex post losses). "For purposes of analysis, an
355. According to one study, 75% of all temporarily disabled claimants retain 80%
employee's wages in a particular job can be thought of as the sum of the wage that
to 100% of their regular after-tax income. Hylton & Laymon, supra note 255, at 175
would prevail for that job if there was no danger and a premium which compensates
n.276 (citing KAREN R. DEVOL. INCOME REPLACEMENT FOR SHORT-TERM DISABILITY:
for the danger associated with the job." James R. Chelius, Liability for Industrial
THE ROLE OF WORKERS' COMPENSATION xi-xiii (1985)).
Accidents: A Comparison of Negligence and Strict Liability Systems, 5 J. LEGAL
356. U.S. CHAMBER OF COMMERCE, supra note 121, at 20-23 (showing that the
STUDIES 293, 295 (1976). To the extent that the wage differential is assumed to
maximum temporary total disability benefit ranges from 70% of the state average
compensate adequately for the level of hazard, and other forces do not interfere, the
weekly wage in Arkansas and Oklahoma to 200% in Iowa; the majority of states cap
provision of compensation should result in a reduction of the hazardous work premi-
these benefits at 100% of the state average weekly wage).
um in the wages; therefore, the employer's costs should be unchanged. Workers then
357. EMPLOYMENT AND EARNINGS 1993. supra note 300, at 91-93 tbl. C-1.
will be financing the system through reduced wages since the availability of benefits
368. Id. at 91 (average weekly earnings for all construction workers nationally).
eliminates the need for the wage premium. Professor Weiler has noted this same
359. Id. (average weekly earnings for miners nationally).
phenomenon in another way when he points out that workers' compensation benefits
360. These weekly benefit amounts have been calculated based upon information
are largely financed by workers, whose wages and benefits are reduced in order to
regarding percent of wages and weekly benefits limits provided in U.S. CHAMBER OF
finance increasing payroll-based premium costs. Weiler, supra note 234, at 848 n.62.
COMMERCE, supra note 121, at 20-23. In a few states, benefits would have been sub-
On the other hand, the economic model which concludes that wage premiums
stantially higher. For example, in Iowa, the most generous state for this category,
compensate workers adequately for the performance of hazardous work is subject to
the maximum benefit is 80% of spendable (net) pre-injury wage up to a maximum of
considerable criticism; there is a substantial question as to whether compensating
200% of the state average weekly wage, or $755 in 1992.
wage differentials are set at the appropriate level. See, e.g., Susan Rose-Ackerman.
361. Refer to note 67 supra.
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in future wages. 362 Permanent total disability benefits do not
benefits, most states have resisted this proposal because of the
come close, in some states, to compensating for a family's loss
enormous increase in actuarially calculated incurred losses
of income. 363 Fatalities are sometimes compensated least
when benefits escalate annually. 366
adequately. In essence, this means that more serious inju-
Third, nonpecuniary losses are never compensated by
ries and illnesses may be compensated less adequately than
workers' compensation programs. Benefits are plainly limited to
less serious ones.
wage-loss protection, loss of earning capacity, 367 and re-
Thus, the level of benefits provided to injured workers, and
habilitation costs and medical treatment 368 Pain and suf-
particularly seriously injured workers in dangerous, high wage
fering is noncompensable in this system. Furthermore, family
industries, does not approach the full economic loss suffered by
members are not compensated for any of their economic or
these workers and their families. This problem is exacerbated
other losses associated with a worker's injuries. 369
by the fact that most states do not allow the rate of benefits in
Fourth, workers' compensation benefits are often reduced
any particular award to escalate with inflationary trends;*
by receipt of benefits from other sources, including both social
in the majority of jurisdictions the benefit rate set at the time
insurance programs and private disability and sickness
of the award applies for the duration of the award. The
plans. 370 Rules of assignment and subrogation also lead to
adequacy of compensation for more severe injuries therefore
reductions in benefits when injured workers obtain recovery in
declines over time. Again, this affects high wage workers in
civil actions. 371 Irrespective of the employer's contribution to
hazardous industries most adversely. Although the National
Commission in 1972 strongly recommended some escalation of
366. Hylton & Laymon, supra note 255, at 178 n.293.
367. Permanent partial disability benefits, which are calculated in a variety of
different ways, are generally intended to compensate for future loss of earning ca-
362. The permanent partial disability amount for scheduled injuries, for which
pacity or loss of mobility in the labor market resulting from the injury and the en-
statutes set a specified level of compensation, varies a great deal among states. For
suing permanent disability. In some states, the benefit is calculated based on loss of
example, loss of a hand is "worth" $18,472 in Massachusetts but pays $193,788 in
future earnings; in others, it is based on a quantification of functional loss (generally
Connecticut. In contrast, the more liberal federal compensation system for federal
referred to as whole man impairment). The theoretical justification for paying this
employees pays $304,727 for loss of a hand. U.S. CHAMBER OF COMMERCE, supra
benefit, which is unrelated to actual time off work, is the same. See IC LARSON,
note 121, at 24. In some states, but not others, loss of a hand may lead to a per-
supra note 65, § 57.14, at 10-69.
manent total disability award if the injured worker then becomes unable to work. In
368. SOMERS & SOMERS, supra note 34, at 59.
many states, the amount of compensation for permanent disabilities is also tied to
369. 2A LARSON, supra note 65, $ 66.20, at 12-89, 12-92, 12-98, 12-103; Weiler,
an individual's wage rate; statutory maximum benefit levels apply to this category of
supra note 259, at 831. Moreover, until the Family and Medical Leave Act (FMLA)
benefits as well. Therefore, high wage workers receive less adequate benefits for
became effective in mid-1993, family members who cared for injured workers could
permanent disabilities as well as for temporary ones.
be terminated from unemployment. The Family and Medical Leave Act now provides
363. Permanent total disability awards are limited to amounts as low as
a right to a 12 wook unpaid leave for individuals who work for employers with 50
$164,000 in Indiana; $125,000 in Kansas; $102,000 in Mississippi; $196,530 in South
or more employees and who must miss work in order to care for an injured or ill
Carolina; $127,296 in Tennessee. Id. at 22-23. The majority of states do not set an
family member. 29 U.S.C.A. §§ 2611-2612 (West Supp. 1994). This minimal level of
absolute cap on these awards, however.
job security does not, however, resolve the issue of uncompensated costs for occupa-
364. Fatality benefits are paid to surviving spouses and children and generally
tional injuries and illnesses.
cause upon remarriage. The benefit amounts are limited to a maximum number of
370. For example, to the extent that injured workers become unemployed or un-
weeks in some states. The total benefit is also capped in many states; the amount
employable as the result of permanent disabilities, other social insurance and social
limits range from $95,000 (spouse only) in California to $228,500 (spouse and chil-
welfare systems provide alternative sources of non-wage income. These benefits may
dren) in Michigan. Id. at 26-27.
be offset against a workers' compensation award, if one was received, resulting in a
365. Id at 20-23. Although most states now tie the maximum benefit to the
lower benefit to the injured worker. See, e.g., W. VA. CODE $ 23-4-23(b) (Supp. 1993)
state average weekly wage, in order to avoid the need for legislative approval for
(reducing workers' compensation permanent total disability benefits when Social Se.
increases, individual benefit awards themselves do not escalate in most states. States
curity old-age benefits, wage continuation, or private disability benefits are received);
which do make at least some provision for inflation within awards include: Califor-
GA CODE ANN. § 34-9-243 (Michie 1992) (reducing workers' compensation benefits by
nia, Connecticut, Hawaii. Idaho, Illinois, Maine (for injuries before January 1, 1993),
the employer funded portion of a disability or other wage contribution plan); MICH.
Maryland, Minnesota, Montana, New Hampshire, Rhode Island, South Dakota, Texas
COMP. LAWS ANN. $ 418.354 (West 1993) (reducing workers' compensation benefits by
(three percent annually only for benefits given for life), Vermont, Virginia, and
employer funded portion of a self-insurance, wage contribution, or disability plan,
Washington. Id. Even these states limit escalation in a number of ways. For exam-
and one-half of old age social security benefits); OR. REV. STAT. 5 656.240 (1991)
ple. in some, inflation adjustment does not begin until two or more years after eligi-
(deduction for sick leave payments only).
bility for benefits commences. West Virginia, which is not listed as a state with
371. Rules governing recovery in third party civil actions brought by workers,
escalation in the U.S. Chamber of Commerce publication, allows benefits to escalate
most commonly against manufacturers of equipment or toxic substances used in the
only after they become capped by the maximum benefit; at that point, they can
workplace, almost universally provide for subrogation. Except in Ohio, Georgia, and
move upward as the cap itself escalates.
West Virginia, the employer or insurer is given a statutory lien against the
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the harm, the employer's costs are thus by the injured
worker's ability to obtain alternative of income or
C. The Effect of the Employment Relationship
damages.372
To the extent that full internalization increases any
The no-fault workers' compensation system, which insulates
incentive effects of compensation workers'
employers from recognition of their responsibility for workplace
compensation plainly does not maximize the
The process
safety, also engenders claims that worker behavior is the
of cost spreading in workers' compensation fundamental
primary cause of skyrocketing costs. The resulting worker-at-
reflection of the underlying workers' paradigm,
fault paradigm further confounds any discussion of the
which presumes that employers are
tiame
for
relationship between costs and prevention of injuries, as
occupational injuries. The goal in designing distribution of
prevention becomes equated with cost containment and cost
costs in workers' compensation is to create efficient system
containment efforts focus on worker, rather than employer,
actions.
373
which limits, but does not obliterate, the of the
injuries on any of those involved. T== to have
Injured workers are not victims of torts committed by
employers pay for the cost of compensation
limit the
strangers; instead, workers are caught within an unequal
amount of that compensation, serves this
Within this
employment relationship which influences their decisions
framework, workers' compensation has been in meet-
regarding when, or whether, to file workers' compensation
claims. The nature of the employment relationship itself
ing its goals.
The substantial increase in aggregent paid by
therefore has a significant influence on the ability of workers'
employers has resulted in increases
individual
compensation costs to encourage primary prevention of injuries.
employers and engendered a concern which
focus on
the distribution of costs. When employers benefits
1. Roots of the Worker-at-Fault Paradigm. The argument
should be decreased, they are in effect favor of a
that worker, rather than employer, behavior is the primary
cause of cost escalation has its roots in the idea that the
system which would decrease their inter
costs and,
symmetrically, increase workers' contrib:
argument is
occurrence of injuries, the filing of claims, and the persistence
of disability all lie within the independent control of workers.
bolstered by the view that workers any responsible for
Several studies which have found a correlation between
increasing costs.
increases in claims filing activity and increases in mandated
benefit levels have provided support for this view.374
employee's tort rights to secure reimbursement of wase benefits.
Weiler, supra note 259, at 836. As a result of these the self-in-
373. We tend to assume that deterrence depends upon the internalization of cost
sured employer or the workers' compensation insurer
costs
asso-
and an accompanying understanding that primary deterrence will efficiently reduce
ciated with the workplace injury from the worker's receive party liti-
costs. If employers can successfully force reduction in costs, by legislative action or
gation, irrespective of the employer's contribution to the - true despite
by influencing filing of claims, then the likelihood they will pursue primary preven-
the fact that a federal study of product liability in = found that
tion of injury and disease declines. This is particularly true because claims-reducing
employer negligence was present in one quarter of all brought
activity may be less expensive than injury-reducing activity in many instances, espe-
by injured workers. Id. at 837 (citing Jonathan M. Weiser Leadity in the
cially if no economic value is placed upon the animosity that grows between employ.
Workplace: The Effect of Workers' Compensation on the Liabilities of
ers and employees as a result of aggressive scrutiny of claims by employers.
Third Parties, 1977 WIS. L REV. 1035, 1039; W. Kip iss information Be-
374. Refer to note 18 supra for a list of these studies. All of these studies show
tween Product Liability and Workers' Compensation = E: Remedies for
that increases in filing of claims occur when benefits are increased. The studies con-
Workplace Injuries, 5 J.L. ECON. & ORG. 185 (1989) These - designed to
clude, based on this evidence, that increased benefits cause increases in claims filing.
prevent double recovery by the worker but may. instea: - recovery.
This conclusion regarding causation is not directly supported by the evidence in the
Workers, having been inadequately compensated by WORKET - are often
studies.
also not fully compensated for losses in this third party inpure may be par-
As noted above, several studies also conclude that, although incentives to re-
ticularly true when these suite are settled prior to trial. The -ght of subro-
duce injury rates do exist in the system, any actual reduction in injuries is obliter-
gation that prevails in most states therefore prevents ful. - workers.
ated by the increases in claims filing. See, e.g., Ehrenberg, supra note 18, at 71, 95
372. As Professor Paul Weiler has noted, these subrapable Fares "make little
(noting "[t]hat a positive relationship between frequency and benefits is observed
sense" when they effectively insulate an employer who IF such 0. grossly negli-
implies that employees' responses to higher benefits dominate, on balance, over
gent or reckless behavior. Id. at 854. Furthermore, the - if = party litiga-
employers' responses"); Butler & Worrall, Moral Hazard, supra note 15, at 201-02
tion has taken pressure off employers and the worket ========================= exclusivity
(concluding that real injuries do not increase but that the moral hazard effect is
doctrine. Id. at 828-29.
predominant).
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Commentators have proposed two different explanations for this
lend support to the view that improvements in occupational
apparent relationship: that increased benefit levels lead
decreased attentiveness to safety and therefore increased rates to
safety hinge upon changes in worker behavior.
This focus on worker-causation of injuries has interesting
the filing of more claims.
of injury; and that increased benefit levels simply encourage
historical roots. Although the safety movement which emerged
early in this century initially targeted changes in industrial
a. Workers-at-fault I: Unsafe worker behavior. The first
process, 377 by the late 1940s this approach was overtaken by
the view that further cost effective engineering improvements
explanation (that increases in benefits lead to increases in
were not possible. 378 This change in prevention strategies is,
injury rates) assumes that higher disability payment levels tend
of course, inconsistent with the views of most modern safety
to remove workers' economic incentive to prevent injuries.
According to this view, workers suffer more injuries (and more
experts;37 it nevertheless haunts current discussions of
workers' compensation cost containment, which often focus on
severe injuries) because higher benefits diminish the economic
worker rather than the employer behavior in the prevention of
risk associated with injury and result in lowered vigilance
injuries. 380 Successful loss control firms381 direct their at-
against injury. There are, therefore, more true injuries due to
tention to "unsafe acts rather than unsafe conditions.' *382 The
relaxation of worker attentiveness as a result of benefit
frequently expressed frustration of managers that workers are
increases. 375 This conclusion, drawn from the observed
inadequately safe, and the continuous exhortations in industrial
increases in compensation claims associated with increasing
workplaces for workers to act safely, are a reflection of this
benefits levels in the 1970s, led the authors of the 1987
Economic Report of the President to conclude that "workers'
compensation benefits have unfavorable effects on safety.
Thus, in this model, investigators (and employers) point to
worker carelessness or lack of risk aversion as a primary cause
377. Refer to part III.A supra.
of injuries and, therefore, claims. These investigators therefore
378. SOMERS & SOMERS, supra note 34, at 202-05 (concluding that the possibili-
ties of improving prevention through engineering change had been exhausted by the
1940s).
379. Refer to notes 9-10 supra. Notably, in contrast with the Somers' assessment
375. See, e.g., Butler, supra note 18, at 61, 86 (concluding "accident rates do ap.
of prevention opportunities, in 1949 Dr. John E. Gordon suggested that injuries be-
pear responsive to changes in the structure of benefits"); Chelius, Incentive to
haved like classic infectious diseases and were therefore amenable to primary pre-
Prevent Injuries, supra note 18, at 154, 158-60 (observing that claims rise as benefits
vention strategies. NATL COMM. FOR INJURY PREVENTION AND CONTROL, INJURY PRE-
rise and concluding that higher benefits are associated with higher injury rates);
VENTION: MEETING THE CHALLENGE 7 (1989). His contribution and that of others
Ehrenberg, supra note 18, at 86 (summarizing other studies as "strongly suggest(ing)
shifted injury prevention away from an "early, naive preoccupation with distributing
that increases in workers' compensation benefits are associated with higher injury
educational pamphlets and posters and toward modifying the environments in which
and claim rates, with at least some fraction of the increase being a pure reporting'
injuries occur." Id. "The last folklore subscribed to by rational men 18 the belief that
or 'classification' effect"); Worrall, supra note 18, at 11 (noting that the "message of
injuries are accidents." Id. at 12. As noted in Part II supra, modern public health
a growing body of research is that higher benefits will bring not only greater costs
approaches attempt to remove human error as a factor in causation. This approach
for the cases already being compensated but also more claimants and, perhaps, more
is also consistent with the findings of the Upjohn Report, supra note 7. at 9, 14,
work injuries ."). Chelius states that "(w]hile it is obviously a value judgment
and the California Insurance Study, supra note 7, at 97, 100-02, both of which indi-
as to how much weight to place on the prevention goal as opposed to the income
cate that a considerable number of serious hazards which result in costly workers'
security goal of workers' compensation it is important to recognize that there is a
compensation claims can be eliminated through engineering controls on a cost effec-
conflict between them." Chelius, Incentive to Prevent Injuries, supra note 18, at 154,
tive basis.
158-60. In other words, Chelius is arguing that workers may be better off with low-
380. According to the CDC's Occupational Injury Panel, "[T]here has been much
or levels of benefits because they will injure themselves less frequently. At least one
emphasis on workers' behavior as the cause of injury and a corresponding tendency
recent study indicates that real injury rates do not rise. Butler & Worrall, Moral
Hazard, supra note 15, at 201.
to blame the worker, often incorrectly." CDC Injury Report, supra note 9, at 344.
381. These firms offer consultative services to employers and insurers which are
The investigators who conclude that injury rates (as opposed to claims filing
designed to reduce the number and size of an insureds' claims. In the workers' com-
rates) rise in this situation ignore the strong economic disincentives for workers to
pensation context, loss prevention or loss management firms offer services relating to
incur injuries, in view of the lack of complete compensation, including inadequacy of
primary prevention or to claims cost containment (such as medical cost containment
weekly benefits for high wage workers. They also ignore the non-economic
or early return to work programs), or both. The goal of these services in a reduction
disincentives for all workers to be injured or disabled. People in general, I think,
in claims costs; this is not necessarily associated with a reduction in injuries. Thus,
dialike being hurt, dislike staying home when they are accustomed to going out, and
"because the workers' compensation market is a nightmare for many insurers, any-
dislike the psychological stress that temporary or permanent disability imposes on
the family.
thing an agency can do to improve the risk profile of clients helps." Novak, supra
note 53, at 32.
376. ECONOMIC REPORT OF THE PRESIDENT, supra note 18, at 197.
382. Id.
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carried view. 383 According to one industry representative, "Unsafe
accidents. on *384 by employees statistically cause 96% of all industrial acts)
on the number of injuries which actually occur. 385 This
tion crisis Thus, in this paradigm, the workers'
flexibility in the filing of claims tends to be viewed in one of
careful. could be solved, if only workers would compensa- be more
two ways.
First, political critics of workers' compensation programs
often argue that increases in benefit levels simply encourage
b. Workers-at-fault II: Claims filing behavior. The
worker to file fraudulent or frivolous claims. Some
benefits explanation offered for the correlation between second
commentators therefore suggest that benefit adequacy should be
number and increased claims filing activity is simply increased that
tempered to avoid this moral hazard. 387 To the extent that an
the that is, the number of claims filed may be dependent
rise: of claims (i.e., reports of injuries) rises when benefits the
increase in claims filing is viewed as a reflection of an increase
in the filing of unnecessary claims, 388 employers are
number which workers choose to file (a reporting effect), not on
encouraged to reduce costs by discouraging their employees
from filing these claims or by challenging them through
aggressive litigation once they are filed.
Of course, allegations of fraud are "long on anecdotes but
"irrational" 383. Psychological behavior theory provides a partial explanation for this. In
chological in safety and health, William T. Dickens identified exploring
21. Dickens BENEFITS: ADEQUACY, EQUITY, AND EFFICIENCY, supra WORKERS'
COMPENSATION Health and "Irrational" Behavior: A Preliminary Analysis, in Occupational
Safety and sources for apparent irrational behavior. William T. Dickens, several pay.
a particular observes that people have both a tendency to attribute more note 29, at 20-
fundamental event to other people involved than they see themselves as control over
385. In this view, workers are simply more likely to seek benefits when the ben-
viduals cause. to see at 27. He then notes, "[t]ogether, these two tendencies as having lead a sin-
gle Id. attribution error") and a tendency to interpret events having ("the
efits are larger. See, e.g., Butler & Worrall, Moral Hazard, supra note 15, at 201
(concluding that "rising benefits may lead to more claims at the same time that
dent, rather accidents as being primarily the fault of the person who may has indi-
they lead to fewer injuries"); Ehrenberg. supra note 18, at 82-84 tbl. 4.1 (summariz-
plant." Id. than being, at least in part, a result of the working conditions the at acci- a
ing prior studies and noting that it is impossible to separate out a reflection of in-
crease in injury rates and how much is merely A reporting effect); Smith, supra note
384. is Novak, supra note 53, at 35. Needless to say, this statistic is
7, at 573-79 (summarizing various studies that show a relationship between increas-
here there as no an way this fact can be statistically proven. The quotation is pure fantasy:
es in benefits and in numbers of claims filed and noting the elasticity in employee
ter, president example of rhetorical hyperbole. The quote is attributed to simply Robert offered
claims for benefits).
with more than and $3 chief million executive in annual officer revenues. of Cohen-Seltzer, a loss prevention agency Selt.
386. Fraud in this context means the filing of claims which involve lies. See Bur-
ton (1993), supra note 2, at 9 (stating that fraud involves schemes whereby unin-
engineers supra note 34, at 202. "H.W. Heinrich, one of the most prominent SOMERS
& conclusion SOMERS, the possibilities for engineering controls had been exhausted. their
This that is not a new idea. The Somers relied on similar numbers to reach
jured workers collect workers' compensation benefits by concocting evidence or by
fabricating medical evidence). For example, workers may claim they have disabilities
that in fact do not exist, or that their disabilities were caused by injuries at work
accidents in the country, maintained as early as 1931 that 88 per cent safety
when in fact the injuries occurred at home. This is different from claims involving
Heinrich's were caused primarily by the unsafe acts of persons. Id. (sic] of all
real injuries and real disabilities for which a worker may choose whether or not to
heated debate research was based on an analysis of 75,000 cases but "is still at 203.
file for benefits, depending on the circumstances.
to in a among safety experts." Id. at 203 n.12. The same research is a point of
387. See Chelius, Control of Industrial Accidents, eupra note 18, at 700, 717;
injuries note were 19, at 7. "In the 1920s, a researcher concluded that nearly 90 ASSESSMENT, of
supro congressional report issued in 1985. OFFICE OF TECHNOLOGY referred
Ehrenberg, supra note 18, at 96 (suggesting that employer incentives can be im-
proved without increasing moral hazard by increasing employer costs but not the
though this due to workers' 'unsafe acts' and 10 percent to 'unsafe conditions.' percent
level of benefits, and using the excess revenue to fund safety and health programs).
supported by other research." Id.
ratio of 'unsafe acts' to 'unsafe conditions' is often referred to, it is not Al-
These commentators do not focus primarily on the adequacy of benefits for injured
workers, of course.
In contrast to this view, the current systems approach to management
388. In keeping with the studies that regard the increased frequency of claims
newed on workplace conditions, not individual acts. A "systems approach has focuses
filing as a manifestation of moral hazard (which is presumptively to be avoided),
companies emphasis with companies looking to emulate the success of gained re-
claims that appear ambiguous are unwelcome in the system. To the extent that a
of Dr. W. by adopting a Total Quality Improvement system based on many the Japanese
worker is, in truth, eligible but not "needy"-at least in the eyes of the insurer or
Deming Edwards Deming." California Insurance Study, supra note 7, at principles 99.
employer-any claim filed may be viewed as a reflection of moral hazard which
cies in the noted that 'approximately 94 percent of incidents can be related "Dr.
needs to be corrected. Of course, need in the context of disability is often ambigu-
Id. This overall working environment, which is the responsibility of to deficien-
ous. When the need for a job outweighs the need for benefits, workers may fail to
phasis; statement is also impossible to prove. The question is, of management" one of
file legitimate claims. As benefits rise, workers may assess these risks differently.
injuries, although the worker error certainly may contribute to the course, of em-
These claims are not fraudulent: they do not involve the manufacturing of disability
is less likely systemic to result approach in injury. would create an environment in occurrence which human some error
where none exists or the inappropriate linkage of disability to occupational etiology.
These "excessive" numbers of claims may involve workers' assessments that it is
worth filing claims for disabilities which are legitimately eligible for compensation.
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virtually devoid of verified data. It is certainly possible
for benefits may never be wholly representative of the underly-
that improved levels of current benefits, and the availability of
ing universe of true injuries: injuries and illnesses can simply
medical benefits without deductible or co-insurance costs, may
go unreported. If illnesses and injuries go unreported at one
increase some fraudulent behavior 390 It is unlikely, however,
benefit level, the result of an increase in benefits may be that
that truly fraudulent behavior is sufficiently epidemic, or that it
previously unreported injuries are reported, not that more
has increased so substantially in recent years, that it can
injuries occur. 393
provide a primary explanation for rising levels of compensation
costs. Unfortunately, the fact that charges of fraud often domi-
2. Factors Affecting Workers' Decisions to File Claims. It
nate public discussions about workers' compensation tends to
seems clear that workers themselves do make decisions
antagonize injured workers and their representatives and to
regarding whether or not to file claims when they suffer
shift the focus of employers and legislators away from under-
compensable injuries. Reluctance to file claims may, of course,
lying problems and toward creation of fraud units and benefit
decline as benefits increase. 394 Workers' decisions are unlikely,
reduction strategies. 391
The alternative explanation for increases in claims filing
activity is that workers with compensable injuries are filing
tributive dilemma." Id. at 17.
claims which they may have previously chosen not to file,
In the context of this discussion, it is important to remember that workers'
particularly when benefits were low and other risks were
compensation is a social insurance, not a social welfare, program; entitlement is
perceived to be high. The number of claims actually filed
based upon both the relinquishment of legal rights (by providing employers with a
heavy mantle of immunity) and of proof of eligibility. Refer to note part III.A.4 su-
pra.
393. As noted in Part II supra, injuries are notoriously underreported by employ-
389. Burton (1993), supra note 2, at 9. Arguments that fraud is ruining the sys-
ers. Although there is a tendency to assume that a system involving self-reporting
by workers will have a greater degree of accuracy, it is questionable whether work-
tem seem to have a particular attraction within the framework of workers' compen-
ers file all claims in which they might be entitled to benefits. Refer to note 101
sation political debates, just as they do in debates regarding social welfare programs.
supra. In at least two specific studies involving workers who have been diagnosed
Attacks on benefit levels or eligibility criteria for social programs are easier to coun-
with occupational diseases, the investigators found that the majority of eligible work-
tenance if the people who are excluded from the programs are perceived to be ma-
ers did not file for workers' compensation benefits. Id. This is consistent with find-
lingerers and cheats.
390. In fact, workers' compensation experts who do not credit fraud as a primary
ings in other compensation and social welfare systems: studies have consistently
found that many people who might have reasonable claims for compensation or bene-
explanation for current behavior feel compelled to offer a disclaimer: It is, of course,
understood that fraudulent claims are likely to represent some component of claims.
fits do not institute them. For example, "[i)n 1970 only 69% of eligible families par-
See id. at 8-9. I offer the same disclaimer. Nevertheless, the extent to which
ticipated in Aid to Families With Dependent Children and only 38% of eligible indi-
unquantifiable fraudulent behavior is the focus of social policy discussions about
viduals participated in the Food Stamp program." John J. Donohue III. Diverting
The Coasean River: Incentive Schemes To Reduce Unemployment Spells, 99 YALE L.J.
workers' compensation is, in my opinion, unjustifiable.
549, 600 n.118 (1989) (citing Moffitt, An Economic Model of Welfare Stigma, 73 AM.
391. Refer to note 495 infra and accompanying text for a discussion of recent
ECON. REV. 1023, 1023 (1983)). Similarly, the Harvard Medical Practice Study found
legislation on these issues.
that fewer than one patient in eight who was injured by negligent medical care
392. In other words, workers who are injured have a right to benefits which they
instituted a claim for compensation. THE REPORT OF THE HARVARD MEDICAL PRAC-
forego in certain circumstances. Obviously, the issue of entitlement is a problematic
TICE STUDY TO THE STATE OF NEW YORK, PATIENTS, DOCTORS, AND LAWYERS: MEDI-
one. Entitlement programs provide certain benefits to people who have the pre-
CAL INJURY, MALPRACTICE LITIGATION, AND PATIENT COMPENSATION IN NEW YORK
acribed status necessary for eligibility; eligibility does not end because budgeted
funds are inadequate to provide benefits to all of those who are eligible. Welfare
(1990) (reporting that out of 27,179 negligence injuries, only 4,000 of these generated
programs, for example, may provide benefits to people simply on the basis of need
tort claims); see also Our Malpractice System: Money Ill-Spent, NEWSDAY, Apr. 4,
1990, at 61 (stating that 98% of the patients who suffer negligent injury in hospitals
(food stamps, for example) or on the basis of need plus membership in a targeted
in New York never file a lawsuit).
class (such as single parent with young child to qualify for Aid to Families with
394. This is true whether or not high wage replacement rates affect workers'
Dependent Children). Workers' compensation is an entitlement program in the sense
underlying work ethic. Yelin notes:
that it guarantees benefits to anyone who meets the eligibility requirements. Just as
The social policy debate revolves around the question of whether, in the
with other entitlement programs, many people publicly denounce those who meet
absence of definitive medical criteria ('absolute need'), individuals choose
eligibility requirements and who exercise their right to the benefits; this is largely a
disability rather than work. The competing images of choice and need are
reflection of our societal commitment to work as the primary mechanism for redistri-
rarely joined in disability research
[C]hoice models will be found want-
bution of wealth and a general societal antipathy for redistribution based upon other
ing because they postulate a set of behaviors which are risky. Individuals
factors, particularly need. See STONE, supra note 230, at 15-28. Stone discusses the
may not estimate their future incomes accurately when they face the deci-
preference for work-based redistribution modalities and notes that "[a]ll societies
sion to leave work, because disability benefits constitute an important part
have at least two distributive systems, one based on work and one on need, whose
of their expected income and the process of filing for benefits is long and, to
coexistence is a thorny problem in social policy and political theory." Id. at 15. "The
judge from the record, the outcome quixotic. Reasonable people would be
tension between the two systems based on work and need is the fundamental dis-
cautious in deciding to leave work now on the expectation that they will
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however, to be based exclusively on an assessment of the
economic worth of benefits. Other characteristics of the workers'
claims when they are injured at work. 399 In addition, claims
compensation system also influence this decision-making
for permanent partial disability benefits may not always involve
process. For example, both the complexity of paper work
periods of inability to perform work; many impairments,
involved in filing claims³⁹⁵ and the potential for not receiving
particularly those resulting from occupational illnesses, may
benefits contribute to workers' reluctance to file claims.
involve progressive development of a disability without a
Ultimately, a worker's decision will be affected by that
temporary acute stage in which the worker is totally unable to
individual worker's knowledge of the availability of benefits, the
work. Because these claims are intended as compensation for
severity of the injury and resulting disability, his or her
impairment or loss of potential future earnings, workers can
assessment of the likelihood of success in litigation, and an
often easily forego these benefits in the interests of maintaining
evaluation of the additional risk entailed in filing a claim.
a "good" relationship with management. "Good" workers become
Factors extrinsic to the workers' compensation system itself will
those employees who do not file claims, even when they meet
therefore play an important role in influencing workers' claims
the eligibility requirements for benefits.40
filing behavior. Post-injury risks are not limited to the
The law and dynamics of the specific employment
possibility of future reinjury or of losing the claim: for those
relationship itself, as well as the law of workers' compensation
individuals who hope to return to work, a primary risk is that
or the levels of statutory benefits, thus directly influence the
of loss of respect at work, of actual job loss, or of other
costs of workers' compensation programs. If risk of retaliation is
retaliation by the employer. Somewhat remarkably, discussions
high (or perceived to be high), and benefits are low, claims will
of the elasticity in claims activity have generally failed to ex-
not be filed and true injuries will not be reported.
plore the impact of the employment relationship, in particular
Underreporting becomes a primary characteristic of such a
the real or perceived risk of employer retaliation for seeking
system.
benefits, on the decision by workers to file claims. These
The implications of this are three-fold. First, the economic
discussions also rarely address the level of worker ignorance
and political equilibrium of the workers' compensation system
regarding benefit entitlement or the impact of changes in work
prior to the 1970s may have been built on the chronic
underreporting of claims.401 This means, of course, that
organization on the ability of older workers to continue to work
after an injury. 397
Whether workers choose to take time off from work and for
how long depends on a variety of both objective and subjective
399. This is, indeed, rational behavior on the part of workers. Similarly, when
factors; disability is, to some extent, both a flexible and
unemployed workers in Illinois were offered bonuses as an incentive to return to the
workforce, many of those who were eligible never claimed them. Donohue, supra
socioeconomic phenomenon. 398 To the extent that workers are
note 393, at 554. Despite noting that a bilateral monopoly relationship may be creat-
capable of continuing to work, and to the extent that they fear
ed by the employment relationship, Donohue nevertheless fails to recognize the in-
adverse consequences at work, they may choose not to file
harent level of transaction cost in any "negotiation" between worker and potential
employer. Id. at 555-56. In a reply, Robert Ellickson explored the problems for a
worker called upon to tell a potential employer about the offer of the bonus, noting
that the transaction costs in such an arrangement are high. Ellickson, supra note
receive adequate income later. Furthermore, choice models emphasize the
236, at 617-18. Participants in the experiment identified stigma as the primary rea.
negative incentives of high replacement rates to the exclusion of the strong
son for failing to participate; the employees did not want to be identified by their
countervailing force of the work ethic. That replacement rates are easily
employers as participants in the program. See id. at 625. "That many bonuses went
measured, while commitment to work is not, does not excuse this oversight.
uncollected may indicate not irrationality and inefficiency but that workers and em-
Yelin, supra note 18, at 625.
ployers responded intelligently to the reality of transaction costs." Id.
396. Smith, supra note 7, at 576.
400. This characterization appears to be adopted in the Upjohn Report, which de-
396. Yelin, supra note 8, at 637.
scribes low claims employers as being "much more successful in avoiding injuries
397. But see EDWARD H. YELIN, DISABILITY AND THE DISPLACED WORKER (1992)
that extend into compensable claims," suggesting that these employers "manage
[bereinafter YELIN 1992] (concluding that the growth in the work disability rate and
work-related disability factors" more effectively. Upjohn Report, supra note 7, at III-
decline in labor force participation are tied to changes in the industrial structure of
15.
the advanced economies; these changes make it increasingly difficult for disabled
401. As noted above, underreporting is a common characteristic of liability and
older workers to find new jobs).
social welfare systems. Refer to notes 101 & 254 supra. Most systems which provide
398. See generally STONE, supra note 230; RICHARD V. BURKHAUSER & ROBERT
benefits or compensation to the injured, the disabled, or the poor appear to achieve
HAVEMAN, DISABILITY AND WORK (1982); ROBERT HAVEMAN ET AI., PUBLIC POLICY
economic equilibrium based upon an underfiling of claims. The financial equilibrium
TOWARD DISABLED WORKERS (1984).
maintained prior to the 1970s in workers' compensation systems may very well have
been a reflection of this underreporting phenomenon. In contrast, the current crisis
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of underlying injury rates.
current costs may be a truer, albeit more expensive, reflection
-remained in full force after the enactment of
the compensation laws. The equal right of either the employer
Second, to the extent that workers perceive the threat of
or the employee to terminate the contract resulted in the well
retaliation to be reduced and the worth of the benefits to be
increased, they will file greater numbers of claims although
known formulation which better mirrors the underlying power
injury rates may remain constant or even decline. The nature
relationship: the employer was free to fire an employee for a
of the distribution of power within the employment
good reason, a bad reason, or no reason at all. The employee
was, of course, free to quit. The employment-at-will
relationship, and the perception of this distribution of power,
doctrine accorded employers full autonomy over decisions
are therefore a secondary and inadequately evaluated variable
within any discussion of workers' compensation costs. The re-
regarding terms, conditions, and continuation of employment,
unless explicitly limited by individual contract.
sult of increasing employee rights within the employment
The passage of workers' compensation laws did not impinge
relationship is likely to be an increase in the filing of claims.
upon the employer's control over the workplace; the obligation
Third, to the extent that employers are motivated by
of the employer to the injured employee was fully discharged by
workers' compensation costs to change their behavior, they can
the provision of social insurance. Workers who received
decrease aggregate and enterprise-specific costs by discouraging
workers' compensation benefits had no legal claim to retain
the filing of claims without improving the underlying conditions
their jobs. 406 Employers retained the right to determine when
in the workplace. The employer's ability to affect claims filing
behavior is directly tied to the inequality of the employment
relationship. The "culture" of the workplace, as discussed in the
404. Wood's Rule is the basis for the employment-at-will doctrine:
Upjohn report, and not safety, therefore becomes the
With us the rule is inflexible, that a general or indefinite hiring is prima
primary, rather than a secondary, cause of workers'
facte a hiring at will, and if the servant seeks to make it a yearly hiring,
the burden is upon him to establish by proof. A hiring at 80 much a day,
compensation claims and costs. As a result, employers may
week, month or year, no time being specified, is an indefinite hiring. and no
direct their efforts toward claims management rather than
presumption attaches that it was for a day even, but only at the rate fixed
primary prevention of injuries.
for whatever time the party may serve.
H.G. WOOD, A TREATISE ON THE LAW OF MASTER AND SERVANT § 134. at 272 (1877).
3. The Influence of Employment Law on Workers' Claims
Or, as stated by the judiciary. "men must be left, without interference to dia-
charge or retain employees at will for good cause or for no cause, or even for bad
Filing Activity. The history of the law governing the em-
cause
Payne V. Atlantic R.R., 81 Tenn. 507, 518 (1884).
ployment relationship gives credibility to the notion that the
Much has been written regarding Woods' rule and whether it was properly
risk of filing workers' compensation claims has declined over
rooted in preexisting employment law. Except as an academic exercise and a study of
legal creativity, this hardly matters. What is remarkable, of course, is the rapidity
the past twenty years. As noted above, the original workers'
and real with which Woods' rule was adopted by the judiciary.
compensation compromise made no pretense of amending the
405. As Professor Fran Ansley recently noted, this symmetry brings immediately
legal terms of the employment relationship. The
to mind Anatole France's memorable aphorism: "The law, in its majestic equality,
forbids the rich as well as the poor to sleep under bridges, to beg in the streets,
employment-at-will doctrine-that peculiarly Anglo-American
and to steal bread." Ansley. supra note 242, at 1786 n.91.
application of individual freedom to the contract of
406. One famous labor law case, United Steelworkers V. American Manufacturing
Co., 363 U.S. 564 (1960), illustrates this point well. Larry Sparks was injured at
work and settled his workers' compensation claim against his employer's insurer for
a 20% award for permanent partial disability. Id. at 566. He then sought to return
to work, relying on the seniority he had accrued under a labor agreement between
his employer and the United Steelworkers of America. Id. The company refused to
rehire him and refused to arbitrate its decision with the local union. Id. American
in workers' compensation is similar to the crisis in medical malpractice, which is, in
Manufacturing's position, in a nutshell, was that Sparks had collected compensation
and was due nothing further. Id. at 564. The District Court held that Sparks, hav-
part, a reflection of an increase in claims filed; in the past, injured individuals did
not pursue their remedies. The fiscal component of the welfare crisis is likewise
ing accepted the settlement on the basis of permanent partial disability, was es-
partially a reflection of the pervasiveness of poverty and the willingness of those
topped from claiming any seniority or employment rights and granted the employer's
who meet eligibility criteria to file for benefits. The cost crisis in workers' compensa-
motion for summary judgment Id. at 566. The Court of Appeals affirmed, holding
tion may thus be a result of increasing numbers of injured workers filing for bene.
"the grievance is a frivolous, patently baseless one, not subject to arbitration under
fits to which they are entitled as the result of occupational illness and injury.
the collective bargaining agreement." Id. The Supreme Court, in reversing and order-
402. Upjohn Report, supra note 7. at I-7 to I-8.
ing arbitration (and thus establishing the fundamental commitment to labor arbitra-
403. Refer to notes 228-30 supra and accompanying text.
tion in American labor law). nevertheless viewed Sparks' quest for employment in
this context as frivolous. Id. at 567. No record can be found of the final outcome of
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an absence would lead to discharge, irrespective of the cause of
these laws do not fundamentally alter the at-will relationship.
the absence. This lack of obligation to the injured worker
In 1973, the year after the National Commission on State
as worker was consistently applied: irrespective of the length of
Workmen's Compensation Laws issued its report, a state court
the period of absence resulting from the disability, whether the
for the first time endorsed the creation of a public policy
injured employee had recovered from the injury and could
against retaliatory discharge for the filing of workers'
perform the functions of the job, or whether the job was vacant.
compensation claims.411 In carving out this exception to the
No public or judicial sanctions awaited employers who
traditional employment at will doctrine, the Indiana court in
terminated any worker thought to be medically unfit,
Frampton v. Central Indiana Gas Co.412 said:
irrespective of the etiology of the disability. Workers could be
terminated because they were injured at work or filed claims
for workers' compensation. If the injury resulted in any
for a federal minimum wage, additional compensation for overtime work, and strict
significant permanent level of disability, workers were almost
regulation of child labor. 29 U.S.C. § 201 (1988). Wage and hour laws were "aimed
certainly excluded from the workforce. Employees' rights were
at the margins of economic life, setting only minimum standards for the wage con-
exclusively limited to those benefits available from
tract, and not otherwise interfering with its terms." Katherine Van Wezel Stone, The
Legacy of Industrial Pluralism: The Tension Between Individual Employment Rights
compensation programs.
and the New Deal Collective Bargaining System, 59 U. CHI. L. REV. 575, 591 (1992).
Some change came with the passage of the National Labor
In the sixties, Congress confronted the specific issues of discrimination in the
Relations Act,408 but the employment-at-will doctrine
workplace in the Equal Pay Act, 29 U.S.C. $ 206 (1988), and Title VII of the Civil
remained largely intact for the majority of workers. Federal
Rights Act of 1964, 42 U.S.C. $ 2000-e to 2000e-17 (1988 & Supp. IV 1992). While
these statutes demonstrated signs of a new legislative willingness to intervene di-
employment legislation has tended to provide specific protection
rectly into the employment relationship, they were also limited in acope.
to categories of workers or to address particular problems;410
Congress also responded to calls for improved workplace safety and health by
passing the Coal Mine Health and Safety Act of 1969, Pub. L. No. 91-173, 83 Stat.
742 (later superseded by the Mine Safety and Health Act of 1977, 30 U.S.C. 5 801
(1988)), and the Occupational Safety and Health Act of 1970, 29 U.S.C. § 651-78
Mr. Sparks' arbitration case.
(1988), signalling to workers that they were entitled to work in workplaces free from
407. See Jean C. Love, Retaliatory Discharge for Filing a Workers' Compensation
recognized hazards. Protection against retaliatory discharge for exercising safety
Claim: The Development of a Modern Tort Action, 37 HASTINGS LJ. 551, 552 n.7
rights was included in this federal legislation. 30 U.S.C. $ 815 (1988) (provisions
(1986) (providing a list of cases in which the plaintiff had no cause of action after
prohibiting retaliation for safety activity in the mines under the Mine Safety and
being fired for filing a workers' compensation claim prior to 1973). This is, of course,
Health Act); 29 U.S.C $ 660(c) (1988) (prohibiting retaliatory discharge for safety
consistent with the employment-st-will doctrine.
activities in general industry under the Occupational Safety and Health Act). These
408. 29 U.S.C. §§ 141-187 (1988 & Supp. IV 1992). Collective bargaining
occupational safety and health laws did not, however, provide general job security
agreements negotiated pursuant to the National Labor Relations Act (NLRA) provid.
guarantees to workers.
ed significantly improved job security for unionized workers; these agreements gener-
411. Until the mid-seventies, most state courts had not adopted any general limi-
ally have been less aggressive in addressing health and safety hazards in the
tations on the employment-at-will doctrine. Although a California court had endorsed
workplace. See BASIC PATTERNS IN UNION CONTRACTS 7, 33, 127-28 (13th ed. 1992)
a public policy exception to the at-will doctrine in 1959, Petermann V. International
(showing that, out of the contracts analyzed, 98% required cause or just cause for
Brotherhood of Teamsters, Local 396, 344 P.2d 25, 27 (Cal. Dist. Ct. App. 1959), few
discharge and 100% contained grievance and arbitration clauses; while 88% had
states followed immediately thereafter. Cases challenging discharges for the filing of
some safety and health language, this language was often limited to very general
workers' compensation claims were among the first public policy wrongful discharge
statements regarding responsibilities for maintaining safe workplaces). Bargaining
torts generally endorsed by the state courts. By 1988, courts in 32 states had adopt-
regarding health and safety did not become a serious component of labor negotia-
ed public policy restrictions on the right of employers to dismiss at-will employees.
tions until relatively recently.
Clyde W. Summers, Labor Law as the Century Turns: A Changing of the Guard, 67
409. As noted above, the courts were reluctant to approve substantive interven-
NEB. L REV. 7, 13-14 (1988). By 1992, that number had grown to 42; 33 states had
tion into the employment relationship prior to the New Deal. Refer to notes 237-42
upheld wrongful discharge actions based upon a contract theory when an employer
supra and accompanying text. Even the passage of the NLRA failed to provide sig-
had violated its policies, handbooks, or other representations; and 13 states recog.
nificant protection to many workers. Collective bargaining never reached a majority
nized a cause of action for breach of the covenant of good faith and fair dealing in
of American workers; even at the post World War II peak, only 34.7% of workers
employment at will cases. Clyde W. Summers, Effective Remedies for Employment
were unionized. MICHAEL GOLDFIELD, THE DECLINE OF ORGANIZED LABOR IN THE
Rights: Preliminary Guidelines and Proposals, 141 U. PA. L REV. 457, 458 n.5
UNITED STATES 10 tbl. 1 (1987). As of 1990, that figure had declined to 16.1% of the
(1992) [hereinafter Summers (1992)].
total civilian workforce and only 12.4% of the private sector workforce. 38 EMPLOY.
412. 297 N.E.2d 425 (Ind. 1973). Dorothy Frampton had injured her arm while
MENT & EARNINGS 228-29 tbls. 57 & 58 (Jan. 1991). Moreover, most states continue
working. According to the court's summary of the underlying facts, her employer,
to retain at least a modified commitment to the employment-at-will doctrine.
Central Indiana Gas Co., and its workers' compensation insurer paid her hospital
410. Prior to the 1960s, legislation which intervened directly into the employment
and medical expenses, as well as her full salary, during the four months she was
relationship (in contrast to providing social insurance protection to workers) focused
unable to work. It is interesting to note that Indiana workers' compensation law
either on the creation of collective bargaining rights or on wage and hour issues.
does not require the payment of full salary. IND. CODE ANN. $ 22-3-3-22 (Burne
The Fair Labor Standards Act, another component of New Deal legislation, provided
1992). It appears from the facts that these benefits were paid to Frampton in lieu of
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[I]n order for the goals of the [Workers' Compensation] Act to
endorsed a public policy against retaliatory discharge involving
be realized and for public policy to be effectuated, the em-
workers' compensation in either case law or a specific
ployee must be able to exercise his right in an unfettered
statute. These cases involve plaintiffs who want to continue
fashion without being subject to reprisal. If employers are
to work after filing or litigating a workers' compensation claim,
permitted to penalize employees for filing workmen's
but who were terminated after filing claims for compensation.
compensation claims, a most important public policy will be
The courts in these cases have explicitly endorsed the idea that
undermined. The fear of being discharged would have a
workers should not be forced to choose between filing for
deleterious effect on the exercise of a statutory right.
benefits and retaining their jobs. In many of these cases,
Employees will not file claims for justly deserved compensa-
plaintiffs sought to return to work while they were still re-
tion-opting, instead, to continue their employment without
ceiving workers' compensation benefits;4" this litigation belies
incident. The end result, of course, is that the employer is
the notion that workers prefer to choose not to work when
effectively relieved of his obligation.
benefits are available.
Frampton was followed by a flood of retaliatory discharge
Other rights for injured or physically impaired workers
cases involving allegations of retaliation for filing workers'
have followed. After many years of political agitation by and on
compensation claims.41 Currently, virtually every state has
behalf of disabled people, the Americans with Disabilities Act
(ADA)*¹⁷ substantially expanded the rights to employment
and reemployment of people injured at work.418 Now, people
workers' compensation perhaps to dissuade her from filing a workers' compensation
with serious work-induced disabilities, who are often able to
claim. The court notes that neither employer nor the insurer informed her that fur-
ther benefits might have been available. 297 N.E.2d at 426. When Frampton did re-
turn to the job, she performed capably. Id. Approximately 19 months after the inju-
ry, her employer and its insurer were notified of a 30% loss in the use of
hibit retaliation against or discharge of employees who file workers' compensation
Frampton's arm which entitled her to permanent partial disability benefits. Id. "Al-
claims); Theodore J. St. Antoine, The Twilight of Employment at Will? An Update, in
though hesitant to file a claim for fear of losing her job she did so, and received a
FIRST ANNUAL LABOR AND EMPLOYMENT LAW INSTITUTE (William F. Dolson ed.,
settlement for her injury. About one month later she was discharged from her em-
1985) (stating "[t]he most frequent situation in which employees have been dis-
ployment without reason being given." Id. In other words, it was the fact that she
charged for exercising legal rights involves the filing of workers' compensation
pursued a claim for permanent partial benefits that apparently precipitated her dis-
claims").
charge.
Given the volume of this litigation, it was not surprising that it was in a
413. 297 N.E.2d at 427 (emphasis added). It appears the motivation of the Indi-
workers' compensation wrongful discharge case that the Supreme Court held that
ana court, and the many courts that followed its lead, was not to establish vested
retaliatory discharge claims arising under state law are not preempted under the
rights to employment, but rather to defend workers' statutory rights to apply for
labor laws if they do not involve rights which arise out of a collective bargaining
compensation benefits. Thus, although restricting employers' control over termination
agreement. Lingle V. Norge Div. of Magic Chef, Inc., 486 U.S. 399, 412-13 (1988).
of the employment relationship, the underlying principle was to guard the integrity
Under the Lingle decision, terminated employees who were covered by collective
of the compensation program.
bargaining agreements may proceed both with arbitration under their labor agree-
414. E.g., Gonzales V. City of Mesa, 779 F. Supp. 1050 (D. Ariz. 1991) (applying
ments and with their tort claims; the tort claim is not preempted. Id. Notably, dis-
Arizona state law); Wal-Mart Stores, Inc. V. Baysinger, 812 S.W.2d 463 (Ark. 1991);
charge claims involving other factual patterns are often held to be preempted. See
Springer V. Weeks & Leo Co., 476 N.W.2d 630 (lowa 1991); Lathrop V. Entenmann's,
Van Wesel Stone, supra note 410, at 607-09.
Inc., 770 P.2d 1367 (Colo. Ct. App. 1989); Smith V. Piezo Tech. & Professional
Wrongful discharge claims involving workers' compensation often involve com-
Adm're, 427 So. 2d 182 (Fla. 1983); Kelsay V. Motorola, Inc., 384 N.E.2d 353 (III.
plex facts in which the claimant raises issues of disability discrimination or the em-
1978); Wolcowics V. Intercraft Indus. Corp., 478 N.E.2d 1039 (III. App. Ct. 1985);
ployer alleges that the discharge arose from enforcement of a facially neutral ab-
Peru Daily Tribune V. Shuler, 544 N.E.2d 560 (Ind. Ct. App. 1989); Murphy V. City
sence policy which treated workers' compensation absences in a manner no different
of Topeka-Shawnee County Dep't of Labor Servs., 630 P.2d 186 (Kan. Ct. App.
from other absences. Plaintiffs often lose these latter claims. See Dana S. Connell &
1981); Sventko V. Kroger Co., 245 N.W.2d 151 (Mich. Ct. App. 1976); Lally V.
Frederick L Schwartz, Effective Handling of Health-Related Leaves of Absence, 18
Copygraphics, 428 A.2d 1317 (N.J. 1981); Hansen V. Harrah's. 675 P.2d 394 (Nev.
EMPLOYEE REL LJ. 103 (1992) (listing the holdings in a variety of states regarding
1984); Brown V. Transcon Lines, 588 P.2d 1087 (Or. 1978) (en banc); Clanton V.
terminations for filing workers' compensation claims or for absences related to work-
Cain-Sloan Co., 677 S.W.2d 441 (Tenn. 1984); Shanholts V. Monongabela Power Co.,
related injuries).
270 S.E.2d 178 (W. Va. 1980); see Theresa L Kruk. Annotation, Recovery for Dis-
415. See Rothstein, supra note 414, at 103; Van Wezel Stone, supra note 410, at
charge from Employment in Retaliation for Filing Workers' Compensation Claims, 32
A.L.R.4TH 1221 (1984) (providing a summary of state law cases in this area). In
591-93. 416. See, e.g., Hartlein V. Illinois Power Co., 601 N.E.2d 720 (III. 1992); Sventko
addition, 22 states enacted statutes which made it explicitly unlawful to diemiss an
V. Kroger Co., 245 N.W.2d 151 (Mich. Ct. App. 1976); Schubbe V. Diesel Serv. Unit
employee in retaliation for filing a workers' compensation claim. Van Wesel Stone,
Co., 692 P.2d 132 (Or. Ct. App. 1984); Wallace V. Milliken & Co., 406 S.E.2d 358
supra note 410, at 592; are also Mark A. Rothstein, Wrongful Refusal to Hire: At-
(S.C. 1991).
tacking the Other Half of the Employment-at-Will Rule, 24 CONN. L Rev. 97, 112
417. 42 U.S.C. $ 12101-12213 (Supp. II 1990).
(1992) (noting that the most common state anti-retaliation statutory provisions pro-
418. See generally id. 9 12101(a)-(b).
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perform the essential functions of their jobs, may not legally be
actual or perceived levels of job security for injured workers. are If
denied reemployment because of their disabilities. The ADA
benefits are low and job security is minimal, workers se-
and other disability discrimination laws prohibit the exclusion
unlikely to file for benefits. As employees perceive both job to
of individuals from work opportunities because they have filed
curity and benefit levels to increase, claims are likely
prior workers' compensation claims, or because of
increase and more closely reflect the true injury rate.
speculative concerns about future risk of reinjury
This thesis is supported by evidence that more
or
increased workers' compensation costs. The Family and
compensation claims are filed in unionized than in similar non- this
Medical Leave Act of 1993 further expands the right of
union workplaces.425 Some commentators believe
injured workers to reinstatement following a temporary period
phenomenon is due to the fact that more dangerous companies
of disability.423
be more likely to be unionized. This explanation
Increases in the filing of compensation claims appear to
may ignores two essential differences between unionized and non-
track the documented and publicized increases in the em-
union workplaces. Unionized workers are likely to have a
ployment rights of work-injured people." The new legal
knowledgeable representative who can advise them on their
protections for injured workers, including common law public
rights to compensation, reducing worker ignorance. Perhaps
policy claims, disability discrimination laws, and expanded
importantly, unionized workers have substantial job
workers' compensation statutory protection against discharge,
more security under enforceable provisions against unjust dismissal
provide significantly increased protection for disabled workers.
which appear almost universally in collective bargaining file
These legal developments remove decisions regarding medical
agreements.⁴² Unionized workers can therefore
fitness of previously injured workers from complete managerial
compensation claims with significantly less fear of retaliation.
discretion. They also expand the scope of judicial and public
Despite expansion in legal protection, however, non-union
inquiry into management decision-making.
at-will employees continue to be subject to retaliatory actions
The thesis seems obvious, once stated: levels of filing of
by employers. Inequalities of power in the employment
compensation claims reflect, at least to some significant extent,
relationship continue to discourage workers from reporting
safety hazards or injuries.629 Workers continue to work in
419. An employer may not inquire into an applicant's workers' compensation bis-
425. See, e.g., Butler & Worrall, Workers' Compensation: Benefit and Injury
tory before making a conditional offer of employment. EEOC TECHNICAL ASSISTANCE
Claims Rates in the Seventies, supra note 18, at 586-87.
MANUAL. supra note 334, 9 9.1. After an offer is made, an employer may ask about
426. Evidence indicates that there is greater activity around safety in unionized
this history in the context of a medical examination which is designed to determine
workplaces. David Weil, Enforcing OSHA: The Role of Labor Unions, 30 INDUS. REL.
whether the individual is capable of performing the essential functions of the job
20, 26-27 (1991) (noting that unionized workplaces are more likely to receive safety that
without posing a significant risk of substantial harm to the safety of himself or her-
and health inspections by agencies such as OSHA). Weil concludes
self or others. Id. % 6.2, 6.4, 9.1.
420. 29 C.F.R. 5 1630.2(r) (1993) (stating that exclusion of an individual "shall be
"[i]mplementation of OSHA therefore seems highly dependent upon the presence from of A
union at the workplace." Id. at 20. On the other hand, a business executive
based on an individualized assessment of the individual's present ability to safely
perform the essential functions of the job").
Michigan has noted that outside regulatory agency activity is a
measure of employees' attitudes If you have a lot of employees calling
421. EEOC TECHNICAL ASSISTANCE MANUAL, supra note 334, § 9.1 (stating that
MIOSH [Michigan OSHA). the Department of Health. the Bureau of
"(a]n employer may not base an employment decision on the speculation that an
Workers' Disability Compensation, and the civil rights agencies, or you have
applicant may cause increased workers' compensation costs in the future").
a lot of inspections other than routine walkarounds, I think you can assume
422. Pub. L No. 103-3, 107 Stat. 6 (1993); 29 U.S.C.A. # 2601-2654 (West Supp.
there is something wrong, there is some attitude problem out there. Most
1994).
423. Although the primary purpose of the Family and Medical Leave Act was to
organizations, whether they are union or non-union, are going to set up a
protect the right of workers to take time off from work to care for others, the Act
system to prevent outside intervention.
also extends the right to a twelve week unpaid leave to workers who are themselves
Meade, supra note 144, at 76.
427. See Weil, supra note 426, at 22 for a discussion on the more highly in-
suffering from a serious health condition which incapacitates them from performing
their jobs. See 29 C.F.R. §§ 825.112(a)(4), 200(a) (1993).
formed nature of workers in unionized job settings.
424. In 1983, Professor Clyde Summers reviewed the changes in the employment.
428. Refer to note 414 supra.
429. The story surrounding the fire at the Imperial Foods chicken processing
at-will doctrine over the preceding ten years and declared, "[t]he forgotten men and
women are no longer forgotten." Clyde Summers, Individual Rights in the Workplace:
plant in Hamlet, North Carolina, although perhaps an extreme case, provides Imperial a
troubling illustration of this phenomenon. The fire that swept through the 164
The Employment-at-Will Issue: Introduction, 16 U. MICH. J.L. REF. 201, 202 (1983).
It seems, however, that the rapid erosion of the employment-at-will doctrine has
plant on September 3, 1991, left 25 dead and 56 injured and the remaining The
slowed considerably after this initial decade of change.
employees without jobs after the plant closed. Kilborn, supra note 76, at A1.
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dangerous jobs, often because they lack options. Despite
relocate or close a plant, or threaten to do, in order to avoid
employers can still legally discharge injured workers who
specific legal protections available to at-will employees,
workers' compensation costs.432 Moreover, cases involving
unable to perform their jobs because of a work-related illness are
injury. Courts have upheld the right of employers to or
685 (Fla. Dist. Ct. App. 1988); Heas V. Clarcor, Inc., 603 N.E.2d 1262. 1273 (Ill.
App. Ct. 1992); Slover V. Brown, 488 N.E.2d 1103, 1105 (III. App. Ct. 1986); Kern V.
South Baltimore Gen. Hosp., 504 A.2d 1154, 1159 (Md. Ct. Spec. App. 1986); Clifford
deaths and injuries were directly related to the fact that the doors to the plant
V. Cactus Drilling Corp., 353 N.W.2d 469, 471 (Mich. 1984); Johnson V. Moog, Inc.,
Gets kept locked; the workers could not get out as the fire apread. Chicken Plant Owner were
494 N.Y.S.2d 152, 154 (App. Div. 1985); Metheney V. Sajar Plastics, Inc., 590 N.E.2d
Jail for Fatal Blaze, L.A. TIMES, Sept. 15, 1992, at A16.
1311, 1313-14 (Ohio Ct. App. 1990); Pierce V. Franklin Elec. Co., 737 P.2d 921, 924-
Imperial, an Atlanta-based firm, was Hamlet's largest industrial employer.
25 (Okla. 1987); Johnson V. Saint Francis Hosp., Inc., 759 S.W.2d 925, 926-29 (Tenn.
workers knew that the jobs were dirty, dangerous, and low paid; the wage The
Ct. App. 1988); Palmer V. Miller Brewing Co., 852 S.W.2d 57, 62 (Tex. App-Fort
$5.50 per hour. Kilborn, supra note 76, at D11. Nevertheless, no complaints about was
Worth 1993, writ denied); Wilmot V. Kaiser Aluminum & Chem. Corp., 821 P.2d 18,
conditions at the plant were made by the workers. Id. "Workers said they did
31-32 (Wash. 1991); Yoho V. Triangle PWC, Inc., 336 S.E.2d 204, 210 (W. Va. 1985).
See generally Connell & Schwartz, supra note 414 (providing a summary of the law
tist quiet for fear of their jobs,' said the Rev. Harold C. Miller, pastor of the First Bap-
raise complaints about safety because they wanted to keep working. 'People kept not
in this area).
The legal protection provided to injured workers under the Americans with
Church in Hamlet and president of the ministerial alliance." Id. Despite two
previous fires, the plant was never inspected by any agency responsible for the
Disabilities (ADA) is also limited. Those workers with serious injuries resulting in
workers' safety. Id.
disabilities which require more accommodation than is deemed 'reasonable' may re-
According to government inspectors who investigated, the fire was the result
ceive no protection under the disability discrimination laws. See 29 C.F.R. $
of the plain failure of the company to provide a reasonably safe working environ-
1630.2(a) (1993) (defining "reasonable accommodation"). Workers whose injuries are
ment for its employees. Chicken Plant Owner Gets Jail for Fatal Blaze, supra,
not sufficiently severe may also not receive any protection: an employee must have
A16 (noting the plant manager's mandate that several plant doors and exits be at
an impairment which "substantially limits" his or her ability to perform a "major life
locked or blocked shut). An investigation by the U.S. House of Representatives Labor pad.
activity," or be regarded as having such an impairment, in order to be considered
and "appears to have recklessly violated a host of OSHA regulations."
Committee found that the company was preoccupied with profits and productivity
disabled within the meaning of the ADA. 29 C.F.R. $ 1630.2(g)-(j) (1993). A worker
who is off work due to an occupational injury for a short period of time is not dis-
abled within the meaning of the Act. See id. $ 1630.2(m). Injuries or illnesses which
Nevertheless, workers were publicly blamed for their own deaths. One state
safety official, Bradford Barringer, member of the North Carolina Occupational Safe-
result in an inability to perform the worker's own job, but not a broad class of jobs,
ty and Health Advisory Council said, "I imagine they stole chickens just as fast
also may not be considered disabilities. Id. § 1630.2(j). In its Interpretive Guidance
they could go. If there had been more honest employees, those doors probably as
to this rule, the Equal Employment Opportunity Commission notes:
wouldn't have been locked." Official Accuses Workers in Doomed Plant of Theft, OR-
For example, an individual who has a back condition that prevents the indi-
LANDO SENTINEL TRIB., Nov. 22, 1992, at A10.
vidual from performing any heavy labor job would be substantially limited
Ultimately, the plant was shut down. Owner of Chicken Plant That Burned
in the major life activity of working because the individual's impairment
Balks at Fine, ORLANDO SENTINEL TRIB., Jan. 24, 1990, at A10. Following the impo-
eliminates his or her ability to perform a class of jobs. This would be so
even if the individual were able to perform jobs in another class, e.g., the
sition of fines in excess of $800,000, Imperial filed for bankruptcy. Id. The company's
president denounced the imposition of the 59 willful health and safety violations
class of semi-skilled jobs.
that resulted in these fines as "simply absurd." Id. The workers and their families
EEOC Interpretive Guidance on Title I of the ADA, 29 C.F.R. $ 1630.2(j), at 404
did ultimately settle with Imperial's three insurers for $16.1 million. Tentative Plant
(1993).
Fire Settlement, WASH. POST, Nov. 7, 1992, at A2. Just six weeks after the fire, the
Before the passage of the disability discrimination laws, employers were also
North Carolina Supreme Court expanded the availability of civil damages for inten-
free to deny employment to applicants upon learning of past or pending workers'
tional torts to situations in which the outcome is "substantially certain" to have
compensation claims. See, e.g., Stoker V. Furr's, Inc., 813 S.W.2d 719, 723-24 (Tex.
App.-El Paso 1991, writ denied) (holding that neither a wrongful discharge suit nor
occurred. Woodson V. Rowland, 407 S.E.2d 222, 228-30 (N.C. 1991); refer to note 247
an employment discrimination suit can be brought under the Texas Workers' compen-
supra. The plant owner, Emmett Roe, ultimately pleaded guilty to 25 counts of in-
sation statute in the absence of an existing employer/employee relationship);
voluntary manslaughter and was sentenced to a 19 year, 11 month prison term.
This post-catastrophe legal outcome is significantly different from the result reached
Rothstein, supra note 414, at 112 (noting that most states' proscriptions against retal-
in the case involving Pymm Thermometer. Refer to note 216 supra.
iation against employees for filing workers' compensation claims apply only to current
430. Increasingly few options exist for industrial and mine workers in the face of
employers and do not extend to subsequent employers).
global competition. Cf. Ansley, eupra note 242; YELIN 1992, supra note 397. As Nich-
432. Unida V. Levi Strause & Co., 986 F.2d 970 (5th Cir. 1993). According to the
plas Ashford notes, "[w]orkers often do not know of the hazards they face, or are too
court, the plaintiffs in this case argued:
weakly organized to take action, or are afraid of losing their jobs in a world of high
Levi Strauss' decision to close the plant was partly motivated by high
unemployment." ASHFORD, supra note 9, at 391.
workers' compensation costs at the San Antonio plant. They argue that this
431. Neither state retaliatory discharge law nor disability discrimination law at
evidence, if it had been properly considered by the district court, raises a
the federal or state level provides a universal prohibition on discharge of injured
genuine issue of material fact. Again, we disagree. Levi Strauss concedes
that its decision to close the San Antonio plant was due to high costs that
employees. For example, in phost states, absence associated with a work-related inju-
ry can lead to discharge if the employer is utilizing a "neutral" absence control poli-
included high workers' compensation costs. This undisputed fact, however, is
cy in making the termination decision. See, e.g., Chiaia V. Pepperidge Farm, Inc.,
immaterial to the question of whether the subclass of terminated employees
588 A.2d 652, 656 (Conn. App. Ct. 1991); Pericich V. Climatrol, Inc., 523 So. 2d 684,
who had engaged in workers compensation activities was somehow discrim-
inated against by Levi Strauss' decision to close the entire plant and dis-
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individual claims of discriminatory or retaliatory action are
remedies rarely establish on-going job security for non-union
difficult to prove. Workers, as plaintiffs, have the burden of
workers in hazardous jobs.
proof; proof of intent, even if derived inferentially, is not always
The continuing flood of wrongful discharge litigation
easy to obtain. 483
involving termination of people who have been injured at work
Legal protection for individual non-union workers is,
reinforces the suspicion that retaliatory action against employ-
therefore, still limited in scope. Despite the increases in
who file workers' compensation claims continues to be
compensation claims filed in recent years, workers are still vul-
ees commonplace. Perhaps in reaction to the sheer quantity of
nerable to pressure not to file claims for compensable injuries
retaliation suits, recent amendments to state workers' com-
and diseases. Prospects for successful reinstatement in
pensation laws have focused on improving the job security of
unorganized workplaces, even with expanded employee rights,
injured workers.43 Anecdotal evidence of retaliatory actions
are notoriously bleak. 435 Retaliatory discharge lawsuits are a
by employers also supports the view that employers still view
useful tool primarily for professionals, managerial, and other
the filing of claims or reporting of injuries as disloyal behavior
upper income workers. 436 Thus, common law procedures and
by employees. Workers, therefore, must evaluate the hazards of
claims filing as well as the hazards of working. Given the
fundamental inequality of the relationship between employers
charge all employees. At most, the Plaintiffs have demonstrated that they
and employees, workers cannot look only at the potential
were treated differently because they worked at the San Antonio plant.
economic benefits of filing a workers' compensation claim in
Id. at 979 n.6. The court also states:
[A]n employer cannot, in our view, engage in discrimination
merely by
order function as rational economic beings within this relation-
closing an entire plant and discharging all employees-including those who
ship:488 pursuit of short-term economic gain may result in
have not engaged in any of the activities protected by [the workers' compon-
long term economic and other loss.
sation discriminatory discharge statute). After all, the word "discrimination"
denotes a "failure to treat all persons equally where no reasonable distinc-
tion can be found between those favored and those not favored." BLACK'S
4. The Ability of Employers to Influence Workers'
LAW DICTIONARY 467 (6th ed. 1990). We fail to see how an employer is dia-
Decisions. It is no secret that employers want to reduce the
criminating against, or treating unequally, employees who have engaged in
costs associated with the provision of both mandated and
workers' compensation activities when the employer is similarly discharging
employees who have not engaged in such activities.
voluntary insurance to workers. Inexpensive cost containment
Id. at 978-79.
433. See, e.g., Powell V. Wyoming Cablevision, Inc., 403 S.E.2d 717. 721 (W. Va.
1991) (applying inferential proof pattern developed in cases arising under laws pro-
hibiting discrimination based on race and gender to workers' compensation discrimi-
and upper management. Middle income employees with contract claims or modest
natory discharge claim).
tort claims who cannot make a substantial payment in advance will be discouraged
434. See, e.g., Slover V. Brown, 488 N.E.2d 1103, 1104 (III. App. Ct. 1986) (reiter-
by lawyers from pursuing their claims. Lower income employees without substantial
ating testimony by an employee that her employer terminated her upon finding out
tort claims will have difficulty finding a lawyer.").
she had filed a workers' compensation claim); Willoughby V. Gencorp., Inc., 809
437. For example, statutes requiring the rehiring of occupationally injured work- Ha-
S.W.2d 858, 859-60 (Ky. Ct. App. 1990) (noting a threatening conversation between
have been passed in Connecticut, CONN. GEN. STAT. ANN. § 31-313 (1987);
an employee who had filed a workers' compensation claim and that employee's boss).
ers wali, HAW. REV. STAT. ANN. § 386-142 (1988); Montana, MONT. CODE ANN. $ 39-2-
435. PAUL C. WEILER, GOVERNING THE WORKPLACE: THE FUTURE OF LABOR AND
901 to -914 (1993); Oregon, OR. REV. STAT. ANN. $ 659.415, .420 (Supp. 1992); Wis-
EMPLOYMENT LAW 86-87 (1990). Statistics indicate that workers who have been dia-
consin, WIB. STAT. ANN. § 102.35 (West 1991); and West Virginia, W. VA. CODE 0
charged rarely achieve successful reinstatement as a result of litigation. Summers
23-5A-3 (Supp. 1993). These legislative actions reflect underlying concern by groups
(1992), supra note 411, at 477-78. Summers notes two factors which deprive rein-
who represent injured workers in the political process that job security has proven
statement of practical value for employees. First, there is excessive delay in resolu-
to be inadequate.
tion of claims, during which most discharged employees will find alternative em-
438. For an example of the description of this theoretically rational worker, see
ployment. Id. Second, employees fear retaliation by their employer. Id. at 478. The
Butler & Worrall, Workers' Compensation: Benefits and Injury Claim Rates in the
employer perception is that returning to the old job will not work out and the em-
Seventies, supra note 18, at 586-89 (arguing that we can capture the essence of the
ployer will find or manufacture some nondiscriminatory reason for dismissal or will
employees' behavioral response by looking at a utility maximizing model in which
make life on the job intolerable". Id. As a result, only 5% of those offered reinstate-
employees weigh the utility of income received when they have an accident with the
ment through NLRB proceedings after six months returned to their old jobs. Id. at
utility of income when they do not). As benefits increase or as wages decrease, the
477.
relative utility of being injured increases and the number of reported injuries should
436. Summers (1992), supra note 411, at 467-68 (noting with regard to wrongful
rise in this model of employee behavior. Id.
discharge cases that, "[b]ecause of litigation costs, all but middle and upper income
439. Workers may, therefore, be making perfectly rational decisions regarding
employees are largely foreclosed from any access to a remedy for wrongful dismissal.
both preferred economic and psychological outcomes. See Ellickson, supra note 236, bo-
This is apparent from the reported cases. Relatively few plaintiffs are hourly wage
at 621-24 (noting, with regard to the Illinois study. that the rejection of a cash
or clerical workers; the large majority are professional employees or are in middle
nus by soon-to-be-employed unemployed workers may have been a rational act).
232
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(or, in insurance parlance, loss prevention) efforts often focus
by challenging all ambiguous or frivolous claims.443
on the elimination of claims costs, not on injury prevention.
The inequality of the underlying employment relationship
Employers' ability to influence claims costs, independent of
enhances the ability of employers to influence claims filing
primary prevention, is dually rooted in the nature of the
activity. Employees rarely pursue litigation (other than union
employment relationship and in the basic workers'
grievances) against employers while they remain employed. The
compensation paradigm.
intimacy of the relationship and the necessity for the
In this paradigm, the price that workers have paid for the
appearance of trust, as well as the possibility of arbitrary
availability of compensation is the loss of the right to bring
exercise of power by the employer, tend to discourage the
common law suit. This price is unvarying, cannot be
bringing of lawsuits. Workers' compensation forces the pursuit
quantified, and tends to be invisible. Workers are therefore
of litigation during the existence of this relationship; it is per-
generally viewed as having paid nothing for their compensation.
haps not surprising that claims for compensation often result in
The price paid by the employer, on the other hand, is contin-
a breakdown of trust and an increase in suspicion between the
gent not upon the occurrence of injuries but rather upon the
parties. The more workers perceive loss of trust or of job as one
filing and resolution of claims; that is, it is determined by the
possible outcome of pursuing compensation claims, the lower
activity of the employees in that enterprise and of the
the likelihood they will pursue claims for compensation before
employees in similarly situated firms.441 The benefit which
they are terminated.
the employer derives from this arrangement is immunity from
In view of this, employers can utilize a variety of means to
suit. The employer, therefore, does not benefit from the
discourage the filing of claims. These include, but are certainly
increased costs which may result from increasing numbers of
not limited to, overt intimidation. Professor Terence Ison has
claims filed by its workers: that is, the employer does not buy
pointed out that the more closely an employer's cost reflects its
more for the higher price. 442
own experience, the more likely the employer will have an
The employer's quest for decreased costs is therefore not
incentive to discourage claims.444 Ison believes the rate-
tempered by the potential loss of some benefit. Because
making process primarily encourages employers to oppose and
workers' filing of claims exhibits some elasticity, employers can
save money by discouraging claims as opposed to preventing
injuries. Costs would generally not increase without the
occurrence of injuries; but cost escalation can be avoided with-
443. As a former workers' compensation administrator and a teacher of labor and
employment law, I receive many solicitations for workers' compensation publications.
out avoiding injuries. Prevention becomes equated with the
A recent and typical one began as follows:
prevention of claims (or the reduction of costs associated with
Dear Colleague:
claims) rather than the prevention of injuries. To the extent
The only way to control runaway workers' compensation is to challenge-and
defeat-all claims that are
that workers are perceived to file excessive numbers of claims,
.
not work-related
it appears appropriate to discourage this behavior. Employers
frivolous
are therefore encouraged to defeat workers' compensation costs
fraudulent
Just letting one minor claim get through will result in an increase in insur-
ance premiums that will cost you thousands of dollars.
Flyer from Quinian Publishing Co. promoting WORKERS' COMPENSATION LAW BULLE-
TIN to "business executives like yourself" received by the author September 26, 1993
(on file with author).
Professor Terence lson notes that the workers' compensation insurance system
often leads employers to challenge claims on the legally irrelevant basis that the
440. Refer to part III.A.4 supra.
disability resulted from the fault of the worker or that it resulted from circumstances
441. Refer to part III.B. supra for a discussion of the specific mechanisms for the
outside the control of the employer. Ison, supro note 20, at 736. His views are echood
distribution of price and cost in workers' compensation.
in the strategies proposed by loss control consultants.
442. One caveat must be offered here. To the extent that any compensating wage
444. Ison, supra note 20, at 727 ("It is assumed and asserted that the variation
differential resulting from hazardous work is reduced by the improved availability of
of assessment rates by reference to the safety performance of the firms concerned
compensation, employers' costs will decrease with improved availability of compensa-
will create an incentive to improve the safety performance. Of course if the rates
tion benefits. I find this argument unpersuasive. The evidence regarding compensat-
really were being varied by reference to safety performance the conclusion would
ing wage differentials is by no means conclusive; there is no strong evidence that
follow; but that is not the case. Rates are varied by reference to claims cost
such differentials adequately compensate for increased risk in hazardous industries
experience and other claims data, and variations in these figures will commonly
or jobs. Refer to note 354 supra.
have nothing to do with safety performance.").
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discourage claims, rather than to promote safety. He lists a
"independent contractors";" employee leasing schemes in
variety of unintended and "nefarious"66 consequences he be.
to which an employer's own employees may be converted into
lieves will result from attempts to use the rate-making process
employees of legitimate, or fraudulent,4 external entities; in-
to promote safety:
stitution of programs which give bonuses either to individual
1. Discouraging workers from reporting claims.
workers who remain "accident-free"62 or to departments or
2. Refusing to complete [the employer's report of injury] when
plant managers which "charge back" savings from reduced
requested to do so
3. Adopting a gimmick type of safety program which creates
incentives for lower levels of management, or perhaps even for
disease problems. However, such publicity might well leave the employer open
workers, to reduce recorded claims, possibly by creating peer
many substantial workmen's compensation claims and to new demands by labor. Thus,
group influence not to make a claim.
to the employer's liability may lead to the suppression of information crucial to the de-
4. Delaying the completion of forms or omitting relevant
tection and prevention of disease." ASHFORD, supra note 9, at 408.
information, thereby causing delays in the processing of a
Workers currently have the right to information regarding occupational haz-
claim, perhaps causing the worker to turn to other sources of
ards under the OSHA Hazard Communication Rule. 29 C.F.R. 1910.1200 (1993). The
income
447
effectiveness of this rule is limited by several factors, however. Nonunion workers
often lack the technical assistance necessary to interpret environmental studies. Data
This is not an exhaustive list. Other strategies include
generated in large plants are voluminous and difficult for local unions to interpret
without substantial professional assistance (which is rarely available at a price they
deliberately withholding information regarding a diagnosis of an
afford). Employers are only required to create relevant information which is
occupational disease,448 or otherwise hindering the diagnosis
required can by OSHA standards. Workers' access is guaranteed only to information that vol-
of these diseases; the subcontracting out of hazardous work
is generated as a result of compliance with these rules or information which is
unterily produced.
450. Ison, supra note 20, at 728-29. In West Virginia, many petrochemical plants
subcontract a substantial amount of dangerous work. A story will best illustrate the
445. Id. at 736 ("If an experience rating plan has any downward influence on
result of this process. Some years ago, when 1 was teaching an evening class on
costs, it is likely to be through the discouragement of claims, opposition to claims,
occupational safety and health to industrial relations students at a state college in
and the confinement of benefits.").
Southern West Virginia, I assigned groups of students to research a number of the
446. Id. at 726.
large petrochemical plants in the Kanawha Valley of West Virginia. One group,
447. Id Professor Ison also notes: "Of course the monitoring of claims by employ-
which was assigned to the local DuPont facility (a company which is nationally re-
ers is not always injurious. Like so many things in life, a certain amount of it can
nowned for its successful safety program), interviewed the plant manager who, proud
be beneficial while too much of it can be damaging. The problem with current sys.
of his safety record, reported that no serious lost time injuries had occurred there in
tems of experience rating is that they promote the monitoring of claims by employ.
a substantial period of time. Their report was challenged in class by an older stu-
ers without creating any incentive to stop at the right amount." Id. at 725-26. But,
dent who was a member of the Laborers Union and who worked at the DuPont
he points out, "there is no way of measuring the harm that is done by experience
facility for a subcontractor. He said that a worker had been killed at the plant and
rating." Id. at 738.
that other serious injuries had occurred, all within the prior year. These injured
448. At least three states have removed the mantie of immunity from employers
workers were, however, employees of the subcontractor, not of DuPont- The death
who have engaged in the fraudulent practice of hiding occupational disease diagnoses
and injuries therefore did not appear in DuPont's statistics. This practice of subcon-
from workers whose disease is aggravated by continued exposure. Johns-Manville
tracting is commonplace. It is generally justified on the basis that the subcontracted that
Products Corp. V. Contra Costa Superior Court, 612 P.2d 948, 950 (Cal. 1990) (hold.
jobs require special expertise which the company lacks. DuPont itself maintains
ing that employee whose employer intentionally concealed the fact that he had con-
subcontractors are informed regarding DuPont's health and safety practices and are
tracted an industrial disease did have a cause of action for aggravation of his dis-
told to conform to them.
ease, although workers' compensation laws bar his common-law claim as to his ini-
451. In some cases, employee leasing firms seem to have been designed solely to
tial injury): Millison V. E.I. duPont De Nemours & Co., 501 A.2d 505, 507 (N.J.
exploit rate-making rules. For example, "an employer forms an employee leasing
1985) (allowing an employee to recover for work-related injuries aggravated by con-
firm, assigns all his employees to it and then leases them back again. This usually
tinued exposure to asbestos when the employer deliberately concealed the risks of
occurs when the experience modification of the principal firm soars well above unity.
asbestos exposure from its employees); Martin V. Lancaster Battery Co., 606 A.2d
Through this accounting maneuver, the experience modification drops back to 1.0,
444, 446 (Pa. 1992) (holding that an employee of a battery manufacturer, whose
even though nothing else has changed." Hager, supra note 13, at 122. This occurs
blood test results were intentionally altered by his employer, resulting in more se-
because new firms are always assigned a modification factor of 1.0. Id; see also
vere injuries to the worker due to continued exposure and lack of treatment, was
Barry Meier, Some Worker Leasing' Programs Defraud Insurers and Employers, N.Y.
not limited to a workers' compensation claim against his employer).
TIMES, Mar. 20, 1992, at A1 (describing how a number of employee leasing firms
449. Employers have considerable control over information regarding occupational
have become defunct, owing injured workers millions in compensation benefits).
diseases. "[E]mployers have traditionally had almost exclusive access to medical and
452 This practice is becoming more commonplace. One example is given in the
scientific data. In order to recognize that a certain disease is occupationally related,
California Department of Insurance report: "Western Parcel Express places drivers
one must know both the medical histories of workers and the hazards they face.
on a bonus system to receive $125 for each month they are accident free." California
Without both sets of facts, it is generally impossible to draw conclusions about the
Insurance Study, supra note 7, at 60. The report suggests this as a positive ap.
etiology of disease. Employers have been in the best position to detect and publicize
proach to safety. Id.
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compensation costs to specific departments or operations within
to cost containment are undoubtedly introduced with the
corporations; disciplinary programs for workers who are
intention of stimulating greater worker vigilance regarding
involved in accidents; threats to close a plant if workers'
safety; if this is the case, their unintended consequences
compensation claims costs do not decline, or closing a plant for
are that they also increase the likelihood that injuries will not
this reason; or simply increasing the level of litigation in
be reported. All of these strategies, whether they involve
challenging the filing of claims. Many of these approaches
inducements to safety or threats of retaliation, reflect the
employer's ability to control the workplace in order to ma-
nipulate claims filing activity.
453. For example, charge-back programs are used in grocery store chains to allo-
With the exception of wrongful discharge litigation and the
cate to stores or divisions the costs of occupational injuries. "Grocery store executives
claim this has been effective in focusing attention on safety considerations and per.
occasional lawsuit involving an employer's grossly negligent or
haps in reducing the number of accidents. At Safeway Stores, the 'charge-back' pro-
intentional misconduct, 459 there is remarkably little litigation
gram is credited with reducing the incidence rate of injuries by 40% between 1987
which challenges employer (mis)behavior in discouraging claims.
and 1991." Id. at 90.
Current commentary draws little distinction between efforts to
454. For example, in 1988, Consolidation Coal Co., a major U.S. coal producer,
established a "safety program" which informed workers that, if they were involved in
prevent hazardous conditions and efforts to reduce costs
repeated accidents, they would be subject to discipline. Consolidation Coal Co., Inter-
through discouraging claims.460 In fact, it is often impossible,
nal Memorandum, Safety Approach to Accident Prevention for High Experience Em-
from the outside, to discern the difference between the two. Of
ployees (on file with author). Employees with two or more recordable accidents dur.
ing an 18 month period would be counseled:
course, looked at from the vantage point of injured workers,
A meeting will be held with the Mine Communication Committee to advise
there is a world of difference.
them of the following:
The fact that employers can exert managerial pressure in
E. We will advise them Thigh experience individual workers] that their con-
order to affect workers' compensation costs without decreasing
tinued poor safety performance will not be tolerated
underlying rates of injury and illness has a tendency to confuse
F. We will be looking very closely at each new accident with all employees.
our understanding of prevention. If the goal is simply to
G. Based on circumstances of each subsequent accident after counseling the
high experienced people, action ranging from 2-4 hours of retraining to sus-
decrease workers' compensation costs to employers, this
pension and/or discharge may occur.
behavior is laudable. If there is genuine interest in achieving
decreases in occupational morbidity and mortality (whether as a
I. This is a new approach to safety and preventing accidents by making
high experienced employees more aware of working safely
public health goal or out of concern for total costs), these ap-
Our intent
and purpose is to help correct poor safety performance, not to punish.
parent decreases in costs serve only to obscure the picture. It is
Id. In the introduction to another related memorandum, the Senior Vice President
the injured worker and other social insurance programs that in
wrote, "Today I want to share my concern and take a close look at the accidents you
fact absorb the costs of uncompensated occupational injuries.
have suffered. While there may be some things that we can do, I want you to review
your own accidents to see what you could have done to prevent your accident. Also,
Determining the true injury rate and the true degree of
what you are going to do to prevent a reoccurrence." Consolidation Coal Co., Internal
workers' suffering becomes difficult within the framework of
Memorandum, Training for High Experience Employees (on file with author). In the
such elasticity.
enclosed counseling session guidelines, the supervisor was instructed to ask the fol.
lowing questions: "Do you think you will beat the odds? What are your odds of being
killed? Do you want to be killed? What can you do about it?" Id. This particular
policy was ultimately withdrawn after a legal challenge which argued that it would
there are others. When claims are likely to be high, litigation becomes more profit-
subject the employees to discipline for reporting safety problems or filing workers'
able." ASHFORD, supra note 9, at 417.
compensation claims, in violation of West Virginia law. UMWA Dist. 31 V. Consolida-
457. It is true that many genuine and aggressive safety programs have an eco-
tion Coal Co., Civ. No. 88-C-391 (Cir. Ct. Mon. Co., W. Va. 1988).
nomic incentive component which is, I believe, designed to get the attention of both
455. A plant closure blamed on excessive workers' compensation costs was unsuc-
hourly and managerial employees and involve them in safety efforts.
cessfully challenged by the workers in Unida V. Levi Strause & Co., 986 F.2d 970,
458. Professor Sugarman notes the same phenomenon with regard to small auto-
977 (5th Cir. 1993) (holding that an employer who closes a plant because of high
mobile accident claims and concludes that "perverse" actions, which involve the con-
costs, including workers' compensation costs does not violate article 8307c of the
cealing of bad conduct or fighting of claims, appear to predominate. Sugarman, su-
Texas Workers' Compensation Act, which provides that an employer may not dia-
pra note 19, at 585. "This concern about higher rates does cause nonreporting and
charge an employee simply because that worker has filed a good faith workers' com-
private settlement of small accident claims once crashes occur. But this is hardly the
pensation claim).
same thing as driving safer in the first place." Id. at 578.
456. This reaction is commonplace and the growth of litigation on claims is dis-
459. Refer to note 247 supra.
cussed in Part 11. As Nicholas Ashford observed, "High benefits mean high costs to
460. In the Upjohn study, no distinction was made between cost containment
employers, and thus incentives to find ways to reduce these costs. One way to re-
based upon successful discouraging of the filing of claims and cost containment
duce costs is, of course, to provide a less hazardous workplace. But, unfortunately,
achieved through hazard reduction. See Upjohn Report, supro note 7. at 111-5.
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D. Ignorance, Doctors, Lawyers, and Other Transaction Costs
rate-making system is particularly confusing for small and
medium-size employers, whose injury rates tend to be worse
An employer can respond to rising workers' compensation
than large employers. Even in companies large enough to have
costs in three enterprise-specific ways: by doing nothing to
both risk managers and engineering design departments, there
change internal practices; by reducing costs through cost con-
is surprisingly poor communication between the two. 465 The
tainment on claims without directly addressing the need for
lack of information which is readily available to both employers
prevention of injuries and illnesses; or by engaging in primary
and workers, 466 and the high costs of obtaining better infor-
prevention. The likelihood that employers will work actively to
mation, exacerbate the problem. The costs of information
prevent injuries is diminished both by the availability of the
transfer are a separate impediment to economic efficiency. 467
apparently efficient response of claims cost containment
As a result, despite evidence that enterprise-specific
and by the substantial transaction costs inherent in the
behavior generates significant cost savings, the public debate
workers' compensation system.
over workers' compensation has often been framed around sec-
Economists refer to those factors which tend to prevent
ondary issues which reflect these impediments. Employers pub-
individuals or firms from acting in an economically efficient
licly blame the cost of workers' compensation on a raft of
manner as transaction costs. 462 In the workers' compensation
problems all of which are outside the direct control of the
context, transactions costs create considerable friction. In fact,
enterprise, while perceiving themselves as victims of a system
it is difficult to imagine a system which is less likely to
which they have no capacity to influence. They tend to see the
generate the level of information and understanding that would
causes of high costs in the actions of workers (who file
be necessary to encourage economically and socially efficient
unnecessary claims), outsiders (such as doctors and lawyers
behavior. Ignorance, psychological factors, fundamental
who benefit financially from the system), the state legislature
inequality of the employee-employer relationship, distribution of
(which perpetuates a program which is somehow always more
costs, and the underlying structure of the workers'
expensive than that in a neighboring state), or state
compensation system all generate transaction costs which ob-
administrative bodies (which are perceived as agencies which
struct an optimal outcome.
delay resolution of claims and find marginal claims to be
As an initial problem, as discussed above, costs are not
compensable).
distributed among employers in a manner likely to promote
People tend to pay a lot of attention to anecdotal
aggressive safety practices. 463 Moreover, employer ignorance
information, to ignore data when forming opinions, to take
regarding the methodology used for experience rating is itself a
significant impediment to achieving this outcome; the
distribution of costs is irrelevant if those who pay them have
465. See GEORGE EADS & PETER REUTER, DESIGNING SAFER PRODUCTS: CORPO-
no comprehension as to the manner of their distribution. The
RATE RESPONSES TO PRODUCT LIABILITY LAW AND REGULATION (Rand Report) 60
(1983) (noting that there was poor communication between in-house risk managers
and engineering design departments with regard to product safety issues).
466. See ASHFORD, supra note 9, at 19.
461. This approach may result in an economically efficient outcome from the
The imperfections in the market approach are inherent and severe:
standpoint of the employer; the resulting bargain, which transfers the costs of inju-
The deficiencies in the knowledge of the nature and severity of health
ries directly to workers or other social insurance programs, may not be optimally
hazards are the most serious imperfections.
efficient from a social point of view, however.
There are serious reasons for questioning the notion that the existing
462. See Coase, supra note 354, at 15 (pointing out that economic theories which
level of workplace hazards represents working people's free market choice re-
assume away transaction costs fail to predict accurately how rational persons will
garding the assumption of job-related risk. Beyond important informational
behave because transaction costs, including information, negotiation, and inspection
problems, a wide variety of other forces-including social, cultural, psycho-
costs, are often very costly and thus prevent people from entering into many ar
logical, and environmental factors-influence workers' decisions regarding the
rangements that would seem profitable in a no-transaction-costs world). To the ex-
assumption of job-related risks. An inability to assess or relate to low-proba-
tent that transaction costs impede efficient results, economic incentives become irrel-
bility, large-harm contingencies is a behavioral trait common to many, if not
evant and the bargain that is ultimately struck may not be the optimal one.
most, individuals. Further, many workers are socialized to accept the haz-
463. "One fly in the Coase ointment is the existence of an imperfectly experience-
ardous nature of certain jobs and are convinced of the necessity of perform-
rated system of no-fault insurance, mandated by the government." Butler & Worrall,
ing them
Workers' Compensation: Benefits and Injury Rates in the Seventies, supra note 18, at
Id.
587.
467. See Coase, supra note 354, at 15 (including the cost of gathering and ana-
464. Refer to notes 323-28 supra and accompanying text.
lyzing information among transaction costs).
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extreme outcomes as being representative, and to attribute
There is no question that doctors and lawyers can
more control over a particular event to the people involved than
manipulate workers' compensation to their own advantage. As
they see themselves as having.**8 These psychological
the state- appointed gatekeepers to most disability
attributes inhibit "rational" behavior" as well as contributing
programs, doctors in particular have a profound influence
to the underlying tension between employees and employers.
on the cost of both medical treatment and workers' benefits. As
They also cause employers to generalize from isolated
a result, physicians are painted (sometimes accurately) as
experiences of worker abuse of the workers' compensation sys-
professionals who tend to overtreat, overcharge, and offer
tem to a general belief that fraud and abuse cause workers'
opinions which are influenced more by the source of the
compensation cost escalation; they encourage a belief in the
payment than by the actual condition of the patient. 474 Some
worker-at-fault paradigm.
employers and insurers now view medical costs as the primary
These psychological tendencies are reinforced both by the
cause of workers' compensation problems and therefore put
underlying workers' compensation compromise, which appears
considerable energy into health care cost containment strate-
to eliminate employer fault and blame as a factor, and by the
gies. The alarming escalation of the medical component of
general state of labor-management relations. The bilateral
workers' compensation costs makes this a legitimate concern; it
monopoly relationship between workers and employers vastly
nevertheless also draws attention toward a component of cost
increases transactional costs.470 Neither the currently popular
and away from the underlying cause of the cost.
"total quality management," a process of involving workers in
Concern has also mounted regarding the activities of
decision-making in order to achieve continual improvements in
claimants' lawyers who advocate expansion of benefits and
quality, nor more traditional collective bargaining, have
encourage the filing of claims by their individual clients.
extinguished the fundamental distrust that pervades worker-
The self interest of these attorneys, whose fees rise with
employer interactions. Because of this suspicion, workers'
increases in benefits, tends to tarnish their image. Employers
compensation claims filed by individual employees are subject
view them as a cause of the escalation of costs. They are
to significant and suspicious scrutiny by employers. Both the
believed to instigate the filing of fraudulent, weak, or
fundamental legitimacy of the claim and the costs which are in-
unnecessary claims and to organize inappropriate screenings to
curred after the claim is found to be compensable come under
locate workers with claims which might not otherwise be
attack.
filed. This view has recently led to the exclusion of attorneys
Because employers often perceive themselves as having less
influence over the occurrence of injuries than they in fact have,
they concentrate on discouraging the filing of claims or on post-
to work prematurely. There is, nevertheless, a need for aggressive programs which
injury claims management instead of on injury prevention.
465 n.452.
enable workers to return to work after an injury. See Spieler, supra note 252, at
Insurers and employers often focus particular attention on the
behavior of health care providers and lawyers who provide
473. See STONE, supra note 230, at 108 (noting that "all disability benefits rely
to a greater or lesser extent on the medical evaluation of impairment" giving doctors
services to injured workers and on the length of time that an
a very significant role in the program).
injured worker remains off work.472
474. See TRAMPOSH, supra note 120, at 53 ("[T)here are physicians that have
'sold out' to employers. They may care about the workers, but they know which side
employers."). their bread is buttered on, and they do not want to alienate their customers: the
476. See generally Greenwood & Taricco, supra note 68.
468. Dickens, supra note 383, at 26-27.
469. See Ellickson, supra note 236, at 40 (noting that people often ignore or oth.
that employers often point to lawyers as one of the major abusers of the workers'
476. See David O. Weber, The Comp Crisis, INS. REV., Oct. 1990, at 30 (stating
erwise fail to respond to law or misconstrue legal signals).
compensation system).
470. The Coase theorem assumes equality of bargaining power, which is patently
lacking in the employment relationship. "[I]f the parties are locked in a bilateral mo-
477. Medical screenings of workers who have been exposed to occupational dis-
nopoly, where neither party has alternatives to dealing with the other, transaction
ease-causing agents became commonplace during the 1980s. Often, these were spon-
costs will be sharply elevated." Donohue, supra note 393, at 556.
sored by labor unions; sometimes claimants' attorneys or occupational health physi-
471. See generally WARREN H. SCHMIDT & JEROME P. FINNIGAN, THE RACE WITH-
cians were the initiators. Claimants' attorneys, physicians, and labor union represen-
OUT A FINISH LINE: AMERICA'S QUEST FOR TOTAL QUALITY (1992).
tatives maintain that these screenings merely identify individual workers who suffer
472. Employers sometimes respond to escalating costs by attempts to improve
from compensable diseases and assist them in receiving benefits for which they are
eligible. But for these screenings, it is likely that many of these workers would nev-
return-to-work and rehabilitative programs. While many of these programs are lau-
datory both in their goal and function, others shortsightedly force workers to return
or week compensation. Not surprisingly, this process is viewed with hostility and
suspicion by employers and insurers. Again, this is an example of the fact that the
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from discussions regarding reform of state workers'
assaults against state programs under the banner of "economic
compensation systems as well as to legislated restrictions on
the activities of lawyers in the system.478
development." During the ensuing battles, employers point to
the possible demise or relocation of a particular firm or
Further, interstate variability in costs encourages the belief
enterprise as proof that workers' compensation costs are, or will
that the root cause of escalating and excessive costs is the
become, excessive. In the course of these confrontations, it
legislative design of the program in each state. Employers
is often implied that legislators in the home state are more
insistently point to neighboring states in which they allege
profligate, that home state workers are greater abusers, or that
workers' compensation costs less for equivalent employers.
the state's administrative body is particularly lax in the
In fact, interstate variability has grown over the past two
granting of claims. This occurs even in those states in which
decades, despite the efforts of the National Commission on
employers' insurance premium rates are relatively low. 482
State Workmen's Compensation Programs to establish greater
Thus, the impediments to effective deterrence that have
uniformity. As a result, employers often launch political
been noted by other commentators with regard to tort liability
systems are magnified in the workers' compensation program.
The general design of workers' compensation has not histori-
system is dependent on the underreporting of claims in order to maintain economic
equilibrium. Medical screenings which expand the number of claims which are filed,
cally encouraged many employers to believe that their own
even if the claims are filed for legitimate, compensable, disabling medical conditions,
efforts at safety would yield significant cost savings within
are unwelcome in a system facing escalating costs.
their own enterprises. The combination of civil immunity, no-
478. Ken Myers, Less Workers' Comp Work Ahead, NAT'L LJ., June 7, 1993, at 1
fault payments, limitations on benefits, and insurability of the
("In [legislative] reform packages, one of the first proposals is usually the elimina-
risk all contribute to this overall view.
tion of lawyers.").
479. Spieler, supra note 252, at 359 & n.89.
Employers' failure to perceive safety as connected with
480. Differences among states (when costs were measured both as a percent of
costs is further fed by their ability to focus on worker behavior
payroll and as insurance premium per worker and were corrected for interstate vari-
ations in wages and industrial mix) grew significantly between 1972 and 1983. John
and to reduce costs by discouraging the filing of claims or
F. Burton, Jr., Interstate Variations in the Employers' Costs of Workers' Compensa-
limiting costs incurred within claims. The ability to blame
tion, with Particular Reference to Connecticut, New Jersey, and New York, in CUR.
workers as well as other parties who are external to the em-
RENT ISSUES IN WORKERS' COMPENSATION, supra note 274, at 111, 112-13. Differenc-
es among states continued to widen in subsequent years, although a state's relative
ployment relationship for increasing costs discourages employer
position is not immutable. For example, while California has been a consistently
self scrutiny, even when such scrutiny might yield economically
high cost state and Indiana a consistently low cost state, rankings of other states,
advantageous decisions for the firm. Thus, both ignorance
including Michigan, have varied substantially. Burton & Schmidle, supra note 25, at
11. Burton and Schmidle go on to observe, "Data on interstate differences in
regarding the actual relationship between cost and safety and
workers' compensation costs may also be used to assess the need for national
objective aspects of the system which do not reward safety have
workers' compensation standards
The widening difference among states in
reduced the likelihood that primary preventive activities will
their costs of workers' compensation
appear (sic) to increase the threat of run-
result from increasing compensation costs. As long as costs are
away employers and thus strengthens the case for federal standards. Id. at 13.
In addition to comparisons based upon premium rates charged to employers,
not, or are not perceived to be, related to internal firm choices,
interstate comparisons are also drawn from the dollar amount of workers' compense.
the ability of workers' compensation to provide effective lever-
tion benefits paid per 100,000 active workers. John F. Burton, Jr & James W.
age to make employers improve underlying safety practices is
Gasaway, Workers' Compensation Benefits Paid to Workers: Interstate Differences Sub-
stantial, National Averages Accelerate, JOHN BURTON'S WORKERS' COMPENSATION
MONITOR, Sept.-Oct. 1992, at 1. Again, the variation among states is substantial.
The highest cost state, Maine, paid $121.1 million in benefits per 100,000 workers in
1992. Id. fig. A. The lowest, Indiana, paid $16.2 million per 100,000 workers in the
481. See COMMISSION REPORT, supra note 32, at 125 (noting that "legislators
same year. Id. The average for 43 states was $43.0 million per 100,000 workers. Id.
likely will bear claims from some employers that the increase in costs will force a
The use of this particular comparison is somewhat misleading, however. These fig-
business exodus. It will be virtually impossible for the legislators to know how genu-
ures appear to represent benefits paid, not incurred, during the year in question.
er."). ine are these claims." The Report terms this "the spectre of the vanishing employ-
See id. at 2. Current payments on claims reflect payments on both new as well as
old claims involving more severe injuries. Therefore, states with hazardous industries
482. For example, between 1985 and 1989, premium rates in West Virginia were
(and therefore larger numbers of severe claims) and declining employment (and
artificially depressed to a very low level as a result of political manipulation. The
therefore a declining number of active workers) will show high costs in this compari-
articulated reason for the depressed rates was that the Governor at that time
son even if their workers' compensation system is not comparatively generous. The
wanted to promote economic development. This development did not occur. At the
comparison is, however, useful in demonstrating the large differences among states
same time, during this period, employer groups approached the legislature to com-
in the liability to injured workers.
252, at 345-48.
plain about what they perceived to be excessively high rates. See Spieler, supra note
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IV. SOLVING THE PARADOX? THE NEW SAFETY RHETORIC
"reform" is an annual exercise in political frustration in many
states.
486
There is some sign of change, however. The political
political Costs, debate. not 483 injury The rates, explosion drive the workers' compensation
realities of workers' compensation require that its fundamental
program. years has On heightened the one the hand, chronic tension of costs that over characterizes the past twenty the
characteristic of compromise be maintained. Organized labor, as
the putative voice of injured workers, therefore finds itself at
when system the through expansion excessive of an filing workers of claims; are accused as is often of taxing the case the
the bargaining table when legislators debate mechanisms for
decreasing cost. But political realities constrain labor's usual
for unanticipated ensuing financial levels of costs, woes. applicants entitlement for program benefits are results blamed in
bargaining stance: the apparent consensus that costs are
excessive has made the expansion of benefits in most states a
compensation charge that the system still On fails the other hand, workers
politically untenable proposition. Faced with persistently
high rates of injury despite rising costs, organized labor has
war to many injured workers. The to provide adequate
therefore shifted its focus to prevention within the workers'
ing cost among reductions), insurers (seeking and workers rate adequacy), three employers way tug-of- (seek-
compensation debates.
most adequacy) insoluble has made political workers' compensation and unions into (seeking the benefit
conundrum. 485 Workers' compensation politicians'
and its insured's victims, but allow such exclusions to be effective as between the
insurer and the insured. In effect, when the insured has violated safety standards
that are conditions of coverage, the insurer would serve only as a guarantor of its
compensation 483. This is, for of occupational course, not disease a new was, phenomenon. in part, a For example, failure to provide
insured's liability rather than as an indemnifier." ABRAHAM, supra note 269, at 61.
Refer to note 101 supra.
Each of these proposals assumes, perhaps incorrectly, that increased costs to employ-
484. [t]he STONE, explanations supra note are 230, at 170. Stone notes that result when of concerns about
ers will yield increased attention to safety. Sugarman, in contrast, favors limiting
costs.
compensation to its distributional role, and increasing other enforcement efforts in
gram cause is of the structure always of its incentives, the same: the program encourages costs rise: abuse be-
order to promote safety. Sugarman, supra note 19, at 590-91, 664.
486. James Chelius, of Rutgers' Institute of Management and Labor Relations,
abuses. in Analyses need of coordination and better and management the administration to curb of individual the pro-
has noted that each year virtually every state amends its workers' compensation
law. "The difference between reform and tinkering seems to depend on whether one
is for or against the changes." James R. Chelius, The Status and Direction of
belief [I]nevitably, that the individual the of critics these citizen of programs is the first and are usually foremost permeated a 'welfare with a deep
Workers' Compensation: An Introduction to Current Issues, in CURRENT ISSUES IN
WORKERS' COMPENSATION, supra note 274, at 1, 3-4.
bound judgment. up with The explanation one based on based laziness on rational program motivation in crisis becomes do attach maximizer'. a moral
The Insurance Information Institute has estimated that between 1982 and
1988 legislators nationwide enacted at least 1050 amendments to state workers com-
efits users they of the do program not deserve. do not really need and it, and fraud. that It they is assumed are receiving inextricably that many
pensation laws. David O. Weber, The Comp Crisis: A Special Report, INS. REV., Oct.
1990, at 27, 34 [hereinafter Comp Crisis]. Former general counsel for the National
primarily Thus, to rapid an increase growth in in use the of disability the insurance program is attributed ben.
Commission, John Lewis has warned that "no reform effort works as intended.
You're lucky if the result is even close to the intention." Id.
Id.
485.
that The increase is thought to be that benefits program, are too and generous. the main
487. Fearing that reforms designed to reduce system costs would mean a reduc-
reason
for
tion in benefits as well, unions have traditionally opposed such changes. Discussing
should commentators deterrence, the so problem to that propose safety of the a and failure variety prevention of of workers' would compensation produce systemic to provide savings, the hoped-for
the Minnesota experience, however, Michael Staten has asserted that reform "does
not have to be a zero-sum game which precludes everyone from gaining." Michael
Staten, Discussion of Papers on Recent State Reforms, in CURRENT ISSUES IN
ample, Deborah system Stone be changed has proposed in order to solutions. increase The its deterrent question is, in essence, has how led
WORKERS' COMPENSATION, supra note 274, at 106, 106 (reviewing Steve Keefe, The
Minnesota Experience with Workers' Compensation Reform).
injury of tort are liability, eminently arguing changeable" that "[t]he that physical the conditions no fault model of work be capabilities? abandoned that in For favor ex-
488. James Ellenberger, Assistant Director, Occupational Safety and Health, AFL-
CIO, summarizes the labor position this way:
fearing hide behind that the no-fault shield. STONE, and, therefore, employers should not be contribute allowed to
The [Bureau of Labor Statistics] Annual Survey for 1988 indicates some
but unjustified that claims, any increase Ronald in Ehrenberg compensation has supra suggested to workers note 230, will at result 191. in On a the proliferation other hand, of to
very troubling trends in workplace injuries and illnesses
....
The response to these horrible statistics, regrettably, has not been a
supra crease note in compensation revenue 18, at 94-95. be used remain to fund static; other he has safety recommended and that health the payroll that any tax resulting be increased in-
renewed effort by policymakers, employers and insurers to reduce accidents
and injuries on the job.
Abraham has suggested that Focusing we "invalidate on the policy design exclusions of insurance as activities. between coverage, the Ehrenberg, Kenneth insurer
The victim of the job injury or illness frequently becomes the target
of those concerned with runsway costs. Instead of focusing corrective action
aimed at stopping accidents and creating safer work sites, all too often ef-
forts are made to lower workers' compensation benefits or to change the
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representatives of employers and employees or unions; they are
A. Legislative Responses to Rising Workers' Compensation
intended to remove much of the rancorous disagreement from
Costs
the legislative arena, to allow the development of expertise by
Confronted with high costs and unwieldy administrative
the participants, and to encourage the growth of consensus
structures, and mindful of the need to maintain the compromise
without the threat of continuous public scrutiny.
nature of these programs, state legislatures are responding to
Second, state legislatures are attempting to reduce the
the workers' compensation dilemma in a number of ways.
amount of delay and friction in the adjudicative system, to
First, in apparent exasperation at the continual and high
increase the speed with which injured workers with legitimate
pitched level of political confrontation over these issues, new
claims receive benefits, and to reduce the role of attorneys in
legislation pulls the workers' compensation debate away from
the litigation of claims. Improved administration of claims
the open political arena by establishing labor-management
has been a goal since before it was advanced by the National
groups to provide guidance in the administration of the state
Commission on State Workmen's Compensation Laws over
system or in the development of new legislation or
twenty years ago. 492 Of course, there is not always consensus
standards. 490 These groups are governing, not advisory,
regarding 493 the appropriate way to achieve administrative
efficiency.
commissions or boards which are generally comprised of
Administrative streamlining and improved labor-
management cooperation are, at least theoretically, consensus
goals which promise to reinforce the atmosphere of political
definition of injures or illnesses
compromise. Although laudable, however, neither of these
The workers' compensation 'crisis' is likely to continue until we
drastically reduce the needless human suffering and economic costs of job
strategies directly addresses the critical problem of high
injuries, illnesses and death. This will require
making safe and healthy
workers' compensation costs and persistent rates of occupational
workplaces our top priority.
James N. Ellenberger, Troubling Trends in Workplace Injuries, Comp Crisis, supra
injuries. States are responding to high costs in two ways. First,
note 486, at 32 (sidebar).
in reaction to employers' demands, legislatures have tightened
489. The examples given in this section are limited in several ways. First, the
the availability of benefits,49 heightened the consequences for
primary health and safety enforcement activities of the twenty-three states with ap.
proved state plans for enforcement of OSHA standards are not the focus of this dis-
cussion. Many of these states have substantially expanded and improved their safety
initiatives. Although some of these efforts have been in reaction to concerns regard-
491. These provisions all address very specific shortcomings in each state's ad-
ing workers' compensation costs, they are mentioned only tangentially here; the safe-
ministrative processing of claims and are quite state-specific. Examples of such
ty initiatives discussed here are those which have been undertaken as part of
changes include: Oregon established penalties for unreasonable delays in payment of
workers' compensation reform. Second, a number of states have enacted provisions
benefits, OR REV. STAT. ANN. § 656.262(10) (Supp. 1992); the Texas Labor Code
governing imminent danger situations; these are not included in this summary.
eliminated de novo trials in court after administrative processing of workers' com-
Third, workers' compensation reform legislation is so widespread that it is impossible
pensation claims, TEX. LAB. CODE ANN. §§ 410.301-308 (Vernon Supp. 1994); Kansas
to include every example of change here. The following discussion provides only a
set new limitations on attorneys fees to be charged claimants, limiting fees to a
brief overview.
reasonable amount or a maximum of 25% of any compensation up to $10,000, 20%
490. See, e.g., MR. REV. STAT. ANN. tit_ 39-A, $ 161 (West Supp. 1993) (estab-
of any award from $10,001 to $20,000, and 15% for any amount over $20,000, and
lishing, as part of the Maine Workers' Compensation Act of 1992, a Workers' Com-
prohibiting attorneys fees on medical and rehabilitation benefits, KAN. STAT. ANN. §
pensation Board composed of four representatives of management chosen by the Gov.
44-514 (1993).
ernor from a list provided by a bona fide employers organization and four represen-
492. COMMISSION REPORT, supra note 32, at 99-114.
tatives of labor chosen from a list provided by a bona fide labor organization repre-
493. For example, the Texas Workers' Compensation Reform Act of 1989, which
senting at least 10% of the Maine work force: members of the board select the
limited de nove jury trials after administrative resolution of claims, has been chal-
chair, which must alternate annually between labor and management represents.
lenged successfully by claimants and unions as an unconstitutional abridgement of
tives); OR. REV. STAT. ANN. $ 656.712 (1989 & Supp. 1992) (providing as of 1990 for
access to the courts under the Texas constitution. Texas Workers' Compensation
an impartial three member workers' compensation board; "inasmuch as the duties to
Commission V. Garcia, 862 S.W.2d 61, 103-04 (Tex. App-San Antonio 1993, n.w.h.)
be performed by the members vitally concern the employers, the employees, as well
(holding the entire workers' compensation reform legislation, passed in 1989, uncon-
as the whole people, of the state, persons shall be appointed as members who fairly
stitutional because the unconstitutional portions could not be severed from the Act
represent the interests of all concerned."); W. VA. CODE 95 21A-3-1, -3, -7. 23-1-1
in its entirety).
(Supp. 1993) (establishing in 1993, a compensation programs performance council,
494. For example:
composed of four labor and four business representatives plus the Commissioner as
The burden of proof to establish work-relatedness has been increased for
ex officio chairperson; the Council is charged with development and approval of voca.
claimants in some states. Oregon provides a good illustration of this. See OR. REV.
tional standards for permanent total disability and all rule-making authority under
STAT. ANN. § 656.266 (1989 & Supp. 1992) (1987 revision requiring that worker car-
the Workers' Compensation Act). Many other states have enacted similar provisions.
ry burden of proof to show an injury or occupational disease is compensable by do-
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fraud, 496 and addressed the post-injury costs of claims. In
many instances, this recent legislation has attempted to turn
back the clock, making claims noncompensable which had
become compensable within the last twenty years.
ing more than merely disproving other possible explanations); OR. REV. STAT. ANN. §
This type of legislative response assumes that the critical
656.273 (Supp. 1992) (limiting compensation for aggravations of prior injuries, "if the
goal is reduction in costs, not reduction in injuries. Un-
major contributing cause of the worsened condition is an injury not occurring within
the course and scope of employment); OR. REV. STAT. ANN. $ 656.005(7)(a)(A) (Supp.
doubtedly, costs will fall as a result of more aggressive claims
1992) ("No injury or disease is compensable as a consequence of a compensable inju-
management or reduction in the numbers of claims that are
ry unless the compensable injury is the major contributing cause of the consequen-
viewed as compensable. This approach will not, however,
tial condition"; administrators interpret this to mean that the claimant has to prove
that the condition is more than 50% caused by work). Oregon has also excluded all
change the underlying health and safety conditions for working
claims in which the claimant cannot produce "medical evidence supported by objec-
people or reduce the number of injuries. Instead, it simply
tive findings." OR REV. STAT. ANN. 5 656.005(7)(a) (Supp. 1992). This arguably ex-
changes the number of injuries which are recognized by the
cludes soft tissue back injuries which cannot be detected on radiologic or physical
examination. The exclusion of back injuries is currently under litigation. Telephone
system or the costs of those injuries which are compensated.
interview with Larry Niswender, Medical Issues Coordinator, Oregon Workers' Com-
Second, mindful of the concerns voiced by organized labor
pensation Division (Oct. 29, 1993).
and others, state legislatures are adopting more proactive
States have restricted claimants' access to physicians of their own choice for
purposes of determining compensability. For example, in Massachusetts claimants
approaches to occupational safety and health as a component of
must now seek medical reports from physicians chosen by the Industrial Accident
workers' compensation reform. This approach has significant
Board; many of these physicians are untrained in occupational medicine and are un-
political appeal: a successful campaign for safety will
able to draw connections between health problems and their occupational etiology.
presumably result in reductions in costs without antagonizing
Telephone Interview with Emily Novick, claimants' attorney in Boston, Mass. (Oct.
27, 1993).
workers through removal of benefits. Investment in safety
Psychological claims unrelated to a physical injury are now noncompensable
represents an increasingly rational economic response to the
in a growing number of states, irrespective of the extent or etiology of the disability.
high costs of workers' compensation. In other words, because
See, e.g., W. VA. CODE $ 23-4-1(Df (Supp. 1993); U.S. CHAMBER OF COMMERCE, supra
note 121, at 3 (Arkansas); Ruth A. Brown, Workers' Compensation: State Enactments
compensation costs are now so high, it has become more
in 1992, 116 MONTHLY LAB. REV., Jan. 1993, at 50, 53-54 (Missouri, Oklahoma).
apparent that "safety pays." As a result, safety has become both
495. In 1992 alone, Connecticut, Minnesota, and Oklahoma established fraud
a viable political solution and, increasingly, a solution accepted
units and Alabama, Missouri, and Rhode Island stiffened their fraud penalty provi-
by the employer community.
sions. Brown, supra note 494, at 50-54.
496. Three particular efforts are appearing in reform legislation:
Safety rhetoric is now ubiquitous. Not only unions, but
First, states have enacted provisions which reduce benefit levels. Some
states have increased offsets against weekly benefits when the injured worker has
other sources of income. See, e.g., ME. REV. STAT. ANN. tit. 39-A, § 220(1) (West
Supp. 1993) (reducing workers' compensation by amount of unemployment benefits
received); W. VA. CODE $ 23-4-23(b) (Supp. 1993) (reducing workers' compensation
workers' compensation medical benefits and utilize existing methods of medical cost
benefits when claimants receive insurance or social security payments). Other states
containment on the combined health costs. See Keith T. Bateman, Twenty-Four Hour
Coverage: An Update, JOHN BURTON'S WORKERS' COMPENSATION MONITOR, Jan.-Feb.
have reduced available benefits directly. For example, in 1993 Connecticut decreased
1993, at 6-7.
the maximum weekly benefit from 150% to 100% of the state average weekly wage.
CONN. GEN. STAT. $ 31-309 (1993); see also U.S. CHAMBER OF COMMERCE, supra note
Third, efforts at rehabilitation and return-to-work programs are being ampli-
121, at 5. Georgia and Minnesota set new limitations on the maximum number of
fied. See, e.g., W. VA. CODE $ 23-4-9 (Supp. 1993) (identifying injured employee's re-
weeks certain categories of benefits may be collected. Brown, supra note 450, at 52-
turn to work as the goal of rehabilitation and elaborating on previous guidelines);
53.
Neb. Legislative Bill 757, 9 17 (1993) (amending NEB. REV. STAT. 5 48-162.01) (revis-
Second, a large number of states are attempting to reduce medical cost
ing the provision of rehabilitation services and establishing priorities for the develop-
inflation through a variety of cost containment strategies. See, e.g., Neb. Legislative
er). ment of a rehabilitation plan which focus on return to work with the same employ-
Bill 757, §§ 2, 3, 7 (1993) (amending NEB. REV. STAT. §§ 48-120, -120.02, -121) (au-
thorizing the compensation court to establish medical fee schedules, restricting the
497. A May 1993 report released by the W.E. Upjohn Institute for Employment
right of employees to change treating physicians, establishing informal dispute reso-
Research concludes that "[m]any employers have realized that disability incidence
lution of medical issues, authorizing managed care options, and creating an indepen-
dent medical examiner system); OR. REV. STAT. ANN. $ 656.245(1), (3) (Supp. 1992)
have not yet begun to pursue disability prevention and management strategies in who a
and costs are, at least to some degree, within their control. Employers
(restricting availability of medical treatment for palliative care after the injured
systematic and diligent way will find that this is an increasing source of competitive
worker's health status has become stationary, restricting right of claimant to change
disadvantage." Roger Thompson, Taking Charge of Workers' Comp; Controlling Costs
physicians, and encouraging participation in managed health care); OR REV. STAT.
through Accident Prevention Programs, NATION'S BUS., Oct. 1993, at 18, 19 (quoting
ANN. § 656.248 (Supp. 1992) (authorizing Director of Department of Insurance and
the new Upjohn Report). Similarly, in discussing the trucking industry, the Califor-
Finance to set medical fee schedules). Similarly, Florida enacted of "24 hour"
nis Insurance Department concluded that "(a)s workers' compensation premiums have
coverage in 1990, which allows employers to combine general health insurance with
grown, protecting employees has begun to receive more attention." California Insur.
ance Study, supra note 7, at 58.
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workers' compensation insurers, 498 state insurance depart.
compensation costs, the critical question obviously becomes: will
ments,
499 workers' compensation administrators, 500 academic
it work? That is, will the use of workers' compensation as a
commentators,501 and employers' organizations are all
tool for the promotion of increased safety result in reduced
beating the safety drum. Safety legislation has emerged as a
numbers of injuries and decreased costs? In order to assess
primary political focus of workers' compensation reform in the
this, it is essential to determine whether these new laws
1990s; it has become the language of political compromise. The
confront the problems described in the preceding sections of
current state legislative reforms reflect this new consensus. 503
this Article. 504
Given this growing acceptance of safety initiatives as a
legitimate political response to the problem of high workers'
B. State Workers' Compensation Safety and Health Reforms
The new safety and health provisions fall into four
498. For example, Bill Hager, president of NCCI, wrote:
categories: premium discounts; safety and health training and
Over the last decade, we have witnessed a marked deterioration in the safe-
consultative services; safety and health committees; and en-
ty of the American workplace. That must be not only checked, but re.
forcement and penalty provisions which require worksite safety
versed.
Many of the stresses on the system would be alleviated if the
injury rate simply fell back to the earlier, lower levels. A concerted effort of
programs. Each of these has somewhat different potential for
employers, state and federal governments, insurers, and labor to attack the
achieving the goal of primary prevention of injuries.
causes of high accident rates must be a fundamental part of a larger pro-
gram of workers' compensation reform.
[T]he American workplace should
1. Premium Discounts. Statutory provisions which are de-
have been growing progressively safer over the last 20 years. The fact that
the opposite has happened is an indictment of our entire society. Safety on
signed to entice employers to adopt safety or loss management
the job has been given far too low a priority. To a degree, the insur-
programs through providing a prospective premium discount
ance industry has been subsidizing such practices by absorbing the losses
appear to be the most common form of workers' compensation
that the combination of inadequate safety measures and inadequate rates
have brought on. One way or another, this unmerited subsidy must end.
"safety" legislation. 506 The popularity of these provisions
Hager, supra note 13, at 17.
undoubtedly reflects the lack of political opposition to them.
499. For example, in its 1993 report, the California Department of Insurance
Unlike the other approaches discussed below, premium
strongly advocates worksite safety practices as a mechanism for workers' compensa.
tion cost reduction. California Insurance Study, supra note 7, at vi (noting that orga.
discounts make no pretense of expanding regulation or worker
nizations with proactive safety programs have lower workers' compensation costs).
participation in safety; they offer only a carrot, and a small one
500. For example, Tony Skiff, Director of Workers' Education for the Connecticut
at that, to employers willing to engage in loss management.
Compensation Commission, recently wrote, "Safety is the most direct, effective meth.
Some of these new provisions require employers to contract
od of reducing workers' compensation caseloads and costs. This is true at both the
worksite and the jurisdictional level." Anthony W. Skiff, How Safety Reduces
Workers' Compensation and Why It's Rarely Used (1993) (on file with author).
501. See, e.g. Raiborn & Payne, supra note 2, at 559 (stating that "[i]t is pa-
504. These problems can be summarized as follows. First, although employer ac-
tently obvious that the first action a company with any level of workers' compensa-
tion can reduce both injuries and workers' compensation costs, employers often have
tion claims should take is to improve workplace safety and employee awareness
not responded as if this is true; a variety of transaction costs have inhibited an eco-
about safety").
nomically efficient result. When, in an effort to overcome this resistance, costs have
502. For example, in responding to the recommendation that health costs for
been made more responsive to individual employers' own claims experience, employ-
work-related injuries and illnesses be merged into the new health care plans, the
are have responded in one of three ways: they have continued to fail to perceive
National Association of Manufacturers responded with "Guidelines by which the
themselves as able to influence costs, irrespective of the level of responsiveness of
NAM would judge any proposal that would include the medical portion of workers'
costs; or, in a minority, but growing number, of instances, they have introduced suc-
compensation in the health care reform proposal." First on the list was the follow-
cessful safety campaigns; or, even in situations in which they have understood their
ing:
ability to control costs, they have responded in "nefarious" ways, utilizing their man-
Safety in the Workplace
agerial control to establish inappropriate mechanisms to reduce the filing or duration
Good safety practices protect employees. Injury prevention should be a pri-
of claims rather than to reduce injuries. Refer to part III.C.2 supra.
mary focus of employers. Employees must recognize their personal respon-
505. See, e.g., MASS. GEN. LAWS ANN. ch. 152, § 53A (West 1993) (authorizing
sibilities to ensure their own safety.
the Commissioner of Insurance to order a specific prospective decrease in premium
NATIONAL ASS'N OF MANUFACTURERS, WORKERS' COMPENSATION AND HEALTH
rate); Mo. ANN. STAT. § 287.125 (Vernon 1993) (outlining requirements for compli-
CARE REFORM: GUIDELINES FROM THE NATIONAL ASSOCIATION OF MANUFACTURERS 3
ance with certified safety program entitling employer to credit against standard pre-
(1993) (on file with author); see also ALEXANDER & ALEXANDER, supra note 55, at 3
mium); W. VA. CODE $ 23-2B-3 (Supp. 1993) (authorizing prospective premium rate
(noting that, in responses to this survey of 1900 corporate risk managers, workplace
credit for employer subscribing to qualified loss management program that has dem-
safety ranked fourth in importance out of 74 legislative and regulatory issues).
onstrated ability to "significantly reduce workers' compensation losses"). These pro-
503. The Occupational Safety and Health Department of the AFL-CIO is tracking
grame are similar to the schedule rating systems which workers' compensation insur-
this state legislation. Refer to note 511 infra.
ers utilized earlier in this century.
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with loss management firms with demonstrated success in
real injury reductions will be achieved. 509 Workers' compen-
reducing workers' compensation claims costs;508 not surpris-
sation administrators are unlikely, however, to have adequate
ingly, these provisions have been criticized for focusing more on
resources to perform on-site evaluations of such programs; the
cost reduction than on injury prevention. Other similar
only alternative is to reward employers based upon successful
provisions appear to require employers to conduct safety audits
reduction in claims costs. There is, moreover, no evidence to
or to demonstrate actual reductions in injuries.
date that these provisions have achieved any significant suc-
Premium discount provisions generally fail to solve the
cess. 610 Notably, the AFL-CIO Department of Safety and
problem that financial incentives tend to encourage many
Health does not include premium reduction programs in its
employers to circumvent rather than reduce injuries. 508 If
enumeration of safety initiatives.⁵¹¹
these discounts are awarded to employers based upon real, not
sham, safety programs, they could increase the likelihood that
2. Safety and Health Training and Consultative Programs.
Employer and worker ignorance contributes to the failure to
reduce workplace hazards. Acknowledging this, states have
developed safety education and training programs which are
often financed through a surcharge on workers' compensation
506. The Massachusetts Qualified Loss Management Program "applies a prospec-
premiums. Voluntary consultative services are also provided
tive credit to the premium of an assigned risk insured who subscribes to a qualified
loss management program. A loss management firm must have a structured ap-
to employers in many states; these programs generally receive
proach in place which focuses top level management of the employer, as well as
federal funding. Purely consultative programs, particularly in
other personnel, on the issue of safety." THE WORKERS' COMPENSATION RATING & IN-
states that lack OSHA enforcement powers, are generally
SPECTION BUREAU OF MASS., FILING MEMORANDUM FOR THE QUALIFIED Loss MAN-
AGEMENT PROGRAM, REVISED 4/93, at 1-5 (on file with author). In general, however,
a loss management firm must demonstrate an overall "ability to reduce losses for its
client employers." Id: see also Beckwith, supra note 7. at 70 (describing the Massa-
509. In his article on experience rating, Terence Ison has noted the difference
chusetts Qualified Loss Management Program which began in 1991: "[T]he
between token safety audits which indicate only "nominal gestures" and real safety
initiative's primary focus is on business practices after injuries occur. In order
audits that
to qualify for the full 10 percent credit, employers must hire an appropriate certified
might include a scrutiny of the design of plant, the choices and uses of
consulting firm, implement a comprehensive loss management program, and reduce
machinery and equipment, the existence and control of toxic substances, and
their losses by 20 percent in the first year."); Sara Marley, Loss Control Pays Divi-
a testing of emergency procedures
It is not practicable, however, for
dends in Colorado, Bus. INS., Jan. 11, 1993, at 3, 27 (describing the Colorado Premi-
safety audits of this type to be undertaken by a workers' compensation
um Cost Containment Program and quoting John M. Berger, manager of the insur-
board among the general range of employers.
ance compliance unit of the Colorado Department of Labor and Employment's Divi-
Ison, supra note 20, at 740.
sion of Workers' Compensation, as follows: "Our focus is on safety education and
510. There are no studies on the success of these programs. Some reports allege
claims management and less on the hazards that fall under the jurisdiction of
that employers have received significant premium reductions. See Marley, eupra note
OSHA.").
506 (reporting that since January 1991 Colorado businesses have saved $10.6 million
507. For example, Montana's law, initially passed in 1987, authorizes insurers to
in premiums through the cost containment program). On the other hand, the Califor-
"provide financial incentives to an employer who implements a formal safety pro-
nia report noted that "(i]n Delaware, beginning in 1989, small employers (less than
gram. An insurer may provide to an employer a premium discount that reflects the
$60,000 in premiums) became eligible for a discount on their workers' compensation
degree of risk diminished by the implemented safety program." MONT. CODE ANN. $
premium, up to 20 percent, if they submit to an independent inspection service and
39-71-421 (1992 & Supp. 1993). Similarly, Missouri's law requires the department of
subsequently pass an unannounced safety inspection
As
of
January
1992,
less
labor and industrial relations to establish standards for certified safety programs
than 3 percent of eligible employers had signed up." California Insurance Study, BLL-
under which certified employers receive premium credits for reduction in the number
pra note 7, at 110.
of work-related injuries, illnesses, and lost workdays. Mo. ANN. STAT. 5 287.125
511. AFL-CIO SAFETY & HEALTH DEPT, SUMMARY OF STATE INITIATIVES ON
(Vernon 1993); see also OKLA. STAT. ANN. tit. 36, 5 924.2 (West Supp. 1994) (basing
WORKER SAFETY AND HEALTH [hereinafter AFL-CIO MEMORANDUM) (on file with au-
premium reductions on successful participation in safety and health consultation,
thor).
education and training program administered by the Department of Labor, which
512. See, e.g., MICH. STAT. ANN. § 17.50(55) (Callaghan Supp. 1993-1994) (requir-
includes undergoing a worksite hazard survey, correction of all hazards, establishing
ing the director of the labor department to assess a surcharge against insurance car-
a workplace safety and health program, and reducing lost workday case rate); N.D.
riers, self-insured employers. and the state accident fund on total indemnity benefits
CENT. CODE § 65-04-19.1 (1993) (providing for a 5% premium discount for any em-
paid by each and to deposit these funds in a safety and education training fund to
ployer who implements or maintains an approved risk management program).
be appropriated by the legislature); MICH. STAT. ANN. $ 17.50(56) (Callaghan 1988)
508. See, e.g., Marley, supra note 506, at 27 (quoting the Regional Vice President
(requiring the state department of public health to conduct occupational health edu-
of Transamerica Insurance Group, Tom Glock, complaining that under the Colorado
cation and training). Connecticut and New York have similar provisions which fund
program "[s]ome of the most unattractive businesses are getting [loss control] certifi-
training efforts through workers' compensation surcharges; in New York funding is
cates [companies that] have no genuine interest in the welfare of their employ-
also provided to occupational health clinics which provide occupational medicine ser-
ees").
vices to workers. AFL-CIO MEMORANDUM, supra note 511, at 4-5.
254
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underutilized, however. 513
Legislative mandates for worker participation in safety and
health committees are undoubtedly rooted in sincere attempts
3. Safety and Health Committees. There is increasingly
to strengthen the voice of workers in the prevention of
general acceptance of the idea that workers can be a source of
occupational injuries; there is no question that workers may be
significant and useful information regarding worksite hazards
more aware of (and concerned about) hazards than many
and that their education regarding hazards is a critical
managers have proven themselves to be. Successful and active
component of improving occupational safety. Over the objection
participation by hourly workers in these committees is
of industry representatives, a number of states have therefore
nevertheless unlikely to occur in many nonunion workplaces. As
adopted amendments to their workers' compensation laws which
the Upjohn Report has shown, toleration of workplace hazards,
require employers to establish safety and health committees
frequent injuries and claims, and negative attitudes toward
composed of representatives of both management and
workers go hand-in-hand in many enterprises; it is likely
workers.
514
that it is in the workplaces most in need of labor-management
cooperation that employers are most likely to retaliate against
workers who exercise statutory rights. Although some of these
513. This is reported anecdotally by state officials who operate these programs.
new provisions establishing safety and health committees
Telephone Interview with Roy Smith, West Virginia Commissioner of Labor (Aug. 9,
include specific protection for employees who participate,
1992); Telephone Interview with Jack Pompeii, Director, Oregon Occupational Safety
and Health Division (OR/OSHA) (Oct. 29, 1993).
this is unlikely to overcome employees' rational perception that
514. These provisions vary. In some states, the requirement for the creation of
participation may yield more trouble than safety.
these committees applied to all employers. For example, in Nebraska every employer
Only anecdotal evidence supports the claim that these
subject to the workers' compensation law must establish a safety committee by Janu-
ary 1, 1994. In unionized workplaces, the committee is to be established through the
legislatively mandated safety and health committees are effec-
collective bargaining process; in nonunion workplaces, the statute specifies that the
tive in nonunion workplaces.61 Unless states establish clear
"committee shall be composed of an equal number of members representing employ-
ees and employer" and the "employer shall compensate employee member of the
safety committee at their regular hourly wage plus their regular benefits while the
employees are attending committee meeting or otherwise engaged in committee du-
with 11 or more employees and an "experience rate modifier" of 1.5 or more to 05-
ties." Neb. Legislative Bill 757, 9 32 (1993) (amending NEB. REV. STAT. § 48-612
tablish safety committees and safety programs; civil penalties can be assessed for
(1988)).
violations of these provisions. N.C. GEN. STAT. ANN. $ 95-250 to -256 (1993).
In other states, the safety committee requirement is imposed only on specified
Some of these provisions exempt workplaces in which collective bargaining
groups of employers. For example, the following states only require employers over a
agreements have previously established joint labor-management committees for this
certain size to establish committees: Minnesota (employers with 25 employees), Mon-
purpose. West Virginia, for example, excludes any "employer that is a member of a
tans (five or more employees), and Nevada (20 or more employees). AFL-CIO MEMO-
multi-employer group operating under a collective bargaining agreement that con-
RANDUM, supra note 511, at 3; see also ALA. CODE $ 25-5-16 (1984) (providing that
tains provisions regulating the formation and operation of a safety committee that
every employer subject to Alabama's workers' compensation law must appoint a safe-
meets or exceeds the minimum requirements of this section
W. VA. CODE §
ty committee of at least three members at the request of any employee).
23-2B-2(d) (Supp. 1993).
Other states require safety committees in workplaces with relatively high
Generally, these provisions require that the committee meet regularly and
claims loss experience. For example, Connecticut recently adopted a provision which
maintain written minutes of the meetings. Many of the statutes set penalties if an
requires "each employer of twenty-five or more employees and each employer
employer fails to comply with the specifications for the joint committees.
whose rate of work related injury and illness exceeds the average incidence rate of
515. Upjohn Report, supra note 7, at 10 (noting that "companies who treat em-
all industries in the state" to establish a safety and health committee in accordance
ployees as stakeholders and valued participants in the organization's activities" are
with regulations to be drawn by the chairman of the workers' compensation commie-
likely to experience fewer workers' compensation claims).
sion in consultation with the labor commissioner. 1993 Conn. Legis. Serv. P.A. 93-
516. For example, the 1993 Nebraska legislation provides:
228 $ 28 (West). West Virginia's 1993 workers' compensation legislation provides
An employee shall not be discharged or discriminated against by his or her
that the commissioner of workers' compensation may require any employer whose
employer because he or she makes any oral or written complaint to the
experience modification factor exceeds the criteria established by the new labor-man-
safety committee or any governmental agency having regulatory responsibili-
agement council "to establish a safety committee composed of representatives of the
ty for occupational safety and health, and any employee so discharged or
employer and the employees." W. VA. CODE 9 23-2B-2(b) (Supp. 1993). Tennessee's
discriminated against shall be reinstated and shall receive reimbursement
1992 legislation requires that a safety committee be established by every public or
for lost wages and work benefits caused by the employer's action.
private employer with "an experience modification factor (or rate) applied to the
Neb. Legislative Bill 757, § 32(4) (1993) (amending NEB. REV. STAT. $ 48-612).
premium in the top twenty-five percent (25%) of all covered employers' modification
517. Representatives of the AFL-CIO indicate that several success stories have
factors (or rates) applied to the premium." TENN. CODE ANN. 9 50-6-501 (Supp.
emerged during the inquiry into models for labor-management cooperation and total
1993). Oregon requires employers in high hazard industries, or employers with more
quality improvement programs by the Commission on the Future of Worker-Manage-
11 or more employees, to have committees. AFL-CIO MEMORANDUM, supra note 511,
ment Relations (commonly referred to as the Dunlop Commission). Telephone Inter-
at 4. Similarly, North Carolina enacted a provision in 1991 which requires employers
view with Lynn Rhinehart, Assistant Director, Occupational Safety and Health Dep't,
256
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strategies for enforcement of these provisions, they are likely to
subject to penalties for failure to adopt safety programs or to
be ineffective. 618 Unfortunately, workers' compensation
correct hazards identified as a result of safety audits. 523
programs which are designated to enforce these provisions may
States with federally approved safety and health plans assess
lack both the expertise and the financial resources necessary to
penalties as part of the state labor department's health and
achieve more than token compliance.619
safety enforcement activities. Some of these states are
achieving better coordination of regulatory and compensation
4. Safety and Health Enforcement Activities. Several states
activities through reorganization of the state administration,
have adopted provisions which require employers to develop
placing both the state OSHA and workers' compensation pro-
safety programs or authorize the workers' compensation
grams into one department. States without approved plans
program director to conduct workplace inspections, with521 or
have adopted two different strategies for imposing penalties. In
without advance notice to employers. Employers are then
the first, penalties or fines are assessed when an employer fails
to comply with provisions of the workers' compensation
laws The second turns the employer over to federal OSHA
AFL-CIO (Oct. 15, 1993). As indicated in the Upjohn Report, however, it appears
that most of these success stories involve enterprises which have made a general
commitment to change corporate culture and expand worker involvement. Upjohn
the employer. The commission shall issue a report on his or her findings and shall
Report, supra note 7, at 15 (concluding that the employers expected to have good
furnish a copy of the report to the employer and to any bargaining unit [sic] repre-
experiences with workers' compensation are those who are committed to the "well-be-
senting the employees of the employer. The commissioner may share information
ing, productivity, participation, and accountability" of their employees).
obtained or developed pursuant to this article with other governmental agencies.").
518. According to Jim Ellenberger, the State of Washington has had a provision
Id.
for safety and health committees on its books "forever, but nobody ever enforced it"
523. See, e.g., 28 TEX. ADMIN. CODE $ 164.1(c)(4) (West 1992) (referring non-com-
Therefore, nothing came of it. Telephone Interview with James Ellenberger, Assistant
plying Texas Extra-Hazardous employers to TWCC division of compliance and prac-
Director, Occupational Safety & Health Dep't, AFL-CIO (Sept. 15, 1993); see WASH.
tices for investigation); N.C. GEN. STAT. § 95-256 (1993) (allowing civil penalties un-
REV. CODE I 296.24.020 (1992) (requiring, since 1980, that employers develop "a for-
der workers' compensation); NEV. REV. STAT. § 618.383(7) (1992) (giving the manager
mal accident-prevention program, tailored to the needs of the particular plant or
of the state industrial insurance system discretion to raise workers' compensation in-
operation and to the type of hazards involved" including, for all employers of eleven
surance premiums as much as 15%).
or more employees, a safety and health committee "composed of employer-selected
524. CAL LAB. CODE § 6401.7(e) (Deering Supp. 1993) (requiring the standards
and employee-elected members").
board to adopt a standard setting forth the employers' duties in establishing injury
519. For example, in West Virginia, the Workers' Compensation Fund, as of the
prevention programs).
time of this writing, has no employees who specialize in health and safety or who
525. See, e.g., OR. REV. STAT. § 656.726 (Supp. 1992) (placing compensation and
have any expertise in health and safety; no budgetary allotment for health and safe-
health and safety enforcement programs under a single administrative roof).
ty activities was included when the 1993 amendments to the workers' compensation
526. See, e.g., TEX. LAB. CODE ANN. §§ 411.041-050 (Vernon Supp. 1994) (setting
statute expanded the commissioner's authority over employers' safety and health pro-
up an extra-hazardous employer program). The Texas Extra-Hazardous Employer
grams.
Program requires safety consultations and follow-up inspections. Id. §§ 411.043,
520. Alaska, California, Montana, Nebraska, Nevada, and Washington require all
411.045. Failure to comply leads to a Class B administrative violation that can re-
employers to develop safety and health plans; Hawaii, Michigan, Minnesota, North
sult in a fine, not to exceed $5000 per violation. Id. $ 411.046; 28 TEX. ADMIN.
Carolina and Oregon impose the same requirement on employers in specified groups,
CODE $ 164.7(e) (West 1992) (Tex. Workers' Compensation Comm'n, Worker's Health
which are either designated by industrial class or by relatively high claims filing
and Safety-Extra-Hazardous Employer Program). The rules governing the program
experience. AFL-CIO MEMORANDUM, supra note 511, at 2-3. Beginning in 1992, Utah
specifically require that employers utilize well-trained safety professionals, rather
has also required safety programs. Brown, supra note 494, at 55.
than loss management firms. Employers contested the method for identifying partici-
521. See, e.g., 28 TEX. ADMIN. CODE §§ 164.1-.6 (West 1992). The Extra-Hazard-
pants in the program; at this point, the program may be on hold pending final reso-
ous Employer Program allows the Texas Workers' Compensation Commission (TWCC)
lution of litigation challenging the constitutionality of the reforms. See Texas
to identify extra-hazardous employers based on high rates of injury in the employer's
Workers' Compensation Comm'n V. Garcia, 862 S.W.2d 61, 103-04 (Tex. App.-San
workforce and industry. Id. $ 164.1. TWCC then must notify the employer of its ex-
Antonio 1993, n.w.h.); State Workers' Comp Fund Writer Intends to Cut Rates, Hous.
tra-hazardous employer status. Id. $ 164.2. The employer has thirty days to obtain a
POST, Aug. 27, 1993, at 32 (reporting that an appellate court declared the workers'
professional safety consultation by an inspector who will make a written hazard sur-
comp law unconstitutional and noting that Jack Floyd, President and CEO of the
vey that includes both hazardous practices and conditions. Id $ 164.3. The employer
Texas Workers' Compensation Insurance Fund, hoped that the law would be upheld
has another thirty days to develop an accident prevention plan that complies with
because, "If we had to go back to the old law, we'd be in deep yoghurt"); It's Back
federal and state safety standards. Id. $ 164.4. TWCC then will conduct a follow-up
Again; Legislators Face New Bout With Workers' Comp Law, HOUS. POST, Aug. 21,
inspection of the premises six months after the employer files the report. Id. $
1993, at A26 (editorial) (reporting that workers' compensation laws will be rewritten
164.5. That inspection will be with full notification and during normal working
in 1995, regardiess of the decision by the Texas Supreme Court); Appeals Court
hours. Id. 5 164.5.
Rules State's Workers' Comp Law Unconstitutional, Hous. POST, Aug. 12, 1993, at
522. See, e.g., W. VA. CODE 9 23-2B-2(a) (Supp. 1993) (authorizing the workers'
B1 (reporting responses to the court of appeals decision); Daniel B. Moskowitz,
compensation commissioner "to conduct special inspections or investigations focused
Court's, Lawmakers at Odds on Workers' Compensation Reform, WASH. POST, June
on specific problems or hazards in the work place with or without the agreement of
10, 1991, at F30 (reporting on tensions between legislative reform and court review).
258
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for purpose of enforcement. 627 The coordination of these state
state OSHA plans often lack the resources and the expertise to
enforcement efforts in states without state OSHA plans can be
enforce these provisions adequately.
perplexing. 628 In cases in which penalties are assessed locally,
several states have utilized the monies generated by enforce-
C. The Implication of Safety and Health Reforms for Injury
ment activities to fund other safety and health activities. 529
Prevention
These plans endorse the idea that compensation and
regulatory activities should be coordinated and abandon the
It is undoubtedly too early to reach a final conclusion as to
idea that increased compensation costs alone will yield
whether any of these strategies will be effective in reducing
improved attention to safety. The motivation is to create an
injuries and costs. Evaluating the results of this legislation is
environment in which compensation costs will decline as a
further complicated by the fact that states have simultaneously
result of injury prevention, and to encourage injury prevention
enacted measures which make significant changes in admin-
through the combined efforts of workers' compensation and
istration of claims and reduce the availability of compensation
for known disabilities. It will therefore be difficult to tell the
regulatory programs. Unfortunately, states without approved
extent to which injury prevention is the cause of any reductions
in cost.
527. See, e.g., Neb. Legislative Bill 757, § 36 (1993). The bill creates the
Nevertheless, it is safe to make three observations. First,
Workplace Safety Consultation Program which authorizes the Department of Labor
the current level of workers' compensation costs finally appears
to conduct workplace inspections and consultations to determine whether employers
to be sufficiently high to spark interest in primary prevention;
are complying with federal OSHA standards. Id. § 36(1)-(2). The bill provides that
Nebraska will inspect the worksite if the employer meets a number of criteria. Id. §
the fact that the effort is being made at all is a positive
36(3). Those criteria include: the amount of premium paid by the employer; the
change. Second, given the past history of workers'
employer's experience modification produced by the experience rating system; the
compensation, efforts that are simply designed to entice high
employer's risk of injuries as evidenced by insurance rates or loss costs; and the na-
ture, type or frequency of accidents. Id. $ 36(3). An employer who refuses to elimi-
claims employers into changed behavior are unlikely to be
nate workplace hazards in compliance with an inspection shall be referred to federal
effective; premium discounts and consultative services, standing
OSHA for enforcement. Id. $ 36(5).
alone, will not generate substantial improvements. Third, states
528. See. e.g., W. VA. CODE 9 23-2B-2(e) (Supp. 1993). The West Virginia safety
that enact legislation without addressing the need for increased
provisions state that "[i]t is not the purpose of this article to either supersede the
federal Occupational Safety and Health Act program, federal Mine Safety and Health
funding for safety activities are only engaging in token efforts
Act program or to create a state counterpart to this program." Id. The U.S. Supreme
to reduce the hazards at worksites.
Court has ruled that the federal Occupational Safety and Health Act preempts the
At this point, reforms appear to have produced reductions
right of states without approved state plans to enact occupational safety and health
standards in areas in which a federal standard has been promulgated. Gade V. Na-
in employers' premium costs only in Oregonᵇ⁹⁰ and Texas. 531
tional Solid Waste Management Ass'n, 112 S. Ct. 2374, 2383 (1992). The OSH Act
Texas' reforms, which have been successfully challenged in
specifically does not preempt state workers' compensation provisions, however. 29
court, have been in place for too short a time to evaluate. 532
U.S.C. 9 653(b)(4) (1988). Other courts have applied this savings clause so that
workers' compensation penalties which increase workers' compensation benefits have
been held not to be preempted. See, e.g., Kroger Co. V. Industrial Comm'n, 402
N.E.2d 528, 530 (Ohio 1980) (per curium). State courts have also held that the
530. See Klein, supra note 52, at 12 (showing NCCI sought rate reductions in
states are not preempted from creating additional penalties for health and safety
Oregon starting in 1990).
violations, particularly criminal penalties. See, e.g., Illinois V. Chicago Magnet Wire
531. Media reports indicate that Texas premium rates stabilized after years of
Co., 534 N.E.2d 962, 966 (III. 1989). The court's ruling in Gade makes challenges to
dramatic increases. See, e.g., James M. Burcke, Texas Comp Reforms Working: Study,
penalties for safety violations that are imposed through workers' compensation stat-
Bus. INS., Sept. 28, 1992, at 22 (indicating that half of 139 Texas risk managers
utes more likely. Gade, 112 S. Ct. at 2383.
responding to Business Insurance survey indicated that their workers' compensation
529. See, e.g., MINN. STAT. ANN. § 176.129 (West 1994) (creating an assigned risk
costs dropped after Texas reform legislation went into effect in 1991); State Briefs,
safety fund from fines and penalties); OR REV. STAT. 9 654.191 (1991) (using fines
NATL UNDERWRITER, Sept. 16, 1991, at 12. During the first six months of 1991, the
generated by the state OSHA program for health and safety training programs). In-
Texas Workers' Compensation Commission reported that lost-time claims went down
terestingly, these efforts bear some similarity to Ehrenberg's recommendation that
9.1%, while litigation and administrative costs were reduced by 44.3%. The legisla-
increased costs to employers not be linked directly to increased compensation for
tion was also widely criticized, however. including by Texas Governor Ann Richards.
workers, see Ehrenberg, supra note 18, at 81-86, 95-96, as well as to Sugarman's
Id. at 13.
prediction that "sccident law will eventually become a combination of social insur-
532. The court in Texas Workers' Compensation Comm'n V. Garcia, 862 S.W.2d
ance (the extreme distributional method) and criminal sanction (the extreme method
61, 103-04 (Tex. App.-San Antonio 1993, n.w.h), held the Texas Workers' Compen-
of deterrence)," Sugarman, supra note 19, at 637 (quoting Ishak Englard, The Sys-
sation Act of 1989 to be unconstitutional. Responses to this decision. rendered after
tem Builders: A Critical Appraisal of Modern Tort Theory, 9 J. LEGAL STUD. 27, 49
rehearing on October 1, 1993, did not appear to be fully formulated at the time of
(1980)).
this writing.
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At this point, Oregon stands alone as a state in which there
and related efforts. 540 Inspections are now triggered by high
have been a consistent pattern of falling employer premium
claims experience; the compensation program generates
rates over a period of years, demonstrating that there have
quarterly reports which are utilized to set priorities to target
been successful cost reductions in the workers' compensation
employers for regulatory inspections. Employers must
system. 538 Prior to these reductions, Oregon's insurance rates
voluntarily seek consultative services; these services are not of-
had been increasing rapidly, and injury rates and claims costs
fered after an enterprise is targeted for enforcement. 542
were among the highest in the country. 534 Recent reductions
As the enforcement capabilities of OR/OSHA have
in rates have been accompanied by drops in other key indica-
increased, 80 have the employer requests for voluntary consulta-
tors: the incidence rate of reported injuries fell by twenty-one
tive services to assist them in promoting safety without risk of
percent from 1989 to 1991; fatality rates dropped from 7.1 to
penalties; consultations increased from 502 in 1988 to 2,430 in
4.9 per 100,000, showing a reduction in every year from 1987
1992. 643 According to Pompeii, "Enforcement drives the whole
to 1992, during a period when the workforce grew by ten
system. If you've got weak enforcement, no one's going to use
percent; the number of accepted disabling claims decreased by
consultation services. #644 Thus, the fact that Oregon employers
over thirty-three percent. 535
were saddled with comparatively high workers' compensation
Three other critical changes occurred in Oregon during this
costs did not lead them to change their internal practices.
period of remarkable decline in costs and reported injury rates.
Enforcement activities may, however, have had this result.
First, the enforcement of the Oregon OSHA (OR/OSHA) plan
Finally, with regard to health and safety, requirements in
was substantially strengthened. The number of employees
the 1990 legislation for establishing safety committees are,
assigned to enforcement grew from about 90 to 243 and the
according to Jack Pompeii, a success. 546 OR/OSHA monitors
visibility of OSHA enforcement was vastly increased. 536 Jack
compliance with safety committee requirements by, among
Pompeii, administrator of the OR/OSHA program, says that
other things, inspecting minutes of meetings; if hazards
employers now practice safety because there are a sufficient
discussed at these meeting are not corrected, employers will
number of inspectors to "encourage" them not to ignore safety
subsequently be cited for willful violations. 646 Citations for
standards; the inspectors are, he asserts, "hanging over the
failure to comply with the requirements to establish these
state like a giant condor. =537 The OR/OSHA program changed
committees grew from 131 in 1990 to 1014 in 1992 547
its focus from "happy worker posters and gimmicks" to
Second, workers' compensation reform legislation enacted in
"ergonomics and engineering controls" during this period. 638
1987 and 1990 in Oregon made it more difficult for workers to
Meanwhile, assessed penalties rose from $1.0 million in 1987 to
obtain benefits in certain instances. Many injuries and diseases
$3.0 million in 1992 and the legislature increased the penalty
that were previously compensable are no longer compen-
per violation. 539 Some of these fines are now being used in a
sated. 548 In particular, compensability of diseases resulting
grant program to fund innovative safety and health training
from cumulative effects is more difficult to prove; diseases
caused by a combination of work and non-work-related hazards
are no longer compensable; and a new requirement for objective
533. See Klein, supra note 52, at 12 (noting that NCCI applied for an overall
rate reduction of 12% in Oregon in 1990). Rates continued to drop for three subse.
quent years: 11% in 1991, 11.4% in 1992, 4.3% in 1993. Oregon Law Resulted in
Fewer Accidents, Elevated Presence of State OSHA, Official Says, 23 O.S.H. Rep.
540. Telephone Interview with Jack Pompeii, supra note 513.
(BNA) 248 (Aug. 4, 1993).
541.
Id.
534. OREGON DEPT OF INS. & FINANCE, OREGON WORKERS' COMPENSATION: MON-
542.
Id.
ITORING THE KEY COMPONENTS OF LEGISLATIVE REFORM i (1993) [bereinafter OREGON
543. OREGON REPORT, supra note 534, at 4.
REPORT) (noting that in 1986, Oregon ranked sixth highest in average workers' com-
544. Telephone Interview with Jack Pompeii, supra note 513.
pensation rates paid by employers and had one of the nation's highest occupational
545. Id. Pompeii acknowledges that these committees do not "work as well in
injury and illness rates).
nonunion facilities; but it's moving health and safety up a notch or two empow-
535. See id. at 2.
ering people to do more than they did before every little bit helps." Id.
536. Telephone Interview with Jack Pompeii, supra note 513; see also OREGON
546. Id.
REPORT, supra note 534, at 4.
547. OREGON REPORT, supra note 534, at 5.
537. Telephone Interview with Jack Pompeii, supra note 513.
548. Refer to note 494 supra. Oregon now excludes many claims which have tra-
538.
Id.
ditionally been compensated on the theory that employers must "take employees as
539. OREGON REPORT. supra note 534, at 4.
they find them." OREGON REPORT, supra note 534, at 5.
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medical evidence is likely to exclude considerable numbers of
reduce costs solely through manipulation of the compensation
cases involving disabling back pain. 549 In addition, severe re-
system; it acknowledges that employers are not adequately
strictions on palliative care and medical cost containment
motivated by workers' compensation incentives alone. The
efforts yielded significant savings after 1990. 550 As one Oregon
intertwining of compensation and regulation, together with the
administrator noted, the political "pendulum swung hard" in
allocation of significant state resources to preventive activities,
1990 toward "giving insurers more tools to contain costs. *561
appears to create a profoundly different-and more posi-
From 1988 to 1992, the total number of claims filed dropped
tive-effect on real injury rates.
from 153,000 to 108,000; it is difficult to assess how much
of this represents a decline in injury rates and how much
V. CONCLUSION
shows worker discouragement as a result of the compensability
changes in rules governing compensability of claims.
When the Commission on State Workmen's Compensation
Third, the state fund, SAIF, administratively reduced the
Programs issued its report in 1972, concern for benefit
number of claims it paid and increased the number it de-
adequacy shaped the political debates about workers'
nied. 553 SAIF now insures about one-third of the employers in
compensation reform. Now, anxiety about costs controls these
Oregon. 554 While the head of SAIF credited most of the costs
discussions. Existing evidence unequivocally supports the
reductions "to legislative redefining of what is a compensable
conclusion that more effective prevention of occupational injury
injury, *555 others think that SAIF artificially, but effectively,
and disease would yield both cost savings for employers and
forced costs down by the simple approach of refusing to approve
less disability for workers. If our goal is to reduce costs without
claims. 556 An investigation of SAIF's practices has led to a
penalizing injured workers, we must confront the failure of
higher approval rate. 667
exploding costs to spur efforts at primary prevention.
Officials in Oregon acknowledge that sinking workers'
It is tempting to conclude that the optimal solution to this
compensation premium costs are a reflection of several, inter-
problem is to boost employers' economic incentives by
locking variables. 568 Nevertheless, it appears that premium
increasing and clarifying the internalization of these costs. But
rates began to drop before both the SAIF administrative re-
this approach creates an inescapable tension: expanding
duction in claims approval and the 1990 workers' compensation
incentives in order to encourage prevention is likely to result in
reform legislation reduced the availability of medical benefits
employers' use of managerial authority to discourage the filing
and narrowed the compensability of claims. 550 The Oregon
of legitimate claims or to engage in other problematic cost
effort differs materially from efforts to improve safety and
reduction strategies. The use of this escape valve by
knowledgeable employers may be an economically rational
response; it fails, however, to meet the dual goals of cost
549. OREGON REPORT, supra note 534, at 5.
containment and injury prevention.
550. Telephone Interview with Larry Niswender, supra note 494. SAIF, the state
In contrast, the Oregon experience provides strong evidence
insurance fund, reported that its medical payments declined from $80 million in
1990 to $64 million in 1991. Id.
that the coordination of regulation and compensation yields
551. Id.
both improved safety and decreased compensation costs. This
652.
Id.
may, in fact, be the only approach which can meet these dual
553. See, e.g., Meg Fletcher, Oregon Probes State Comp Fund, Bus. INS., Apr. 20,
goals. Its success requires the forging of a new political
1992, at 3 (stating that SAIF's denial rate on claims was, for a period of time, dou-
ble that of commercial insurers active in the Oregon market).
compromise: expansion of safety regulation in exchange for
554. Telephone Interview with Larry Niawender. supra note 494.
decreased escalation of workers' compensation costs. The
565. Louise Kertesz, Oregon Reforms Still Yield Savings, Bus. INS., Sept. 28,
legislation passed in the last few years in many states indicates
1991, at 34.
556. See Stuart Silverstein, Oregon's How-To Book on Repairing Workers' Compen-
that a national consensus is in fact emerging around these
sation, L.A. TIMES, Nov. 20, 1991, at A1, A26, A28.
principles.
557. Telephone interview with Larry Niswender. supra note 494.
Unfortunately, the current combination of state and federal
558. Id; Telephone Interview with Mary Dora, Division of Workers' Compensation
(Oct. 26, 1993).
compensation and regulatory programs makes this coordination
559. Telephone Interview with Mary Dora, supra note 558. Dora suggests that
difficult in many states. Those states with state OSHA plans
the initial premium drops reflect aggressive safety enforcement, while the more re-
can emulate Oregon's model. As long as compensation programs
cent ones may be the result of benefit reductions. Id.
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dom, unequivocally made every one of the Lanham Act's existing
NOTE
remedy provisions applicable to all section 43(a) violations, regardless
of
( fication. In effect, Congress acquiesced to an unsound judicial
1 1 that had evolved in the federal courts. A better, more logical,
and more complete solution would have been to create separate reme-
dy provisions for section 43(a) violations.
RECONCILING CONFLICTS BETWEEN THE
Congress also blundered when it failed to address the issue of con-
AMERICANS WITH DISABILITIES ACT AND THE
sumer standing under section 43(a). In blatantly avoiding its legislative
NATIONAL LABOR RELATIONS ACT TO
responsibility, Congress gave absolutely no guidance to a badly frag-
ACCOMMODATE PEOPLE WITH DISABILITIES
mented federal court system. Instead of making the wrong choice, as
with the wholesale incorporation of section 43(a) into the Lanham Act
Rose Daly-Rooney
remedy provisions, Congress made no choice. Instead, Congress
should have explicitly granted consumers standing to sue under sec-
tion 43(a).
INTRODUCTION
Imagine being consulted to provide legal advice to the following
employers: (1) The personnel director of a large metropolitan public
school district who has hired a man with a mental disability to work
as a janitor for the school district. The employee receives training
assistance through a job coach under the auspices of another state
agency that provides vocational rehabilitation. With training, he has
learned the job functions at a specific school site. Because he has less
seniority, however, he has been bumped from his position by senior
employees on several occasions pursuant to the terms of a collective
bargaining agreement. Each time he has had to be retrained for a
position at the different site. He now complains that this is not a rea-
sonable accommodation under the Americans with Disabilities Act.'
(2) An office manager for an advertising agency who has hired a
deaf applicant to work in a word processing department. The position
requires extensive typing and proofreading with written instructions
accompanying each project. On a rotating basis the five workers in the
unit answer the phone for their department, usually consisting of in-
The author has served for more than six years as an advocate in the Developmental Disabili-
ties and Advocacy Program at the Arizona Center for Law in the Public Interest, where, commencing
in August 1994, she will be a Skadden Fellow practicing employment law on behalf of people with
disabilities.
1. This example is similar to the facts of a complaint pending before the EEOC that was report-
ed in 3 HIGHLIGHTS TO DISABILITY L REP. 8 (Feb. 3. 1993). Additional circumstances for the exam-
ple were added for purposes of creating the hypothetical.
387
#5
NOTHING To DO w/
OSMA
but interesting
+ could be significant
w/ Labor & work safety.
388
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house calls inquiring about a project's status. The office manager is
categorical determinations. Accordingly, not all people with epilepsy
unsure whether she may eliminate phone answering from the job
are disabled; and conversely, not all persons with attention deficit
duties listed in the job description in the collective bargaining agree-
disorder are disabled under ADA standards.⁶ The employer must un-
ment to accommodate the deaf applicant.
derstand what qualifies as a "major life activity" to determine whether
(3) A factory owner who employs over two hundred workers each
a job applicant should be considered disabled. Working is a major life
of whom work on one of three shifts. An applicant who uses a wheel-
activity. Determining whether an individual is substantially limited in
chair seeks the first shift because he relies on public transportation.
a major life activity and specifically in the major activity of work-
The accessible route ends before the second shift is over so that he
ing' are also individualized inquiries.
could travel to work but not home unless he is hired for the first shift.
Once an individual meets the statutory definition of disability, he
Openings on the first shift are granted to senior employees. The em-
must otherwise be qualified to perform the essential functions of the
ployer does not know if she can make an exception to permit her to
job either with or without a reasonable accommodation. This re-
hire this applicant.
quires (1) distinguishing between the functions that are essential rather
To provide legal advice to any of these employers requires an ex-
than marginal to the job" and (2) assessing whether the employee
amination of the effect of collective bargaining agreements on the
with a disability could perform the essential function with or without a
employer's duty to provide reasonable accommodations to qualified
reasonable accommodation.
individuals with disabilities under the Americans with Disabilities Act
The ADA prohibits a covered employer from discriminating against
of 1990 (ADA).3
a qualified individual with a limitation by not making reasonable
This Note will argue that the terms of a collective bargaining agree-
accommodations to the known physical or mental limitation.¹ The
ment should be one of numerous factors taken into consideration when
ADA envisions that an employer's efforts to reasonably accommodate
determining whether a proposed accommodation is reasonable. A
individuals with disabilities may take the following forms:
conflicting provision in the collective bargaining agreement, standing
alone, should not be dispositive of a finding that the accommodation
is unreasonable. This Note will advocate the use of a multifactorial
test4 to evaluate the reasonableness of a proposed accommodation that
ity as: "a record of such an impairment" or "being regarded as having such an impairment" be dis- but
which does not require consideration of reasonable accommodations and therefore will not
conflicts with the collective bargaining agreement.
cussed in this note).
6. There are some conditions which are not covered under the ADA. such as transvestitism.
I. BACKGROUND
7. Interpretive Guidance on Title I of the Americans with Disabilities Act. 29 C.F.R. 1 1630.2(i)
(1993). 8. Id. " 1630.2(j)(2)(i)-(ii) (including such factors as the nature and severity of the impairment:
A. Requirements for Employers Under the ADA
the duration or expected duration of the impairment; and the permanent or long term impact. or the
expected permanent or long term impact, of or resulting from the impairment).
The Americans with Disabilities Act requires numerous individual-
9. Id. 4 1630.2 (j)(3)(ii). Including such factors as:
ized determinations by employers making employment decisions about
(A) The geographical area to which the individual has reasonable access:
(B) The job from which the individual has been disqualified because of an impairment,
people with disabilities. Evaluating whether an individual is disabled
and the number and types of jobs utilizing similar training, knowledge, skills or abilities.
is the first of these individualized inquiries. Disability is defined as "a
within that geographical area. from which the individual is also disqualified because of the
physical or mental impairment that substantially limits one or more of
impairment (class of jobs): and/or
(C) The job from which the individual has been disqualified because of an impairment.
the major life activities of such individual."5 Generally, there are no
and the number and types of other jobs not utilizing similar training. knowledge, skills or
abilities, within that geographical area. from which the individual is also disqualified be-
2. Although the Americans with Disabilities Act also requires that the barriers to accessible mass
cause of the impairment.
transportation be eliminated. the time lines for reaching compliance will continue to result in similar
Id.
inequities until full compliance can be accomplished. See 42 U.S.C. # 12141-150 (Supp. II 1990).
10. 42 U.S.C. 1 12111(8) (Supp. II 1990).
3. See id. " 12101-213.
11. Interpretive Guidance on Title 1 of the Americans with Disabilities Act. 29 C.F.R. app. 4
4. See infra notes 134-142 and accompanying text.
1630.2(o) (1993).
5. 42 U.S.C. 4 12102(2)(A) (Supp. a 1990). See also id. " 12102 (2)(B)HC) (defining disabil-
12. Id. at app. 1 12112(b)(5)(A).
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[M]aking existing facilities used by employees readily accessible to and usable
tion criteria is a business necessity, she may be excused from elimi-
by individuals with disabilities; and job restructuring. part-time or modified
nating that standard even though it has a disparate impact on workers
work schedules, reassignment to a vacant position, acquisition or modification
with disabilities."
of equipment with devices, appropriate adjustment or modification of examina-
tions, training materials or policies, the provision of qualified readers or inter-
preters, and other similar accommodations for individuals with disabilities."
B. Impact of the Collective Bargaining Agreement on the ADA Duty
to Accommodate
Congress intended that the ADA would level the playing field be-
tween disabled and non-disabled employees and applicants. Recogniz-
Entering into this rather private interactive process between the
ing that individuals with disabilities experience staggering levels of
employer and the applicant with a disability are the rights of the other
unemployment and poverty, Congress attempted to substantially allevi-
employees as summarized in the collective bargaining agreement. The
ate a major obstacle to their employment - reliance on the cost and
National Labor Relations Act (NLRA) regulates the relationship
inconvenience of accommodations as grounds for not employing oth-
between labor unions, as duly authorized representatives of employees,
erwise qualified people with disabilities.
and employers. This statute and its corresponding regulatory provi-
According to a Louis Harris poll cited by the Senate Committee
sions proscribe unfair labor practices related to the collective bargain-
considering the ADA bill, "about 8.2 million people with disabilities
ing agreement.
want to work but cannot find a job." Testimony presented to the
Certain actions by an employer represent unlawful labor practices
committee indicated that the major categories of job discrimination
under the NLRA. Those unlawful labor practices which are pertinent
faced by people with disabilities include the failure to provide or
to the duty to accommodate include refusing to bargain collectively
make available reasonable accommodations."
with the representatives of the employees;" unilaterally modifying or
In designing a reasonable accommodation standard, Congress in-
ignoring the terms of a negotiated collective bargaining agreement;"
tended an interactive process to take place between the employer, the
implementing a policy affecting represented employees without nego-
employee, and outside resources." Although the employer should
tiating the policy through the union;23 and engaging in individual
consider those alternatives preferred by the employee, the employer is
dealing with union members."
ultimately free to choose the least costly, effective alternative."
Collective bargaining agreements generally cover rates of pay,
The defenses of undue hardship and business necessity set bound-
wages, hours of employment, and other conditions of employment."
aries on the lengths an employer must go in order to accommodate the
applicant or employee with a disability. If an employer proves that the
accommodation would pose an undue hardship on the operation of the
19. An employer may also defeat a claim of discrimination for using a standard, test, or selection
business, the accommodation is not required." If the employer ade-
criteria that has an adverse and disparate impact upon people with disabilities if it is proven to be (1)
quately demonstrates that maintaining a standard, test, or other selec-
job-related. (2) consistent with business necessity, and (3) its performance cannot be accomplished by
reasonable accommodation. Id. at app. 4 1630.15(b).
20. 29 U.S.C. II 151-191 (1988).
21. Id. 4 158(a)(5).
22. Id. 1 158(d).
13. See Id. at app. I 12111(9).
23. Id. 4 158(a)(5).
14. S. REP. No. 116, 101st Cong., 1st Sess. 32 (1989) and H.R. REP. No. 485, 101st Cong., 2d
24. Id. 4 158(a)(1). But see id. 1 159(a) (permitting an exemption from the requirement of dealing
Sess. 41 (1990): reprinted in COMM. ON EDUC. AND LABOR, 101st Cong. 2d Sess., LEGISLATIVE
with representatives when the adjustment is consistent with the terms of the collective bargaining
HISTORY OF PUBLIC LAW 101-336, THE AMERICANS WITH DISABILITIES ACT. 107 (1990) [hereinafter
contract or agreement then in effect and the bargaining representative has been given the opportunity
Legislative History of the ADA].
to be present at such adjustment).
15. Id.
Section 159 of the NLRA raises another potential conflict between the NLRA and the ADA
16. Interpretive Guidance on Title I of the Americans with Disabilities Act, 29 C.F.R. app. 4
which is not addressed in this Note, but was addressed in Jules L. Smith, Accommodating the Ameri-
1630.2(o) (1993).
cars with Disabilities Act to Collective Bargalning Obligations Under the NLRA, 18 EMPLOYEE
17. Id. at app. 1 1630.9.
RELATIONS LJ. 273, 277 (1992). The conflict is whether the requirement to deal with representatives
18. id. at app. 1 1630.2 ("Undue hardship refers to any accommodation that would be unduly
interferes with the right of the employee with a disability to confidentiality regarding his/her condi-
costly, extensive, substantial. or disruptive, or that would fundamentally alter the nature or operation
tion under the ADA.
of a business.").
25. See generally BASIC PATTERNS IN UNION CONTRACTS (BNA ed., 8th ed. 1975).
392
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Provisions of collective bargaining agreements usually address dis-
no exceptions were available to the other workers under the collective
charge and discipline, insurance. pensions, grievances and arbitration.
bargaining agreement. For example, an employer may have an absen-
income maintenance, hours and overtime, holidays, layoff, rehiring,
tee policy stated in the collective bargaining agreement whereby em-
worksharing, leaves of absence, vacation, wages, working conditions,
ployees are discharged for more than eight absences per quarter. If the
safety, and seniority.26
employer granted an exception for an employee with a disability who
Seniority provisions are found in the vast majority of collective
needed twelve days each quarter to take leave for necessary medical
bargaining agreements." Seniority, i.e., the length of continuous ser-
treatment, the letter of the agreement would be violated. Also, some
vice with an employer, is generally used to rank employees for vari-
collective bargaining agreements include descriptions of jobs. If an
ous employment actions, such as layoff, promotion, and transfer."
employer restructured a job and reassigned nonessential duties to other
Seniority may be the sole factor, the determining factor, an equal
workers in a manner that altered the duties set out in the job descrip-
factor, or a secondary factor considered only when other factors are
tions, the employer technically would be violating the agreement.
equally considered in making these employment decisions.
Of all of these areas of potential conflict, the role of seniority in
light duty assignments, transfers, and reassignments pose the thorniest
C. How the Conflict Emerges
problems for employers because the rights of one worker are pitted
Whenever an employer proposes an accommodation that contradicts
against the rights of another. If an employer wishes to accommodate
the collective bargaining agreement, a conflict between duties
an individual with a disability by a transfer, assignment to a part-time
emerges. Conflicts that commonly emerge include granting a shift
or modified position," or reassignment, the collective bargaining
change, transfer, or assignment to a light duty position³⁰ for a person
agreement would require that the bidding procedures of the contract
with a disability who does not have the prerequisite seniority to bid
be utilized. When competitive bidding procedures are followed and a
competitively. Often preferential shifts and assignments may require a
more senior employee bids on the position, the seniority provisions
minimum number of years of service before the employee can bid for
most often require that the senior employee be placed in the position.
the position. Similarly, workers with more seniority may "bump"
Such a strict adherence to a collective bargaining agreement can es-
workers with less seniority from positions under the terms of some
sentially prevent qualified persons with disabilities from obtaining
agreements. If an employer freezes a position to accommodate a work-
such positions.
er with a disability that position has been exempted from the competi-
tive bidding process set up in the private agreement.
Another potential conflict might emerge if an employer made an
exception to a general policy for a worker with a disability" where
26. Id. at IL
27. Id. at 85.
28. Id at 89.
quest the transfer through the union. Id. at 486. This case illustrates that transfers may be potential
29. Id. at 66.
accommodations subject to the provisions of a collective bargaining agreement.
30. Carter V. Tisch, 822 F.2d 465 (4th Cir. 1987). Bringing an action under the Rehabilitation Act
32. Jasany V. United States Postal Service, 755 F.2d 1244, 1251-52 (6th Cir. 1985). Plaintiff was
of 1973, plaintiff claimed that he was entitled to a reasonable accommodation of a permanent transfer
hired by the United States Postal Service as a Distribution Clerk, Part-time Flexible, Machine Quali-
to a light duty assignment because of his disability. However, the light duty positions fell under the
fied. The job included duties working as an operator of a mail sorting machine and manual distribu-
collective bargaining agreement which mandated that those positions be assigned to employees with a
tion. The operation of the machine caused an exacerbation of plaintiff's pre-existing eye condition.
specified amount of seniority. Id. at 467.
He was unable to perform these duties and was terminated. In lieu of termination, plaintiff sought
31. Wimbley V. Bolger, 642 F. Supp. 481, (W.D. Tenn. 1986), off d. 831 F.2d 298 (6th Cir.
either to share the work as an "allied man" or part-time schedule on the machine. The court noted
1987) (claiming his excessive absenteeism, the motivation for his termination. was caused by a ser-
that "there was nothing in the record pertaining to the existence of such a position
[and]
that
vice-connected disability). Plaintiff asked for # transfer in lieu of the termination, but the transfer he
an employer cannot be required to accommodate a handicapped employee by restructuring a job
requested fell within those covered by the collective bargaining agreement. Ultimately, the request for
which would usurp the legitimate rights of other employees in a collective bargaining agreement." Id.
a transfer was not upheld by the court because. in part, plaintiff did not take the proper steps to re-
at 1251-52.
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II. ANALYSIS
cases under the Rehabilitation Act have adopted the equivalent of a
There is evidence in the language of the statute and regulations,
per se rule; if a proposed accommodation conflicts with the terms of a
guidance from the EEOC." legislative history,* the nature of col-
collective bargaining agreement, the accommodation is not reasonable.
lective bargaining agreements, and sound public policy that a multi-
Although the sponsors of the ADA drew upon the regulations and
case law of the Rehabilitation Act to create the ADA, it was also their
factorial test should be used to balance the rights of the senior worker
intent to "create a statute that [could] stand on its own and not be
and the less senior worker with a disability. Because no cases have
been decided to date under the ADA, the analysis also includes a
dependent on incorporation by reference to regulations issued under
review of pertinent cases decided under the Rehabilitation Act. These
Section 504."39 For the following reasons the ADA should stand on
cases are not dispositive of the test to be used under the ADA, how-
its own in utilizing a multifactorial test to resolve the reasonableness
ever, because of several key differences between the Rehabilitation
of an accommodation in the face of a conflicting collective bargaining
Act and the ADA.
provision. First, the majority of the cases under the Rehabilitation Act
are distinguishable from cases that will be brought under the ADA.
A. Case Law Under the Rehabilitation Act"
Second, a per se rule provides over-inclusive protection for workers
with seniority. Third, federal workers with disabilities need less pro-
Until a case is decided under the employment provisions of the
tection offered by a per se rule than do workers in the private sector.
ADA, it remains unknown how the courts will resolve conflicts be-
tween terms of collective bargaining agreements and proposed accom-
1. Cases Under the Rehabilitation Act Are Distinguishable
modations. One commentator recommends that courts defer to collec-
tive bargaining agreements as has been done under the Rehabilitation
Although the ADA provisions track some of the regulations and
Act. Another commentator suggests that the duty under the ADA is
decisions of the Rehabilitation Act, the ADA is different in two key
different from the duty under the Rehabilitation Act and "should be
ways. Unlike the Rehabilitation Act, the Americans with Disabilities
capable of mitigation by the provisions of a collective bargaining
Act listed reassignment, as a method of accommodating employees
with disabilities. Also different is a tripartite standard that the em-
agreement only under extraordinary circumstances."
Although at least one district court acknowledged that the terms of
ployer must meet to establish a defense of business necessity under
a collective bargaining agreement should be a factor in analyzing
the ADA." These variances will yield different results for cases with
reasonableness of a proposed accommodation," many courts deciding
similar facts brought under the ADA.
Cases, such as Carty V. Carlin, Alderson V. Postmaster
General," Jasany V. United States Postal Service," Dancy V.
33. Interpretive Guidance on Title I of the Americans with Disabilities Act, 29 C.F.R. app. 1
Kline," and Carter v. Tisch are cited for the proposition that an
1630 (1993).
accommodation is unreasonable if it conflicts with the collective bar-
34. Legislative History of the ADA. supra note 14. at 107.
gaining agreement. These cases discuss whether reassignment is a
35. 29 U.S.C. # 701-796i (1988).
36. See generally Jules L. Smith. Accommodating the Americans with Disabilities Act to Collec-
contemplated alternative for accommodating the worker with a dis-
sive Bargaining Obligations Under the NLRA. 18 EMPLOYEE RELATIONS LJ. 273 (1992).
37. See Joanne Jocha Ervin, Reasonable Accommodation and the Collective Bargaining Agree-
ment Under the Americans with Disabilities Act of 1990, 3 DET. C.L. REV. 925. 927 (1991).
39. Legislative History of ADA. Vol. 3 of 3. supra note 14. at 2219-20 (written response by Chai
38. Dexler V. Tisch, 660 F. Supp 1418. 1424 at a. 7 (D. Conn. 1987) (noting that Tw]hile the
Feldblum. Legal Counsel to the American Civil Liberties Union and a drafter of the ADA bill. to the
collective bargaining agreement cannot override federal law regarding employment of the handi-
Honorable James Sensenbrenner).
capped. its provisions are factors to consider in analyzing the reasonableness of a proposed accom-
40. 42 U.S.C. 4 12111(9) (Supp. u 1990).
modation"). The court ultimately found that Mr. Dexler, who had achondroplastic dwarfism, could
41. See supra note 19.
not be accommodated by the USPS because of safety and loss of efficiency. The terms of the collec-
42. 623 F. Supp. 1181 (D. Md. 1985).
tive bargaining did not come into play under the accommodations proposed by Mr. Dexler. Id. See
43. 598 F. Supp. 49 (W.D. Okla. 1984).
also Bey V. Bolger, 540 F. Supp. 910 (E.D. Pa. 1982) (holding that a five year minimum seniority for
44. 755 F.2d 1244 (6th Cir. 1985).
light duty was reasonable and substantially related to established goals, while deeming placement of
45. 639 F. Supp. 1076 (N.D. DL 1986).
the employee with . disability in that position was unreasonable).
46. 822 F. 2d 465 (4th Cir. 1987).
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ability. In each of these cases, federal employees working under col-
lective bargaining agreements requested the accommodation of a reas-
Such a test was not set out in the statute or regulations of the Rehabil-
itation Act. Under the Rehabilitation Act, some courts applied a wa-
signment to a position where they could perform the essential func-
tered down legitimate business standard," while other courts applied
tions of the job. Each was decided on a premise that an employee was
the lone element of business necessity.
only entitled to an accommodation if he could perform the functions
of the present job with or without an accommodation. In dicta, the
This more stringent standard will not be met by circumstances
court in Carty V. Carlin" noted that "such a reassignment might also
accepted by courts utilizing the less rigorous standard of the Rehabili-
tation Act. For example, in Daubert V. United States," Ms. Daubert
agreement." violate other employees' rights secured by the collective bargaining
applied to the USPS as a part-time distribution clerk. She satisfied the
In Carty V. Carlin," the plaintiff had worked for the United States
job requirements despite a disclosed history of preexisting back prob-
lems. The USPS later converted a job function from dragging mail
Postal Service (USPS) for over fourteen years as a mail collector,
sacks to loading a large dolly with mail sacks. After this change, Ms.
messenger and later as a custodian. Due to severe depression and
other medical conditions, Mr. Carty was temporarily reassigned to
Daubert began experiencing back problems and was temporarily as-
clerical work. When his doctor recommended a permanent assignment
signed to light duty where she rewrapped parcels. She underwent a
to this position, Mr. Carty was terminated from employment. The
fitness-for-duty examination by USPS medical officer and was de-
clared unfit for duty because of her back disability. She was ultimately
court focused its inquiry on whether Mr. Carty could successfully
perform the job of custodian with an accommodation. When it was
discharged.
found that he could not perform those duties, the court held he was
Although the federal district court held that she had established a
not a qualified handicapped individual despite his abilities to perform
prima facie case of handicap discrimination, the USPS defeated the
as a clerical worker."
claim by establishing a legitimate business reason for Daubert's termi-
The inclusion of reassignment in the ADA as an option in the menu
nation; "[The USPS) was legally incapacitated under its national union
of accommodations would have probably resulted in Mr. Carty being
contract to modify the job requirements of a distribution clerk-ma-
granted an accommodation if he was working for an employer covered
chine operator or create an exception due to her back injury."5
Ms. Daubert asked for either an accommodation of permitting her
by the ADA. As an existing employee with a disability, he would be
entitled to reassignment to the clerical position unless it posed an
to perform part of the duties or of transferring her to light duty work.
undue hardship upon the employer. Because he had worked there
Both options were foreclosed because of seniority provisions in the
temporarily without creating an undue hardship on the employer, a
collective bargaining agreement. There was no discussion that another
worker wanted the position or if reassignment of nonessential duties
permanent accommodation would have likely been reasonable.
would have burdened other workers. If the facts in this case had been
Another difference affecting the outcome of cases determined under
tried under the ADA standard, however, it is unlikely that a covered
the ADA is that the ADA imposes a higher standard than the Rehabil-
itation Act for establishing a defense to a discriminatory use of a
employer could have satisfied the ADA's standard because there were
qualification standard, test, or selection criteria. The ADA creates a
no reported facts that the accommodations she requested would have
tripartite test: (1) job-relatedness, (2) business necessity, and (3) in-
actually harmed the rights of other workers or jeopardized the effi-
ability to be accomplished through reasonable accommodation."
ciency of the business.
47. 623 F. Supp. 1181 (D. Md. 1985).
48. Id. at 1189.
49. Id.
53. See generally Jasany V. United States Postal Service, 755 F2d 1244 (6th Cir. 1985); Daubert
50. Id.
V. United States Postal Service, 733 F.2d 1367 (10th Cir. 1984).
51. Id.
54. See Davis V. Frank, 711 F. Supp. 447 (N.D. III. 1989).
52. See supra note 19.
55. 733 F.2d 1367 (10th Cir. 1984).
56 Id. at 1369.
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2. A Per Se Rule Is Over-Inclusive
bona fide seniority system, justification remains for not applying the
same rationale for cases under the ADA. An applicant or employee of
In addition to the court in Daubert." other courts were concerned
the United States government has additional protections that applicants
that the rights of people with disabilities under the Rehabilitation Act
and employees of other covered employers do not possess. These
should not usurp the legitimate rights of employees under a collective
protections include Constitutional protections, most notably substantive
bargaining agreement." However, the legitimate rights of non-dis-
and procedural due process and equal protection. These protections,
abled employees may be protected under a multifactorial test without
while also available to employees of state and local government cov-
sacrificing the goals of the ADA.
ered by the ADA, are not available to the employee with a disability
When a per se rule is invoked by a court, a proposed accommoda-
in the private sector.
tion will be deemed unreasonable if it conflicts with a provision of the
These protections make a person with a disability less vulnerable to
collective bargaining agreement, even if another worker's legitimate
arbitrary decisions by the state and afford them protections when they
rights are not involved. For example, an accommodation of restructur-
are affected by an adverse decision. In City of Cleburne V. Cleburne
ing the duties of the job would be per se unreasonable if the job du-
Living Center," the United States Supreme Court invoked an elevat-
ties are different in the collective bargaining agreement. Moreover,
ed rational basis test more akin to intermediate scrutiny to overtum
where positions are available only to employees with a specified se-
a zoning ordinance that had a discriminatory impact upon the living
niority, it is difficult to argue that another employee's rights are being
arrangements of persons with disabilities.
violated if no qualified employee bids for the job.
Congress intended for the federal government to become a model
In both Daubert" and Carty,60 the courts did not discuss whether
employer of people with disabilities. The federal government is re-
another, more senior employee was bidding for the position which
quired to take positive steps to employ and advance qualified handi-
would have accommodated these employees with disabilities. The per
capped persons under the Rehabilitation Act. The affirmative action
se rule invoked by the courts under the Rehabilitation Act failed to
component helps to ensure that steps will be taken to recruit and se-
provide a framework for evaluating when a conflict would usurp the
lect people with disabilities for federal employment. The positive steps
legitimate rights of other workers.61 Therefore, the per se rule pro-
include special hiring programs offered exclusively to persons with
tected the letter of the agreement even in cases where no legitimate
disabilities. An example of a special hiring and training program for
rights of union members were at stake.
people with severe disabilities was described in Davis V. United States
Postal Service."
3. Workers with Disabilities in the Private Sector Need Greater
The statutory and regulatory language, guidance by EEOC, and the
Protection
legislative history of the ADA demonstrate that the duty to provide a
The ADA applies to nearly every employer, except the federal
reasonable accommodation is greater than the duty carved out by the
government and employers with fewer than twenty-five employees.62
courts under the Rehabilitation Act.
Whether the courts have fairly interpreted the Rehabilitation Act to
that rights under that Act cannot prevail over rights created by a
63. 473 U.S. 432 (1985).
57. Id.
64. Id. at 458 (Marshall, J., concurring in part and dissenting in part). Chastising the majority.
58. Jasany V. United States Postal Service, 755 F.2d 1244 (6th Cir. 1985): Carry V. Carlin. 623 F.
Marshall stated. "The refusal to acknowledge that something more than minimum rationality is at
Supp 1181 (D. Md. 1985).
work here is, in my view, unfortunate Id. at 459. He referred to the scrutiny in this case as
59. See supra note 55.
"second order" rational review. Id. at 458.
60. See supra note 42.
65. 29 U.S.C. 1 791(b) (1988).
61. See also Ervin, supra note 37. at 950 "[T]he opinions are noteworthy in the absence of
66. 675 F. Supp. 225 (M.D. Pa. 1987) (describing a special program in which people with severe
a developed rationale.").
disabilities were hired in a noncompetitive process for training and permanent hiring if they later met
62. 42 U.S.C. 4 12111(5)(A) (Supp. II 1990).
performance standards).
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B. Statutory and Regulatory Language
The language of the regulations point to Congress's reliance on
The language of the ADA suggests that collective bargaining agree-
multifactorial approaches in making determinations under the ADA.
ments should not be the sole factor in determining reasonableness of
For example, there are multifactorial approaches for determining
an accommodation. Specific references in the statute and regulations
when: (1) a person is substantially limited in a major life activity;"
prove that the existence of the collective bargaining agreements is
(2) a person is limited in the activity of working;" (3) the job func-
only one factor among others in this evaluation. Just as important in
tions are essential;74 and (4) an accommodation poses an undue bur-
den."
interpreting the ADA is the exclusion of a provision to protect seniori-
ty systems.
This reliance on a multiplicity of factors in making determinations
demonstrates a general unwillingness to use a per se approach. A per
1. Specific Language About Collective Bargaining Agreements
se approach in which the terms of a collective bargaining agreement
either always or never outweigh the rights of an individual with a
The ADA defines unlawful discrimination as the "participation in a
disability would be inconsistent with the multifactorial approach used
contractual or other arrangement that has the effect of subjecting an
throughout the ADA.
applicant or employee of the employer to discrimination.' The em-
ployer cannot engage in actions through a contractual arrangement that
2. No Express Exemption for Bona Fide Seniority Systems
would be discriminatory if committed directly by the employer. The
regulations define contractual or other arrangements to include collec-
Absent from the language of the ADA is any provision to exempt
tive bargaining agreements with labor unions. Therefore, the plain
seniority systems. To protect seniority systems. Title VII of the Civil
language of the statute, together with the regulations, prohibit an em-
Rights Act of 1964 included a provision which excluded from the
ployer from refusing to accommodate an individual with a disability
scope of unlawful employment practices the "appl[ication] of different
solely because of an inconsistent term in the collective bargaining
standards of compensation, or different terms, conditions, or privileges
agreement.70 Complying with a term of an agreement which preclud-
of employment pursuant to a bona fide seniority system."7
ed providing a reasonable accommodation would be tantamount to
If Congress wished to exempt the application of different terms,
directly refusing to provide the accommodation."
conditions, or privileges of employment based on seniority systems, an
express provision patterned after Title VII would have been incorpo-
rated." Excluding seniority systems would have been inconsistent
with the findings and purpose of the ADA as set out in the statute.
67. 42 U.S.C. $ 12112(b)(2) (Supp. " 1990).
Congress found that discrimination against individuals with disabilities
68. See generally Ervin. supra note 37. at 971 (exploring the theory that the labor unions also
have a duty to make reasonable accommodations for employees with disabilities under the Americans
persists in employment and other areas key to gaining access to em-
with Disabilities Act).
69. 29 C.F.R. 4 1630.6 (1993).
70. The regulations that implement the Rehabilitation Act have some similar provisions regarding
72. See supra note 8 (listing factors considered in the determination of substantial limitation of a
contractual relationships.
major life activity).
A recipient may not participate in a contractual or other relationship that has the effect of
73. See supra note 9 (listing factors considered in the determination of substantial limitation of
subjecting qualified handicapped applicants or employees to discrimination prohibited by
working).
this subpart. The relationships referred to in this subperagraph include relationships with
74. A non-exhaustive list of factors that may be considered in determining essential job functions
employment and referral agencies with labor unions
include: (i) the employer's judgment as which functions are essential; (ii) written job descriptions
34 C.F.R. $ 104.11 (a)(4) (1993).
prepared before advertising or interviewing applicants for the job: and (iii) the amount of time spent
Compare this with the regulations implementing the ADA which added the language that con-
00 the job performing the function. 29 C.F.R. I 1630.2(n)(3) (1993).
tractual or other arrangements include "collective bargaining agreements." 29 C.F.R. I 1630.6 (b)
75. See supro note 18.
(1993); see also 34 C.F.R. $104.11 (1993) ("[A) recipient's obligation to comply with this subpert is
76. 42 U.S.C. " 2000c-2(h) (1988).
not affected by any inconsistent term of any collective bargaining agreement to which it is a party").
77. Ervin. supra note 37, at 962 (excluding seniority systems from the acope of unlawful employ-
71. Legislative History of the ADA. supre note 14. at 332-33 (explaining this section by stating
ment practices was Intentional, Ervin argues, because Congress presumedly knew the exception was
"the basic Intent of this provision is that any entity may not do through a contractual provision what
being read into discrimination cases under I 504, and therefore Congress did not make such a coun-
it may not do directly").
terpart in the ADA).
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ployment, such as transportation and public accommodations. Individ-
Service would not accommodate him by placing him in such a posi-
uals with disabilities face "outright intentional exclusion, the discrimi-
tion.
natory effects of transportation, and communication barriers, over-
The non-entry level positions were not available to him under the
protective rules and policies, failure to make modifications to existing
applicable collective bargaining agreement because he did not possess
facilities and practices, exclusionary qualification standards and crite-
the requisite seniority. Davis, although ultimately unsuccessful, chal-
ria, segregation, and relegation to lesser jobs, or other opportuni-
lenged the disparate impact of this policy upon similarly-disabled peo-
ties."⁷
ple" because they were unable to obtain employment in jobs for
Excluding seniority systems would have made the goals of the
which they could perform since the only channel to those jobs were
ADA illusory. Provisions of collective bargaining agreements strike
through jobs that they could not perform."
more heavily against most employees with disabilities than those
Seniority provisions of a collective bargaining agreement that arbi-
protected under Title VII because these agreements control most per-
trarily eliminate people with disabilities from entry into a workforce,
sonnel actions and job descriptions where modifications must be made
which occurred in Davis," were not intended to be excluded from
to accommodate many workers with disabilities.
unlawful employment practices as is evidenced by the lack of an ex-
For workers with disabilities, access to jobs is not only impeded by
press exemption.
the attitudinal barriers other protected groups face but also by actual
physical, mental. communicative, architectural, and transportation
C. Equal Employment Opportunity Commission's Guidance in
barriers. Two-thirds of the working-age disabled are unemployed."
Interpreting the ADA
Gaining access to employment is the first step to realizing the ADA's
Three excerpts from the Equal Employment Opportunity
goals of equal employment opportunity and economic self-sufficien-
Commission's (EEOC) guidance to interpreting the ADA lends sup-
cy." These barriers include the inaccessible public transportation
port to a multifactorial approach of evaluating reasonableness. First,
system that others may rely on to get to work, the lack of telecommu-
the EEOC's guidance on determining essential job functions is rele-
nications devices for people who are deaf (TDD) at a place of em-
vant to accommodations of part-time or modified work arrangements
ployment to contact an employer regarding job inquiries, architectural
which often require reallocating nonessential job functions to other
barriers at the front door, lack of an accessible bathroom in the work
employees. The Appendix indicates that the collective bargaining
site, or actual physical and mental limitations in performing certain
agreement would be relevant," but it also indicates other relevant
job functions. All of these barriers have made the most accurate de-
sources, such as the work experience of past and current employees in
scriptive account of what its like to be disabled in America as "not
working."*"
the position." This guidance by the EEOC strongly suggests that an
employer must use a multifactorial approach to the determination of
Davis V. United States Postal Service offers an example of the
essential job functions, marked by consideration of, but not complete
additional adverse impact that seniority systems may pose for workers
deference to, the terms of a collective bargaining agreement.
with disabilities. Davis, who was disabled by hemophilia and arthritis,
Secondly, the EEOC's guidance, that a policy that does not qualify
was precluded from permanent employment because he was unable to
as a disparate impact on people with disabilities may nonetheless be
perform the duties of an entry level position. Although Davis was
challenged as discriminatory in individual cases, is important to deter-
able to perform the duties of a non-entry level position, the Postal
84. Id. at 237. Other people with disabilities did qualify for entry level positions when the plain-
78. 42 U.S.C. 4 12101(a)(5) (Supp. n 1990).
tiff took the test. but they had different types of disabilities. Id. The plaintiff's claim was that it had a
79. Legislative History of the ADA. supra note 14, at 107.
disparate impact on similarly-disabled people. Id.
80. 42 U.S.C. I 12101(a)(8) (Supp. II 1990).
85. Id. at 235.
81. Legislative History of the ADA. supra note 14, at 107.
86. Id.
82. 675 F. Supp. 225 (M.D. Pa. 1987).
87. See 29 C.F.R. app. & 1630 (1993).
83. Id. at 230.
88. Id.
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mining if exceptions might be made in policies contained in the col-
the disabled employee's salary."
lective bargaining agreement. The Appendix offers an example of a
The rationale behind the rejection of the proposal was that "[b]y
no-leave policy during the first six months of employment." Even if
including a number of factors [it is] intended to establish a flexible
the policy withstood a disparate impact analysis, an employer may still
approach" and "that setting a ceiling on reasonable accommodation is
be required to make an exception to accommodate an individual with
inappropriate.' If Congress took painstaking steps to reject a per se
a disability (unless it would cause an undue hardship on the operation
approach to assess reasonableness in light of cost, it is unlikely the
of the business)." Applying this analogy to the collective bargaining
approach was intended to be abandoned in light of conflicting collec-
agreement would mean that exceptions to the policies embodied in the
tive bargaining terms.
terms of these agreements may also need to be made. Making excep-
The legislative history provides additional support that a flexible
tions to policies such as competitive bidding and bumping would
approach should be used when there is an employer who is covered
permit the provision of accommodations without abandoning the poli-
by a collective bargaining agreement. The Senate Report explained
cies.
that "an employer cannot use a collective bargaining agreement to ac-
Third, employers under the ADA may not rely on the lack of dis-
complish what it otherwise would be prohibited from doing under this
criminatory intent to save those provisions of a collective bargaining
legislation."
agreement which have a discriminatory effect." An employer and the
Both the House and Senate in their reports concluded that the col-
representatives of the union could negotiate an agreement without
lective bargaining agreement would be "relevant in determining
consideration of the effect on workers with disabilities yet without a
whether a given accommodation is reasonable." The reports added
specific intent to discriminate against them. The interpretative guid-
that if there were seniority provisions that reserved some jobs for
ance makes clear that provisions having a discriminatory effect on
employees with a specified seniority, such provisions would represent
people with disabilities will have to be avoided. For example, in
a "factor" for consideration." Moreover, the House concluded the
Daubert V. United States Postal Service," where the defendant de-
existence of an inconsistent term in the collective bargaining agree-
feated the plaintiff's prima facie case by showing in part that there
ment would not be "determinative."
was no intent to discriminate," the lack of intent would not be help-
ful to establishing a defense.
E. Private Agreements
D. Legislative History
Congress recognized the potential for flexibility in these private
agreements when it recommended insertion of a clause permitting the
The legislative history of the ADA evinces Congressional intent that
employer to take necessary steps to comply with the ADA. 101 Such a
the determination of reasonable accommodation would be an individu-
provision would be consistent with anti-discrimination clauses found
alized inquiry marked by a flexible approach. An example from the
in the majority of collective bargaining agreements that provide guar-
Judiciary Committee Report illustrates that a per se approach to deter-
antees against other kinds of discrimination by management. These
mining reasonableness was avoided in favor of a multifactorial ap-
proach.* The Committee rejected a proposal that would have deemed
unreasonable any accommodation that cost more than ten percent of
95. Legislative History of the ADA. supro note 14, at 481.
96. Legislative History of the ADA. supra note 14, at 481.
97. Legislative History of the ADA. supra note 14, at 336.
98. Legislative History of the ADA. supra note 14. at 130. 336.
99. Legislative History of the ADA. supra note 14, at 130. 336.
89. Id.
100. Legislative History of the ADA. supra note 14, at 336.
90. Id. at app. I 1630.15(b).
101. Legislative History of the ADA. supra note 14. at 130, 336 (recommending a method for
91. ld. at app. I 1630.6.
employers to avoid any conflicts between the duty to provide reasonable accommodations and the
92. 733 F.2d 1367 (10th Cir. 1984).
duty to comply with collective bargaining agreements, Congress stated that the parties could include
93. Id. at 1369-70.
a provision in collective bargaining agreements that permit the employer "to take all actions neces-
94. Legislative History of the ADA. supra note 14. at 481.
sary to comply with this legislation").
406
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provisions usually provide that the company will not discriminate
tive bargaining agreement is central to the relationship between labor
against groups protected by various federal, state, and local ordinances
and management. Seniority provisions are one of the strongest mea-
prohibit discrimination.¹⁰²
sures protecting workers. Both labor and management would agree
Congress recommended a method for employers to avoid any con-
that the benefits of seniority provisions include: (1) avoidance of
flicts between the duty to provide reasonable accommodations and the
claims of favoritism and discrimination in personnel actions, such as
duty to comply with collective bargaining agreements. Given this
layoffs, transfers, recalls, shift preferential, demotions and promotions,
Congressional recommendation to insert such a clause, a plaintiff
and (2) ease in administration.
should more easily be able to rebut a defense by the employer that an
Adherence to the collective bargaining agreement and its seniority
accommodation is unreasonable because it conflicts with the collective
provisions is not absolute. Although the overwhelming majority of
bargaining agreement.
collective bargaining agreements contain seniority provisions that
Without more evidence, the proffered reason would seem
prefer employees who have longer continuous service with the em-
pretextual. If the collective bargaining agreement (1) has been negoti-
ployer, exceptions to this general rule exist. Three such exceptions are
ated since the date of the enactment of the ADA, or (2) has a provi-
the "super-seniority" afforded union representatives, the selection of
sion which permits renegotiation in the event of conflict with other
less senior workers with specialized training, and the settlements of
laws, 103 the nature of the anti-discrimination provisions sanction vari-
discrimination suits.
ations in the terms of collective bargaining agreements to create ac-
Policy considerations affording union representatives super-seniori-
commodations that are otherwise reasonable.
ty106 is grounded in policy considerations of preventing them to be
the first to go in a layoff. The policy spares the less senior representa-
F. Policy Considerations
tive for the good of the union. Continuity in representatives during
time of layoff ensures better representation and eliminates the
There are important public policy considerations on both sides of
disincentive to serving as a representative.
this issue. Respecting the rights of individuals with disabilities to
Another exception is that a junior employee, who has specialized
obtain necessary and reasonable accommodations as well as the rights
training not possessed by more senior employees, will not be laid off
of union members to collectively bargain with management requires
if the training is needed for efficient business operations. 107 The se-
more than a per se approach. A per se approach would result in one
niority standards are relaxed for the ultimate good of the company.
set of policy considerations overshadowing all other concerns. A mul-
Labor would not be able to negotiate a seniority policy that did not
tifactorial approach will ensure that neither set of policy concerns are
include some exceptions to make contrary hiring decisions for the
ignored.
efficiency of the business.
A multifactorial analysis recognizes that collective bargaining holds
One commentator offers another exception to the general principle
numerous advantages for both labor and management. Unions provide
of adhering to the collective bargaining agreement: providing remedies
workers with an avenue towards genuine bargaining. The collec-
to victims of discrimination. The Supreme Court has allowed col-
lective bargaining agreements to be overridden in order to make vic-
tims of discrimination whole under Title VII. In Franks V. Bowman
102. Guarantees against discrimination-by either the union, the company. or both-appear in 83
percent of the sample of collective bargaining agreements, an increase since the Civil Rights Act of
and the Age Discrimination in Employment Act of 1967. BASIC PATTERNS IN UNION CON-
TRACTS 127 (BNA ed_, 8th ed. 1975).
105. More debatable claims of the advantages of seniority systems are that they reward the most
103. Some collective bargaining agreements do contain provisions which set out the procedures in
efficient. reliable. and loyal employees and protect the older workers. These benefits are subject to
the event that a provision conflicts with a law. Id. at 7.
debate because employers raise concerns that seniority systems tend to decrease the ambitions of
104. A single employee bargaining with an employer is at a great disadvantage unless whe is criti-
younger employees and decrease the likelihood that they will remain with the employer. Id. at 72.
cal to the business of the employer. With numbers of workers being the individual, however, the
106. Id.
employee will not have to accept whatever wages and working conditions the employer offers.
107. Id. at 70.
MARVIN J. LEVINE & EUGENE C. HAGBURG. LABOR RELATIONS, AN INTEGRATED PERSPECTIVE 6
108. See Rence Cyr, The Americans with Disabilities Act: Implications for Job Reassignment and
(1978).
the Treatment of Hypersusceptible Employees. 57 BROOK. L. REV. 1237 (1992).
408
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Transportation Co., Inc.,¹⁰⁹ the plaintiffs, who had been the victims
ployer. The employees receive an incidental benefit of a robust com-
of racial discrimination, sought retroactive seniority as a component of
pany not plagued by a labor shortage.
damages. The plaintiffs argued that they would have been working in
The reason most cited by cases decided under the Rehabilitation
the seniority earning position if not for the discrimination.110 The
Act for deferring to the collective bargaining agreement is that pro-
defendants claimed that awarding seniority to employees who had not
viding accommodations may usurp the legitimate rights of other
in those positions would violate the collective bargaining
workers. However, the courts in these cases did not expound on the
agreement." The Court held that the only way to adequately com-
nature of the legitimate right of other workers. In Carty V. Carlin, 115
pensate the plaintiffs was to include retroactive seniority as part of the
the District Court of Maryland objected to an accommodation that
damages and permitted the collective bargaining agreement to be
"might also violate other employees' rights secured by the collective
overridden.¹²
bargaining agreement
***16 It appeared that the possibility of a
Achieving the goals of the ADA also warrants departing, at times,
violation of other's rights, without further inquiry, would be enough to
from the terms of the collective bargaining agreement. There are
override the duty to accommodate.
strong public policy considerations at stake in accommodating people
An automatic determination that all provisions of the agreement
with disabilities in the workplace. Those considerations include: (1)
equate to legitimate rights of covered employees would result in a per
decreasing the enormous costs of the wasted productivity associated
se determination of unreasonableness whenever an accommodation
with unemployment of the disabled; (2) reinforcing the labor market
conflicted with one of its terms. This approach shows too little respect
with another population of workers before a critical labor shortage
for the interests of people with disabilities and the goals of the ADA
occurs; and (3) eliminating the staggering discrimination in all areas
while overprotecting the union workers. Balancing the legitimate
of life experienced by people with disabilities.
rights of union workers with the right of workers with disabilities to
Remarks by former President Bush expounded on these public pol-
reasonable accommodations requires a determination of what rights
icy considerations:
are actually legitimate. It is clear that there is a legitimate right to be
On the cost side, the National Council on the Handicapped states that current
safe from being bumped from a job to accommodate an employee
spending on disability benefits and programs exceeds $60 billion annually. Ex-
with a disability and less seniority. It is also clear that mere incon-
cluding the millions of disabled who want to work from the employment ranks
venience of other workers does not qualify as a defense of undue bur-
cost society literally billions of dollars annually in support payments and lost
den.
i
tax revenues
The United States is now beginning to face labor
In Davis V. Frank,¹ the United States Postal Service failed to
shortages as the baby boomers move through the work force. The disabled offer
a pool of talented workers whom we simply cannot afford to ignore. especially
promote an employee who was deaf and needed some accommoda-
in connection with the high tech growth industries of the future."
tions, including elimination of the nonessential job function of answer-
It
been estimated that there is a "20 year window of opportuni-
ing phones and the use of basic sign and written communication by
fellow workers.¹¹⁹ Davis illustrates that some accommodations will
ty" to integrate people with disabilities into the labor pool before we
conflict with a term of a collective bargaining agreement and the
are faced with a critical labor shortage.' Looking for opportunities
for employing those who need accommodations will benefit the em-
result may only be inconsequential or inconvenient to other workers.
In those cases the need to accommodate people with disabilities in the
109. 424 U.S. 747 (1976).
110. Id. at 758.
115. 623 F. Supp. 1191 (D. Md. 1985).
111. ld. at 773.
116. Id. at 1189.
112 Id. at 778,
117. Legislative History of the ADA, supra note 14, at 130 ("The Committee also wishes to make
113. Legislative History of the ADA, supra note 14. at 115.
clear that reassignment need only be to a vacant position "bumping" another employee out of a posi-
114. Legislative History of the ADA, supra note 14. at 115 (comments from Jay Rochlin, the exec-
tion to create a vacancy is not required").
utive director of the President's Committee on Employment of People with Disabilities to the Com-
118. 711 F. Supp. 447 (N.D. III. 1989).
mittee on Labor and Human Resources).
119. Id. at 450.
410
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workforce should outweigh the "rights" of other workers.
casing mail was above shoulder height. By lowering the shelf, Mr.
Legitimacy of rights of union workers is a continuum. At the low
Prewitt would become just as capable as any non-disabled employ-
end of legitimacy is the mere inconvenience standard of Davis and at
The court noted that the shelf could be lowered making the
the high end of legitimacy is the security from being bumped from a
"requirement" unnecessary.
current position by a less senior, worker with a disability. Other
It is equally unfair that barriers unique to people with disabilities
"rights" may include: performing the job duties as written in the job
and outside of the place of employment also influence access to em-
description of the contract; bumping a less senior worker for a more
ployment. For example, people who rely on public transportation to
choice position; preference in selection of shift, for transfers, and
travel to work may work for any employer located near a bus line.
assignment to light duty positions; greater lay-off protection; and
People with mobility impairments who rely on public transportation
access to non-entry level positions.
must rely on those routes that have become lift-equipped. Not all
The evaluation of the strength of the legitimacy of these "rights"
routes are lift equipped nor will be lift-equipped for some time even
depends upon the factual context. Several variables which contribute
under the ADA.¹²⁴ Opportunities are unequally available because of
to this context include: the existence of a proviso regarding compli-
barriers like these.
ance with the ADA, the degree of harm to each party, and basic no-
Non-disabled workers enjoy their seniority to some extent because
tions of fairness.
of the lack of competition with the full labor pool. The pool of appli-
Generally, seniority provisions create reasonable expectations with
cants for jobs would have been greater if people with disabilities had
respect to various personnel decisions. Through seniority lists, an
been able to compete without discrimination. At least 8.2 million
employee knows whether she is the most senior person eligible for a
people with disabilities who are unemployed want to work. 125 If the
position and by its terms knows the duties she is expected to perform.
barriers had not existed, many of those individuals would have been
However, if the agreement contained a provision that the employer
competing in the private sector for the jobs now held by non-disabled
may take whatever steps are necessary to comply with the ADA, then
workers.
the expectation that seniority will always prevail is no longer reason-
It would be grossly unfair to keep people with disabilities out of the
able.
workforce whenever an accommodation conflicted with a seniority
In evaluating when an expectation by another worker is legitimate,
provision to protect other workers who earned their seniority in a
employers and employees without disabilities may need to rethink
discriminatory system. In Franks V. Bowman,¹ the Court gave cre-
their notions of fairness. It certainly is not fair to people with disabili-
dence to the plaintiffs' claim of race discrimination - but for the
ties that the job descriptions are based on the norm of the non-dis-
discrimination, they would have been in seniority earning posi-
abled employee." Capable people with disabilities often look as
tions.¹²⁷ Credence must be given to the claim that absent the perva-
though they are not measuring up even though at times the standard is
sive discrimination, many more people with disabilities would have
arbitrary. For example, in Prewitt V. United States Postal Service, 121
been in the workforce earning seniority.
a job requirement that applicants be able to raise their arms above the
Certain personnel decisions that do not involve decreases in pay or
shoulder was based on the norm of a non-disabled person and bore no
foreclosure of future opportunities are more akin to inconvenience
real relation to the job. The requirement existed because a shelf for
than bumping unless there are other important, nonfinancial reasons
for the request. A non-disabled senior employee may miss an opportu-
120. See Marths Minnow, When Difference Has Its Home: Group Homes for the Mentally Retard-
122. Id. at 305.
ed. Equal Protection and Legal Treatment of Difference. 22 HARV. C.R.C.L. L REV. III (1987). In
123. Id.
discussing various approaches to dealing with difference, Minnow notes that labeling a group as
124. See supra note 2.
different is an "act of power by which the namers simultaneously assign names and deny their rela-
125. See supra note 14 and accompanying text.
tionships, with, and power over, the named Id.
at
128.
126. 424 U.S. 747 (1976).
121. 662 F.2d 292 (5th Cir. 1981).
127. Id. at 758.
412
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nity occasioned by the need to accommodate an otherwise qualified
siderations.
applicant or employee, but this missed opportunity may not represent
a foreclosure to future opportunities based on seniority. In that case,
III. How THE MULTIFACTORIAL TEST WORKS
the frequency of turnover in those opportunities would inform the
The multifactorial test is the polestar to determining when an excep-
significance of the right at stake.
tion should be granted to accommodate a person with a disability.133
The Supreme Court has allowed for reduction in opportunities in
The direction of the ADA, its implementing regulations, and its legis-
other cases to eradicate discrimination. In United States V. Para-
lative history all advise against a per se rule and instead favor a flexi-
dise,¹²ⁿ the Supreme Court held that a court-ordered racial quota of
ble approach. The approach must consider numerous factors (in addi-
promoting one African-American for every other position within the
tion to the factors listed in the EEOC regulations) to address the
Alabama Department of Safety was permissible given the pervasive
competing policy considerations raised by the group right of collective
manner in which discrimination had persisted in the department. A re-
bargaining and the individual right of reasonable accommodation.
duction in half of the opportunities for the other officers was not
These factors should include:
deemed unlawful under these facts.129
(1) whether the accommodation raises an actual conflict with the
In Johnson V. Transportation Agency," the Supreme Court held
"right" of another employee;
an affirmative action plan that took gender into account as one
(2) if the accommodation affects another employee and the nature
factor in the promotion decision of a road dispatcher position was
of the effect;"
acceptable under Title VII.¹⁵¹ In that case, a white male employee
(3) the weight the agreement gives seniority;
was passed over for promotion in favor of a female employee who
(4) the existence of other exceptions to the provision;13
had equivalent qualifications, although the male employee had a score
(5) the reason the senior employee needs the position in question;
on a written civil service test that was two points higher. The Court
found significant that although the "petitioner in this case was denied
a promotion, he retained his employment with the Agency, at the
133. Ervin, supro note 37. at 969. Factors "a covered entity is likely to consider" when grappling
same salary and with the same seniority, and remained eligible for
with reassignment of a disabled employee include:
other promotions."
1. The number of employees in the bargaining unit.
2. The rate at which positions like the one in question becomes available.
Although the facts in Johnson involved the legality of a voluntary
3. The demand for reasonable accommodation in this particular unit.
affirmative action plan, the comparison of what kind of personnel
4. The number of employees whose seniority rights would be adversely affected by a reas-
decisions may rise to the level of an entitlement is equally open to
signment decision.
5. The difference in amount of seniority between the disabled employee and the able-bodied
decisions under the ADA. The issue under the ADA is whether the
employee(s) whose seniority rights are adversely affected.
other worker is burdened by the accommodation rather than an affir-
6. The alternative opportunities for employment with this employer of both the disabled em-
mative action plan.
ployee and the non-disabled employee(s). both short and long-term.
7. The extent to which the seniority rights of the non-disabled employee(s) have been neg-
The public policy stakes on each side are high. Neither the rights of
atively affected in the past.
union workers nor workers with disabilities should always prevail.
Id.
Many factors effect the importance attributed to any particular provi-
Ervin's factors could be applied to other types of proposed accommodations besides reassign-
ment. These factors would be helpful in analyzing various factors within the multifactorial test.
sion. Exceptions are made to accommodate competing policy consider-
134. See supra text accompanying notes 87-93.
ations. Therefore, the appropriate test must weigh these various con-
135. See Ervia, supra note 37. at 969 (in analyzing this factor, Ervin's factor #6 is particularly
applicable).
136. See Ervia. supra note 37. at 971 (concluding that the "employer of a unionized workforce
might be said to have a corresponding duty in the context of the ADA to propose an accommodation
128. 480 U.S. 149 (1987).
that has the least negative impact on majority rights under the agreement"). This is closely tied to
129. id at 180.
determining if there are alternative accommodations. Id. Some reasonable accommodations may not
130. 480 U.S. 616 (1987).
impact the collective bargaining agreement and should first be explored. Id. This commentator sug-
131. Id at 623-24.
gexts that all alternatives that impact the agreement should be analyzed for the most effective accom-
132. Id. at 638.
modation and the least negative impact.
414
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415
(6) the existence of alternative accommodation(s) that do not
for the position so their rights do not come into play.
conflict with the terms of the collective bargaining agreement;
When the rights of another worker do come into play, the other
and
factors of the multifactorial test should be examined, including: the
(7) the burden on non-disabled union members in the relative
nature of the right at stake; the weight given seniority under the col-
work site.¹ⁿ
lective bargaining agreement; existence of other exceptions to selec-
When an employer is faced with a conflict between the terms of a
tion by seniority; the reason the senior employee needs the position in
collective bargaining agreement and a proposed accommodation, the
question; existence of other reasonable accommodations that do not
inquiry should begin with a determination of whether the accommoda-
conflict with the collective bargaining agreement; and the burden on
tion actually affects another worker's rights. Generally, eliminating a
non-disabled union members in the relative work site.
nonessential job requirement or eliminating a physical "requirement"
The importance of the right at stake should influence the weight
for a job may not affect another worker's rights. For example, if a job
given to the other factors. Financial benefit and future opportunities
requirement of lifting one's arm above shoulder level was eliminated
may. add to the importance of the right. In the third hypothetical,199
by lowering a shelf, the rights of another worker would not be affect-
an applicant requires a day shift so that he can use accessible public
ed.¹ⁿ If there is no actual conflict with another worker's rights then
transportation, but employees with more seniority have preference for
the inquiry should end and the accommodation granted.
openings on the day shift. Working the day shift probably does not
A proposed accommodation may raise a potential conflict but not
involve a pay increase. However, assignment to a non-entry level
an actual conflict. For example, in the second hypothetical presented
position over a senior employee is likely to involve a wage differen-
in the introduction, the office manager wishes to accommodate a deaf
tial. A right that does not offer increased wages may be less weighty
typist in the word processing department by eliminating the need for
than one where rate of pay is effected.
him to answer the telephone. The job duties in the collective bargain-
There may be occasions when a right to a transfer or shift prefer-
ing agreement include answering the phone, but elimination of the
ence may involve other important non-financial benefits, such as
duty for this individual will not significantly affect the rights of the
proximity of the work site to home or family responsibilities. In those
other typists in the business because they are already required to an-
cases it is also important to consider the frequency of additional, simi-
swer the phone.
lar opportunities. For example, if openings in the day shift occur every
Similarly, a position may be available through competitive bidding
few weeks or months, the opportunity might merely be postponed for
but no other worker at the time bids for the position, transfer or shift,
the senior employee. If the openings are rare, the loss of the opportu-
yet, under the applicable terms of the collective bargaining agreement,
nity may be more significant.
the position may be foreclosed to people with less than one year of
Frequency of other opportunities is closely tied to the diffusion of
seniority. If no other worker with sufficient seniority desires the posi-
the burden throughout the place of employment. These factors are of
tion, an employer should not be foreclosed from devising an accom-
importance to the ultimate resolution of the first hypothetical
modation for an applicant or employee with a disability. No
about the individual with a mental disability who worked as a custo-
employee's rights under the collective bargaining agreement are at
dian and had been bumped on numerous occasions from his work site.
stake even though the terms of the agreement come into play. Em-
One way to accommodate his training needs is to lock him into a
ployees with less than one year seniority do not have a right to apply
position at one site and take that position out of the competitive bid-
ding process. If the employer has numerous janitorial positions with
frequent openings at different sites, the restriction of one position
137. This is a factor which concerns the Supreme Court in evaluating the constitutionality of affir-
might be less burdensome on the other employees. If, on the other
mative action plans. See, e.g., Wygant V. Jackson Bd. of Educ., 476 U.S. 267 (1986): United States V.
Paradise, 480 U.S. 149 (1987): Sheet Metal Workers V. EEOC, 478 U.S. 421 (1986). See also Ervin.
supra note 37, at 969 (suggesting that factors 1,2,3,4, and 7 provide useful guidance in determining
the burden in the relative work site).
139. See supra note 2 and accompanying text.
138. Prewitt V. United States Postal Service, 662 F.2d 292 (5th Cir. 1981).
140. See supra note 1 and accompanying text.
6
DEPAUL BUSINESS LAW JOURNAL
[Vol. 6:387
and, the employer accommodated numerous people with disabilities
! janitorial services and had restricted numerous positions, the burden
nay be too great on the other workers.
Also important to the determination are other factors, such as the
existence of other alternatives for accommodating people with disabili-
ties that do not pose actual conflicts with other workers' rights. If a
ANNOUNCEMENT
reasonable accommodation does exist which does not interfere with
another worker's rights under the agreement, the accommodation
should be implemented first.
CONCLUSION
We have acquired the entire
If the mandate of the Americans with Disabilities Act is to be ful-
back stock, reprint, and
filled, a multifactorial approach to weighing competing considerations
microform rights to the
must be adopted. Not all the terms of a collective bargaining agree-
ment translate to actual rights of other workers. Not all "rights" of
other workers deserve absolute deference in the face of competing and
significant interests of integrating people with disabilities into the
DEPAUL BUSINESS LAW JOURNAL
workplace.
The words of the ADA and its regulations impose an obligation to
weigh the effect of the collective bargaining agreement into an equa-
tion of reasonable accommodation but not to foreclose opportunities
for people with disabilities because of an inconsistent term. The leg-
Complete sets to date
islative history of the ADA warns that terms of collective bargaining
are now available. We
agreements are not determinative of the reasonableness of accommo-
can also furnish single
dations. The nature of private agreements teach us that they can be
volumes and issues.
adapted to various legal requirements. Public policy reminds us that a
greater duty of accommodation must be carved out under the ADA.
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