At the heart of workers’ compensation law is a compromise between capital and labor: a worker injured at work relinquishes their right to sue their employer, while, on the other hand, the employer accepts responsibility for a certain limited set of benefits irrespective of fault. Popular legal discussion tends to present this as a “Grand Bargain,” indicating that the relinquishing is mutual and, after a fashion, fair. Whatever the historic merits of that image, it does not square with present reality. In recent decades, many states have reformed their workers’ compensation laws, and the general tendency is clear: changes are favoring employers and insurers and decreasing benefits for injured workers.
How did this happen? This essay attempts an answer. I argue that the peculiar and fragmented structure of the U.S. welfare system is key to understanding the process. I begin with several of the questions presented by Emily Spieler in her excellent 2017 article, (Re)Assessing the Grand Bargain. What is workers’ compensation’s function in society? Is it a special form of sick leave to help workers manage one specific type of health crisis? Is it a simplified version of tort liability to obviate the need for lawyers, or is it natural territory for litigation, where the winners recover in proportion to their loss? Is it a disability benefit, akin to a specialized version of Social Security Disability Insurance? Is it mainly a type of medical insurance?
These questions have no satisfactory answer because workers’ compensation as we know it has been molded by the incoherent structure of the U.S. welfare system. Federalism produces diversity in workers’ rights across states—which leads many state governments to cater to the wishes of capital or face the (stated) threat of capital flight, a commonly declared reason for eroding workers’ compensation benefits. Social Security Disability exists to serve some of the disabled population, whether their disability arose out of work or otherwise—but this is a meager benefit both in terms of benefit amounts and criteria for eligibility, leaving large gaps. Pensions and health care are mostly provided through private employer-funded benefits, which leaves many workers falling through the cracks with minimal to no sick leave and no health insurance. This lack of coverage in turn gives some workers a strong incentive to fraudulently impose costs on their employers. This incentive creates a widespread perception, aided by eager media—largely unjustified, but consequential for all that—that workers’ compensation fraud is a massive social problem.
This incoherence has also left a political gap, where the people most capable of fighting for the benefit are not the people most in need of preserving the benefit. Unions support the right to workers’ compensation, but the strong ones can negotiate for better health care and private disability programs for their members, leaving them less dependent on this legally mandated benefit. This inequality in turn creates a division among workers in their need to preserve workers’ compensation: some workers face a disaster if workers’ compensation is eroded, while others are relatively insulated. Attorneys who represent injured workers are certainly invested in the system, but the role of attorneys is a multiple-edged sword. There is conflicting evidence about how claimants’ attorneys help workers, but it is clear on the political front that (1) claimants’ attorneys make for easier political villains than injured workers, and (2) lawyers, especially those who represent large numbers of individual clients, have limited capacity to mobilize to counter the interests of business, however helpful they/we may be in court. The result has been a successful state-by-state political project to undo workers’ compensation, with limited opposition and a largely passive public.
Most of these changes have flown under the radar of the mainstream media and the activist left. This is remarkable, as workers’ compensation is a massive collection of programs, in terms of costs and individuals affected. The National Academy of Social Insurance noted, in 2017, that there were over 2,810,000 workplace injuries, with total benefits paid by all programs equaling $62,000,000,000.00 and a total cost of $97,200,000,000.00. This payout is comparable to the entire federal SNAP (food stamp) program.
One Florida judge stated:
Workers’ compensation is a very important field of the law, if not the most important. It touches more lives than any other field of the law. It involves the payments of huge sums of money. The welfare of human beings, the success of businesses, and the pocketbooks of consumers are affected daily by it.
Since that passage was written in 1982, this “very important field” has changed, mostly favoring “the success of businesses” and at the expense of “[t]he welfare of human beings.” This essay seeks to sketch how and why this transition happened, and what can be done.
I begin with a brief historical and conceptual overview of workers’ compensation, with a focus on the significance of its being a welfare benefit provided by an employer, rather than a tax-funded benefit provided by the state. I then provide background on the core elements of a traditional workers’ compensation system, using the Longshore and Harbor Workers’ Compensation Act as an illustration.
The Fourth Section, “Workers’ Demands and the Grand Bargain,” discusses the extent to which workers’ compensation as enacted was a compromise for workers. The traditional system prioritizes post-injury remuneration over protection, and limits benefits in sometimes arbitrary ways.
The article then discusses the erosion of workers’ compensation over the past four decades. The United States’ fragmented welfare regime has enabled this erosion, by dividing the interests of organized labor from those of the working class as a whole, granting an outsized role to attorneys, and leaving policy battles at the state level, where business has an advantage over labor. I elaborate on these points using case studies of reform campaigns in West Virginia, California, and Oklahoma.
The essay concludes by discussing how I believe the problem can be fixed. Because fragmentation lies at the root of the erosion of workers’ compensation, I argue that the solution is unification: a single national system, funded by taxes, with little need for lawyers, operated by the federal government.
As noted above, workers’ compensation provides a set of limited benefits to workers in exchange for the right to sue. Though these rights and terminology vary from state to state, the classic model in the U.S. includes the following: (1) the right to medical treatment for a work injury; (2) partial wage replacement for times when a worker is recovering and either partly incapacitated (“temporary partial disability”) or totally incapacitated (“temporary total disability”); (3) permanent partial disability wage loss, for injuries in which the worker can work in some capacity but has lost earnings due to their limitations; (4) schedule loss (sometimes confusingly referred to as a different form of “permanent partial disability”), which accords particular monetary value to different body parts and then compensates based on the “percentage” of that body part that the worker has lost, up to 100%; (5) permanent total disability, which grants some form of long-term remuneration, usually based on wage loss, to a worker who cannot work at all due to a work injury; and (6) death benefits, for the surviving spouse and children of a worker who dies due to a work-related injury. I will elaborate on these various rights and their changing nature below.
To explore how workers’ compensation wound up in its current state, it is helpful to start with a historic overview. The nineteenth-century explosion of industrial capitalism led to a corresponding surge in serious workplace accidents across the Western world. To address this crisis in Germany, Chancellor Otto von Bismarck’s government developed a system of employer-provided insurance benefits for industrial accidents. This move was, unsurprisingly, a top-down affair, organized by the Chancellor for his interests—however, there is evidence that he was acting to prevent the discontent that could arise from having a population of untreated and impoverished incapacitated workers. The specter of mass politics, if not its actualization, compelled the autocratic leader to undertake the initial reform.
The industrial accident crisis was especially acute in the United States. John Fabian Witt notes that, in the United States around the turn of the twentieth century, “around one worker in fifty was killed or disabled for at least four weeks each year because of a work-related accident,” which was “an accident crisis like none the world had ever seen and like no any Western nation has witnessed since.” The crisis drew the attention of muckraking journalists, politicians, and, of course, insurance companies. In the first two decades of the twentieth century, these interested parties reached an operative consensus that the best solution was employer-provided insurance, covering accidental injuries regardless of fault but with fewer benefits than a negligence lawsuit.
Bismarck’s fondness for employer-based welfare rights has led some commentators to dub them Bismarckian welfare, often presented in contrast to Beveridgean welfare—named after twentieth-century British reformer William Beveridge—which grant universal state-based rights, like Social Security in the United States or the National Health Service in the United Kingdom. Gøsta Esping-Andersen describes the distinction in terms of different visions of a just economy. The Beveridgean ideal grants benefits with fewer strings or conditions. In so doing, it increases worker independence from employer constraints and allows the worker more freedom of action—for instance, to leave their employer. In this sense it weakens the power of capital over the working class. The Bismarckian benefit, by contrast, ties benefits to relationships of dependency, in particular the employer-employee relationship. The Bismarckian approach treats benefits less as empowerment than as humanitarian relief that can be provided while preserving existing class hierarchy. A worker in a Beveridgean system is not dependent on their employer to access a benefit and therefore has relative freedom to operate even against their employer’s will. Private health insurance in the United States is a Bismarckian benefit, as many workers cannot leave their job without losing their health insurance, tethering them to their employers. Workers in Canada or the United Kingdom do not face this problem. Another example is pensions: a public tax-funded system like Social Security allows workers to change employers without losing their pension, while many employment-specific pensions do not encourage such mobility and can leave a worker tied to a particular workplace and boss. The paradigmatic “welfare” benefit (widely pilloried in the United States despite never having really existed), in which the state pays the able-bodied unemployed, is the most extreme example of Beveridgean welfare, as it allows workers to leave a workplace situation for whatever reason and still have means to support themselves, albeit without some comforts.
In general, Beveridgean benefits allow workers greater independence. Ha-Joon Chang describes the welfare state as “a bankruptcy law for workers,” arguing that it allows those who work for a boss—the majority of the population—to experiment with new projects or lines of work without the risk of total wipeout in case the experiment fails. This is akin to the way bankruptcy law is supposed to function for entrepreneurs. In this light, a worker in Sweden has more room to act than a worker in the United States, precisely because of the Swedish state-provided safety net. While this does not decrease the salience of class in a revolutionary sense, it does constrain the power of employers over workers. In this sense, it creates a less hierarchical society.
Beveridgean benefits impose costs on businesses and wealthy individuals as a class, through taxation, in contrast to Bismarckian benefits, which impose specific costs on specific employers in relation to their own employees. This difference can have varied effects depending on circumstance. On the one hand, businesses may unite against a Beveridgean benefit because of the tax increase involved and because of the general weakening of employer authority. On the other hand, because the tax burden of a Beveridgean benefit is often shared in a relatively equal way, no particular employer or sector of capital is likely to face any special burden, which may in turn mean that no particular sector is especially hostile to the benefit. Social Security is an example of this phenomenon. By contrast, Bismarckian benefits often impose particularly high costs on specific businesses or sectors and thereby provoke greater hostility. For instance, union automotive manufacturers in the United States pay enormous sums for private pensions, giving them reason to be hostile to this particular Bismarckian benefit. Many employers have few pension-eligible employees, so they do not experience this burden the same way as auto manufacturers.
Workers’ compensation is a Bismarckian benefit in most respects, though it is almost universal. Rather than relying on state funding, the law mandates that the employer provide it, which is usually, though not always, through private insurance that the employer purchases. The wage-loss benefit is proportionate to income, usually around two-thirds of pre-injury earnings, which preserves income inequality among the injured. It is officially an insurance benefit, based on the wage relationship, and not based on need—although it is in a sense a welfare benefit, it is not “welfare” in the redistributive sense of the term. Wage replacement is partial, not whole, to incentivize the worker to return to work. Most systems include requirements that workers try to find work when they are able, using the threat of termination of benefits as a cudgel to ensure compliance. Insurance costs are higher for high-risk employers, putting particular burdens on some industries as opposed to others. The system is anti-Beveridgean in its premises, its assumptions, its incentives, its aims, and its implementation.
As noted above, in the first half of the twentieth century, jurisdictions across the United States adopted forms of workers’ compensation along the German model, albeit after agitation, struggle, and changes in understanding of responsibility and risk. As in Germany, unions were not always leaders in agitating for this right, though after some initial resistance, they were largely in favor. Some leftist agitators like Crystal Eastman were crucial in pushing for the new policy.
The workers’ compensation systems that states ultimately adopted shared some common themes. The Longshore and Harbor Workers’ Compensation Act, adopted by Congress in 1927, is illustrative of the model that became the norm. The Longshore Act was the explicit model for the Private Sector Workers’ Compensation Act in the District of Columbia and has had a large impact on numerous states; an earlier version of the New York Act was the model for the Longshore Act. The salient features for the purposes of this article are discussed in the following subsections.
A worker cannot sue their employer for injuries suffered while working, regardless of fault. There are exceptions, as in the case of lack of insurance or intentional acts of harm, but those exceptions are sufficiently rare that they will not be discussed in this essay. There is the option of suing a third party that is responsible for a workplace injury, but that only applies in a minority of cases, and the workers’ compensation insurer can claim a credit against such recovery. What this means in practical terms is that the vast majority of injured workers are barred from any benefits beyond the prescribed benefits of workers’ compensation. This limit is in stark contrast to civil suits, which aim to “make the plaintiff whole” by allowing remuneration for all losses, be they medical expenses, lost wages, or pain and suffering. While there is plenty to interrogate about the concept of money as recompense for suffering, in the case of workers’ compensation there is not even a pretense of making the injured party “whole”—the law does not try and sharply limits the sums owed.
An injured worker has the right to any and all medical treatment that is reasonable, necessary, and causally related to their work injury, to be provided by the physician of their choosing. This level of full coverage, without co-pays or deductibles, is invaluable in the present age of provider networks and high deductibles. The Employer/Insurer can challenge the requested treatment by alleging that it is not necessary or helpful, and evaluating the worker through an appointment with a physician of employer’s choosing. As will be discussed below, various states have devised various limitations to this framework, often including networks limiting choice of physicians and outside review of requested treatments to fight against perceived overtreatment. The Longshore Act allows the claimant an initial choice of a treating physician, but limits the right to change doctors after that.
An injured worker has a right to be paid two-thirds of their pre-injury average weekly wage by their employer’s insurance company while they are recovering and incapable of performing their pre-injury position. Workers’ compensation benefits are tax-free, which in this case has the peculiar indirect effect of counteracting the progressive effects of income tax law: low income workers who pay no income tax receive a larger pay cut when they are dependent on workers’ compensation benefits, while higher earners, who may pay a significant share of their income in taxes, still get two-thirds of their prior gross income—and thus receive an amount closer to their pre-injury net pay. This is only true up to a certain income level: the Longshore Act, like the state workers’ compensation laws, has maximum rates, so those who earn much higher than the average receive a lower proportion of their earnings while off work due to an injury. Nevertheless, middle earners generally face less of a reduction than those in the lowest income tax brackets. The effect on the poor is harsh.
The Longshore Act specifies the value of certain workers’ permanent losses in terms of weeks of compensation. If a worker loses their leg, they are owed 288 weeks’ worth of compensation, which is set at two-thirds of pre-injury average weekly income. If a worker loses an arm, they receive 312 weeks’ worth of benefits. In general, this means a percentage of the total loss, in accordance with a medically informed, contentious, and multifactorial adjudication of how bad the loss is. The attempt to quantify such loss is a peculiar exercise—what does it mean to have a twenty-five percent loss of an arm versus a thirty-five percent loss of an arm?—which sometimes puzzles courts and medical evaluators. The list of covered body parts is also arbitrary, including limbs, digits, loss of hearing, loss of vision, and a small sum for some disfigurement, but excluding the back, the neck, and nervous system injuries like headaches.
In addition to the above peculiarities, the valuation is remarkably little. Three hundred-and-twelve weeks’ worth of benefits at a rate two-thirds of pre-injury pay is only four years of pay. Without doing any polling, I wager that most workers value their arms more highly than that and would decline an ex ante offer to give up an arm, even for a sum much higher than this amount.
In many cases, workers cannot return to their pre-injury position even after they complete treatment and stabilize (reach “maximum medical improvement”). If the worker can work in some capacity, they can be eligible for ongoing wage loss at two-thirds of the difference between their former earnings and current earning capacity (“permanent partial disability”). If the worker is incapable of working in any position for life, they receive the same two-thirds compensation for life.
Permanent partial disability wage loss is distinct from permanent partial disability schedule ratings, the valuation of limbs described above. As noted, the benefit to which a worker is entitled depends on which body parts they injured. With injury to non-schedule parts—such as the back or neck—wage loss is the principal guiding issue, rather than a disability rating.
The Longshore system bases permanent wage loss on actual post-injury earnings, “if such actual earnings fairly and reasonably represent [the injured worker’s] wage-earning capacity.” This clause means that there must be an administrative determination of the claimant’s “reasonabl[e]” wage-earning capacity independent of actual earnings. As a result, an administrative law judge must often make inquiries about earning capacity, including the consideration of expert evidence. Specialists in assessing career prospects—often rival experts for the employer and the claimant—opine about what the specific worker’s remaining earning capacity is in the relevant job market, considering the worker’s limitations and transferable skills. A non-English-speaking physical laborer with a relatively mild physical limitation may lose tremendous earning capacity, while a white-collar office worker with a serious physical injury does not suffer the same loss of economic prospects, and the system aims to adjust compensation accordingly.
The dueling experts approach is distinct from the approach that many jurisdictions have adopted. California allows employees a vocational training voucher if their employer does not offer them a position or help them find a position at or near their pre-injury income. California’s system also aspires to incorporates elements of lost earning capacity, as determined by age and occupation, in its method of rating permanent partial disability. Washington, D.C.’s private sector law is closer to the Longshore Act, but gives limited value to vocational expert evidence and more weight to the actual work that a worker winds up performing. Even if a worker has “earning capacity” according to the report of the experts, if a sincere effort to secure work fails to bear fruit the worker remains totally disabled. One trouble with this approach is that it inverts the usual logic of finding a job: if the worker finds work, their success may cause them to lose money, while not finding a job is at least potentially remunerative. The lower the pay the more compensation is owed. If the worker does not try to work, they may end up in an even worse position, but that result merely complicates and does not counteract all the other peculiar and perverse incentives. The system demands that the worker want to work for reasons other than making money. In other words, the law rewards a performance of class subservience and ignores the “shared selfishness” that supposedly legitimates the present economic system and ought to guide individual rational actors navigating this system.
If workers cannot secure any employment at all, the wage loss benefit becomes “permanent total disability.” The permanent total disability benefit is for workers who, by whatever above process, are deemed unable to return to the work at all, or at least not in any meaningful capacity. The Longshore Act places the burden on employer to show suitable potential employment, and a formal statement that some work might be available does not suffice. States have elaborated on this rule in similar ways. The Minnesota Supreme Court in 1950 summarized the view as follows: “An employee who is so injured that he can perform no services other than those which are so limited in quality, dependability, or quantity that a reasonably stable market for them does not exist, may well be classified as totally disabled.” This view is still the governing principle in the District of Columbia’s Private Sector Workers’ Compensation Act.
Most jurisdictions have some form of permanent total disability.
If a worker covered by the Longshore Act dies due to work-related conditions, their widows, widowers, and/or dependent children are entitled to an ongoing set of benefits that can add up to the full two-thirds of wage loss. This benefit can follow from a fatal accident or a subsequent fatal consequence resulting from a work injury. An example of the latter might include exposure to toxic chemicals that leads to a lung condition that ultimately proves fatal. How courts approach these questions when effects are more attenuated or removed is a constant source of contention in workers’ compensation law.
Death on the job was the supreme catalyst for the adoption of workers’ compensation. This consequence is perhaps unsurprising, given natural sympathy for orphans and widows, and no question of fraud on the part of the deceased worker. The issue remains live, notwithstanding some safety gains: in 2019, the Bureau of Labor Statistics reported 5,333 fatal work injuries.
Death benefits were originally structured in accordance with the vision of a traditional patriarchal nuclear family with a laboring breadwinning husband and dependent wife. The law sought to aid the newly destitute widow and orphaned children after loss of the male worker breadwinner. Accordingly, the benefits cease upon remarriage, with the implication that the dependent partner has found another breadwinner. Although the law has become formally gender neutral—granting benefits to “a widow or widower”—this structure remains.
The role of attorneys in workers’ compensation has always been contested. Many historians have viewed the system’s supposedly automatic benefits provisions, and the prohibition on negligence suits, as methods for bypassing the need for lawyers and litigation. Nevertheless, workers’ compensation wound up spawning a large industry of lawyers for both sides. The Longshore Act encourages such a practice, with a contingency-based incentive for claimants’ attorneys of up to twenty percent of the sums owed claimant, and fee-shifting under certain circumstances, to make the employer/insurer, rather than the claimant, pay the fee.
The contingency fee mechanism encouraged attorneys to become involved, and many did. In fact, the largest lobbying body of trial lawyers, the American Association for Justice (AAJ), formerly known as the American Trial Lawyers Association, was founded in 1946 as the National Association of Claimants’ Compensation Attorneys, focusing specifically on workers’ compensation cases. Only later did the organization expand to include other plaintiffs’ attorneys. In 1995, a group of claimants’ attorneys founded WILG, the Workers’ Injury Law and Advocacy Group, to focus specifically on workers’ compensation. The plaintiffs’ bar, with its lobby, here exemplified in the AAJ and WILG, has been a crucial stakeholder in the Longshore system and in the United States’ many systems of compensation for harm since this time period.
The Longshore Act is a good illustration of the “Grand Bargain” of workers’ compensation as it has played out in one relatively pro-worker system. It should be noted, however, that from its onset the “Grand Bargain” differed from the demands of workers and workers’ rights advocates. It was a compromise, and, except from the standpoint of the politics that conceived and birthed it, the lines that it demarcated are arbitrary.
First and foremost, the “Bargain” concerns benefits after an injury takes place, not proactive health protection, a problem that present systems still do not adequately address. Workers at the time of the explosion in industrial accidents wanted safety and not merely remuneration after they were injured. Even focusing purely on post-injury benefits, however, the gap between demands and resulting laws is stark. The initial models proposed for workers’ compensation, including the version adopted by New York in 1910, allowed workers’ compensation as an optional alternative to private suits for negligence, rather than a benefit that generally precludes any right to sue one’s employer. As Daniel Berman noted in 1978, many of the core demands of labor organizations and socialists in the 1910s included proposals that are still wanting:
To these Berman added:
No jurisdiction in the United States has adopted the first option. Union jobs often have more safety protections; however, given both present union density and extant union capacity, that hardly approaches the above vision of worker-directed safety. The retention of the right to sue is generally found only in exceptional cases, and in Texas, for some employers who opt out of workers’ compensation entirely. No jurisdiction allows both workers’ compensation and the right to sue one’s employer for negligence.
Some jurisdictions in the United States have adopted versions of the third and fourth proposals. Ohio, for instance, has a public insurance system for workers’ compensation costs, though it is technically not a monopoly because employers have the option to self-insure. Other states, like West Virginia, formerly had public insurance but discarded it due to (contestable) cost issues. The District of Columbia has a general presumption that a claim is compensable. California has numerous presumptions in effect, though many are specific to particular occupations, often those with powerful unions.
The federal government, followed by some state governments, did eventually establish a worker safety inspection apparatus that is independent of employer control, exemplified by the federal Occupational and Safety Health Administration (OSHA). However, this structure remains inadequate to address the safety risks of a workforce of 165 million.
OSHA notes on its website that it has only one inspector for every 59,000 workers. Together with its state affiliates, OSHA performed 73,013 inspections in 2018 for a workforce of 165 million. By way of comparison, the Danish Working Environment Authority (DWEA) performs around 60,000 inspections per year for a country with three million total employees. A Danish worker is astronomically more likely to work in an inspected workplace than a U.S. worker. Unsurprisingly, the rate of workplace death is about 75% higher in the United States than in Denmark. Whole sections of OSHA’s safety structure are practically unenforced and nugatory: OSHA litigated a total of thirty-two cases under its whistleblower protection provision between 1995 and 2009.
In addition, the no-fault structure of the system undermines employers’ supposed incentive to ensure a safe work environment: a workplace injury caused by employer negligence is no more costly than any other workplace injury. Employers have less incentive to ensure the safety of their employees than they do toward customers, third parties, or anyone else, because their exposure is inherently limited by the exclusive remedy rule. Some countervailing factors, such as experience rating, adjust an employer’s premiums based on their record in workplace safety; however, these are imperfect mechanisms. On the whole, a system that relies so heavily on post-injury compensation does so at the expense of prevention. In many respects, the workers’ demands of the 1910s are as ripe as they were a century ago.
If the Longshore Act is an exemplar of the Grand Bargain, the contours of that bargain have always varied from state to state. The history of workers’ compensation in the United States has been tortuous and varied. While New York adopted its first version of a workers’ compensation law in 1910, Mississippi did not enact a law until 1948, and Texas still allows employers to opt out of workers’ compensation entirely, though they must face either negligence liability or provide an alternative plan for benefits. Meanwhile, many states do not require coverage for all workers.
In the early 1970s, when Congress enacted the Occupational Safety and Health Act, it also decided to pay increased attention to state workers’ compensation systems. President Nixon, pursuant to the OSH Act, convened a National Commission on State Workmen’s Compensation Laws. In 1972, the Commission, whose fifteen experts all agreed on the basic objectives of workers’ compensation, published a report declaring that existing laws were inadequate. They issued a series of recommendations, of which they deemed nineteen to be essential, breaking down into six categories:
None of these demands is radical, as one can see from a quick comparison with the above labor/socialist demands from the 1910s. The Commission described itself as uniformly supportive of the principles underlying the workers’ compensation system. In addition to its essential recommendations, it painted an overall picture of an improved workers’ compensation system that would do more to allow worker control over medical care, in particular in the initial stages of treatment, and to prevent workplace injuries from ever putting workers in a state of penury.
The Commission summary proposed a deadline for compliance: “We believe that compliance of the States with these essential recommendations should be evaluated on July 1, 1975, and, if necessary, Congress with no further delay in the effective date should guarantee compliance.”
After the Commission’s report many states undertook serious reforms. Although many states acted to move closer to the recommended guidelines, most did not come close to meeting all of the recommendations. Five days before the advised deadline, on June 26, 1975, New Jersey Senator Harrison Williams introduced a bill, S. 2018, the National Workers’ Compensation Act, with the stated aim of establishing the Commission’s recommendations as rights—a basic floor for state compensation systems to meet and exceed—and including public and private causes of action in case of state failure to secure workers’ rights.
Only seven senators cosponsored the bill, and it never became law. A partner bill in the House only found one sponsor and one cosponsor. The 1972 Commission Report’s political salience faded, and the idea of a federal floor for state workers’ compensation programs fell by the wayside.
In 1978, five years after the Commission’s report and eight years after OSHA’s establishment, Daniel Berman wrote a scathing indictment of the ongoing failures of both the state compensation laws and the broader “compensation-safety apparatus,” which privileged post hoc benefits over protection, and which was inadequate even at that. He noted that “the compensation system, in effect, shifts at least 90 percent of the financial burdens of work-related casualties onto workers, their families, and the public, while government and private agencies ostensibly designed to prevent injuries largely ignore such tasks.” Berman’s analysis called for a return to the above-noted labor-socialist demands of the 1910s, and for a greater role for unions and the nonprofit bodies that address worker safety concerns, the Committees for Occupational Safety and Health (COSHes).
Whatever the merits of the limited steps taken to enhance workers’ compensation rights in the initial years following the Commission’s report, in the decades that followed, roughly since the 1980s, state legislatures have reversed their course. As part of a broader trend toward austerity, state after state placed new limits on benefits and enacted new measures whose official stated purpose was not to aid injured workers but rather to contain costs. Many workers, unions, advocates, nonprofits, attorneys, and others fought against these changes, but mostly without success. While it must be noted that these developments have occurred in a context of decreasing workplace deaths and serious injuries—largely attributable to mechanization and decrease in manual labor—that general mitigating fact does not benefit those workers who find themselves among the ranks of the injured.
After the issuance of the Commission’s report, the U.S. Department of Labor began issuing annual reports of the states’ compliance with the nineteen essential recommendations. They noted progress until the early 1980s, but it was followed by stagnation and decline. The 1981 report noted real progress in the 1970s: as of 1972, the fifty-two jurisdictions (the states plus D.C. and Puerto Rico) had averaged compliance on 6.9 out of 19 of the essential recommendations, but, by 1980, that number had risen to 12.1 out of 19. However, that trend stagnated: as of 2004, the overall average was 12.83, more or less where it had been twenty-three years before. A number of states, such as Mississippi and Georgia, failed on a majority of essential recommendations. In 2004 the Department of Labor discontinued this review and has not undertaken the analysis since.
In 2018, Elliott Schreuer, a WILG researcher, performed an unofficial review of state compliance with the recommendations and noted how little had changed since 2004. No state was in full compliance, and only six states met more than three quarters of the recommendations. Moreover, the report noted that “the adequacy of state workers’ compensation systems has often declined in ways outside the scope of the Commission’s recommendations,” noting “[n]ew developments in state laws such as limitations on the compensability of certain conditions, tightening eligibility standards for workers with preexisting conditions, and the shifting of the burden of proof” as illustrations. Many of these changes are procedural in form, which conceal their drastic impact on workers’ lives. Direct substantive cuts are more subject to scrutiny and criticism.
How did this happen? The erosion of workers’ compensation since 1980, and especially since the 1990s, is the product of political economic changes across the United States and around the world, in which states have weakened public benefits and privatized many formerly public operations. This general background is necessary for understanding the shift; however, it is not sufficient. The erosion of public goods has proceeded at different paces in different times and places. For instance, lawmakers have not diminished Social Security Retirement benefits in the same way that they have weakened workers’ compensation. In addition, different states have eroded workers’ compensation rights to differing degrees. To account for the shift requires examining the particular ways in which the erosion took place and the political and legal conditions that made it possible.
The United States’ many workers’ compensation system are vulnerable to erosion for reasons that are bound up with the incoherent character of the U.S. welfare system as a whole. As discussed at the outset of this article, this precarity arises, in part, from workers’ compensation’s status as one Bismarckian benefit among many, standing alongside private health benefits like short-term disability, means-tested public benefits like Medicaid, and a host of other forms of welfare. Jacob Hacker termed this system as “the divided welfare state” and made the case that the system of “welfare” benefits in the United States is, despite common perceptions, not less prevalent or cheaper than in Western Europe, but rather more privatized and more diffuse. That is, once one factors in private benefits like employer-funded health insurance or private pensions, welfare is just as ubiquitous and costly in the United States as in France or even Sweden; it just happens that here the “welfare” is much more likely to be provided by a private actor under state incentive or mandate, rather than coming directly from the state.
In addition to the peculiar public/private division, two related features of the U.S. welfare state give it a patchwork quality that makes preserving benefits like workers’ compensation difficult. The first is the prominent role of lawyers in securing benefits. The need for lawyers is an outgrowth of the patchwork system of benefits and remuneration; at the same time, this dependence reinforces many of the system’s worst features. The second peculiarity is the federalist system, which puts important decisions in the hands of state legislatures that compete against one another in a competition to be more “pro-business.” Although theoretically more democratic, federalism is not so in practice. All of these phenomena interact with and reinforce one another. Because my analysis diverges from Hacker’s in its greater focus on federalism and the role of lawyers, I use the phrase “fragmented welfare state” to refer to the convergent impact of these three phenomena.
Workers’ compensation is embedded in the United States’ system of privately provided benefits in convoluted ways. For instance, many private employers provide benefits similar to workers’ compensation benefits for non-work-related injuries. These benefits include good health insurance, sick leave, and private programs such as short-term and long-term disability insurance, which pay workers who must take prolonged leaves of absence for non-work-related disability. These programs, however, are not universal. In most of the country, employers have no requirement to provide any amount of paid sick leave, much less short-term or long-term disability. Private disability plans are among the most helpful and beneficial benefits that employers can provide their employees, and only some employees can benefit from them.
The inequality between workers with access to private benefits and those without has huge implications for workers’ compensation, as it effectively means some workers are much more dependent on preserving workers’ compensation rights, while others, who have alternatives if need be, are less dependent and therefore less invested in their preservation. The relatively privileged workers who benefit from private benefits are often either credentialed (“skilled”) or members of unions. Many collective bargaining agreements include increased sick leave and programs like short-term and long-term disability insurance. Access to these forms of sick pay is one of the principal services that labor unions can provide to their members.
On the other side of the work conditions spectrum, many workers have little to protect them in the event of a non-work injury. They have limited or no paid sick leave and no health insurance or inadequate health insurance with high deductibles. This asymmetry creates political problems. One problem is that these workers are less likely to be labor union members and therefore less likely to have a collective voice in shaping workers’ rights policy, but these are the very people who need the policy strengthened the most. The prospects are bleak in a situation where the workers who need the universal policy the most have no union, while those who have a union are less in need of the universal policy.
This problem stems from the structure of the U.S. labor movement itself, which has been more effective at securing private benefits for select groups of workers in collective bargaining agreements than it has been at achieving any general program for the working class. Although at one point many unions agitated on a class basis, the labor peace purchased after the Second World War, embodied in the United Auto Workers’ “Treaty of Detroit,” became dominant. Management secured control of the workplace and freedom from strikes, while the represented workers achieved better pay and benefits. Unions did not cease organizing or seeking to expand, but the structure of private welfare in collective bargaining agreements created a division of interests between union members and other workers. Workers’ compensation is one of many arenas where this divergence manifests.
A second matter dividing the working class is that poorer workers’ very lack of sick leave and good insurance creates a strong incentive to commit fraud when they are injured outside of work, as they must choose between, on the one hand, staying at home without pay and possibly without medical care or, on the other hand, potentially having partial wage loss and medical treatment covered by workers’ compensation. It would be astounding if some of them did not allege that non-industrial problems were industrial to try to get their bills covered by their employer’s insurance. Many of them may even view it as morally right, given the harms that they would inflict on their families if they did not attempt this one narrow path away from penury. Popular perceptions inflate the prevalence of such fraud, but the incentive is clear as day. And the perception of widespread fraud is well-documented, which has serious consequences. In recent decades, many states have special bureaus to investigate workers’ compensation fraud and special warnings about fraud on workers’ compensation filing documents.
On an anecdotal level, I have met individuals, some of them quite educated, who, upon learning that I am a workers’ compensation attorney, have asked me if I encounter many valid claims. The unexamined nature of the question is startling: these individuals do not merely suspect that fraud is widespread, which, however dubious, is at least theoretically plausible—they allow their suspicions to eclipse the obvious fact that people still get hurt on the job. Even if fraud were common, that fact would not diminish the number of actual injuries. These people appear not to have realized that they are in effect asking whether workplaces—including construction sites(!)—are somehow the only places on earth where individuals are safe from injury. This is merely anecdotal, but it supports the above argument about the climate of suspicion surrounding alleged fraud.
The perception of fraud and the resentment this perception incurs further divided workers. The fragmented welfare state, with its patchwork of benefits and remedies, helps cultivate this mistrust.
The role of trial lawyers in the United States is distinct from other countries. Functions that other wealthy societies delegate to public regulators are here determined by private attorneys working to make profits. These attorneys work for contingency fees, which allows them to represent poor or struggling clients and incentivizes them to target the wrongdoers with the deepest pockets—an inversion of the incentives faced by most of the labor force, who make money insofar as their labor benefits the wealthy.
There is a lengthy debate to be had about the role of the plaintiffs’ bar. On the one hand, their (our) work compensates victims of wrongdoing and places costs on those who commit harm. This result, in turn, can have a deterrent effect on future conduct, as for instance a corporation considering dumping toxic waste near a poor community must weigh the cost savings against possible future litigation. Litigating wrongs also serves an expressive purpose and can present a forum for the weak to stand against the strong for wrongs committed. On the other hand, the plaintiffs’ bar enriches itself and often focuses on harms that are the most remunerative and not necessarily the most dire for the public. Above all, regulation by lawsuit is far from having the reach that a well-functioning regulatory state could have.
Workers’ compensation is a core part of the plaintiffs’ bar. As noted above, the principal lobbying entity for trial lawyers, the American Association for Justice (AAJ), was founded in 1946 as the National Association of Claimants’ Compensation Attorneys. Representation is a regular feature in workers’ compensation proceedings across the country. The AAJ has an active Workers’ Compensation and Workplace Injury section. Separately, the Workplace Injury Law Group (WILG), founded in 1995, has over 1,100 members and branches in all states.
While the centrality of workers’ compensation to the plaintiffs’ bar as a whole is undeniable, there is something anachronistic when one compares workers’ compensation to the sorts of mass litigation, like pharmaceutical defects, that might require complex investigation and regulation to rein in abuses. A workers’ compensation claim is an alternative to a lawsuit by design; many attorneys specializing in accident litigation even opposed its initial enactment fearing that it would lose them business. Exceptions exist, but most work injuries are not the sorts of obscure evils that require Erin Brockovich to figure out.
In addition, the role of lawyers in workers’ compensation is anachronistic when one considers the demand for workplace safety as opposed to merely post-accident compensation. Workplaces could become much safer with better regulation, which is currently wanting. The principal methods to achieve workplace safety are ones that are a sore mismatch for attorneys. This is true even assuming a favorable view of the plaintiffs’ bar as a tool for regulating undesirable conduct. Managers and owners have ultimate control over work conditions, but attorneys can only impact this through indirect methods. Workers’ compensation insurance premiums incentivize employers to support safety measures; however, provisions that limit recovery to less than the damages available in a lawsuit mitigate this effect.
There are theoretical reasons to believe a system with less of a role for attorneys could be preferable to the present one. However, there is also a counterargument that the prominent role of lawyers is the product of a system that made lawyers necessary. After all, if insurance companies more regularly voluntarily paid benefits like workers’ compensation, injured workers might be less likely to seek counsel. As a result, weakening the role of attorneys might well result in harm to injury to injured workers, whose needs would take a backseat to principles of profitability and “fiscal responsibility.” Some states have gone to great lengths to weaken the role of claimants’ lawyers. Evidence suggests that this outcome winds up harming claimants more. In general, there is ample reason to be wary of “tort reform” and to view it as a campaign by business lobbies to save money, rather than an attempt to establish better systems of remuneration for victims of wrongdoing. Nevertheless, inasmuch as the founders of workers’ compensation designed it to be a system of non-litigated automatic benefits, the ubiquity of litigation is a sign that something has gone awry.
Claimants’ attorneys—despite our important role in ensuring workers get benefits—have, as argued above, inherent limits in working for the welfare of the whole worker. The greatest limit, however, is the inability of attorneys to generate mass movements that can challenge the obvious business interest in lowering workers’ compensation costs. Since elites have superior financing and organizational capacity, those seeking to challenge them need considerable numerical superiority to prevail. Struggles over benefits in state legislatures have repeatedly revealed the limits of lawyers in this capacity.
In most of these political fights, claimants’ attorneys have provided a convenient bogeyman for the right, to paint us as self-serving, parasitic, and unnecessary. Attacking alleged malingerers is useful but risky: much of the voting public might relate to someone accused of malingering, realizing that it could be them or someone they know. In addition, many members of the public have a healthy skepticism of employers and insurance companies. Attacking attorneys presents less risk.
There are active claimants’ bars in every state that has seen weakened workers’ compensation, but attorneys have not carried out significant mass mobilization. This outcome is in contrast to labor organizations, which have the capacity to strike and engage in rallies, and on occasion, to lead general strikes. This may be partly due to a failure to try, or because common negative perceptions of attorneys doom attorney-led efforts at mobilization or organizing. On a deeper level, the role of an attorney is at loggerheads with large-scale organizing masses of people. Labor organizer and scholar Jane McAlevey describes three models of political engagement, distinguished by the relative passivity or activity of the affected population. In advocacy, a small, engaged group of advocates seeks to champion the interests of a larger mass. The advocates speak on behalf of the population, which remains largely passive. In mobilizing, the mobilizing group stimulates already sympathetic populations to engage in particular actions, but the population nevertheless does not direct itself. Finally, in organizing, the organizers recruit people and guide them to develop the capacity to lead themselves. Organizing is the most democratic of the three, while advocacy is the most elitist.
Practicing law is an extreme form of advocacy. Lawyers mostly strategize for, and speak for, their clients, and seldom encourage them to mobilize for their interests. It is still more rare that lawyers help clients build independent capacity to organize together for shared goals. Since changes in workers’ compensation laws are not often the subject of major media headlines, the need for some conduit to help voters make an informed decision is immense. That education, in turn, requires deeper engagement by the workers than merely having a professional advocate on their behalf. Unions might perform such a role; attorneys cannot and will not.
The centrality of attorneys to protecting workers’ compensation benefits thus creates a vicious circle: the very fact that workers have a hard time getting benefits makes them rely on lawyers, who are private profit-seeking actors whose interests do not wholly align with the interests of the workers. The lawyers advocate for workers rather than organizing or mobilizing workers. As these advocates’ role grows, they become more essential to the political struggle for preservation and expansion of workers’ benefits; however, they have neither the funding capacity of big business nor the organizing or mobilizing capacity of mass movements. The fragmented welfare state creates patchwork benefits, and the constituencies for defending these benefits are consequently themselves disunited. This disunity leaves them poorly positioned to defend these benefits. In other words, the defenders of the fragmented welfare state are losing because such a system is comprised of fragments. In situations where attorneys are essential to certain welfare benefits, the situation is worse yet: the fragment itself is designed not to join with others. In this light, it is not such a surprise which side is losing.
Another one of the most distinct elements of the U.S. system in contrast to most other wealthy societies is federalism. Some critics, like Rob Hunter and William Forbath, have argued that federalism has weakened labor and diminished the prospect of most reforms that challenge business interests. Because most workplace regulation takes place in the states, workers’ advocates and movements have had to narrow their sights. Just as the working class is fragmented between workers who receive private benefits—like private pensions and disability insurance—as opposed to those who rely on the state, the working class is also divided spatially and jurisdictionally into many different states. Workers’ organizations find themselves forced to fight similar battles in different states without the capacity to unify their struggles or petition a single authority. In addition, any particular change in the law, since it only happens in one state, affects only the small fraction of the working class that happen to live or work in that state. This applies to gains in workers’ rights, like D.C.’s strong protection against wage theft, and to losses, like the many rollbacks in workers’ compensation over the past three decades.
The trajectory of workers’ compensation supports the argument that federalism is bad for the working class. As noted above, the Longshore Act is a federal law that provided a template for many states’ laws. Congress has amended the Longshore Act for good or for ill at several points, but they have not overhauled it to curtail workers’ rights the way many states have with their workers’ compensation systems.
The problems with federalism in this context are numerous. First, the enactment of workers’ compensation on a state-by-state basis makes their erosion less noticeable and therefore less likely to face resistance. Second, federalism causes the prospect of capital flight as a reason, or rationalization, for reducing workers’ compensation benefits for each particular state. And third, federalism fragments political actors in a way that advantages the more powerful, which, in the present context, is the pro-business lobby. Because business interests have more money to coordinate activities across boundaries, they are better positioned to advocate for their interests in this multiplicity of systems.
On the first point, state politics is an arena of little democracy. Voter turnout is lower in federal off-year elections, which leaves many of the most important state elections’ being decided with lower participation. This result also means that the voting population in these important contests skews toward the side of older, whiter voters with more formal education. Age is especially important in this context because (more privileged) older people are often retirees and therefore not facing the prospect of a work injury. Finally, state elections are less discussed in popular media than federal elections, especially presidential ones, which decreases the extent that the public is engaged in the important state election issues.
The threat of capital flight invariably justifies making an environment more amenable to business interests, which often conflict with the interests of other sectors of society, in particular workers. It is easier for business to make such threats than to carry them out, but the prospect still manages to help capital gain political advantage. However, even if one assumes the threat of capital flight is real, that is perhaps a stronger count against the federalist system than if businesses are bluffing. It is conceivable that a well-intentioned private legislator faces a choice between, on the one hand, appeasing private power by passing pro-business, anti-worker laws, or, on the other hand, facing capital flight that brings unemployment and ruin on their state. This hard scenario may mitigate that particular legislator’s personal moral responsibility for capitulating, but this exculpation only pushes the problem back a step: why would we want a government that cannot act but at the sufferance of private power? What is wrong with a system where a legislator repeatedly acts against their conscience and their constituents to placate the powerful? If the state in fact cannot act contrary to business interests, the problem persists, but it is the fault of the system and not just bad legislators.
The men who wrote the U.S. Constitution sought to contain both the power of concentrated wealth and the prospect of overly strong mass movements. It is plain as of 2022 that they failed at the former but succeeded at the latter. A state-by-state comparison of workers’ compensation laws bolsters the evidence from other arenas that federalism in practice mostly means a race to the bottom for the well-being and interests of those without power.
As I argue below, I believe the problems with federalism make a persuasive case that any credible solution to the present problems should come from the federal level. If the states are “laboratories of democracy,” some of them are engaged in grim forms of human experimentation.
The cases of West Virginia, California, and Oklahoma are illustrative of the regression in workers’ compensation, and of the mechanisms that enabled it. All of these states have modified workers’ compensation in recent decades in ways that decrease insurance costs and decrease benefits for workers. Some of these changes went directly contrary to the 1972 Commission’s recommendations, which are now all but forgotten in halls of power. The states introduced limits on access to medical treatment, decreased worker control over medical care, arbitrary limits on benefits, and reductions in benefits that force injured workers into penury. Others weakened workers’ rights in ways that diverge from the Commission’s particular concerns, but which run contrary to its aims of swifter and fairer compensation for injured workers.
The advocates of cutting workers’ compensation succeeded in these three states in large part because of the fragmented welfare state, as described above. Labor organizations and lawyers’ groups lacked the capacity to achieve the mass mobilizations necessary to stop these changes. Because these changes were happening on a state level, national news paid little attention, and national progressive advocacy organizations were less well-positioned to challenge their better-organized business lobby opponents. Public rhetoric often touched on themes of fraud, affordability (to business), and the threat of capital flight. Politicians justified changes by appealing to inter-state competition to contain costs. Some legislators and actors viewed the benefits as handouts, or “welfare” in the commonly pilloried sense of the word, rather than an insurance program. Many anti-workers’ compensation crusaders painted greedy claimants’ attorneys as the bogeyman—and then used the opportunity to reduce benefits for workers.
Finally, the changes were implemented in ways that reinforce rather than ameliorate inequality among workers. This result is both unjust, as it harms the most vulnerable, and hostile to working-class unity.
The descriptions below do not represent political science studies, and are based largely on media reports, personal conversations with those acquainted, law review articles, and review of the laws themselves. They are illustrative and, hence, not expository. The conclusions are my own. These accounts are partial in both senses of the word.
West Virginia adopted workers’ compensation in 1913. For many decades, the state was one of the few to handle its workers’ compensation through a state monopoly insurer rather than a private insurance market. The benefits were less generous than those noted under the New York/Longshore Act model noted above, but through subsequent reforms they came to include the traditional benefits of wage loss, medical treatment, schedule loss, and permanent total disability. At the time of the 1972 Commission, the state had serious shortcomings according to the National Commission criteria, such as an arbitrary four-year time limit on temporary total disability benefits and a failure to cover domestic service workers and workers in small-scale agricultural firms. There were other elements present, however, that made the system somewhat sympathetic to workers, including a long-standing default “rule of liberality”—that doubts be resolved in favor of the claimant—and permanent total disability benefits without time limits. These favorable conditions increased in the subsequent time period, notably with the West Virginia Supreme Court’s 1983 adoption of an “odd-lot doctrine,” which placed the burden on employers to show that a claimant who could not work in their pre-injury capacity could find work elsewhere. The court summarized the doctrine: “Briefly stated, this doctrine is that total disability for compensation purposes can be found when an employee has been so handicapped by his physical injury, though not utterly immobilized and bedridden, that he cannot be regularly employed in any well-known segment of the labor market.”
As West Virginia’s economy was dependent on the dangerous industry of coal mining, it faced high insurance costs. This was further complicated by West Virginia’s having high workplace accident and death rates, even controlling for industry. Nevertheless, legislators sought to contain costs without regard for these discrepancies. In 1985, under the leadership of Republican Governor Arch A. Moore, the state decided to freeze the public insurer’s premium taxes at an artificial and unsustainable level. This freeze, combined with other factors, like the above-noted rule of liberality and a prohibition on final settlements of workers’ compensation claims, led to a crisis in funding. By the mid-1990s, pro-business politicians were eager to resolve this funding shortage, and they intended to do so by cutting benefits rather than raising taxes.
A series of new laws, and, in particular, changes in 1993, 1995, and 2005, remade the state’s system. The memory of the 1972 Commission had long faded, in West Virginia as elsewhere, and lawmakers gave no consideration to the Commission’s essential recommendations. Many of the changes pushed change in the exact opposite direction. One change in 1993 sought to eliminate certain psychiatric injuries from coverage—a practice, that, though common, is premised on an unscientific attempt to drive a wall between psychiatry and other forms of medicine. The 1993 changes also included mediation of medical disputes by state-appointed provider panels and a ban on permanent total disability benefits to older workers entitled to Social Security Retirement benefits.
In 1995 the state undertook further reform oriented toward lowering costs. These measures included imposing a minimum fifty percent physical impairment requirement for most severely disabled claimants to qualify for permanent total disability—meaning that injured workers would not qualify for permanent benefits without meeting a particular (very high) threshold of physical loss, even if they could not find any work. This measure is contrary to the logic of workers’ compensation, which is supposed to compensate for lost earning capacity and not just medical harm: a construction worker who cannot lift, kneel, bend, stoop, or lift more than ten pounds is for practical purposes more disabled than an accountant with identical restrictions, and the former may be unable to work in any capacity, while the latter can work their pre-injury job. The bill ignored this element in imposing a physical threshold requirement. The bill also imposed employer-directed managed care in some circumstances and blocked benefits in cases that had been inactive for a long period of time, regardless of the worker’s condition. This latter provision ironically encourages workers to continue pursuing treatment, whether or not it is needed, to preserve their rights.
Emily Spieler, former Commissioner of the West Virginia Workers’ Compensation Fund, wrote a critical assessment of the 1995 bill. Spieler described how the law’s stated claim of fiscal responsibility rested on some dubious foundations: as noted above, the actual shortage in the Fund owed to the untenable lowering of Premium Taxes in the 1980s and not to some inevitable incapacity to pay. In addition, the bill’s proponents compared the costs of workers’ compensation in West Virginia to those of other states without factoring in the state’s long-standing dependency on hazardous industries, in particular coal. This method of comparison can only lead in one direction: a state with higher-risk employment can only make its costs comparable to a state with lower-risk employment by providing lower benefits.
In addition to the peculiar framing of the fiscal “crisis,” designed to preclude the possibility of taxation as the (obvious) solution, Spieler noted that the 1995 bill’s proponents prioritized the fiscal calculus over the ostensive primary aim of the system—insuring workers against industrial injury. The bill’s authors even included a projection of “savings” to be derived from new standards of appellate review, stating their assumption (and intention) that the supposedly fairer method of review would help employers and hurt workers. Justice, evidently, is far from blind.
Although many legislators claimed that the 1995 bill’s aim was benefiting workers, this was entirely by supposedly restoring the system’s solvency: the point is not, this change will help workers, but rather, this change may be bad for workers but the alternative is worse. As then–State Senator Joe Manchin stated at the time: “Higher Workers’ Comp premiums drive up unemployment. That’s bad for workers. Higher Workers’ Comp premiums bankrupt businesses. That’s bad for workers. And the rising deficit would have destroyed the whole Workers’ Comp system, which would have been catastrophic for workers.” Unions strongly opposed the 1995 law, but state legislators vowed to proceed with or without them. The legislature that passed the bill was predominately Democratic, and a Democratic governor signed it into law.
More modest but significant shifts followed in the years between 1995 and 2005, favoring business over workers. In 1999, the legislature restricted permanent partial disability schedule loss benefits to purely medical considerations, without regard to non-medical elements. This is a smaller version of the physical impairment requirement for permanent total disability noted above: it ignores the logic of the system, which is supposed to compensate for lost earning capacity and not merely physical impairment.
In 2005, the state enacted a more dramatic overhaul of its workers’ compensation system. The most pronounced change was the privatization of the long-standing state monopoly insurance fund, which later led to the handling of matters through a competitive private insurance market. The law also included numerous changes in benefits, including the arbitrary two-year limit on temporary total disability benefits (down from four years) and a termination of benefits upon a finding that the medical condition has stabilized (“maximum medical improvement”). This rule limits an injured worker’s right to wage replacement benefits even if they have not yet recovered to be able to work, effectively conceding inability to work but denying any compensation for this disability. While the previous law had restricted changes of physicians to managed care organizations, the 2005 law extended this provision to let insurers limit the worker’s initial choice of doctor.
The 2005 bill also introduced global settlements as a possibility for many, perhaps most, workers’ compensation cases—meaning a lump sum payment for a claimant relinquishing all future rights to workers’ compensation benefits, usually including medical benefits. West Virginia, unlike most states, had previously not allowed these agreements, barring certain exceptional circumstances. While in principle this outcome encourages attorney involvement—for better or for worse—this result did not appear to be the case in West Virginia. Numerous firsthand accounts indicate that attorney involvement has plummeted over the past few decades, leaving workers to challenge insurance companies without advocates.
If we return to the standards of the 1972 Commission to evaluate the new laws, they fail. Some workers, like agricultural workers in small businesses, remained—and still remain—without workers’ compensation insurance. Far from removing the arbitrary time limits on benefits that the 1972 Commission frowned upon, the state further restricted such access. Worker autonomy in health care remains restricted, as employers can restrict initial choice of physician to those in a “managed health care plan.” The laws also enacted limits on permanent total disability, both procedural and temporal. Although the 1972 Commission was neutral on public versus private insurance, in the case of West Virginia the same austerity that animated benefits reduction also motivated the shift from a public monopoly to a competitive private system: the principal objective of privatization was to save the state money and, by implication, to lower employer costs for workers’ compensation.
West Virginia’s path to cutting benefits followed a familiar path in the neoliberal era: an underfunded public benefits system, a debt “crisis” that politicians decided would not result in a tax increase and therefore could only be solved through reduction in benefits and privatization. However, the specific features of the U.S. welfare system, especially federalism, were equally essential to this campaign. Federalism framed the predicament: the entire country benefited from West Virginia’s abundant coal for energy, but the state alone had to bear the costs of the bodily harm of mining with limited support. Rather than challenging this burden, legislators responded by racing to the bottom, openly calling for compensation costs to be comparable to those in states with less hazardous employment. Federalism established the justification for many of the changes.
West Virginia lawmakers weakened benefits in ways that reflect lack of clarity about the system’s intended purpose. As noted, the new laws barred simultaneous receipt of Social Security retirement benefits and permanent total disability benefits. This result suggests a view of both benefits as forms of similarly purposed “welfare,” notwithstanding the fact that neither is designed as alms for the indigent: workers’ compensation is supposed to be a form of insurance for particular sorts of injuries, while Social Security is a pension benefit, funded by the workers themselves. While the West Virginia Supreme Court invalidated this Social Security offset, a subsequent decision by the same Supreme Court ultimately affirmed a modified version that simply terminates these benefits at sixty-five, achieving the same outcome without officially endorsing this rationale.
The same spirit of incoherent penny-pinching that animated the benefits reduction discussions also justified privatizing the state insurance monopoly. Opponents of the monopoly emphasized that it was losing money—but this arguably suggests the opposite conclusion: if workers’ compensation benefits are rights, the fact that the workers’ compensation insurer is not profitable is an argument for preserving public ownership, because the state is uniquely situated to operate at a loss. If the system operates at a loss, then private insurance can only turn a profit by reducing benefits. In addition, there is no good reason the state could not simply raise taxes—premium taxes and others—enough to pay for the difference, but the state legislature would not countenance the possibility. They had not accepted the plain premise of a Beveridgean welfare state that people should pay taxes to secure public rights.
Unlike in many places, the seminal changes did not take direct aim at attorneys. In allowing full and final settlements the new laws presented a potential opportunity, albeit one that did not bear fruit. Nevertheless, the local claimants’ bar and weakened labor movement proved inadequate to challenge a bipartisan drive for cuts. West Virginia’s union density declined during this time period, from 22.7% in 1985 to 16.3% in 1995 to 14.4% in 2005 to 9.6% in 2021. The decline impacts not only the overall capacity of organized labor, but also its priorities: faced with this overall trend, unions must focus on with reversing dwindling numbers and scaling back some of their projects, rendering them incapable of focusing even their reduced energies on defending workers’ compensation.
The focus on cost containment, incentivizing business development, and preventing benefit duplication clouded out any coherent concept of the aims of workers’ compensation. West Virginia legislators disregarded not only the specific demands of the 1972 Commission and other reformers of that generation, but, in some cases, even the pretense that the system’s purpose is to insure injured workers. In 2014, when the Charleston Daily Mail gloated that privatizing workers’ compensation had been a smashing success, they used no criteria beyond fiscal responsibility, with not even a word of lip service about how the changes had impacted injured workers. In 2020, the West Virginia Offices of the Insurance Commissioner boasted on its website that after the 2005–06 laws “aggregate loss costs have decreased over 75%”; there is no mention of who lost while employers and insurers gained.
California first enacted a workers’ compensation law in 1911, when what is now the most populous state in the country had only around two and a half million people. Like West Virginia, California was then heavily dependent on dangerous industries. By the time of the 1972 Commission, California was in compliance with fewer than half of the essential recommendations, but its record improved over the course of the following decade, as found by the Department of Labor’s 1981 report. The system contained many of the familiar elements: partial remuneration for wage loss, medical treatment, permanent total disability, and permanent partial disability.
The system has changed much since the 1980s, mostly in a pro-business and anti-worker direction. California is in some regards a more tortuous story than West Virginia, in part because a strong labor movement maintained pressure against cost-cutting measures to a high enough degree to make some of the debates into partisan disputes. There were also some pro-worker measures that passed, even as the legislature cut benefits overall. Nevertheless, from 2004 on, the overall trend has been towards reducing business costs by reducing workers’ rights.
The conflicting tendencies in California workers’ compensation manifested in different areas. In 1993, the California legislature drastically restricted psychiatric injuries. As in West Virginia, this measure was an attempt to delegitimize a field of medicine, made largely by laypeople for reasons that do not square with evidence. It also included a stealth abandonment of the no-fault principles of the system, as employers were exempted from paying benefits when they could persuade judges they were not to blame for workers’ psychiatric harm in the workplace. On the other hand, as late as 2002, the legislature was still prepared to add cost-of-living adjustments to permanent total disability benefits, a boon and salve to the state’s most incapacitated workers. Commentators at the time reported this as a gesture by politicians to labor unions. It was among the most significant pro-claimant reforms of this era. Of note for the present essay, the legislature also introduced laws allowing labor unions to negotiate separate, more generous workers’ compensation substitute agreements for their members, starting in the construction industry in 1993 and expanding to other industries in 2003 and later state employees in 2012. While on its face a positive step for some workers, allowing this option formalizes the divergence of interests among workers discussed above. The organized workers who benefit from these carveouts become relatively insulated from the impact of weakened workers’ compensation laws.
The real anti-worker shift in workers’ compensation came in the 2000s, in response to surging insurance rates. That surge, in turn, had roots in pre-2000s policy. In 1993, under the guidance of Republican Governor Pete Wilson—and a mostly Democratic legislature—California deregulated many practices of the insurance industry, eliminating the former rule establishing minimum insurance rates. In the following years, many insurance companies expanded their operations far beyond the realm of insurance, financializing to cash in on bumper profits in the technological sector, later referred to the “dot-com bubble” after the subsequent downturn. Many insurers also turned to artificially low-cost reinsurance. Given their extraordinary success with financialization, they had less need of profitability in their (supposed) primary line of service, selling insurance, and faced a race to the bottom for charging artificially low premiums—including in workers’ compensation.
When the dot-com bubble burst in the early 2000s, the companies that had been selling insurance at artificially lowered costs were forced into a position in which their ostensive principal line of business would again have to be their principal source of profit. The result was a series of insurance bankruptcies, which left the California Insurance Guarantee Association, the backup insurer for insolvent employers, supporting large sums of unexpected liabilities. This also led to skyrocketing premiums for employers. The business community and mainstream punditry, unsurprisingly, perceived and portrayed these changes as a crisis. The changes were astounding. However, as noted, this was due to a variety of factors, including the peculiar prior history of the insurance industry, along with some other factors mixed in like medical cost inflation. The problem was not a glut of claims or of particularly generous benefits, though some schedule award costs were higher than other states.
In 2003 and 2004, the mostly Democratic legislature, working with both Democratic Governor Davis and then with Republican Governor Schwarzenegger, overhauled workers’ compensation to protect employers from their newfound burden. Some labor leaders fought to include insurance rate regulation to reverse the effects of prior liberalization, but they failed. Most of the Democratic establishment cooperated in the process.
The political calculation was shaped by the abnormal condition of the market at the time. In non-crisis circumstances, there is something to be said for describing politics in a niche issue like workers’ compensation as a compromise among various “stakeholders”: employers, unions, insurers, claimants’ attorneys, employers’ attorneys. Although some of the stakeholders have greater power, countervailing forces arise when less powerful actors are more focused or concerned. For instance, claimants’ attorneys have very little money compared to employers’ lobbies as a whole, but workers’ compensation is the central issue for the former, but only one of many for the latter. In a business crisis, this imbalance of dedication no longer holds, and the dominance of the strongest party becomes clear. The fallacy of parity is illustrated by a quip in a Sacramento Bee article from 2003:
Work comp has been one of the Capitol’s longest-running sideshows, and one of its axioms has been this: There are four major factions in the perennial squabble over benefits and procedures—labor unions, the attorneys who represent workers with compensation claims, employers, and work comp insurers. And when three of them get together, roughly once a decade, they stick it to the fourth.
That axiom may describe some of the interactions at the California state capital, but the premise that “employers” as a whole—that is, capitalists in the world’s fifth largest economy—are peers to insurers, unions, or applicants’ attorneys, is absurd. Employers may not always win, when they are divided or relatively indifferent, but that does not mean that their opponents have comparable power. The crisis of the early 2000s made this clear.
California’s new laws targeted several types of benefits. As in West Virginia, the legislature adopted a cap on temporary total disability benefits at two years, regardless of whether the claimant had returned to work. This cap left many workers disabled without income. Rather than granting workers more medical rights, a 2003 law took decisions out of the hands of treating doctors and placed them in utilization review—a process by which absent doctors, often in another state, review a treating physician’s medical requests to determine whether the treatment is reasonable and necessary. The bill capped physical therapy and chiropractic care at twenty-four visits per claim, an arbitrary decision that harms patients, especially those receiving surgery, and arguably favors more unhealthy medication-based treatments.
The 2004 bill lowered permanent partial disability benefits, by making their calculation more rigid, lowering weekly benefit rates, and compensating less severe injuries at lower rates than more severe injuries, and not merely in lower amounts. That is, for an injury causing less than 10% permanent partial disability, each percentage of disability warranted an increase of 3 weeks’ worth of benefits. For injuries causing more than 10%, each additional percentage warranted an additional four weeks’ worth—with the amount progressively increasing. While this modification can help more seriously injured workers, it is part of an overall project of reducing costs by reducing the benefits payable in most cases. The new law also introduced new methods for reducing benefits if the worker had a pre-existing problem with the injured body part(s). The bill boosted benefits if the worker could not return to their pre-injury position—but the increase was only fifteen percent. Most importantly, the maximum rate for permanent partial disability was only $230 per week pre-adjustment, or $264.50 post adjustment. As a result, a worker who had suffered an injury that disabled them from their previous job, but who could potentially work in another position, faced a precarious future. If they received a rating of nineteen percent permanent partial disability they would be eligible for “two thirds of average weekly earnings” for seventy-two weeks, but since the weekly rate was only $264.50, the total seventy-two weeks’ payment amounts to only $19,044.00. This was below the 2011 federal poverty rate for a household of three, and that is only for the seventy-two weeks for which the worker could receive benefits—after that time they would be jobless without compensation.
By 2005, after the cuts were implemented, many in the labor community cried foul more loudly. Some Democratic politicians also began to claim after the fact that they had not anticipated the impact of these cuts in benefits. In 2006 a Sacramento Bee reporter described workers’ compensation as the single most important issue for the business community in Schwarzenegger’s re-election campaign.
As a result of these cuts, the average total payout to a worker with permanent partial disability decreased by more than one-half, from $25,000 to $12,000. Unsurprisingly, inflicting this hardship on injured workers saved employers and insurers a lot of money. Despite much popular pabulum about class harmony and shared interests, many of these disputes are in fact zero-sum.
Attorneys litigated, with some limited success, against some of the restrictions, such as the factors involved in assessing permanent partial disability. However, courts did not invalidate the new law’s more wholesale abandonments of the system’s aims, like the short time limit on temporary total disability or the prohibitively low compensation rates.
In 2012, the legislature acted to remedy the remarkably low permanent partial disability rates. At the same time, the bill also took additional steps toward eroding workers’ rights. It arbitrarily excluded more types of injuries from the increase and decreased the rights of injured workers to control their own medical treatments. The legislators framed the law with the aim of discouraging litigation, but in the process they eroded workers’ capacity to challenge denials of medical treatment. In most cases of denial of treatment, no adjudicative body can review a medical determination—even one made by a doctor who never sees the patient and who is beholden to insurance companies for the bulk of their business. The law also expanded the carve-out arrangements to public employees, further dividing workers in their relationship to the workers’ compensation system.
As in 2004, the 2012 proposed changes had bipartisan backing and were presented in the press as an accord between business and (at least some sectors of) organized labor. And while the legislature raised the permanent partial disability levels, the revisions did not address the arbitrary time limits on temporary total disability from the 2004 law.
After 2012, with strong lobbying from vested interests, and in particular Dallas Cowboys’ billionaire owner Jerry Jones, California also enacted a separate bill excluding many professional athletes from access to California workers’ compensation benefits. Although the stated reason was jurisdictional—granting California benefits to non-resident workers—this enactment creates problems for professional athletes who travel frequently and therefore might fall through the jurisdictional cracks, winding up left with no remedy.
As in West Virginia, the rhetoric in California around the changes in the law, in particular the 2004 and 2012 overhauls, had drifted far from the focus in the age of the 1972 Commission. Despite some recognition that permanent partial disability rates had gone too low after 2004, the concept of minimum standards for injured workers was far from the center of the debate. The focus on cost containment has all but obliterated the idea of any red lines in terms of worker protections: the order of the day is arbitrary exclusions of certain types of injuries, arbitrary constraints on medical treatment, and arbitrary time limits on benefits.
California introduced elements diametrically opposed to the 1972 Commission’s recommendations. Like in West Virginia, the state imposed a completely arbitrary two-year time limit on the vast majority of workers receiving temporary total disability, regardless of whether the worker had returned to work or not. These cuts pushed many injured workers off of workers’ compensation and onto state disability insurance. Many critics underscored the problem that this cost was forced onto the state, rather than on the injured workers’ employers. This point relates to the thesis of this essay. The people noting the overlap were trying to call the system back to its stated purpose: workers’ compensation performs one function, while public disability aid performs another. The need for this reminder shows that the system had not been performing as promised. This confused and harmful result is a natural outcome in a patchwork system of public benefits.
The legal changes also went contrary to the Commission’s position that workers should direct their own medical treatment, including choosing their own initial provider. In 2003, the system adopted utilization review as a form of nonjudicial adjudication of medical rights. The 2004 reforms allowed employers to constrict the applicant’s initial choice of doctor to a medical provider network. The 2012 reforms went furthest in this regard, in some cases removing review of medical decisions entirely from public authorities. The system addressed its legitimate concerns about medical inflation and “doctor-shopping” by destroying the medical autonomy of injured workers.
The exclusion of professional athletes, though a smaller issue, also shows the anti-claimant tenor that the state adopted over the course of its transformation. The Commission was entirely against arbitrary exclusions of particular groups of workers. Unlike the Commission’s other core recommendations, the question of exclusion is not a field in which most states are regressing, even if many have yet to reach full coverage. In this regard, California’s regression is exceptional. In addition, the state’s stated reason was to exclude nonresident workers from California coverage—but many professional athletes work in many jurisdictions. Allowing flexibility of jurisdictions to prevent this nightmare scenario was one of the essential recommendations of the Commission, now long forgotten.
All of the features of the fragmented welfare state enabled California’s austerity drive. Federalism animated the rallying cries for the 2004 law, which responded to California’s status as the state with the highest workers’ compensation costs. It is a truism that with different state systems, at least one of them has to be the most expensive. At the same time, it is intuitive and unsurprising that no state would want to be in that role. Governor Schwarzenegger said at the time that “the sad story is that we have the highest costs in workers’ compensation but not the best benefits”—and then proceeded to lower costs by slashing benefits. Business lobbies presented the costs in advertisements with implicit threats of disinvestment. At least some advocates of the benefits reduction were confident enough that the public supported them that they threatened a referendum on the workers’ compensation law. This drive to erode workers’ compensation could only have occurred in the shadow of federalism.
California’s change in direction in the twenty-first century is also inconceivable without considering the fragmented welfare state’s impact on medical care. Medical inflation was a major contributing factor in the spike in costs before 2004. The United States’ system of patchwork insurance plans and treatment remunerated on a fee-for-service basis enables this inflation to take place. If a coherent healthcare policy were in place in the United States, one of the principal drivers animating the drive to cut workers’ compensation would be mitigated or removed.
The champions of the cuts in compensation also cited concerns with fraud. Schwarzenegger vowed to “root out waste and fraud,” and the 2004 law gave civil immunity to those accusing an injured worker of fraud. The 2012 law justified its savings in part owing to anticipated fraud prevention, and though much of this concerned doctors’ abuses, cost projections included savings from an anticipated decrease in claim frequency (“utilization”). That is, injured workers bore the cost of these “cost reduction” measures.
The California reformers also took aim at attorneys. The Sacramento Bee described the 2012 bill as a deal between unions and management that cut out applicants’ attorneys. The article failed to document the bill’s defects from the standpoint of workers. Nevertheless, by limiting discretion, variation, and litigation, the new law did increase benefits while simultaneously decreasing costs, the Holy Grail of twenty-first-century public policy. However, these changes were good only relative to the post-2004 landscape of very low indemnity benefits. It looked miraculous because the preceding harm was so immense. And only in this light can the limitation on worker choice—justified by attacks on attorneys—appear progressive.
The union carveout provision is perhaps the starkest illustration of the incoherent welfare state in action. Labor in California was a major factor in the positive measures that the state took, like the cost-of-living adjustments in 2002, and fought against many negative features of the 2012 overhaul. Nevertheless, the union leadership by several accounts supported the 2012 law, in a context in which organized workers face a different reality than unorganized workers. By creating special workers’ compensation carveouts in 1993 and then expanding them in 2004 and 2012, California explicitly divided union members from the rest of the working class. The better positioned workers do not share the fate of other workers even with regard to formerly universal legal rights. The California Department of Insurance lists some data about carveout plans on its website. Although the data is incomplete and involves large annual fluctuations, the programs are substantial: as of 2015, they covered 1,552 employers and 89,000,000 person-hours, which would very roughly be about 2.25 million workers, about 13.6% of the workforce. Only 17.2% of California workers were covered by collective bargaining agreements at this time. In this context, a labor union’s duty to its members diverges from its duty to the working class as a whole, and a union’s efforts may improve the lot of the former while the majority of workers are thrown under the bus.
California set out in the early 2000s to overhaul its workers’ compensation system, with the primary aim of reducing costs for employers and insurers. Studies indicate that its 2004 and 2012 overhauls were successful in this aim. In response, some critics have noted that some cost containment was cost displacement, often pushing injured workers to use resources from the state, like State Disability Insurance and MediCal, the state’s Medicaid program. This point was often presented by defenders of workers’ compensation to present their position as responsible and fiscally conservative, rather than rooted in (presumptively irrational) compassion. However, the true cost of this process was borne by injured workers in particular, not by “the taxpayers” as a whole.
Oklahoma first enacted workers’ compensation at around the same time as California and West Virginia, in 1915. The outline of basic rights there was also similarly based on the New York/Longshore template. Despite prolonged struggles for expansion, at the time of the 1972 Commission Oklahoma scored poorly on the Commission’s metrics. The most prominent divergence from the Commission’s vision was lack of inclusion. Oklahoma restricted workers’ compensation to workers in “hazardous employment,” which could exclude even industries that some might consider quite dangerous, like unloading furniture from a truck or carrying a washing machine. Although many states excluded some groups of workers from coverage, Oklahoma was remarkable in making exclusion the default rule.
As in other states, the 1970s were a period of progress. The post-Commission ferment culminated in a massive reform in 1977. The bill expanded coverage to “non-hazardous” industry workers, though it still excluded some groups, like agricultural workers, from coverage. The law established a new Workers’ Compensation Court, aiming to have decisions made by those with administrative expertise and freedom from political influence. The law also contained some mixed provisions, such as limiting schedule injuries to medical evidence based on the American Medical Association’s Guides for Permanent Impairment. While this approach does reflect increased standardization, it can also fail to account for the substance of a worker’s loss, which often extends beyond its medical component and into questions of earning capacity.
Some modifications took place in the few decades following 1977, but not on the scale of the 1977 reforms—and nothing resembling the changes that were to come. The anti-workers’ compensation drive came later to Oklahoma, in the 2010s. In Oklahoma, there was no precipitating event near the scale of California’s surging premiums or West Virginia’s large population of permanently totally disabled miners. Nevertheless, some business leaders and lawmakers argued that workers’ compensation was costing too much and that benefits were increasing at an excessive rate. The legislature passed a law in 2011 which aimed at reducing costs—in part through familiar stratagems like restricting medical choice—but it did not arrest the impetus for more radical change.
If the “crisis” in Oklahoma was much less acute, the solution was more draconian. In 2013, a Republican-dominated state legislature, working with a Republican governor, completely overhauled the existing system. The principal architects were big business interests, including the Oklahoma Chamber of Commerce, Unit Drilling, and Hobby Lobby. Not only were claimant’s attorneys excluded, but, for the most part, the defense bar also had limited involvement. Many groups, from the AFL-CIO to Lawyers for Working Oklahoma, mobilized against the law, but without success. Governor Mary Fallin signed the bill into law on May 6, 2013.
The most dramatic change was an “opt-out” provision that allow employers to opt out of workers’ compensation in favor of private plans. This was a radical departure from the earliest principles of workers’ compensation law. In the early twentieth century when states adopted workers’ compensation laws, the laws were either compulsory, or “voluntary”—meaning employers could elect not to participate—but with harsh restrictions on employers who opted out: such employers could be exposed to negligence suits from their workers without the ability to use common defenses like contributory negligence or assumption of risk. Oklahoma’s system a century later did not allow for this level of worker protection.
The law did impose some conditions on the private opt-out plans, but they were pro forma. An employers had to submit its private plan to the state Insurance Commissioner to be deemed a “qualified employer.” In practice, there were no effective minimum standards, and the benefits offered were vastly inferior to those offered in workers’ compensation plans more generally. The Insurance Department’s General Counsel stated bluntly that there was no review of proposed plans but rather a rubber stamp: “We are supposed to confirm; it never uses the word ‘approve’. . . .”
The policy was arguably more extreme than the one in Texas, which allows employers to completely opt out of workers’ compensation, because Texas allows negligence suits against employers who choose that option. Under the 2013 Oklahoma opt-out law, the worker was still bound by the exclusive remedy provisions that are customary in workers’ compensation systems. With the employer opt-out provision, the Oklahoma law verged on declaring workers to be a separate legal caste, legally barred from pursuing the negligence remedies available to the general public, but also denied a substitute remedy.
In addition to the opt-out scheme, the law also included provisions cutting benefits more directly. As in California, the law restricted temporary total disability benefits to 104 weeks, regardless of whether the worker could return to work or not. This limit inevitably left many injured workers with no income due to their work injuries. Permanent partial disability was capped at $323.00 per week, below the federal poverty line for a household of three or more. The law limited permanent partial disability awards to 350 weeks in full. Workers who had worked at an employer less than 180 days were barred from filing claims for cumulative trauma/occupational disease. Not only could employers limit the injured worker’s choice of initial treating physician, the employer actually had the right to make the selection of doctor. A worker who missed two appointments was barred from receiving any benefits, even if the problem was lack of transportation.
The law decimated schedule benefits. Prior to 2013, in accordance with the New York/Longshore template described above, if a worker in Oklahoma returned to work but still suffered a partial or total loss to a given body part, that entitled them to receive a certain amount of schedule disability benefits (a form of “permanent partial disability”). The 2013 law allowed employers and insurers to deduct these benefits—which are based on lost earning capacity and not lost earnings—due to time worked. As a result of this many workers saw their award reduced to nothing by the time it took to schedule a hearing.
Oklahoma went so far from the aims of the 1972 Commission that to contrast them seems almost absurd. The Oklahoma legislature inverted the Commission’s essential demands: from worker control of health care to total inflexibility; from a condemnation of arbitrary time limits to the celebration of them; from greater flexibility in jurisdictional access to establishing an opt-out system that denied jurisdiction even to workers within the state. The opt-out provision was something far below the standards of the early twentieth century, when employers would seek to push contracts of adhesion on workers to deny them their right to access the courts. Even the states that allowed employers to opt out of workers’ compensation left the worker the right to pursue negligence suits. By 1972, the idea of a proposal like Oklahoma’s was not even on the radar of the National Commission. The National Commission Report did not entertain the possibility that a state might let employers opt out of workers’ compensation while simultaneously blocking workers from suing.
In this particular case, the war against workers’ compensation went too far for its own success. The extreme character of the Oklahoma evisceration of benefits opened it up to effective legal challenge, and a group of advocates, in particular longtime claimants’ attorney Bob Burke, litigated the major changes. Through this litigation, the state Supreme Court deemed fifty-five of the provisions unconstitutional. These included throwing out the 180-day limitation on cumulative trauma claims as “underinclusive and overinclusive.” The ruling noted that the limitation was not a factual description—no one could rationally state that a cumulative injury requires more than 180 days to develop—but instead an arbitrary restriction on benefits. The Supreme Court also upended the new act’s plan to deduct permanent partial disability schedule benefits for workers who returned to work, noting that it arbitrarily discriminated against employees with certain types of injuries without providing “some distinctive characteristic warranting different treatment.” The decision also stated that scheduled losses compensate for lost earning capacity, not merely physical limitations. It follows that an arbitrary restriction on non-medical evidence ignored the purpose of the law.
The legal challenges did not all succeed: the provision on employer selection of treating physician survived. This section of the law does contain some mitigating factors, including limitations if the employer does not act quickly and provisions allowing for judicial appointment of doctors when disputes arise. Because the independent medical evaluator’s opinion is presumed correct by default, the employer-selected physician is not decisive. Nevertheless, the section is severe, and completely contrary to the idea of patient-directed care and worker autonomy—and it remains law.
Most importantly, the Oklahoma Supreme Court shot down the opt-out provision, declaring it an unconstitutional “special law,” explaining that “[t]he core provision of the Opt Out Act . . . creates impermissible, unequal, and disparate treatment of a select group of injured workers.” A concurrence by Justice Noma Gurich brought the question back to the exclusive remedy rule:
“[T]his Court has long recognized that the protection of employees from the hazards of their employment is a proper subject for legislative action. . . .”. The Legislature, in exercising such power, is free to eliminate the workers’ compensation system entirely, abolish exclusive remedy protections for employers, and leave work-place injury claims to the courts. However, the Legislature is not free to substantially reduce benefits for some injured workers under the guise of an “opt-out” system and force such injured workers to remain within the system through the use of exclusive remedy.
Whatever else the state could get away with, workers would not become a separate caste in terms of legal protections.
Since 2013, Oklahoma’s legislature has changed tack in modest ways, raising the two-year cap on temporary total disability to three years, and increasing the permanent partial disability rate from $323.00 per week to $350.00, and come 2021, $360.00 per week. Though this amount is obviously not an income that allows for comfortable living, the changes are moving in the direction of increased benefits, however modestly. In addition, the drive to expand Oklahoma’s now largely defunct radical anti-workers’ compensation project has stagnated in other Republican-dominated legislatures, though its champions have proven persistent. An attempt to reintroduce a similar proposal in Arkansas in 2019—after prior attempts floundered—was met with a blunt response from one dissenting legislator: “This is a great bill if you’re an insurance company. . . . It’s a terrible bill if you’re an injured worker.”
Despite the setbacks that opt-out bills have met, however, it is misleading to describe any of this sequence as a turn in a pro-worker direction: it is more accurate to say that the opponents of workers’ compensation are retreating from their most ambitious projects.
The confusion in the U.S. welfare state is key to understanding the conditions that made Oklahoma’s radical experiment possible. The changes proceeded in part by lack of clarity about the purpose of workers’ compensation. This uncertainty is facilitated by Oklahoma’s proximity to Texas, the only state that does not require coverage. If insurance for workplace injuries is not a right, then it makes sense to let the parties negotiate for the appropriate terms and levels of benefits. That is what the opt-out provision in effect does, but, given the radical asymmetry in power, the “agreement” is a contract of adhesion.
The same elements of the fragmented welfare state that allowed overhauls in West Virginia and California were at work in Oklahoma, as well. This included a focus on fighting fraud and limiting the supposedly pernicious role of claimants’ attorneys. Oklahoma’s 2013 law established a Workers’ Compensation Fraud Investigation Unit. The State’s stated bases for denying cumulative traumas for employees who had been on the job for less than six months included “preventing fraud,” notwithstanding the fact that, as the Oklahoma Supreme Court concluded, the purported relationship between fraud and employment duration is more than a bit attenuated. Oklahoma’s earlier 2011 reform sought to limit the role of attorneys by facilitating settlements without attorney involvement and by promoting mediation. The 2013 law went further, promoting early settlement conferences with the stated purpose of keeping lawyers out of the picture, and sharply limiting fees for claimant’s attorneys. In championing the bill, which hurt workers far more than it could ever hurt lawyers, the Senate President Pro Tem said: “The biggest roadblock to a stronger economy in Oklahoma is our adversarial workers’ compensation system. . . . The system is designed to reward trial lawyers for dragging cases out and delaying outcomes as long as possible.”
Federalism made Oklahoma’s law possible in several ways. Most importantly, because Oklahoma is just one state among many, the national media paid little attention to its evisceration of a benefit system that has been part of the nation’s social contract for a century. As a result, the changes could fly under the radar of most of the public. NPR and ProPublica’s excellent reporting on the project in 2015 was the first that many outside of Oklahoma ever heard of this project. Second, as elsewhere, Oklahoma’s anti-workers’ compensation crusaders invoked the supposed competitive edge of lower business costs. The President of the State Chamber of Commerce described the law’s goals as to “help reduce costs, get workers timely, quality medical care and make Oklahoma more competitive economically with our surrounding states.” The Daily Oklahoman’s editorial board opined twice in 2012 that reform was needed because Oklahoma’s costs were higher than surrounding states. As elsewhere, the race to save the most money for business was at the center of the case for change. The champions embraced the race to the bottom, adopting the view that the role of state government is to create a favorable climate for business.
Because Oklahoma’s 2013 law was so radical, the courts have in fact undone many of its worst features. Nevertheless, the very draconian nature of the law underscores how striking it is that those who support workers’ compensation rights could not form any coalition to win this battle on the political level. As of 2019, Oklahoma had only 6.2% of its workforce in unions. The state has established many legal obstacles to labor organizing, in particular a 2001 constitutional referendum that placed “right to work” in the state constitution. Claimants’ attorneys, notwithstanding their important role in specific cases, lack the numbers, funds, and organizing capacity to take on the power of big business. The fragmented welfare state places this politically limited force alone on the front lines of this crucial battle, with predictably lopsided results.
Despite recent setbacks for the war on workers’ compensation in Oklahoma, there is little indication of political capacity to move in the opposite direction with any force. Compliance with the 1972 Commission is long forgotten, no longer even in the conversation. The target status quo is still at best some truncated and tweaked version of the system that a presidentially-commissioned panel of experts deemed inadequate fifty-one years ago.
The three examples above illustrate how the disordered web of private benefits allowed for state-by-state erosion of protections for injured workers. States evaluated their “costs”—meaning costs for employers and insurers, not for workers—and then compared them to those of others. They then “saved money” by slashing workers’ benefits. Those lobbying for the changes targeted alleged fraud and medical inflation by curtailing claimants’ rights. Politicians attacked claimants’ attorneys and injured workers were collateral damage.
The inadequacies of the present system are becoming clear to even some on the conservative side of the debate. In the above-noted 2015 ProPublica/NPR report on the erosion of workers’ compensation, the head of the Alabama Defense Attorneys Association Dudley Motlow said, “It’s an injustice what they’re doing. . . . It’s just too low. How much money do you have to make to be considered poor folks in this country?” Despite this common perception, there has been little success in reversing course, and those lamenting the effect often underestimate the magnitude of the cause. Business has an interest in lowering the cost of compensation, and business lobbies are still in a dominant position across the country. This is true both economically—as the wealthy are gaining the lion’s share of benefit from economic growth—and politically, because public policy, especially at the state level, is oriented toward serving capital’s interests. The fragmented welfare state has left mere fragments of opposition on the other side. For the most part, this opposition has failed.
This article has argued that the situation of workers’ compensation in the fragmented welfare state has made it precarious. Because it is a private insurance program, businesses have a more direct interest in reducing it than they do in reducing tax-funded public benefits. Because it varies from state to state, it can be eroded bit by bit without attracting much notice. Because union workers are less dependent on it than other workers, organized labor is less invested than the rest of the working class in its preservation. Because lawyers are among the principal interests defending it, those who wish to cut workers’ compensation can justify their actions by attacking lawyers.
To address the current state of decline requires reexamining everything that made workers’ compensation precarious: the use of private insurance, the state-by-state variations, lawyer-dependence, and the confounding overlap in purpose with other benefits. The elements that allowed the erosion of workers’ compensation have been present from the onset, so even if it were possible to restore the past, that would not remove the precarity. The only viable path forward is through new demands for a new type of workers’ compensation: a comprehensive public social insurance program, with better benefits, more worker autonomy, and more emphasis on safety and worker empowerment.
State-based workers’ compensation systems should be abolished and replaced by a federal system organized under a federal system run by (a reformed version of) the Social Security Administration or the Department of Labor. There are already precedents for this option in the United States, both in the numerous extant federal workers’ compensation programs, like the Longshore and Harbor Workers’ Compensation Act and the Defense Base Act, and in programs like the Black Lung Benefits Act, which apply to subsets of domestic private sector workers. These programs vary in quality—the Longshore Act provides much better benefits than the Black Lung Benefits Act, for instance. Nevertheless, they have an infrastructure and set of benefits that could act as a model. There are also examples in other wealthy societies, particularly the welfare states of northern Europe, which could inform this process. Denmark, for instance, has a mixed public-private insurance arrangement and numerous generous rules, including coverage of unpaid workers and a presumption that a loss in earning capacity is related to an industrial injury “except where it is likely beyond reasonable doubt that this is not the case or this Act stipulates otherwise.”
Good reasons suggest preserving some of the particular benefits of workers’ compensation, like schedule loss and permanent total disability, which grant specific benefits to workers at the expense of their employers. These harms are inevitable in a system of mass employment, and there is a logic in imposing these costs on employers, whether through experience-rated premium taxes or some other mechanism. If we were to erode these benefits at present, it is likely that whatever replaced them would be inferior from the standpoint of worker well-being.
By the same reasoning, I am against attacks on the role of attorneys in the present system. While I can hardly be unbiased, evidence indicates that weakening claimants’ attorneys would weaken claimants—indeed, if the goal (as is sometimes stated) is to save business expenses, reducing workers’ benefits would be the principal advantage of weakening the role of lawyers. Nevertheless, the reforms envisaged here would ideally erode the need for attorneys’ services in this context. Workers do not usually need to litigate their entitlement to use their sick leave, or to secure Medicare or Social Security retirement benefits. We can design a system in which injured workers only need attorneys in exceptional cases. That setup was part of the original intent of workers’ compensation, and there is no reason to assume that it is impossible.
Because workers’ compensation is so intertwined with the other elements of the fragmented welfare state, the campaign to improve workers’ compensation would benefit by pushing for Beveridgean benefits to replace Bismarckian employer-linked benefits in other areas. In part, this succession is already happening with the campaign for single payer health insurance: calling for better workers’ compensation health benefits would become (thankfully) moot if health insurance were all under the public wing. The same should apply to paid sick leave: if workers could get reliable access to a form of public disability for non-work-related conditions, the need for workers’ compensation wage loss would diminish.
If health care and sick leave could be basic rights independent of workers’ compensation, there would be less concern about fraud. If single-payer insurance and strong regulation could contain medical costs, the crises of medical inflation—to insurance companies or “the taxpayers”—could be contained and with them some of the ugliest elements of the austerity agenda. In addition, a national drive to re-center the well-being of workers could give voice to concerns about safety and prevention and not merely post-accident remuneration. This succession could lead to a strengthened OSHA, with more inspections and stricter enforcement.
A movement for a new workers’ compensation could learn from the demands of the labor socialists one hundred years ago: public insurance, full wage replacement, pro-claimant presumptions, worker-controlled safety protections, and retention of the right to sue.
The most obvious objection to the above proposals concerns money. Unlike so many arguments for reform that describe a win-win scenario, I will not pretend that employers will welcome these proposed changes. Rather, my position is that increased costs are worth paying. There are, of course, mitigating factors, particularly if these changes could be enacted contemporaneously with policies like single-payer health insurance, which would save enormous medical costs that workers’ compensation insurers—and by extension, employers—now have to pay. However, those are caveats: achieving these goals will require raising taxes and increasing costs for business.
To win the above demands, workers and workers’ movements will have to challenge capital. The only way to fulfill the promise of workers’ compensation is political struggle. Reiterating the unapologetic principles of workers’ advocates a century ago is one step toward the goal.
