Of Regulation, Social Responsibility and Opt-Out

Once I survived being a teenager and began making my way through college, my political and social sentiments went decidedly conservative. As far as I was concerned, if I was able to work my way up through the evolutionary vagaries of adolescence to adulthood, get an education while working 30+ hours a week, and actually get into law school, then anybody else could too.

And if they didn't that was their own problem - not mine.

This was during the Reagan era - the man who shut down federal funding for mental in-patient facilities, fired all of the air traffic controllers, took on Leonid Brezhnev and the Berlin Wall, and survived an assassination attempt.

I was full blown Republican (or at least as Republican as a Southern California surfer could be). Less government. Free enterprise. Reduced regulation. Trickle-down economics.

Then those professors at law school warped my sensibilities. And this was at Pepperdine University School of Law - known to be a conservative institution (imagine if I had gone to Boalt Hall at Berkeley)!

I began to see the other side of the story and understand that the reason we have laws and regulations is because there is a minority of the population that can't behave themselves, or don't fit well into society, and they need guidance.

Or sometimes they just need to be outright controlled.

Because this minority of population can make life miserable for the rest of us.

Recent events, some having to do with work comp, some not, have really brought this home to me.

The Rana Plaza garment factory building collapse in Dhakah, Bangladesh, where the death toll is now reported to be over 900 people, is a current example (and just yesterday there was yet another garment factory fire in Bangladesh where at least 8 have perished).

The average wage of a garment worker in Bangladesh is 3000 taka a month. To put this into perspective, this equates to about twenty-one CENTS per hour if extrapolated to a 40 hour work week.

U.S. garment wages range from $8.25 (573.38 taka) to $14.00 (973 taka) per hour, based on production. And this does not include healthcare, vacation, holidays and other benefits.

So basically a garment worker in Bangladesh works an entire month to make the same as an American working about 4 hours. I know prices are lower in Bangladesh, but we're still talking extreme poverty and, when you consider that the garment worker's bosses "ordered" them to work despite concerns with building safety, it is in my mind essentially slavery.

Yet Bangladesh is the third largest exporter in the world of garments to the U.S., following only China and Vietnam, shipping $3.41 billion worth of garments to the U.S. in 2009. You can bet that only a handful of people in Bangladesh benefit from those export numbers.

According to the LA Times, "The Bangladesh garment industry, a national golden goose, is politically well-connected. Clothing accounts for a whopping 80% of the country’s $24 billion in annual exports and employs 4 million people, with dozens of lawmakers closely linked to factory owners."

Not to mention there's no workers' compensation to take care of the families devastated by the loss of income from a now dead garment worker.

Closer to home, the West Fertilizer Co. explosion in Texas further serves to remind us that sometimes there's a reason for regulation, and enforcement.

"It's rare for Texas to require insurance for any kind of hazardous activity," Tyler lawyer Randy C. Roberts told The Huffington Post. "We have very little oversight of hazardous activities and even less regulation."

Roberts expects West Fertilizer Co. owner, Adair Grain Inc and its owner, Donald Adair, to ask the court, in response to the various lawsuits coming its way, to divide the paltry $1 million in insurance and then seek bankruptcy protection against all other claims.

Adair's public statement says nothing about making people whole, but proudly announces that his church is offering grief counseling.

Grief counseling through his church - that's all he can offer? I can only assume that Adair's safety and risk management consisted solely of prayer based on the abysmal safety record (so abysmal there really isn't much of a record) of the plant.

Even closer to home is the case about the death of Charles Romano at the hands of Sedgwick Claims Services.

These are just recent examples.

When SB 30 was signed into law by California Governor Pete Wilson in 1992, I was still more to the right. I believed that this free market maneuver was the best thing for the state and that the carriers that couldn't survive without an artificial rate floor didn't deserve to be in business.

Boy, was I wrong on that one - the fact is that workers' compensation is a captive market, and anytime a market is captive it is subject to gross abuse.

And that's exactly what happened as the small specialty carriers that actually did provide good, well managed, claims services were wiped out by the big multi-line carriers that price competed and systematically destroyed employer's experience modifications with sloppy, inadequate claims handling.

What does all of this have to do with this week's extended rants?

Regulation - of safety, of financial responsibility, of the treatment of fellow human beings. Most of us, likely anyone that reads this blog, have a sense of social norm and etiquette.

I know YOU are offended by Raza Plaza, by West Fertilizer, by Sedgwick. Yet we are bound by the same regulations and laws that get created when this minority of luddites make the lives of others miserable.

Because without regulation these people can't behave themselves.

At my semi-advanced age I'm understanding that laws and regulations exist for a reason - so that the majority of the population is protected from that small minority of arsholes that ruin our lives and livelihoods.

We bemoan what we deem excessive regulation but I have come to ask myself, particularly over these past few months when so much misery and social expense could have been prevented with some strong regulatory action, "would I trade our regulatory environment for death or life ruination at the hands of some non-caring, contemptible anus?"

I'd like less regulation. I'd like the freedom of being able to conduct my life as I see fit because I'm a conscientious, responsible person.

But there's a cadre of society without conscience, or lacking etiquette, or just so selfish and narcissistic that common decency escapes them and the rest of us need protection from them.

Which is why there's so much excitement about Oklahoma opt-out. This gives employers with the resources the ability to create their own regulation and customize compliance to fit with their employment culture.

Sure, saving money is a prime motivator but when you talk to employers that have good non-subscriber systems in Texas and why they are excited about Oklahoma's option, it is because they can escape the rat's maze of regulatory burden that otherwise wouldn't be applicable to them, and can devise their own systems to do what is right.

In opt-out, regulatory mandate won't drive employer compliance and safety, the insurance market will because employers won't be able to cover their risks if they don't comply with underwriting requirements.

Peter Rousmaniere, a workers’ comp consultant who published a study on opt out last year, notes that only employers that can document and commit to three important changes to their practices will be able to obtain coverage: employers must have an ERISA (Employee Retirement Income Security Act) plan that specifies benefits for occupational injuries, separate mandatory arbitration provisions, as well as an effective safety and loss-prevention program aimed at mitigating negligence liability risk.

Opting out in the Oklahoma system requires a commitment beyond regulatory compliance - a company's cultural is going to determine success for both employer and employee.

There's going to be a couple of anal fissures, to be sure. But in Oklahoma, there is no "going bare" like there is in Texas, so Adair probably won't be interested in moving operations there, and certainly no Bangladeshi garment factories will be opening in that state.

I'm hoping my conservative roots get vindicated and that the market serves Oklahoma right. But as we have seen, it takes only one to ruin it for the rest of us.