Reasonably Just Substitute

Jacob White was a night watchman for the New York Central & Hudson River Railroad Company. White's job was to guard the tools and materials intended to be used in the construction of a new station and new tracks upon a line of interstate railroad.

He died on the job. The courts found that his job did not involve interstate commerce and thus his death was covered by New York's workers' compensation system (as opposed to the Federal Employers' Liability Act) and awarded benefits to his widow accordingly.

A constitutional challenge to New York's workers' compensation law was raised by both the railroad and the widow:

(a) that the employer's property is taken without due process of law, because he is subjected to a liability for compensation without regard to any neglect or default on his part or on the part of any other person for whom he is responsible, and in spite of the fact that the injury may be solely attributable to the fault of the employee;

(b) that the employee's rights are interfered with in that he is prevented from having compensation for injuries arising from the employer's fault commensurate with the damages actually sustained, and is limited to the measure of compensation prescribed by the act, and;

(c) that both employer and employee are deprived of their liberty to acquire property by being prevented from making such agreement as they choose respecting the terms of the employment.

And nearly a hundred years ago the United States Supreme Court found that compulsory workers' compensation passed muster.

The Court's dialogue is eerily prescient of today's environment:

"In support of the legislation, it is said that the whole common law doctrine of employer's liability for negligence, with its defenses of contributory negligence, fellow servant's negligence, and assumption of risk, is based upon fictions, and is inapplicable to modern conditions of employment; that, in the highly organized and hazardous industries of the present day, the causes of accident are often so obscure and complex that in a material proportion of cases it is impossible by any method correctly to ascertain the facts necessary to form an accurate judgment, and in a still larger proportion, the expense and delay required for such ascertainment amount in effect to a defeat of justice; that, under the present system, the injured workman is left to bear the greater part of industrial accident loss, which, because of his limited income, he is unable to sustain, so that he and those dependent upon him are overcome by poverty and frequently become a burden upon public or private charity, and that litigation is unduly costly and tedious, encouraging corrupt practices and arousing antagonisms between employers and employees." [emphasis added.]

A standard was espoused by the court - a compulsory workers' compensation system must be a "reasonably just substitute" for common law tort rights:

"The statute under consideration sets aside one body of rules only to establish another system in its place. If the employee is no longer able to recover as much as before in case of being injured through the employer's negligence, he is entitled to moderate compensation in all cases of injury, and has a certain and speedy remedy without the difficulty and expense of establishing negligence or proving the amount of the damages. Instead of assuming the entire consequences of all ordinary risks of the occupation, he assumes the consequences, in excess of the scheduled compensation, of risks ordinary and extraordinary. On the other hand, if the employer is left without defense respecting the question of fault, he at the same time is assured that the recovery is limited, and that it goes directly to the relief of the designated beneficiary. And just as the employee's assumption of ordinary risks at common law presumably was taken into account in fixing the rate of wages, so the fixed responsibility of the employer, and the modified assumption of risk by the employee under the new system, presumably will be reflected in the wage scale. The act evidently is intended as a just settlement of a difficult problem, affecting one of the most important of social relations, and it is to be judged in its entirety." [emphasis added.]

But the Court warns:

"This, of course, is not to say that any scale of compensation, however insignificant, on the one hand, or onerous, on the other, would be supportable. In this case, no criticism is made on the ground that the compensation prescribed by the statute in question is unreasonable in amount, either in general or in the particular case. Any question of that kind may be met when it arises."

One hundred years ago, and the intellect, and great wisdom of justices White, Van Devanter, Holmes, McReynolds, Brandeis, Day, Clark, Pitney and McKenna saw that there had to be a balance, that in order for both the employer and the employee to be forced into a structured program for work injuries that each had to give up rights in order to achieve fairness.

I had opined in the past that workers' compensation has nothing to do with fairness or justice, and that such determinations are in the hands of the legislatures that pass the laws creating and maintaining work comp.

I still maintain that position, so long as the system created or maintained meets the standards espoused in 1917:

1) There must be certainty;
2) It must be speedy;
3) There must not be any protracted disputes about fault or damages;
4) The employer's obligation must be limited and fixed;
5) The entire program must be viewed as a whole; i.e. no one facet takes precedence over any other.

There are constitutional challenges going on in state courts around the nation. Florida, Oklahoma, California ... each of the challenges to the state programs focus on singular, specific areas of workers' compensation law.

Are things any different now, in 2015, than they were when White died in 1914?

-"the expense and delay required for such ascertainment [of AOE/COE or disability] amount in effect to a defeat of justice"-
-"the injured workman is left to bear the greater part of industrial accident loss, which, because of his limited income, he is unable to sustain"-
-"frequently become a burden upon public or private charity"-
-"and that litigation is unduly costly and tedious, encouraging corrupt practices and arousing antagonisms between employers and employees"-

A common topic of discussion in workers' compensation circles these days is whether the federal government will weigh in and mandate certain standards, or even take over all of workers' compensation.

I don't think so. There is neither the political will, interest or fortitude for Congress to do so.

But the right case to the US Supreme Court, asking it to revisit the standards espoused 100 years ago could change everything.

Are modern workers' compensation systems (or an employer's opt out program) a "reasonably just substitute"? [Page 243 U. S. 201] There's good argument that we have strayed from that standard, and it will be both an employer and it's injured worker who will make that challenge together when the employer feels it is paying too much for too little, and the employee feels he is getting too little after suffering too much.

Comp + Immigration = SCOTUS

The immigration policy of this country has routinely been found by the United States Supreme Court to be a federal issue, even as states attempt to frame it within the context of laws that have nothing to do with immigration.

Florida's Supreme Court recently refused to disturb lower appellate court holdings that a workers' compensation statute could be more broadly interpreted to criminalize the lack of legal residency even if there had been no claim for workers' compensation benefits.

It appears that the U.S. Supreme Court, again, won't stand for a state trying to legislate and adjudicate immigration issues.

The court on Wednesday announced that Brock v. State of Florida has been distributed to the justices for conference on Feb. 20.

This doesn't mean that the court is going to accept the case for hearing. But it is a very good indication that the court is interested in the case so the probability that it will actually hear it is good.

Francisco Brock – also known as Armando Lopez-Bock – was arrested after a raid at Waste Pro USA, and charged with violating Florida Statutes Section 440.105(4)(b)9.

Section 440.105(4)(b)9 of Florida statutes makes it unlawful for a person to present "any false, fraudulent, or misleading oral or written statement to any person as evidence of identity for the purpose of obtaining employment or filing or supporting a claim for workers’ compensation benefits."

Brock's coworker, Hector Jordan – also known as Jordan Hector – was also arrested and prosecuted under the same statute.

Violation of Section 40.105(4)(b)9 is a third-degree felony, punishable by up to five years in prison.

Brock and Jordan went to trial in a consolidated proceeding. They moved to dismiss the charge against them on the basis that neither could have committed comp fraud when neither had ever filed a comp claim.

The judge granted their motion, finding the state was "required to prove that they obtained employment for the purpose of workers' compensation benefits" to establish a violation of Section 40.105(4)(b)9.

But the 4th District Court of Appeal reversed the judge last April.

The 4th DCA said Section 40.105(4)(b)9's use of the word "or" indicated that it could be violated in two ways – by the presentation of false information for the purpose of obtaining employment, and by the presentation of false information for the purpose of obtaining workers' compensation benefits.

Based on its reading of the statute, the 4th DCA found the Legislature "specifically intended to make it a felony for a person to knowingly present any false or misleading identification for the purpose of obtaining employment, irrespective of the existence of any workers' compensation claim."
Brock and Jordan both appealed to the Florida Supreme Court citing a conflict of laws in that the 1st DCA in an earlier case known as "Matrix," which held that a worker who presents a false Social Security card for the purpose of obtaining employment is still entitled to workers' compensation benefits, was in conflict.

The Florida Supreme Court wasn't interested.

In the past the U.S. Supreme Court has recognized the Immigration Reform and Control Act of 1986 as the federal government's assertion of control over the regulation of the employment of undocumented workers.

Part of the "immigration problem" this country has is that there is a disconcerted voice on immigration policy because states, particularly border states, seem to have their own agenda on immigration.

But immigrants, legal or not (and the vast majority of us are descendents of illegal immigrants), have a place in this country, have established important cultural roots in this country, provide a source of economic activity (don't get me started that they are a drain on the economy - there are study after study that say the exact opposite), and, bottom line, they are human beings deserving of what this country stands for: life, liberty and the pursuit of happiness.

I'm thrilled that the U.S. Supreme Court is giving the Brock case consideration, and hope that it hears the issues.

After all, its not often that workers' compensation makes its way to the very highest court of the land.

The Profile and Why Federalist Expansionism is Alarming

“My dad fought a war so this can never happen in America. I will not dishonor my father’s memory by giving up what he fought for. No, sir. With all due respect, I will not consent to a search without a proper warrant.” - Larry Gaines, private pilot to a Customs and Border Protection (CBP) agent seeking an unlawful, warrantless search of Gaines' aircraft because his flight fit a "profile" of “from west to east, from California.”

Coming off the Memorial Day holiday weekend, where the nation pays tribute to those who have fallen in the name of our country, I'm struck by the perversity of our collective sentiments versus an incongruous police state that has been evolving since terrorism was declared a national threat.

If you follow any sort of politics at all outside the workers' compensation arena you might have noticed an alarming trend over the past decade - expansion of the federal government's willingness to disregard individual Constitutional rights and the use of its mighty resources to quell individual dissent.

This started with the creation, funding and expansion of the Department of Homeland Security (DHS) and its more familiar agency, the Transportation Security Agency (TSA). Despite billions of dollars in funding for personnel and fancy machines, there has not been a single case of terrorism that has been thwarted by this massive bureaucracy.

We get a false sense of security as backscatter machines prob our bodies with electrons and we take our shoes and belts off and remove lap top computers from brief cases - while questionable TSA employees rifle through our bags committing theft (and we all know that the few that were actually caught are only representative of a much bigger problem).

But we all accept TSA like apathetic sheep because the federal government said we have to in order to ensure orderly travel, despite the fact that there is not one scintilla of evidence that TSA has ever made travel safer. None.

Then we get to Larry Gaines. His plight is not unique at all now in the general aviation community. It seems that a couple times per month some completely law abiding private pilot is detained and essentially searched, without warrant, and without legal authority, in the name of terrorism, despite the fact that general aviation has never been identified as a credible terrorism threat - it's simply much, much easier to plant a bomb at the Boston Marathon than it is to learn how to fly a plane and rig it as an explosive device.

And, by the way, these reports of aircraft and pilot interceptions do not involve the ONLY governmental agency that has ANY authority whatsoever over an aircraft and its pilot - the Federal Aviation Administration (FAA). The FAA, from what I have read thus far, disassociates itself completely from the police activity of these rogue federal agencies.

The fact is that neither DHS, TSA, CBP or any local police agency has any authority WHATSOEVER to detain, search, investigate, confiscate, prosecute, etc. any violation of any aviation law or regulation - NONE. They can not conduct "ramp checks" (inspecting an aircraft on the ground as a matter of course); they can not confiscate pilot certificates; they can not search an aircraft or detain a pilot for anything that occurs in the air, or at an airport once past security fencing.

And yet that does not keep these entities from using their police authority to engage in these unlawful activities because they have money, ergo power, and will use that ostensible authority because they have the resources and know that in order for YOU to muster sufficient resources to protect your rights you need to spend a lot of money in a short period of time, and by then these autocrats have had their way - they've made their point.

Other recent, glaring, and despicable examples of the federal government's disdain for the People's Constitutional Rights are the Justice Department's recent actions against journalists - unprecedented, and unfounded activities that are designed for no purpose other than to stifle the ability of The Media to keep a check on government.

There is the warrant against Fox News reporter James Rosen where the Justice Department with the blessing of the Attorney General of the United States, Eric Holder, obtained his Google account emails in which he corresponded with a State Department analyst suspected of leaking classified information about North Korea. Rosen was doing his job - he did not violate any laws, he did not engage in illegal activity, he did not create a security threat or a breach of safety for the public.

Investigators routinely search the e-mails of suspected leakers, but Congress has forbidden search warrants for journalists’ work product materials unless the reporter committed a crime - and Rosen committed no crime. His activity is Constitutionally protected and this very same issue has come before the United States Supreme Court many times in the past and on each occasion the government has lost.

But because the government deemed Rosen's activity against its own interests - SECRECY - they have engaged in a tactic designed to quell his First Amendment right of freedom of the press and have used him as an example to make sure that other journalists don't start investigating things the government doesn't want you to know. 

The federal government knows that they have resources, and that it takes lots of money to fight them.

And of course there is also the FBI's seizure of Associated Press reporter's phone records in the name of ferreting out who leaked information about a potential terrorist plot.

The issue isn't a direct threat to The Press - but the result has been to chill sources, and without sources news can not be responsibly reported. 

So while The Press experiences some legal challenges, the practical effect is that people are no longer willing to talk to The Press for fear that the federal government is going to come after them by the flagrant disregard of the Constitutional rights of journalists.

What does this have to do with workers' compensation?

Maybe nothing. And, maybe - everything.

We're in our own little cocoon of the workers' compensation world. We fight about benefit rates, about reimbursement to vendors, about waiting periods and presumptions. We alter standards for causation, carve out separate rules for psychiatric issues, develop formulas for indemnity, research risk rates and actuarially determine which business classes deserve our underwriting attention.

But once the federal government encroaches on the rights of the people, and the rights of states to govern as they please, none of what we do in work comp will matter. States won't need to distinguish themselves, or build systems to fit their unique cultures, because the Feds will take over for us.

The increasing power of the federal government in all respects of our lives should be alarming to you. If you recall there have been attempts to expand the powers of the federal government in insurance regulation, there have been attempts to create a federal net for workers' compensation, and perhaps the most invasive federal involvement to present is the aggressiveness of the Centers for Medicare and Medicaid Services to go after Medicare funding from awards.

And don't forget that we now have federally mandated health insurance...

Is the federal government going to interfere with workers' compensation trends because they might fit the "profile" - going from west to east from California? It's been proposed before and if we don't keep a check on federal power then we may one day wake up to a rude, new, reality.

postscript: see this article on targeting general aviation and the growing police state by The Atlantic writer James Fallows: http://www.theatlantic.com/national/archive/2013/05/annals-of-the-security-state-even-more-airplane-stories/276239/.

Supreme Court and the Relevancy of Work Comp

Thursday's US Supreme Court ruling in National Federation of Independent Business, et al vs. Sebelius, etc. et al, had most workers' compensation observers opining about the impact of mandated health insurance on the cost of workers' compensation.

Yet, when I read the news and the opinion itself, in particular after having just written about the insane financial failure of the present workers' compensation system in California, my immediate thought was that we are one more step closer to declaring workers' compensation in its present form redundant, unnecessary, illogical and administratively, financially and socially irrelevant.

In our present iteration, workers' compensation, regardless of all its faults and costs, remains a very necessary element of a modern economy - all modern economies, and growing economies like China, recognize the need for protection of the work force that is responsible for creating national abundance. It is what defines a responsible society.

Workers' compensation has two basic elements - providing medical treatment to cure and relieve a person from the effects of an industrial injury, and to provide indemnity for inability to work while being cured and to offset the permanent effects of an injury on future income.

While there are limitations on employer participation in the Affordable Care Act, mostly related to the size of an employer's work force, and an individual requirement to have insurance, I suspect that a majority of people that do work are now going to be covered for medical care.

In that sense, then, what is the logic behind maintaining a medical component in workers' compensation? Why does there have to be any "cost shifting" at all?

Critics to this line of thinking say that general health care and industrial medicine are distinctly different because workers' compensation has in place the indemnity component, so physicians need to address medical issues differently, taking into account whether an injured worker can return to work, the nature and extent of any potential disability and the myriad of various reporting points in the monitoring of a worker's medical condition.

All of those arguments have one fundamental flaw - they all assume that a physician who is treating an injured worker must know all about impairment and disability.

That of course is nonsense. Most systems recognize a specific type of physician - those that have been trained to evaluate impairments and render opinions on disability. They are called Qualified Medical Evaluators, or Independent Medical Evaluators, etc. Disputes or concerns about impairment and disability are dealt with by those experts.

Treating physicians treat. Evaluating physicians evaluate. That is no different than what occurs under our current system. Some physicians do both, and quite often those physicians get one or the other incorrect.

And study after study has demonstrated that tying indemnity to medical status only increases disability - there is a reward system in place that unintentionally creates a more disabled work force.

If all of the work force has medical coverage then why go through machinations and discriminating maneuvers to determine through "causation" standards as to whether a worker should get treated via the workers' compensation system or the general health system?

Doing so just defies logic.

I can certainly support such activity when it comes to the indemnity component - put money on the table and people inherently try to find a way to put some of that in their own pockets.

But doing so for medical treatment lacks human compassion and social responsibility.

The US Supreme Court's action on Thursday isn't going to change things overnight. It should, however, further provoke the debate about the relevancy of workers' compensation in its present form.

Irrational Complexity to the Detriment of Stakeholders

Attorney Emily Spieler and retired Rutgers University professor John Burton had published in the American Journal of Industrial Medicine in January an article entitled, "The Lack of Correspondence Between Work-Related Disability and Receipt of Workers' Compensation Benefits," basically concluding that workers' compensation doesn't do its job anymore.

"Injured workers are facing complex systems that are not providing benefits for all work-related conditions," they said. "The current system is irrational, at best, and unjust at worst."

Burton is well known to the workers' compensation community, having taught about this social policy system for many years at Rutgers and having produced much of the nation's public policy research.

Spieler is probably less well known, but has impressive credentials starting with Dean at Northwestern School of Law.

Both have spent the majority of their professional lives providing research, insight, guidance and policy recommendations about workers' compensation.

Everyday I read about some complex issue in workers' compensation that, to the uninitiated, would seem like splitting hairs and would be technically irrational to the general population, providing ammunition to the author's conclusion of irrationality and unjustness.

For instance, in this morning's WorkCompCentral news there is a story about a Florida case from the First District Court of Appeals making a distinction between "essential" hypertension and "arterial" or "cardiovascular" hypertension relative to whether a police officer could claim a presumption of occupational causation.

Without professional guidance would the average police officer even know the difference, let alone know that there was a presumption of causation? I doubt it.

Spieler and Burton in the study suggest that additional protection for injured workers against retaliation for injury reporting and programs to reduce "stigma" associated with injury claims could help increase participation in workers' compensation systems by workers with industrial injuries who otherwise would seek treatment through other channels.

Another example was in this morning's news reporting a case where a UPS driver sustained a work injury and was released to work by his treating physician with various restrictions. According to the case history, his supervisor reacted angrily upon learning of the worker's injury and refused to honor his medical restrictions, and that the supervisor was overheard telling someone in the UPS human resources office that the worker was feigning his injury and making a false workers' compensation claim. The dispute escalated to the point where the worker made a Department of Fair Employment and Housing complaint, obtaining a "right to sue".

Every year I am tasked with lead editor of our California Flowchart. I started this project before I started WorkCompCentral. The original excuse was to promote my law practice but the reality was that it was just a challenge. My thought was that there WAS some logic and rationale behind the system's laws that could be followed making it more understandable. I estimate the original Flowchart took me about 6 months of part time editing, mostly between 2 and 5 in the morning every single day, to produce.

That Flowchart was significantly less complex than the present day Flowchart (sold out...):

2012 CA Flowchart


And the Flowchart still does not have everything there is to know about the path a claim can take in the California system - there are just too many variables introduced from one reform to the next.

Indeed, Spieler and Burton state that decades of state amendments to workers' compensation laws passed since the late 1980s have tightened rules and limited compensation for workers.

The primary focus of those reforms has "consistently been on costs to insurers and employers, rather than on adequacy of benefits to workers," according to Spieler and Burton, though some changes did include provisions some would consider protective for the employees.

The authors call the issue of causation "a key pivot point" to closing the gap between the numbers of work-related medical conditions and those addressed in workers' compensation systems.

"There is no reason to link access to adequate health care to the cause of a medical condition," the authors wrote. "We wonder whether it's appropriate to have a social insurance system that is linked to proof of causation at work, given that the effects of work disability affects workers equally, irrespective of the etiology of the disability."

I find this statement very interesting in light of the present challenge pending before the United States Supreme Court as to the Constitutionality of the Affordable Care Act, aka ObamaCare. A decision and opinion by the Court is anticipated to be released in the next couple of weeks. Certainly any decision about the Affordable Care Act is going to impact workers' compensation as a subset of general health care because if the individual health mandate is upheld it would seem that the need for a separate medical system, i.e. workers' compensation, would be reduced or completely nullified.

For decades legislators have debated about the costs of workers' compensation and in my opinion that debate is misdirected. The debate should be about stability and ensuring that the single greatest privately funded social benefit system in the world operates to ensure that all employees have access to adequate medical care and financial protection against a ruinous situation.

Spieler and Burton seem to agree but they don't have the argument quite right.

The questions and concerns of today that are forcing notable percentages of injured workers to seek treatment and help outside workers' compensation systems, they say, should be approached "with a human rights lens" that "thrusts the injured worker to the center of the debate and de-emphasizes the effects on employers or insurers."

Take "employers" out of the above sentence and then the statement is correct because ONLY workers and employers should be in the discussion about workers' compensation. Everyone else, including the insurers, are just profiteers. Maybe necessary profiteers, but profiteers nevertheless.

NY Trusts Go to US Supreme Court

An interesting legal battle going on in New York has escalated to the United States Supreme Court and has implications beyond workers' compensation if the court decides to grant a hearing.

Chairmen of 12 former self-insurance trusts managed by New York administrator First Cardinal filed a petition for writ of certiorari asking the Supreme Court to intervene in a three-year battle over assessments levied by the State Workers' Compensation Board (SWCB) to pay off claims left by a string of trust failures dating back to 2006.

The trusts argue that SWCB had no legal authority to assess healthy trusts – those considered fully funded under New York law – for the failure of 17 other trusts declared insolvent and taken over by the board in the past five years.

The so-called "First Cardinal" trusts won summary judgment from the New York Supreme Court, the state's trial court, in May 2010.

The court ruled that assessing healthy trusts for the liabilities of failed ones constituted an improper taking of the rights of trust members to "reasonable, investment-based expectations" under the Fifth Amendment to the U.S. Constitution.

The trial court's ruling was overturned by a New York appeals court on April 21, 2011. The Appellate Division of the Third Judicial Department ruled that the board's assessments were designed to promote the common good and didn't "rise to the level of a taking."

The New York Court of Appeals -- the state's highest court -- declined to hear the case in September. In a two-paragraph slip opinion, the court said it found no constitutional issues that would merit a hearing.

The First Cardinal trusts contend that their combined board assessments swelled from $155,000 in 2007 to $12 million in 2008, after then SWCB Chairman Zachary Weiss invoked a section of New York law allowing him to impose emergency assessments to pay workers' claims.

To avoid further assessments, the twelve trusts voluntarily dissolved, effective Jan. 1, 2009. They contend they were assessed more than $100 million to pay for failed trusts and are facing another $33 million in exit penalties.

A quick search of "workers' compensation" in the Cornell University Law Library web site did not produce too many results, as one might expect, the last being in 2006, HOWARD DELIVERY SERVICE, INC., et al., PETITIONERS v. ZURICH AMERICAN INSURANCE CO.

The Howard case involved a carrier seeking priority status for unpaid premiums in a bankruptcy proceeding of its insured.

The court held that a carriers’ claims for unpaid workers’ compensation premiums owed by an employer fall outside the priority allowed by §507(a)(5) reasoning that such premiums are more appropriately bracketed with liability insurance premiums for, e.g., motor vehicle, fire, or theft insurance, than with contributions made for fringe benefits that complete a pay package, e.g., pension plans and group health, life, and disability insurance:

"In sum, we find it far from clear that an employer’s liability to provide workers’ compensation coverage fits the §507(a)(5) category 'contributions to an employee benefit plan … arising from services rendered.' Weighing against such categorization, workers’ compensation does not compensate employees for work performed, but instead, for on-the-job injuries incurred; workers’ compensation regimes substitute not for wage payments, but for tort liability."

The First Cardinal petitioners argue that New York's group-trust crisis is part of a bigger liability problem facing multi-employer pension systems and health insurance plans across the U.S.

"The court should grant review in this case to provide sorely needed guidance to the lower courts as they deal with the inevitable flood of litigation to follow," the petition contends. "The crisis in New York’s self-insurance market is a microcosm of a broader nationwide crisis in unfunded pension and health-care liabilities."

It seems to me that the US Supreme Court has made its view pretty clear with the Howard case - workers' compensation is unlike pensions in that it is not a wage payment. Equating a state requirement of joint and several liability, to which the trust members agreed going into the arrangement, to a pension or health-care liability, which are employee contract obligations, doesn't seem to hold up to legal analysis.

If the US Supreme Court does take up the challenge it could be a game changer. workers compensation, work comp, injured worker