Workers’ Compensation and Opt-Out Plans

October 19, 2015

I heard a story on National Public Radio about workers’ compensation on Thursday. I haven’t been able to let it pass.

Workers’ compensation differs from state to state; however, at its root every comp system provides for wage replacement and medical benefits when an employee gets hurt at work, without regard for what happened. (Families also get death benefits when an employee dies as a result of a work-related incident.) The system depends on a basic trade-off: In return for a limitation on payments, injured employees and dead employee’s estates cannot sue the employer or co-workers.

Workers’ compensation developed as a mandatory system in the United States about 100 years ago, in response to industrialization and a realization that the tort system was ill-suited to workplace injuries. Contact me and I will explain the tort problem; too many words for an already long piece.

The workers’ compensation system has worked pretty well for 100+ years. There’s fraud, for sure, and in plenty of jurisdictions benefits have not kept pace with inflation and wages. Nevertheless, the system works. Premiums get paid, and injured workers get benefits. Th system also reflects a market-based approach to worker safety, as employer premiums go up or down based on claims. Operate your plant safely and you will likely have a lower premium, Mr. Employer.

Alas, in some states no system is worthy if it benefit workers at the expense of their employers, even a little. The NPR story reports on the opt-out plans which are now part of Oklahoma and Texas law. (Walmart, Lowe’s, Safeway, and Nordstrom Are Bankrolling a Nationwide Campaign to Gut Workers’ Comp by Molly Redden for Mother Jones, from about six months ago, provides a more detailed backgrounder on the opt-out movement.)

Basically, Oklahoma and Texas have allowed employers to opt-out of workers’ compensation if they design their own plans. So what’s wrong with that, some might ask. It’s a free country, after all, maybe plan X is better than what the government mandates.

There is so much wrong with this idea, as implemented, that it is hard to know where to start, but I’ll focus on reporting deadlines for now. The reporting reflects the fact that most opt-out plans require that an employee report an injury by the end of a shift, or within 24 hours. So how many times have you hurt yourself, and not noticed the injury right away? Or thought, Oh, that’ll go away? (I hurt my knees on the treadmill, and whatever it is goes away for weeks or months.)

Or, perhaps, you’re injured and not able to report the injury. And maybe you don’t have people in your life who can do it for you.

According to the NPR story, a failure to report formed the basis for denying Rachel Jenkins’ claim. (The cause of her injury? She works in a social service agency, and was injured when she tried to protect one client, who was being attacked by another.) Alas, according to Bill Minick—he’s the president of PartnerSource, which plays a role in pushing opt-out laws around the country—the system worked. Why? Well, Ms. Jenkins’ supervisor complained and, after 16 days, the company waived the late filing defense. Per Mr. Minick:

Simply by voicing the concern and by having the claim reviewed informally, it was determined that that was not a good denial. It was not fair to the injured worker. And so the system worked.

Well, forgive me, but policy by anecdote is bad. And 16 days without care is really bad. And, channeling Paul Harvey, here’s the rest of the story. Ms. Jenkins was sent to an ENT doctor for her back injuries. That doctor referred her to an orthopedist, and her employer refused to pay. Really, really bad!

Mr. Minick thinks workers’ compensation is no longer necessary. He says:

Workers’ compensation systems grew up at a time when employers did not care about their employees. If one got hurt, you cast him aside and brought in the next immigrant to fill that job. Now companies are competing to be the best place to work.

Right. Like Ms. Jenkins’ employer.

P.S. Mr. Minick and I agree about the fact that many employers provide an excellent, safe, workplace, and do really care about their employees. Unfortunately, many do not, many of them are large employers, and opt-out provides nothing more or less than a chance to avoid responsibility.


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