WILG is hosting A Constitutional Challenges Summit on April 18th in Washington D.C. I won’t be able to travel to the event, but this post and my next post are my contribution to this important disucssion.
Two seemingly obscure court decisions (sorry for the cliché) involving payment of air ambulance bills in workers compensation cases raise big questions about the role of federal law in traditionally state-based workers compensation laws.
Thomas Robinson, editor of the leading treatise on workers’ compensation laws, summarized Texas state court and 10th Circuit Court of Appeals decisions invalidating Texas and Wyoming laws that held that air ambulance bills for workers hurt on the job should be paid under workers’ compensation fee schedules. Both courts held that since air taxis are regulated by the Federal Aviation Act, that federal law would preempt state workers’ compensation acts.
Many lawyers who specialize in workers’ compensation are skeptical of federal intervention in workers compensation. In the world of workers’ compensation so-called “federalization” is often viewed negatively. Robinson worried that the “wall” against federal intervention in the workers’ compensation system was not strong enough and wondered if there were any barriers to federal intervention in state-based workers’ compensation laws.
Anybody who reads this blog on a regular basis knows that I am a skeptic of those are who skeptical of federal intervention in the workers’ compensation system. My fundamental gripe with the “state’s rights” crowd is that workers compensation laws were enacted in the 1910s when a very pro-business Supreme Court used a narrow definition of interstate commerce to limit the power of the federal government to regulate the workplace. Workers’ compensation laws had to be enacted under state law through their 10th Amendment police powers. But the power of Congress to regulate interstate commerce was expanded by the Supreme Court in the New Deal era which allowed the federal government to mandate matters such as wages and workplace safety.
So when Robinson asked if there were any barriers to federal intervention in state workers’ compensation laws, my first reaction was to say no. But the more I looked at the issue, the more I question that reaction.
Robinson described the wall against federal intervention in state workers’ compensation laws as the McCarran-Ferguson Act. McCarran-Ferguson, passed in 1945, gives the states to regulate “the business of insurance” “without interference with from federal law unless federal law specifically provides otherwise. Since workers’ compensation is at heart an insurance scheme, McCarran-Ferguson provides a barrier against federalization of workers’ compensation.
McCarran-Ferguson was enacted primarily in response to Untied States v. South-Eastern Underwriters a 1944 decision which held that insurance contracts were interstate commerce. Southeastern Underwriters overturned roughly 80 years of precedent that insurance contracts were not interstate commerce because insurance contracts, even if involving interstate parties, were not actually commerce.
The issue of what constitutes commerce figured prominently in NFIB v. Sebelius, the 2012 case upholding the individual mandate in the Affordable Care Act. In that case, the individual mandate was upheld as constitutional based on the federal power to tax rather than the power to regulate interstate commerce. Much of the same reasoning found in the dissenting opinion in Southeastern Underwriters about what constitutes commerce was found in Chief Justice Roberts’ analysis of the commerce clause in NFIB v. Sebelius. According to Roberts, requiring a person to buy health insurance or any product did not constitute commerce, so Congress cannot enact such a requirement under its power to regulate interstate commerce. Justice Roberts expressly rejected a cost-shifting argument made in support of the individual mandate being constitutional under the commerce clause. Supporters of federal minimum standards for state workers’ compensation laws, like me, argue that deficient state laws shift the costs of work injures onto the taxpayers and/or the worker themselves
But under the reasoning in NFIB v. Sebelius, a cost-shifting argument in favor federal standards in workers compensation could run into tough questioning from the Roberts court if power to enact those standards is based on the commerce clause. In view of NFIB v. Sebelius, I believe the air ambulance cases are narrow exceptions to the federal deference to state law in matters of workers compensation.
But I believe state laws regarding workers compensation are subject to indirect federalization through constitutionally-favored tax legislation. In the recently passed tax bill, workers were given incentives to declare themselves independent contractors. As evidenced by NFIB v. Sebelius, the Roberts court seems more inclined to find laws constitutional under taxing authority than the interstate commerce clause.
Gig economy companies and their lobbyists are pushing for legislation like the NEW GIG Ac t (10) which allows companies to use the tax code to classify workers as contractors without running into legal trouble. For the foreseeable future, I believe the so-called federalization of workers’ compensation will take place in fights about tax law. The sad fact for employee advocates is that laws enacted under the taxing authority of the federal government are likely to be upheld as constitutional. Unfortunately, any worker-friendly reforms made at a federal level would face a skeptical audience with the Roberts court if they were enacted through the interstate commerce clause.