Today’s post comes from guest author Thomas Domer, from The Domer Law Firm.
Dr. Richard Victor, an economist who founded the Workers’ Compensation Research Institute (WCRI) 35 years ago, just presented a paper at the WCRI National Conference in Boston. He indicated that federal policies on immigration and health insurance promise to make worse the challenges the United States faces by an aging workforce and a widespread labor shortage. He noted that workers’ compensation claims could double and overall costs could expand by over 300% in the next dozen years, without any increase in benefits to workers. External forces could bring far more cases into the system because of a number of forces, including an aging workforce, labor shortage, slowdown in immigration, and more shifting to workers’ compensation claims that should be paid by group health insurance. Dr. Victor projected current claims out a dozen years to 2030 indicating that claims should actually be down to about ¾ of today’s numbers, but external factors will more than overtake that favorable percentage. Labor shortages caused by baby boomers retiring will increase injury rates. Research indicates that the older workforce will mean an increase in lost work days and more injuries and a real impact on labor shortage as more baby boomers retire. Dr. Victor indicated “These labor shortages, which will be longer and deeper than anything we have experienced, will lead to significant increase in workers’ compensation claims and longer durations of disability.” During a period of labor shortages, employers relax hiring standards and hire workers they would not have hired in a normal labor market, including workers who are less capable. The overall labor shortfall leads to more workers’ compensation claims.
The Immigration Factor:
Economists have seen immigration as a factor that mitigates against the impact of the labor shortage. The Trump Administration, changing federal immigration policy, will further tighten labor markets and prolong the duration of a labor shortage. Moreover, Trump’s “anti-immigration rhetoric” also discourages people to come to America. In health care, Victor noted that one in six health care workers is foreign-born including 27% of physicians and surgeons, 15% of nurses, and 22% of home health aide, each of which effects the workers’ compensation system.
A shortage of people with adequate health insurance is also a problem for workers’ compensation. Health insurance deductibles have risen from the hundreds to many thousands of dollars, and this new reality causes more workers to go without or delay getting medical care for an injury or illness. When they can no longer ignore their condition, many claim it as a work-related condition and seek workers’ compensation (he cited a Rand Research study indicating workers with high deductible or co-insurance plan postponed care in over one-third of cases of the most common kind of workers’ compensation claims – soft tissue injuries.” As the number of workers who lose their insurance grows (since the Trump Administration and Congress ended subsidies and other aspects of the Affordable Care Act) case shifting form health insurance to workers’ compensation could have a major effect, ballooning workers’ compensation claims by as much as 35% in the next dozen years.
Victor’s conclusion: “You end up with a 300% increase in workers’ compensation costs without increasing benefits to injured workers.”
Democrat Lee Carter, a democratic socialist, won an election to represent Virginia’s 50th District in the state’s House of Delegates.
Lee Carter took a bad experience with a work injury and turned it into motivation to win election to the Virginia legislature last November. But the nature of Carter’s bad experience with his work injury shows why electing true worker advocates to state legislatures may not be enough to protect injured workers.
Multi-state claims can also subvert democratic rule. A worker has some input over workers compensation laws in the state where he or she lives and votes through their respective state legislatures. A worker who is forced to bring a claim in another state does not have that influence unless they happen to be among the 6 percent of private sector employees represented by a union. But even then, it may be burdensome to bring a claim in another state.
But workers have a say over national laws through their Congressional representatives. Minimum standards and some uniformity in state workers’ compensation laws would give injured workers more say in the types of benefits they would receive if they were hurt out of their home state or hurt for an out of state employer. Minimum standards legislation would also draw more national attention to the short coming of various state workers’ compensation laws. Renewed pushes for federal standards for workers’ compensation happened in the early Obama administration and towards the end of the Obama administration. National standards for workers’ compensation legislation will probably have to wait for a change in the partisan makeup of the two elected branches of the federal government.
Lost among the din of Twitter feuds and even more serious reporting on tax reform, is attention to a tax bill about gig economy workers that could impact more than just tax policy.
The New Economy Works to Guarantee Independence and Growth Act (NEW GIG Act) essentially allows firms such as Uber to withhold income taxes for workers without that withholding being construed as evidence of an employee-employer relationship. Boston College of Law Professors Shu Yi Oei and Diane Ring perceptively point out that the NEW GIG Act will help define how gig economy workers are classified for purposes of laws that cover employees like anti-discrimination laws, unemployment insurance, wage and hour laws and possibly workers compensation laws. Their argument is that NEW GIG allows companies like Uber to define their workers as contractors within the tax code and that helps creates a presumption of independent contractor status.
Federal employment laws like the Fair Labor Standards Act depend on the so-called common law test distinguishing between contractors and employees. State wage and hour laws, fair employment laws and workers compensation laws may not always rely on those definitions. In cases where a state doesn’t use a common law test to distinguish between employees and contractors, the question would be whether NEW GIG would pre-empt those state laws. NEW GIG does not appear to have an express preemption clause, so courts could tend to uphold state employment laws that would conflict with NEW GIG. Lack of express pre-emption language in NEW GIG may also mean that courts wouldn’t pre-empt state employment laws that rely on the common law test distinguishing contractors from employees. If courts read NEW GIG as just a way for gig economy companies to collect income tax from their workers without creating an employee-employer relationship, then its impact could be muted on state laws and possibly on federal laws.
But Uber is not the only gig economy company and public statements by our elected officials don’t always match up with their actions. Even if NEW GIG is just a tax bill there is power in the perceptions and presumptions that would be created if NEW GIG were passed. Advocates for employee rights would be well advised to keep a close watch over the NEW GIG bills in the House and Senate.
Curtailing 401k accounts would continue and worsen these trends as the 401k account has essentially replaced traditional pensions. The prospective end of 401ks may be the first tangible result of more draconian employee benefit reforms in the 2010s and 2020s. The emergence of the gig economy will probably be the catalyst for any new round of anti-worker reforms.
The emergence of the gig economy has led to an increase in fights over employee classification. Gig economy workers, like Uber and Lyft drivers, tend to be classified as independent contractors who aren’t eligible for even rudimentary employment benefits like unemployment and workers compensation insurance.
Courts and legislators have yet to conclusively answer whether gig economy workers are employees or independent contractors. No less a luminary than former Treasury Secretary Robert Rubin lead a panel of prominent Democratic economists and elected officials in a forum about modernizing labor laws to promote the gig economy. Anyone who remembers the results of the financial reforms promoted by Rubin in the 1990, should shudder when Rubin discusses reforming laws governing the employer-employer relationship.
The rise of the gig economy is leading to calls for portable benefits not tied to the employee-employer relationship as a way to address concerns about how to classify gig economy workers. Portable benefits are an old idea in the political arena. The Affordable Care Act increased portability of health insurance through health care exchanges. Even business groups critical of the ACA praised how the ACA increased portability of health care benefits. Many employers like the idea of “portable benefits” as it reduces employee costs.
While Congressional Republicans are working to curtail the 401k plan as an employee benefit, some Democrats are also anxious to help employers shed benefits traditionally offered to employees. These benefits can be voluntary benefits like health insurance or mandatory benefits like workers compensation and unemployment insurance. Either way workers need to filter out the noise of politics as entertainment and support political candidates who unambiguously put workers ahead of political donors from big business.
The Lincoln City Council is scheduled to vote on an ordinance on October 16th that would formally eliminate a requirement that Uber and Lyft drivers pass a physical, background check and test about Lincoln that taxi cab drivers currently have to pass in order to drive a taxi in Lincoln.
The City of Lincoln doesn’t have a workers’ compensation ordinance. But allowing Uber competitive advantages over taxi cab companies indirectly impacts workers compensation because if Uber takes market share away from traditional taxi cabs fewer drivers will be covered under workers compensation.
Lincoln does a have a human rights ordinance that covers more employees than either state or federal anti-discrimination laws. By allowing Uber a competitive advantage over traditional taxi cab companies, Lincoln is potentially excluding workers from coverage of that ordinance since Uber denies it is an employer. Traditional taxi cab companies are subject to Lincoln’s human rights ordinance.
While efforts to repeal the Affordable Care Act and cut Medicaid appear to have stalled for now, any successful effort to cut Medicaid will adversely impact workplace safety for nurses and nurse’s aides.
Lawmakers on a state or federal level are correct in having concerns about PBMs if they want to address drug costs and opioid use. The PBM industry has argue that state laws are “pre-empted” by federal laws regulating prescription drugs, so state laws are unconstitutional. Pre-emption is premised on the fact that federal laws are superior to state laws if there are federal and state laws on both subject matters. Recently the U.S. Supreme Court has used pre-emption to strike down state-based consumer protection laws in favor of corporate defendants. The threat of successful litigation may scare states, especially smaller states, from passing laws to regulate PBMs.
But state laws regulating the use of PBMs in the context of workers’ compensation may be easier to defend from a legal standpoint. Workers compensation laws are enacted under a state’s police powers under the 10th Amendment. The constitutional basis of workers’ compensation laws is arguably a fluke of legal history but workers’ compensation is traditionally seen as a state law concern so federal courts may be less to strike down laws regulating PBMs in the context of workers’ compensation.
Workers’ Compensation benefits are often confusing and seemingly unfair at first glance to many of my clients. As a result, I often find myself explaining to these clients how we, as a country, got to where we are with workers’ compensation laws and why the benefits are more limited than other civil lawsuits.
In explaining work comp laws, I usually give a brief description of the work comp system that was first developed in the early 20th century and a description of the “Grand Bargain”, the premise that employers pay for some benefits of their injured employees in exchange that the employee cannot sue that employer for negligence in civil court.
I, and many scholars, could go on and on about the history of the Grand Bargain and how it was strengthened/reworked in the 1970’s. Also, scholars can (and have), go on about the recent “reform” to workers’ compensation laws that have eroded workers’ rights in domino-fashion in many states by anti-worker legislation.
Nevertheless, I think the most poignant description of why we need to protect workers, and continue to protect workers, is this quote from our 26th president, Theodore Roosevelt, in calling for further reform of laws that Congress passed for employers’ liability laws:
In spite of all precautions exercised by employers there are unavoidable accidents and even deaths involved in nearly every line of business connected with the mechanic arts. This inevitable sacrifice of life may be reduced to a minimum, but it can not be completely eliminated. It is a great social injustice to compel the employee, or rather the family of the killed or disabled victim, to bear the entire burden of such an inevitable sacrifice. In other words, society shirks its duty by laying the whole cost on the victim, whereas the injury comes from what may be called the legitimate risks of the trade. Compensation for accidents or deaths due in any line of industry to the actual conditions under which that industry is carried on, should be paid by that portion of the community for the benefit of which the industry is carried on–that is, by those who profit by the industry. If the entire trade risk is placed upon the employer he will promptly and properly add it to the legitimate cost of production and assess it proportionately upon the consumers of his commodity. It is therefore clear to my mind that the law should place this entire “risk of a trade” upon the employer. Neither the Federal law, nor, as far as I am informed, the State laws dealing with the question of employers’ liability are sufficiently thorogoing.
— Theodore Roosevelt: Sixth Annual Message, December 3, 1906.