Monday, May 2, 2016

The Grand Bargain Defined or Refined

There is a great debate in the 21st Century about the “Grand Bargain.” This is a phrase from the Supreme Court’s decision in New York Central Railroad v.White, 243 U.S. 188, 37 S.Ct. 247, 61 L.Ed. 667 (1917). Several states have already celebrated their centennial of workers’ compensation. But next spring we will celebrate this landmark decision that concluded workers’ compensation was constitutional.

Recently, the American workers' compensation system has seen a variety of legal challenges. Many of these seek review of the constitutionality of workers' compensation, with employees contending that the measure of benefits afforded is not sufficient. They contend that the benefits from workers' compensation no longer provide a viable and equitable alternative to the rights an employee might otherwise enjoy in the tort or civil law systems.

This White case was commenced by the widow of a worker who died at work. She was awarded benefits under “workmen’s compensation,” a nomenclature (“workmen’s”) that was common in the Twentieth Century. The defendant railroad, appealed seeking a determination that the exclusive “liability, if any,” was under “the Federal Employers' Liability Act,” or “FELA.” Furthermore, the railroad claimed “that to award compensation” in this instance “would deprive” the railroad “of its property without due process of law, and deny to it the equal protection of the laws.”

Today's constitutional challenges are primarily by employees seeking to avoid workers' compensation. In White, the spouse of the employee contended the New York workman’s compensation law was constitutional. The railroad (employer) contended that workers’ compensation was not constitutional. At that time, several workmen’s compensation laws had been invalidated on the grounds of violating employer due process.

The Court quickly concluded White was not covered or constrained by the FELA, and proceeded to consider the constitutional implications of the workmen’s compensation law.

The details of the New York "Workmen's" Compensation Law are examined by the Court, including which employees were covered, the definition of "employment," and the payment of compensation “according to a prescribed schedule for the disability or death.” The law required an “injury,” defined as “only accidental injuries arising out of and in the course of employment, and such disease or infection as naturally and unavoidably may result therefrom.” Employer liability was generally “without regard to fault as a cause.”

The law did include defenses when injury arose from “wilful intention of the injured employee to bring about the injury or death,” and where injury “results solely from the intoxication of the injured employee.”

New York's law included “exclusive remedy” meaning that “the prescribed liability is made exclusive” and the only recovery possible unless the employer failed to secure the payment of compensation. If the employer thus failed, the employee could still choose to seek workmen’s compensation benefits from the employer or to sue in civil court.

The New York law provided “surgical, or other like treatment,” and income benefits “based solely on loss of earning power.” These were calculated using the “average weekly wages” and were related to “the character and duration of the disability, whether partial or total, temporary or permanent.” And there was compensation for injury by death.

The Court characterized this “scheme” as a “wide a departure from common-law standards.” The extent of change “naturally” resulted in doubts “respecting its constitutional validity.” A recognition by the Court that the more dramatic the change, the more prone the change might be to curiosity or challenge. 

The employer railroad contended that in this scheme “the employer's property is taken without due process of law,” and the employer “is subjected to a liability for compensation without” fault or negligence. The employer also complained that the worker’s damages were not “commensurate with the damages actually sustained” but only as “prescribed by the act.” Finally, the employer complained that the law forced this "workman’s compensation" relationship into the employment contract, whether or not a particular employer or employee wanted it.

The Court began its constitutional analysis noting that “[n]o person has a vested interest in any rule of law, entitling him to insist that it shall remain unchanged for his benefit.” Tort, or “civil” law, and its “nature and extent,” and defenses thereto can be “modified by legislation.” The court noted that the state could define and refine civil, “tort” liability. And thus, "workman's compensation" might be viewed as simply such a change to a state's tort law. 

Then the Court noted what some have since viewed as a prospective warning to the states saying that a state might not be able to “suddenly set aside all common-law rules respecting liability as between employer and employee, without providing a reasonably just substitute,” without violating the Due Process Clause. The Court said “it perhaps may be doubted whether the state could abolish all rights of action, on the one hand, or all defenses, on the other, without setting up something adequate in their stead.”  Many of today's challenges cite the "reasonably just" and "adequate" language.

The adequacy and just arguments are essentially that what existed when these laws were initially enacted no longer exists verbatim and thus the current laws must therefore be inadequate. This is perhaps supported by the White Court conclusion that “it cannot be pronounced arbitrary and unreasonable for the state to impose upon the employer the absolute duty of making a moderate and definite compensation in money to every disabled employee.” However, this “is not to say that any scale of compensation, however insignificant, on the one hand, or onerous, on the other, would be supportable.”

Analyzing the New York law, the Court concluded it set-aside one body of law and replaced it with another. The employee could no longer collect civil damages but was “entitled to moderate compensation in all cases of injury,” delivered with speed and without making various proofs. Likewise, the employer lost defenses related to fault and gained predictability of the amount of damages. This evidenced both employers and employees enjoying benefits and suffering detriments under the law; there is a mutuality evidenced.

The Court recognized the employer/employee relationship is “one of the most important of social relations," and because this law affects it, the law "is to be judged in its entirety.” The Court could not “ignore the question whether the new arrangement is arbitrary and unreasonable, from the standpoint of natural justice.” This has been a rarely quoted standard, “natural justice,” and its definition and affect remain unclear.

The Court ultimately concluded the "workmen’s" compensation law did not violate the employer's due process rights. 

Is the "Grand Bargain" a macro or micro analysis? Clearly, the Court determined the question in White analyzing the effect of that law on that worker's widow. In such an analysis there are unavoidable micro elements, as those facts and that case are considered. But there is also, undeniably, macro analysis of the system in a broader context. There is consideration of the law's effect on more than this railroad and this widow. There are broad policy analysis elements of the Court's analysis.  

The Court concluded that both the employee and the employer enjoy benefits and suffer burdens. It is this mutuality that makes the bargain "Grand." It is this mutuality that results in no one enjoying every benefit nor suffering every potential detriment. Often in mediation, parties are told that compromise is where everyone gets something but no one gets everything. Workers' compensation in its entirety is much like this. 

Should workers' compensation be judged on a micro level, i.e. is the compensation "moderate," is the speed and predictability sufficient, in this case? Or, should this be a macro analysis, i.e. does a state system overall provide for moderate compensation and sufficient speed and predictability.

Is it inevitable that individual employees and employers will enjoy or suffer inconsistent results under workers' compensation? If so, is disparity any less inevitable in the alternative civil justice system? Can the totality of a system be judged by the result in some micro example, some subset of its totality?

In any economic discussion, there will be scarcity. Our access to resources is limited. In order for one to have resources, another must be deprived of them. For example, an employer is deprived of money so that an employee can receive money (wages). This is an exchange, on a micro level. The higher the wages, the greater gain for the employee and the greater loss to the employer. If the employer's revenue is envisioned as a pie, this analysis is about how much of that pie the employee receives and how much pie the employer keeps. 

Likewise, a workers' compensation system might be considered as a collection of rights and obligations of both employees and employers. The combination of all rights in the system might likewise be viewed as a pie. And the law defines what portion of those rights and responsibilities benefit employees and what portion employers. 

A system change that benefits a group will conversely burden another group. Statutory change that expands employee rights will expand employer burdens. These changes may come in small increments over time, or perhaps in larger revisions sometimes referred to as "reforms." The changes may broadly affect all employers or all employees, or may make specific alterations which affect smaller, more discrete groups within the whole. 

For example, there was a time when workers' compensation laws included "liberal construction" provisions. These stated that the statute was intended to be "liberally construed" to provide compensation to employees. When these provisions were removed, statutes instead provided for equal justice systems in which each party received equal protection of the law. By this change, a measure of benefit previously enjoyed by employees was shifted to employers. This represents a system change, affecting all employees and employers. 

Alternatively, there was a time when employees were required to prove that occupational diseases were work-related. Statutes were amended to create presumptions that such diseases, when suffered by certain special employees, were presumed to be work-related. These changes altered the distribution of rights, but only as to these special employees and their employers.

As the 2016 National Discussion of workers' compensation proceeds, understanding of the Supreme Court's White analysis is important. The authority of states to substitute one recovery system for another is reasonably clear, but there will be questions as to whether there is balance therein. When legislative action enhances the rights of any, consideration of the corresponding detriments is appropriate. 

Will alterations to the process and system maintain the balance, the mutuality of rights and responsibilities that society has deemed an appropriate process for protecting employers and employees? What balance is appropriate? What balance is optimal?


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