Thursday, August 11, 2016

Too Poor to Pay?

A recent article about an employer caught my attention: Employer cries poor over worker's comp claim. The story was published by HRD Singapore. In this July 19, 2016 story, HRD describes a construction company whose employee suffered a serious work injury.

It is allegedly somewhat common for employers to dodge the responsibility to procure workers' compensation insurance. Some critics of workers' compensation assert that both avoidance and misclassification are rampant in the employment setting. It is sometimes referred to as being, or going, "bare." It undoubtedly occurs inadvertently in some instances, through misunderstanding of obligations and requirements. But, there is a perception that some businesses knowingly operate without coverage to save costs, and in the belief that luck will persistently shine on them and nothing bad will happen.  

In Singapore, Tan Zengshun suffered a work accident and "was left blind in one eye." It was apparently not some cataclysmic accident, just a normal, perhaps even mundane, work accident with serious results. The employer lacked workers' compensation coverage, and therefore defended itself against Tan's claim for workers' compensation benefits. Tan prevailed in the "labour court," and was awarded SG$93,000 (app. U.S. $69.080) in damages as a result of the accident. Later litigation increased this to SG$122,800 (app. U.S. $91,216).

The employer, Yao Xing, having not procured workers' compensation coverage, was ordered to pay the injured worker itself. I have seen this happen in Florida. Some employees in that "uninsured employer" situation will file a civil lawsuit. The consequences for the employer in that setting may be significant. The workers' compensation law in Florida penalizes the uninsured employer, see Fla. Stat. 440.06. And the financial consequences are not limited as they may be in workers' compensation. A recent Texas case illustrated the the potential financial impact, more serious from a financial impact than this Singapore case. 

The Singapore verdict and order to pay prompted company officials to complain about the size of the judgment against it. A director of the company wrote a letter to the Ministry of Manpower (MOM). This January 2016 letter complains that "it is beyond the firm's means to pay Zengshun compensation or medical fees." The letter "also claimed Zengshun’s condition was partly due to 'possible neglect' on the part of doctors in the hospitals that treated him." 

Workers' compensation is undoubtedly not perfect. The National Conversation has identified a multitude of issues that could stand further discussion, refinement, and repair. This Singapore story illustrates that it is likely or perhaps certain that there is regret when an accident threatens the existence of an employer. No business owner wants to lose their assets, their livelihood, to pay medical bills and income benefits to an employee. 

As I write this, I am reminded of Rhiana's ballad Take a Bow. Responding to an appologetic paramour, she says "Don't tell me you're sorry cause you're not; Baby when I know you're only sorry you got caught."

The time to protect the business against that risk and exposure is not after (as mom would perhaps have put it) "someone gets an eye put out." As kids in America, we all experienced the "go to" mom threat that someone was going to get "an eye put out." Mom warned us to stop certain activities. She was able to perceive danger that did not readily occur to us. She was the ultimate risk manager, observing behavior, instructing, warning, correcting, preventing. And, when someone did get hurt, she was the medical department. She always had some iodine, Mercurochrome, antibiotic creme, band aids, and when necessary a trip to the emergency room. 

But her focus was on preventing the injury, that is preventing the risky behavior ("young man, get off that roof this instant!"). The benefit of workers' compensation is similar. It is effective because all businesses purchase the coverage before there is an accident or injury. The coverage is not there primarily to prevent, but to mitigate effects of the risk. The business pays a certain sum (premium) in advance, in case there is an injury, and thus avoids the uncertain sum (damages) possible in the end. There is an ancillary preventative effect. To keep premium costs down, businesses are also encouraged to be safe and to prevent injury.

When a business elects not to protect itself, when a business chooses not to buy coverage to protect its employees, should there be sympathy after someone is injured? The answer is certainly yes, there should be sympathy. Sympathy is a natural human emotion. We have to be careful with the tendency or desire not to acknowledge sympathy; it does not mean we condone or excuse behavior, it just means we understand someone's predicament. But that sympathetic feeling is probably more appropriate for the employee. There is nothing wrong with sympathy as an emotion, but it does not change the outcome of the case. 

And, it is important to remember that it is the employee in this instance that is now blind in one eye. Whether that result is 100% the work injury or somehow partially attributable to the medical care as alleged, the result is the same - blind in one eye. There is nothing wrong with feeling sympathy for this employee either. It is the employee who has been living at "the Migrant Workers' Centre," who has lost his ability to "do the work I used to," whose "home is gone." But, that sympathy likewise does not change the outcome of the case. 

So, the effects of this event are devastating. The employee is blind in one eye, and has suffered significant loss. The employer is likely to cease to exist. The employee, employer, and all of its other employees are likely to be affected. And despite the best efforts of a legal system, it is perhaps unlikely that Tan will ever receive the full measure of damages, as similarly occurred in the recent Texas case. In the end, there is no winner in this story. 

It is important to remember that although both parties were damaged here, it was the employer in this instance that had the choice. The employer chose not to follow the law. The employer chose not to have workers' compensation coverage. Having chosen to take the risk, the employer likely enjoyed some gain. For some period, the employer did business and collected revenue while avoiding the expense of insurance coverage. Its luck ran out, and it suffers the result. Unfortunately, the employer's decision impacts Tan, Tan's coworkers, and ultimately the taxpayers that will bear at least part of the cost of his care and support. 

The most disturbing part of this story, however, is perhaps that it sometimes takes tragedy to correct bad behavior. The story says that in Singapore "insurance is a legal requirement for employers of foreign workers in order to secure their work permit." Enforcement processes are in place, and failure to procure insurance "can result in a fine of up to $10,000, up to a year's jail, or both." So, one might conclude that Singapore is serious about requiring coverage and preventing occurrences like this. 

But, it turns out that "insurance is only scrutinised by the authorities when the work-pass term starts," essentially once a year. The article notes that this lackadaisical enforcement paradigm resulted in minimal convictions for "failing to insure workers," one in 2015, "compared to two in 2014 and four in 2013." Seven prosecutions in three years? 

In Florida, we often hear that attorney fee liability is the "penalty" or downside that encourages appropriate carrier behavior on providing workers' compensation benefits. Some believe that this "penalty" is necessary because they perceive the government is not effective at policing the market. They feel there just are not enough workers' compensation "troopers" on the system "highway of benefit delivery," and not enough "tickets" being issued for bad behavior. That is a subject perhaps destined for more discussion in months to come.

So, with an absence of effective enforcement, perceived or real, employers apparently gamble regarding coverage. They put their livelihood, their business, and their employees on the line for near-term gain and hope against hope that no one will get hurt. In all likelihood that gamble must pay off sometimes for some employers, or else employers would quit laying that bet. But then sometimes the result is tragic. People are hurt. Lives and businesses are destroyed. It is important to remember that there are no winners in that event.  And perhaps if we think about it, read about it, the potential risks will drive better behavior?

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