Tag Archives: grand bargain

A Study on Expanded Use of ‘Presumption’

The COVID-19 pandemic has effected fundamental changes on society, business and our very existence. It perhaps cannot yet be characterized as the equivalent of the plague, cholera, smallpox or even some historically significant influenza strains. As of May 2020, COVID-19 is not yet even the most significant viral threat of our lifetime, that being human immunodeficiency virus (HIV), which currently infects about 40 million worldwide and killed an estimated 770,000 in 2018. However, COVID-19 impacts are widespread, broad, personal, economic and societal. 

Government responses have included testing, treatment, recommendations for social interaction, forced isolation through stay-at-home orders and diminished commerce through business closure orders. Some states have further reacted to the threat with executive and legislative alteration of workers’ compensation, specifically regarding presumptions of compensability. These presumptions are widely discriminatory, treating various workers differently than others. 

This paper begins with a brief history of American workers’ compensation, and the path from agrarian families through industrialization to the modern information age. The existence and function of vocations has evolved, and that continues today with new employment challenges from artificial intelligence, robotics, generational distinctions and a self-employed “gig” economy. COVID-19 brings attention to workers’ compensation from the perspective of its relationship with work generally, the public health more broadly and the overall employee/employer relationship. It has highlighted and seemingly accelerated the progressive application of the “presumption of compensability” as legislators, politicians and regulators look for ways to assist those affected by the virus. We examine and consider the long-term implications of its expanded use in workers compensation.

Brief Historical Perspective

Workers’ compensation in America today is no more like what it was at birth (1911) than any of us are as individuals. We, and it, began in embryonic form, learned and adapted, grew and matured and became what we are through evolutionary growth and development processes. To understand where workers’ compensation stands today, a brief review of its origin and course is helpful.

The American colonies began as agrarian societies. Initially, dependence for manufactured goods was near absolute, but local manufacturing businesses soon developed. However, well into the mid-19th century, the majority of Americans still earned their living on family farms. As the economy evolved toward the 20th century, the onset of the industrial revolution changed that complexion, with increasing populations migrating to towns and with the growth of industry, manufacturing and employment outside the family home and beyond the farm. This was a paradigm shift of two significant points. First, the labor was less socialized. A family on a farm would strive communally to support an injured family member, while other work environments would lack that familial loyalty. Second, work with machines presented a significant increase in potential for trauma and injury. 

It was the industrial revolution, the expansion of manufacturing and the industry ancillary to it, such as transportation, that drove the volume of non-familial injuries (most farms and businesses had previously been family-run). The 1860s brought America’s first attempt at tort reform, (effectively employer protection), which precluded lawsuits by injured employees. The reforms contained no substitute compensation system for the injured

From German roots, through English adoption, came a movement of American workers’ compensation in the earliest 20th-century. The initial efforts (1902) were deemed unconstitutional, largely because of the prohibitions on “taking” found in the 5th and 14th amendments to the U.S. Constitution. In our current era, when constitutionality has been a critical issue in workers’ compensation legislation and regulation, it is important to remember that early constitutional challenges were successful for employers, underpinned by the strict liability (aka exclusive remedy) element of workers’ compensation.

The foundational element of workers’ compensation was the occurrence of an accident, usually focused upon an “unexpected event happening suddenly.“ It was such a structure, based on “accident, “ that was challenged regarding New York’s 1910 workers’ compensation statute. Its constitutionality was upheld in New York Central R. Co. v. White, 243 U.S. 188 (1917).

White is a critical juncture in the history of American workers’ compensation. It is a critical consideration that all American law must fit within the powers that “we the people” have conveyed to government through our republican form of government and constitutional empowerment. That equation may, of course, be different in other countries that lack this constitutional structure and approach. Similarly, state in the U.S. has its own constitution, which may constrain state law. Thus, workers’ compensation will potentially vary from country to country and from state to state. 

From the system’s conception, birth, evolution and development forward, it has evolved from its foundation of sudden accidental injury. Concepts not endemic in its origin, such as psychiatric injury, repetitive trauma and occupational disease, were periodically added to the various state laws that define workers’ compensation. Notably, American workers’ compensation is a conglomeration of at least 55 different jurisdictional systems, rather than a singular comprehensive federal law.

The system’s evolutionary nature and state-driven diversity are critical elements that underpin the emphasis on constitutionality. The early years of the 21st century saw significant volumes of constitutional challenge to American workers’ compensation systems. These were predominantly, if not exclusively, challenges by injured workers contesting the sufficiency of benefits or process in these various state systems, each of which was unique due to its underlying statute. 

The decision in White found constitutional sufficiency in the perception of a “grand bargain,” since popularized and quoted as “The Grand Bargain.” The court conceived that there was excuse for the taking of property (no-fault liability) in the concurrent and coexistent loss of tort remedy to the employee. The underlying justification for the impairment of both employer and employee rights is the corresponding enjoyment of various benefits by each. 

The foundation of the 21st-century constitutionality challenges has primarily been injured workers asserting that cumulative changes in the “basket“ of benefits undermined the perceived balance of those corresponding advantages and disadvantages. Workers essentially argue that the decrease of, or constraints upon, benefit volume render the bargain less “grand.” Employee advocates see diminution of benefits without perceiving corresponding (“bargain”) enhancements. There is argument on this point. Others point to increased liability for employers in the first century of American workers’ compensation (disease, mental injury, repetitive trauma), similarly without perceived corresponding employer benefit.

There is also some disagreement as to whether systems should be considered in a macro or micro perspective. That is, should constitutionality be a determination of whether a system’s basket of benefits is sufficient generally for employees generally. Or, should the analysis be whether the basket available to a particular employee in specific circumstances is sufficient to justify the Grand Bargain consideration of the employer. This macro/micro discussion occurs both academically and in discrete cases of constitutionality argument. 

It is important to remember that workers’ compensation systems are drawn by legislative bodies through a process that is collaborative, adversarial and necessarily compromising. It is therefore generally accepted that workers’ compensation systems are imperfect. There are demonstrable instances in which employers are liable for injuries that are in no way their fault. Similarly, there are demonstrable instances in which injured workers receive no benefits for injuries that are as demonstrably certainly either the employer’s fault or at least inextricably caused by the work. The systems operate on a macro analysis of compromise. As a result, there are individual outlier examples in which the results are perhaps less than ideal. The systems are imperfect, drawn by people who are imperfect, and therefore necessarily imperfect results will ensue.

Occupational disease

The introduction of occupational disease came to workers’ compensation largely through diseases of and peculiar to workplace environments. The best examples are pneumoconiosis and other dust exposure diseases such as silicosis, asbestos and black lung disease. There is an inherent, internal logic to the compensability argument of such exposures. There are likely no occasions for exposure to these diseases in modern American non-work environments. One would be hard-pressed to note the last time they were exposed to such disease-causing dust in their daily, non-occupational lives.

While there is protection from such substances in our modern safety cultures, it is not necessarily true historically. In recent decades, school children were exposed to asbestos that had been used in school buildings and included in clothing as fire retardant. There was a time when children were exposed to Rockwool insulation in the streets and childhood playgrounds. Inhabitants of coal-mining towns were undoubtedly exposed to coal dust from clothing and vehicles in their everyday lives. Thus, the general public was certainly exposed to dusts even when on-the-job exposure was deemed compensable as occupational diseases. 

Despite the potential for other exposure, the link between pneumoconiosis and employment was deemed significant and persuasive. Workers’ compensation systems evolved to include a compensability of such occupational diseases that were not “ordinary diseases of life,“ or “to which the public was not ordinarily exposed.” Those who would lament the addition of such occupational disease to workers’ compensation systems and who view it as an inequitable additional liability should remember that the employers enjoyed a corresponding immunity from civil liability based on the ostensible unavoidable presence of these substances in their workplaces.

Similarly, the concept of repetitive minor trauma has become integrated in workers’ compensation, by legislative intent or judicial interpretation. These trauma situations were seen as akin to occupational disease, an “exposure” to trauma in the same sense as an exposure to dust or other disease-causing agent. Some states have created such liability through court interpretations by stretching the word “accident” into more than a discrete event happening unexpectedly. Some states responded through statutory inclusion of repetitive minor trauma while others proceeded merely under judicial interpretations of inclusion, and a few continue to this day to decline benefits for such “trivial trauma” injuries.

As to the addition of these and other liabilities to the states’ workers’ compensation systems, the authors take no position regarding whether the quid equal the quo in this regard. However, for the sake of discussion, the existence of different perspectives on this and other expansions of the application of workers’ compensation is positive in the consideration of workers’ compensation generally in the 21st century.

Challenges of proof

In all workers’ compensation cases, allegations of accident, injury, causation and benefit entitlement are subject to a party proving them. This burden is now often on the injured worker. A persistent problem with disease is epidemiology. Americans are persistently faced with a plethora of maladies for which causation remains an elusive pursuit. We are beset with cancers, heart disease, diabetes and more. These diseases perennially top the list of American cause of death. Billions of dollars are expended annually researching the causes, treatment and potential cures for these maladies and conditions. Though there is periodic progress and specific successes, in large part science remains unable to identify specific causative factors, despite the cataloging of various identifiable risk factors or predispositions with varying degrees of controllability.

A similar challenge is encountered in regard to mental illness. Unlike a broken bone that can be both physically perceived and diagnostically demonstrated by X-ray and other devices, emotional distress and damage are less objective. The existence, and resulting disability or impairment, is inherently more subjective. Through correlative analysis and application of academic training, some objectivity can be brought to bear. However, causation remains a challenge to prove. Equally troublesome is a general societal perception of bias against those who suffer emotional conditions, addictions and similar maladies. It is practical to consider societal bias against these people and conditions that may influence the compromise or bargain that is the statutory trade-off of workers’ compensation.


Workers’ compensation systems began with an inclination to providing injured workers with a benefit of the doubt. This was essentially a presumption in favor of the injured worker. In the late 20th century, statutory amendments were adopted in various states to remove such judicial interpretations. These were referred to as “leveling the playing field,” and essentially resulted in the injured worker having the burden of proof as regards accident, injury and benefit entitlement. However, in a similar timeframe, legislatures were beginning to adopt presumptions of compensability in favor of certain workers for certain conditions. 

The concept of a workers’ compensation presumption of compensability began with “first responders” and focused on a general skepticism as to the compensability of cardiovascular disease and events such as high blood pressure, heart attack and stroke. This skepticism evolved into adoption of presumptions for cancer and post-traumatic stress disorder. (Various such presumptions may not be found in a jurisdiction’s workers’ compensation statute, but in other statutes that impose different compensability, presumption or proof burdens in workers’ compensation proceedings.)  

Most Americans are familiar with the concept of a presumption in terms of our criminal law. We have heard on television shows that one is presumed innocent until proven guilty. This example illustrates the purpose and point of a presumption, which is merely that something is true under the law until proven otherwise. Presumptions generally fall within two categories, “conclusive” and “rebuttable.” A conclusive presumption makes the decision and its results impervious to challenge. A conclusive presumption of compensability in workers’ compensation would mean the alleged injury is compensable, despite any proof to the contrary that might be presented. A rebuttable presumption is the opposite, as it is true only until proven otherwise. 

See also: Workers’ Comp: Cost of Doing Business

In a general sense, both in tort and more recently workers’ compensation, the person seeking recompense (benefits) is presumed not to be entitled to them. That person, the injured worker, is presumed to not be entitled until she/he proves otherwise. Therefore, that person must come to the court and bear the burden of proving entitlement to what is sought. In general, that is showing that an accident and resultant injury occurred in the course and scope of the employment.

A compensability presumption generally establishes that premise. Thus, the “first responder” presumptions simply establish that benefits are due unless another party (the employer) proves that they are not. Generally, the presumption shifts the “burden of proof,” without significantly changing the underlying law of the jurisdiction regarding compensability generally. As these laws provide favorable treatment to select specified occupations or workers, there is an imposition of disparate treatment by government. Some workers are thus treated better than others, with the implication that thus society values them or their service more than others.  

These presumptions have become a trend in American workers’ compensation largely through the efforts of collective bargaining units (unions) representing the interests of firefighters and police officers, who have come to be collectively referred to as “first responders.” There are other occupations that have successfully sought inclusion in the “first responder” group, including correctional officers, paramedics and forest rangers. These definitions and thus the inclusion and resulting exclusion differ from jurisdiction to jurisdiction. 

Presumptions in the “first responder” realm have become commonplace as to cardiovascular conditions, cancers and emotional claims. Generally speaking, as noted above, these have changed only the evidentiary process of claims. Thus, any employee could prove the compensability of a heart attack or other cardiovascular event in workers’ compensation, but a “first responder” with a presumption may have such an event or condition presumed compensable without proof. A non-first responder would have to prove her/his case, while the firefighter would prevail unless the employer disproved the causation and compensability. 

The impact has been different with presumptions regarding first responders and post-traumatic stress disorder (PTSD), a reasonably new (1980) label for a long-documented psychological condition. This presumption has effected substantive change in jurisdictional workers’ compensation law by rendering mental injury claims compensable in one class of employee (first responders) to the exclusion of other classes. This is thus beyond the scope of previously enacted presumptions of a more procedural character. 

However, some states have legislated compensability of mental claims in workers’ compensation without necessity of any physical harm or injury. Those states, and this paradigm, are referred to as “mental/mental.” In other jurisdictions, mental sequalae is compensable only if that follows some physical injury otherwise compensable in workers’ compensation. This is consistent with the rule oft-applied in tort cases called the “impact rule,” “pure emotional damage negligently inflicted without physical injury was not compensable.” These jurisdictions and this paradigm in workers’ compensation are referred to as “physical/mental.” 

As an example, Florida is a physical/mental jurisdiction; mental claims are compensable only if related to and associated with a physical injury. However, the 2018 creation of a PTSD presumption in Florida expanded the scope of Florida workers’ compensation, rendering mental/mental claims compensable for those who qualify as “first responders” under the Florida presumption law. 

Various jurisdictions have established these presumptions for select occupations and conditions. The table was thus set across the country for a variety of reactions to the presentation of an unexpected and somewhat unprecedented contagion, COVID-19, being presumed compensable. 

Virus Claims

In February 2020, we began to hear about COVID-19. Within weeks, whole populations were in quarantine, subject to stay-at-home orders and even community lockdowns. The potential of a contagion was not a complete surprise. Hollywood has repeatedly focused upon this potential. However, COVID-19 has largely startled the world. That is, from its novelty (it is often referred to as the “novel coronavirus”), its spread (apparently often transmitted by asymptomatic carriers), its scope (worldwide) and its speed (from first diagnosis to World Health Organization designation as a pandemic in less than four months) make it unlike prior viruses, even those of pandemic magnitude

This contagion has produced once-in-a-lifetime job loss. There is already evidence of permanent changes in the way we dine, work, travel and relax. And through legislative action there will be potentially long-lasting changes to workers’ compensation systems. State executive action has been more prolific thus far, and of broader scope; the duration of those changes, however, is likely less significant as they seemingly remain dependent on the temporary emergency powers of the various governors. 

The selected tool for response to COVID-19 has generally been a presumption of compensability in workers’ compensation. This has ranged from the now traditional treatment of “first responders” to the entire non-work-at-home workforce. Some jurisdictions whose executive actions have been targeted between these two inclusion levels have more broadly defined a group as “essential”; others have instead specifically included other employee groups in the presumption.

Those states effecting change through legislative action are more likely making prospective change, though some have specifically included retroactive effect dating to the early diagnoses in March 2020. These actions are statutory amendments, which will remain unless repealed by future legislative action, but which may be rendered moot by medical developments. The states acting through executive action are similarly changing their workers’ compensation laws, but under the auspices of emergency powers of that branch delegated to enhance responsive speed in such events. The executive declarations are therefore temporary, yet could certainly be rendered more permanent through efforts of those states’ legislative branch. 

Regardless of whether executive or legislative action was taken, those who pay workers’ compensation benefits will likely be driven to adjust in the face of this unexpected expense. Insurance companies will seek increases in rates; employers that self-insure will either adjust prices or elect methods to otherwise absorb costs. The impacts will be potentially significant, depending on: market, the overall recovery of the economy, the volume of individuals that qualify for COVID-19 workers’ compensation coverage, and the benefits awarded in those reacting states. That these various uncertainties remain may render the adjustment efforts regarding cost-absorption challenging. 

Not all states have reacted with COVID-19 presumptions. Florida, for example, reacted with an executive decision directing acceptance of some COVID-19 claims by the state itself. Arizona issued a May 15, 2020, Substantive Policy Statement that directed payer scrutiny of denial decisions. This was not a directive of payment, but a veiled reminder of the potential for other remedies such as “bad faith,” if claims were denied without investigation and decisions taken “not well grounded in fact.” In early June, New York posted an undated memorandum that likewise was not a presumption but suggested some proclivity for the acceptance of COVID-19 claims.

Micro-economic impacts

In economics, the study of financial impact and cause-and-effect analyses are often divided into “micro” (small sample) and “macro” (economy-wide or perhaps industry-wide) categories. The impact of COVID-19 is appropriately examined in these two perspectives: the economic impact on a worker or employer, and more broadly on workers’ compensation systems. Analysis of impact on the nation collectively is perhaps impractical because of the federalist process and resulting diffuse and diverse state subsystems that collectively make up American workers’ compensation. 

The immediate financial effects are obvious. Essentially, those who have taken on risk in exchange for payment (insurance carriers) will have their exposure increased without corresponding premium collected or invested. Insurance companies essentially have those two methods for making money: premiums and investment. There is value in markets being predictable and transparent. The predictability of losses allows actuaries to forecast losses, affording a carrier opportunity to charge an appropriate premium, invest it to produce earnings and secure coverage for those who suffer an injury. 

Executive action regarding occupational disease like COVID-19 increases risk. Those actions are applicable retroactively, requiring coverage this year without any premium collected therefore this year. Statutory changes that similarly operate retroactively also produce that risk. There are valid questions as to the extent of that risk, and some expense associated with COVID-19 is not covered even in the most liberal extension of compensability (i.e., California). These financial risks can be divided for discussion into three categories: “immediate,” “intermediate” and “long-term.”

The immediate costs are associated with the quarantine requirement that follows the incubation period of this novel virus. When one learns that a co-worker or close family member is infected, the Centers for Disease Control and Prevention (CDC) recommends a self-isolation or quarantine of 14 days. This will produce either a depletion of paid sick leave or an immediate cessation of income. While it is possible that an employer might graciously provide paid leave in such a setting, to avoid infection of other workers by encouraging the self-quarantine, not all employers are likely to do so outside of the new federal mandate. None of the executive actions thus far have required such employer response. Furthermore, each suspected exposure will likely necessitate testing and, perhaps, a physician visit. Successive exposures might lead to repeated need for both medical attention and quarantine, though the federal mandate does not require provision of paid leave beyond 10 days (at five of seven days in a traditional workweek, effectively one, two-week quarantine). 

Even in California, the presumption of work-relatedness requires a positive diagnosis. Thus, if the employee quarantines for 14 days as instructed, and learns that the test results are negative, the employee is not entitled to workers’ compensation. Further, the testing involved, and any medications prescribed during that period, would likewise not be an employer’s workers’ compensation burden, though an employee might find those were paid by workers’ compensation as part of the obligatory investigation. And, the financial burden may nonetheless fall to the employer in a variety of situations under the recent risk-socialization amendments to the Family Medical Leave Act (“FMLA”). The same outcome of this federal mandate would thus likely result in employer cost in all states. 

The “intermediate” costs would begin with a positive diagnosis in those presumption states. These are foreseen as potentially nominal. A fair number of patients with such a diagnosis will self-isolate and recover in a home setting. One would hope that such isolation and recovery might be limited to 14 days. However, there are anecdotal news reports of individuals suffering serial positive tests and recovery periods of eight weeks. There will potentially be resulting indemnity benefits and nominal medical treatments or medication. There is significant anecdotal evidence that a significant volume of the infection cases falls into this home-recovery paradigm. 

The “long-term” costs would begin when hospitalization is deemed appropriate. Such care is expensive, with daily costs often exceeding $10,000. Treatment in an intensive care unit, or including surgeries, respirators and more would be significantly more expensive. Reports estimate that average COVID-19 hospitalizations are eight days, suggesting a reasonable probability of close to $100,000 exposure per case for those incurring “long-term” costs. There is anecdotal evidence of far more significant costs. A 62-day hospital stay in a non-work-associated situation yielded recent headlines of a $1.1 million hospital bill for a 70-year-old survivor of COVID-19. The disease has been present and studied for less than a year. Whether there are recurrent costs or significant risks of future complications and expense for patients remains unknown. 

Furthermore, “long-term” costs may also include the permanent death benefits and funeral expenses for the small percentage of patients who succumb to the disease and its sequalae or complications. Those complications may lead to litigation where an employer might contest that COVID-19 caused death, as opposed to a patient’s various potential pre-existing or co-morbid conditions such as heart disease, diabetes, asthma or otherwise, that could have been the real cause of death.

See also: Optimizing Care with AI in Workers Comp Claims

The foregoing is complicated by the potential that testing presents the potential of false results, positive and negative. A false test could affect the employee and employer as to the “immediate” costs, such as quarantine absence. As the compensability of COVID-19 depends on a positive diagnosis, a mistaken test could lead to over- or under-inclusive characterization of those and other expenses. Furthermore, a false negative test might mistakenly re-introduce an infected worker to the employer’s premises just as a false positive might artificially and unnecessarily extend the period of disability in the “intermediate costs” period. The lack of certainty or perceived dependability may increase costs, dictate additional testing, increase uncertainty and anxiety and degrade public confidence and cooperation. All these factors and more complicate the estimation of cost impacts from these scenarios. Regardless, even the lower-range estimates are significant.

Macro-economic impacts

There have been significant financial impacts predicted worldwide, with figures discussed in the billions and trillions of dollars. Early in the pandemic, some estimated that presumptions or other efforts to bring COVID-19 infection within workers’ compensation might increase costs to more than $50 billion. Actuaries quickly revised those estimates to $10 billion. In California, the Worker’s Compensation Insurance Rating Bureau estimates a range of cost impacts for the deployment of the presumption on COVID-19  from $2.2 billion up to $33.6 billion, with a mid-range estimate of $11.2 billion, which is 61% of annual workers’ compensation costs in that state alone. The Florida Division of Workers’ Compensation reported in June 2020 that approximately $3.5 million has been paid there for COVID-19 claims (notably a state without a COVID-19 presumption). Predicting the ultimate costs may be an elusive endeavor. 

These estimates and expenditures are perhaps not shocking in the context of news stories about trillion-dollar expenditures. However, the impact on workers’ compensation systems and premium should be viewed relative to system impact. Those costs will be borne across employment in those jurisdictions adopting such presumption. This shifting of viral disease into workers’ compensation represents a potential significant cost and may lead to significant implications for workers’ compensation systems as a material departure from their previously intended construction and application. Critical to the sound management of risk is the balance of loss payment with premium collection and investment. Potentially, a carrier or carriers might sustain a cost increase short-term, without serious effect. However, it is unlikely that such capacity is limitless as regards the nature of risk added or the duration or risk thus undertaken.

The immediate implication may be litigation. Illinois was among the first to adopt a COVID-19 presumption to broaden the scope of workers’ compensation. The Illinois Commission acted on April 13, 2020, near the outset of national reaction to COVID-19. The intent was to “hold employers responsible for COVID-19 diagnoses.“ There were legal challenges almost immediately, and in less than a month a judge had entered a preliminary ruling and the commission had withdrawn its rule. That preliminary ruling was a restraining order in a lawsuit brought by the Illinois Manufacturers’ Association and the Illinois Retail Merchants Association that had the support of more than two dozen business groups. It is groups like these that represent the employers that would see economic impact to their businesses from an increase in workers’ compensation premiums to finance such benefits outside the more historically normative and anticipated application of the statutes.

Workers’ compensation premiums are like any other cost of doing business. In setting a price for goods or services, businesses take into consideration the underlying costs such as raw materials, overhead (rent, utilities, taxes, fuel etc.) and labor. Part of that labor cost is the expense from workers’ compensation premiums. As premiums increase, businesses face economic choices, which may or may not be in the best interest of society but, at least in a public company setting, are in the best interest of its owners. 

Interstate competition

Faced with an increase in labor cost, business will either absorb that cost or increase the price of its products or services. To some degree, that decision will be internally driven, but it may also be influenced by competitive forces in the business’ market. If the good or service is confined to a geographic area, such as a hotel, the decision is more likely to be influenced by outside factors such as the price that competitors charge locally. If a hotel in Illinois sees increased workers’ compensation premium cost as a result of COVID-19, then it is likely that hotels around it will set the same or similar increases, and all such businesses will increase prices accordingly. Thus, an impact focused primarily on consumers.

If the business is one that faces cross-border competition, such as a hotel in Calumet City, Illinois, that is mere blocks from competing hotels in Indiana, then the reaction to a premium increase may instead be to absorb all or part of such increase to retain a competitive marketplace price. As the Indiana competition need not increase its price for such presumption, the Calumet City business may thus be unable or unwilling to do so. This may be a similar inclination in any business that is non-localized (mobile tradespeople, Internet-based sales, state border locations, etc.). History supports that businesses with a non-localized focus may even relocate facilities based on perceptions of state or local governance possibly affecting the economic health or profitability of the company. The business is inclined, even obligated, to minimize expense and maximize profit where possible.

This inclination to minimize cost has been historically viewed in terms of workers’ compensation premium costs as a jurisdictional “race to the bottom.” Some perceive that states vie for business enterprises by constricting the benefit levels in workers’ compensation and by otherwise “discouraging injured workers from applying for benefits.” The perception has been expressed that limited workers’ compensation entitlement leads to minimized insurance premiums, and thus a competitive cost advantage for business in that jurisdiction. The theory holds that businesses will strive when practical to locate in jurisdictions with perceived favorable workers’ compensation systems. That is, of course, not always possible, as with a hotel in Columbus, Ohio (which is a long distance from any state border and thus any competing jurisdictional price advantage). The theory may be evidenced by some but not all states where the other various factors that influence where companies locate and conduct their business are accounted for.

The perception that business may make cost-based location decisions is reinforced by recent construction of multiple massive automobile manufacturing facilities far from the Motor City. In 2018, Axios noted that “auto manufacturing in Southern states has flourished,” while the effect has been the opposite in previous manufacturing strongholds. The attributed reason is the lower cost of labor in the South, a product primarily of the unionized workforce in Michigan. Workers’ compensation costs are a factor in overall labor costs and can add significantly to expense. Premium cost can contribute to comparative advantage and competition for employment opportunities. 

The Chicago Tribune compared Illinois with Indiana. The analysis specifically attributed company departures to taxes, regulation, and “the Illinois workers’ compensation program.” Thus, as states strive to shift the societal cost of COVID-19 onto employers in their states, those costs will either decrease profitability (if the business’ competitive posture will not allow price increase), which may spur departures, or those costs will be passed on to consumers in price increases where possible. Even if the premiums increase significantly, that will not necessarily mean a commensurate or similar level of product price increase. However, increasing the cost of workers’ compensation insurance may have a significant impact on the price of any business’ products or services.

In non-localized endeavors, the cost of (or even existence of) workers’ compensation and similar regulatory programs may render competition with offshore enterprises increasingly difficult. While there is a significant focus in the U.S. on employee safety and welfare, that sentiment may not be shared in off-shore jurisdictions. There, the cost of labor may therefore be less than can be achieved here. The shifting of COVID-19 costs to business could exacerbate that effect. 

In each instance, the impact on the worker is important. Whether through collective bargaining or not, the employee seeks to earn a competitive wage in the overall economic exchange. The workers’ compensation system offers workers a critical benefit, a safety net. However, many employees will work an entire career without need for workers’ compensation; they will evade accidental injury and occupational disease. 

Similarly, a great many workers will toil year after year without significant need for the benefits of health insurance or short-term disability either (each is also a cost of labor for the employer, or a benefit purchased by the employee). Employees, for the protection of self and family, are interested in the existence of such coverages but are perhaps less interested in costs, unless they themselves purchase the coverages. At the same time, how or if presumption, its use, expansion and application affects businesses, their decisions and bottom line are similarly beyond the interest of most workers. It is, by default, of greater interest to companies and their interests in both efficiency and a quality to maintain a well-functioning system for work-related injury and disease. As the entity bearing the cost, a business focuses more on the implications of shifting COVID-19 into the workers’ compensation Grand Bargain.

The employee is benefited by the maximization of remuneration, in a relationship that must remain symbiotic. Employers cannot produce and profit without employees, though robotics and artificial intelligence imply some 21st century shifts in that relationship. Though the employee seeks to maximize return, an agreement for a wage rate is not worthwhile if the employer becomes bankrupt. The employee should want the employer to succeed and prosper, and the employer should have similar wishes for the labor engaged. In recognition of this symbiosis, the employer should likewise facilitate success for the employee. Those aspirations are unfortunately not uniformly seen in practice, but in ideal. 


The stage is set for workers’ compensation in some jurisdictions to face costs associated with COVID-19. Whether those costs are immediate through retroactive executive liability expansion or in the future through legislative expansion with commensurate rate changes, workers’ compensation insurance carriers will eventually be forced to increase premiums to cover this risk where deemed compensable. As states expand both their workers’ compensation coverage and premiums, there will be potential incentive for business to minimize presence in those jurisdictions, as practical, and thereby enhance profit. The implications for both intrastate and international competition are potentially significant. 

There may be those who characterize this expansion, contrary to recent system criticisms, as a “race to the top.” Critics may allege that merely describes the workers’ compensation cost of doing business. As COVID-19 plays itself out over time, the extent and frequency of using the presumption will influence how it and similar presumptions are used for distribution of risk in the future, not yet on the radar. Stakeholders in the workers’ compensation systems would be wise to carefully consider the full ramifications of the continued expansion of the presumption tool before capitulating to its use without a clear, supportable basis for doing so. The Grand Bargain was designed to offer balance in industrial injury rights between employers and employees. Overuse, and under-debate, of the presumption risks is tipping the balance away from the original intent and increasingly toward inequity between these stakeholders.

Long-Awaited Ruling in King v. CompPartners

The long-awaited decision by the California Supreme Court in King v. CompPartners (2018) S232197 is finally out. In it, the court unanimously held, through a majority and two concurring opinions, that a claim for malpractice against a utilization review (UR) physician for injuries arising from a review decision for the treatment of a compensable injury could not be maintained under the workers’ compensation system and is barred by exclusive remedy.

The case will be extensively analyzed by all participants in the workers’ compensation system. This will include parsing of various comments in the two concurring opinions regarding whether the UR process is performing up to expectations. As noted by Associate Justice Goodwin Liu in his concurring opinion, “The legislature may wish to examine whether the existing safeguards provide sufficient incentives for competent and careful utilization review.” The other concurring opinion, by Associate Justice Mariano-Florentino Cuéllar, stated, “Even now, those safeguards and remedies may not be set at optimal levels, and the legislature may find it makes sense to change them.”

It is difficult to find a point in time where a thorough analysis of the system is contemporaneous with the judicial review of it. Such is the case here. The utilization review events that caused this case to be brought occurred in 2013. Given that this case was dealing with a review of prescription drugs, it is important to note that “safeguards and remedies” now include the Medical Treatment Utilization Schedule Formulary.

As stated in the formulary, “ For injuries occurring prior to Jan. 1, 2018, the MTUS Drug Formulary should be phased in to ensure that injured workers who are receiving drug treatment are not harmed by an abrupt change to the course of treatment. The physician is responsible for requesting a medically appropriate and safe course of treatment for the injured worker in accordance with the MTUS, which may include use of a non-exempt drug or unlisted drug, where that is necessary for the injured worker’s condition or necessary for safe weaning, tapering or transition to a different drug.” [8 CCR 9792.27.3(b)(1)]

See also: Where the Oklahoma Court Went Wrong  

This particular regulation also states, “Previously approved drug treatment shall not be terminated or denied except as may be allowed by the MTUS and in accordance with applicable utilization review and independent medical review regulations.” [8 CCR 9792.27.3(b)(4)]

In addition, Senate Bill 1160 (Mendoza) requires UR processes to be accredited by July 1, 2018. The accrediting agency is URAC, although the Division of Workers’ Compensation has the authority to add requirements for certification. The purpose of accreditation is to have an independent, nonprofit entity “…certify that the utilization review process meets specified criteria, including, but not limited to, timeliness in issuing a utilization review decision, the scope of medical material used in issuing a utilization review decision, peer-to-peer consultation, internal appeal procedure and requiring a policy preventing financial incentives to doctors and other providers based on the utilization review decision.” [Labor Code Sec. 4610(g)(4)]

Much has happened to the system that was under review by the court in King. To improve on this progress, we need to understand what has been done already to provide more safeguards and remedies for injured workers while being faithful to the “grand bargain” that is workers’ compensation. This cannot be done by turning back the clock.

Time to Revisit the ‘Grand Bargain’

I honestly did not know what to expect, yet I was somewhat shocked by the results. And it is making me rethink much about our current educational strategies.

I’ve had the tremendous fortune over the last few years to present at numerous conferences and seminars about various areas of workers’ compensation. Many of those presentations mentioned the “grand bargain,” yet, it wasn’t until last week that the thought ever came to me. We spend a great deal of time talking about the tenets of the grand bargain, or the “great compromise”; but how many workers’ compensation professionals even know what it is?

I spoke at the Texas DWC Educational Conference in Dallas recently. My scheduled topic was titled “Opting Out of Opting In – The Cost of Non-Subscription.” I did not simply wish to focus on the accounting aspects of employer liability within the Texas non-subscriber world. I wanted to talk about the real cost to the employer, worker and society of not protecting our most valuable assets – our human workforce. Part of this presentation mentioned the basic doctrines of workers’ compensation, both the grand bargain and exclusive remedy. Shortly before the presentation began, however, I had a thought. I wondered, how many people, embedded in the day-to-day minutiae of workers’ comp, even know what the grand bargain is? I decided to ask, for the first time ever, that question of this audience.

See also: Taking a New Look at the ‘Grand Bargain’  

My session was the last one of the conference, the mightily feared “closing session.” A number of attendees had already departed, so I would estimate that there were only about 100 people in the room. As I began my presentation, I told them that I would like to ask what was likely a stupid question. I said, “By a show of hands, how many of you have ever heard of the grand bargain?”

Probably just a dozen or so hands went up. I claimed at the time that I was not too surprised by that, but I was truly taken aback. The grand bargain, the covenant that created basic protections for injured workers in exchange for limited liability protections for their employer, is the underlying foundation that created and has guided our industry for more than 100 years; yet 90% of the workers’ compensation professionals in the room had never heard of it.

How could we let that happen?

It is often said that, to understand where you are going, you must have a clear vision of where you have been. People working in workers’ compensation today may have a clear understanding of process, but they may be fuzzy on why we exist in the first place. I’ve often said that one of the problems of the workers’ comp industry is that it has been essentially commoditized over the last 100 years. It is not clearly understood by the people it serves, and those who experienced the confusion and tumult that brought the industry to life have long since departed this earth. Today, workers’ comp is viewed by many employers as a pain-in-the-butt mandatory expense that they would be better off without. They do not appreciate the benefits and protections that workers’ comp can provide them. They don’t know about the grand bargain.

And, apparently, many in our industry are not prepared to educate them. That must change.

This shouldn’t be difficult. The grand bargain can literally be explained in minutes. It should be required curriculum at all conferences and within workers’ compensation training programs. People must understand the “why” in addition to the “what” and the “how.” In fact, the “why” is probably the most important part, as it can motivate and guide the way our processes and procedures are performed.

See also: ‘Opt Out’ Will Return; Pay Attention  

This was not the fault of the people in that room in Texas. It is the failure of an industry to embrace and understand its heritage. It is the result of a relentless focus on process versus one of purpose and recovery.

We need to teach our professionals about the grand bargain. It is part of understanding our history; and, as we all know, a failure to understand history means we may be doomed to repeat it.

Workers’ Comp and Due Process Don’t Mix

If attorneys and judges really want due process with regard to workplace injuries, then they should endorse the workers’ compensation (WC) alternative in Texas that we call nonsubscription. They won’t, even though nonsubscription is consistent with the Fifth, Seventh and Fourteenth Amendments to the U.S. Constitution — the amendments that identify due process as a key component of our national identity. The Fourteenth Amendment is very clear: “[N]or shall any State deprive any person of life, liberty or property, without due process of law . . .” In this legal context, employers are considered persons, so WC statutes mandating them to pay insurance premiums — regardless of fault — are violations of due process. That argument was so powerful it nearly prevented the original enactment of WC laws around the country a century ago.

Unlike WC, Texas nonsubscription never required employees or employers to fully surrender their legal rights to a system of special adjudication, so when employees sue their nonsubscribing employers, the cases are of the big-boy variety: tort. In Texas nonsubscription, we’ve seen about 100 judgments/settlements at or over the $1 million mark — much bigger than what WC constituents are used to. Moreover, our lawsuits in nonsubscription are processed in the civil court system, which is both a hallmark of due process and a reminder of what a day in court really looks like.

By contrast, WC disputes are typically relegated to administrative systems, where attorneys are sometimes tutored on procedure during hearings by administrative law judges. If this sounds like due-process-with-training-wheels, it’s because training wheels are necessary for everyone involved in the system (from lawyers and judges to regulators and legislators) to keep their balance as they attempt to negotiate two types of terrain at once. Due process can be thought of as a reasonably smooth legal pathway that’s been cleared for centuries by lawyers and judges. The special adjudication reserved for WC can be thought of as a smooth but abbreviated fast track that’s subject to change at the will of a legislature. But the fast track to fairness within the confines of WC is now littered with bumps and potholes because judges have permitted lawyers to drag due process procedures into a system of special adjudication that was never designed to accommodate them.

See also: Back to the Drafting Table on Work Comp  

To fans of due process, the nonsubscription system in Texas does say: “We will not deprive our employees and employers of their life, liberty or property unconstitutionally.” To fans of special adjudication, the WC system in Texas (and everywhere else) should say: “We understand why an expedited process for solving problems related to workplace injuries appeals to both employers and employees, and we can reduce costs, save time and improve outcomes for injured workers by minimizing attorney involvement.”

So if you are an employer or an employee committed to due process in the world of workplace injury, you should do everything possible to support Texas nonsubscription. But if you are committed to foisting due process concerns onto existing WC systems, you’re probably just a lawyer looking for a payday.

These Aren’t the Droids You Are Looking For

The lack of due process in unconstitutionally seizing property from employers is the obvious and gaping flaw that attorneys and judges don’t want to discuss when promulgating due process in all other areas of WC. They certainly don’t want to alter the funding of WC. Strict due process was a hurdle that WC couldn’t clear when the Grand Bargain was struck in the early 20th century. Due process almost destroyed WC then — and it threatens to destroy it today. Simply stated, strict due process and WC do not mix. This critical warning continues to fall on deaf ears as state Supreme Court Justices from New Mexico to Florida apply due process wherever it is convenient for the legal profession (but not necessarily where it is most critical for injured workers).

When forced to address this unconstitutional seizure issue, the legal community has, thus far, successfully used mind tricks akin to the one made famous by Star Wars’ Obi-Wan Kenobi. Lawyers want us to forget that reduction of legal friction was a key incentive for employers to abandon their due process concerns and accept the Grand Bargain in the first place. Each time a new generation of entrepreneurs asks, “Why do employers have to foot the bill for this whole sprawling WC system?,” legal spokespeople respond, “Everyone already agreed to this,” deftly deflecting through a sort of Jedi mind trick. And when the business owners who have done their research press the matter by asking, “But didn’t everyone also agree to bypass other areas of due process in favor of special adjudication within the confines of WC?” the legal spokespeople wave their hands and shake their heads very convincingly as they chant in unison, “No. That is not the argument you are looking for. ”

As with Kenobi’s lie, there’s no substance to the lawyers’ falsehood beyond the confidence with which they assert it, but the mind trick continues to work. “Well, I guess that isn’t the argument I am looking for,” you might hear from an exasperated CFO. “These attorneys have been trained in the law, so they must know. Carry on.

Those who lie about due process’ historical place within WC need to know that we are on to them. Their flawed arguments need some work.

See also: What Happened on the Oklahoma Option?  

Texas nonsubscription has provided a robust case study in what due process looks like for employers and employees alike. WC worked well under special adjudication for decades. But over the past half century, as layers of procedural due process have been added to WC’s inner workings, the legal community has cried foul about the lack of substantive due process — except it selectively disincorporated that whole funding-by-the-employer component from its argument.

I support due process in Texas nonsubscription.

And I support special adjudication in WC.

Let the legal community dictate what happens in nonsubscription. But let the legislature dictate what occurs in WC — which was the original deal. Mixing them has never worked.

What Happened on the Oklahoma Option?

Regarding the Dillard’s v. Vasquez ruling, I point everyone to the dissenting opinion, which is so insightful and succinct that all concerned parties should read it.

The majority’s opinions ruling the Oklahoma Option unconstitutional were predictable in light of a number of cases on which the justices have opined over the past several months. For the fully developed rationale behind my own rejection of their poor decisions, I refer you to an essay I wrote four months ago: “Why Oklahoma’s Title 85A Has Been Right for the Sooner State Since 1917.” Leaning heavily on that essay and the aforementioned dissenting opinion from Justice Winchester, I offer a few thoughts below.

See also: An Open Letter on the Oklahoma Option  

Grand v. Petit Bargain

In my aforementioned essay, I introduce the concept that the petit bargain replaced the Grand Bargain over the past half century. This evolution can be summarized as follows:

Genesis of the Grand Bargain circa 1910

  • Before the Grand Bargain, employers could use extremely powerful (and unfair) common law defenses when sued by employees who were injured on the job.
  • Importantly, the only legal exposures by employers prior to the Grand Bargain were limited to: a) defense costs and b) damages when found negligent.
  • The Grand Bargain was meant to adjust this arrangement by: a) minimizing legal costs while b) dumping the medical and lost wage expense of workplace injuries on the employer.
  • The employee, therefore, would have a mitigated but universal solution via a no-fault system.

Incremental Incorporation of the Petit Bargain circa 1960

  • The legal community was excluded from the Grand Bargain except in rare cases of dispute.
  • Since disputes led to involvement, attorneys found ways to expand the grounds for disputes.
  • Attorneys (both plaintiff and defense) have steadily increased their standing, sophistication of arguments and expenses in workers’ compensation (WC).
  • For all WC cases (win or lose, plaintiff and defense) medical AND legal expenses are billed to employers.
  • Dispute resolution became the norm in many states’ WC systems—with Oklahoma being near the top of that unfortunate list prior to the overhaul of 2013.

The above summary demonstrates deft, self-serving maneuvers by the legal community until 2013. Recent court decisions are less deft and more blatant in their promotion of antagonism between employers and employees. The above summary should also help explain statements such as the one below from Mark Schell, co-chair of the Oklahoma Injury Benefit Coalition (the lobbying force behind the statutory overhaul):

The OIBC will continue to work with the [l]egislature to preserve and improve the progress that this historic legislation has provided Oklahoma despite the opposition of those who cling to the old, more litigious system from which they benefited.

What concerned parties need to understand about Oklahoma politics is that the state bar association has a lot of control over who sits on the state’s Supreme Court. Justices are therefore subservient to the collective agenda of attorneys throughout the state. The petit bargain is a financial windfall for attorneys and judges. Eliminating the costs of these disputes is not a prospect they want to consider, because very few attorneys fare well when everyone is happy. To avoid that conversation, lawyers and judges pretend to be united in their commitment to traditional and patriotic notions of due process—notions that are misplaced in the world of Grand Bargain legislation, which is all about special adjudication (a distinction explained in more detail in my above-linked essay).

Gurich Opinion

The Gurich opinion bears some clarification, as her argument included multiple logical flaws that inattentive readers may have missed.

See also: The Pretzel Logic on Oklahoma Option

After offering a false dichotomy in her first sentence, Gurich spends several pages discussing the red herring of Texas nonsubscription. She follows that up with a straw man argument against the false narrative of ERISA before concluding with a classic equivocation in her misuse of “exclusive.” Logicians and rhetoricians throughout the nation should be impressed with her argument’s brazenness (if not its efficacy).

More important than detailing Gurich’s sophistries are Winchester’s comments in his concise dissent.


Several months ago, we at WorkersCompensationOptions.com could see the writing of this decision on the wall, so we helped draft House Bill 2205, which addresses virtually all the concerns put forth by the Supremes yesterday. That bill had more than enough support last session to pass. We suspect the same will hold true this next session. It is now up to the legislature—as spokesmen of the citizens of Oklahoma—to determine what the next step is.