"The inescapable conclusion," a federal commission concluded in July 1972, "is that workmen's compensation laws in general are inadequate and inequitable."
The 18-person National Commission on State Workmen's Compensation Laws scored each state's current system's degree of compliance with standards it decided were universally valid. Compliance overall was about 50 percent. Ten states were woefully deficient; about as many scored well.
Within a few years of the commission's report, researchers reported widespread improvements in state laws. Whether publicity engendered by the commission or threat of deeper federal involvement prompted the revisions was unclear.
In any event, the reforms did not satisfy the commission's director, John Burton, who stays active today as the de facto dean of workers' compensation researchers. Burton recently retired from Rutgers University.
The episode involved a particular alignment of forces, the reoccurrence of which is inconceivable in the foreseeable future. Workplace injury rates increased in the 1960s, jarring against the Great Society innovations in the country's social safety net. It appeared that state oversight over work safety had faltered.
The Nixon administration and large majorities in both houses of Congress responded by enacting the Occupational Safety and Health Act of 1970. Thanks largely to New York Republican Senator Jacob Javits, the act created a temporary commission to inspect workers' compensation systems.
When Burton, then on the faculty of the business school at the University of Chicago, was recruited to direct the commission, he was given 13 months to conduct the first ever systematic review of the performance of state workers' compensation systems.
Burton recalls that the investigation, including telling testimony, conveyed a picture of workers' compensation that was much worse than the staff and commission members had anticipated.
In most states, the maximum weekly benefit for total disability was below the national poverty level for a family of four. Moreover, permanent disability and medical benefits were often time limited.
The greatest barrier to state reforms, in the commission's view, was competition among states to keep their workers' compensation costs low. With the help of the National Council on Compensation Insurance Inc., the commission discovered that its recommendations would drive workers' compensation costs up by an average of about a third, with the largest jumps concentrated in the South.
Burton and his staff drew up a list of 84 recommendations, including 19 essential recommendations. The commission agreed that states should be given until 1975 to upgrade. If they did not, then federal intervention was called for.
The state-based workers' compensation system was erected before the New Deal. In 1935, Congress enacted a federally sponsored unemployment insurance system, which suggested to commission staff what a federally sponsored workers' compensation program might look like.
By 1976, the average compliance on the part of every state with the 19 essential recommendations rose from 8 recommendations to 11.5 recommendations. But well before then, the unanimity of the former members had dissipated, and Congress was in no mood for further action.
PETER ROUSMANIERE is an expert on the workers' compensation industry
September 15, 2011
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