The California workers comp experience as a cautionary tale

June 17th, 2004 by Julie Ferguson

We’ve just posted an article that Tom Lynch authored for the Winter 2004 edition of The Journal of Workers Compensation entitled Good Grief! Does Our Future Lie in California? Although the article was published just prior to the ouster of Grey Davis and the subsequent adoption of a workers comp reform plan, the overall examination of why some states work well and why some *break* may be instructive.
Here is an excerpt:

The United States did not invent workers compensation. That honor goes to Germany, which first introduced the concept in 1884. By the middle of the 20th century, most countries throughout the world had some kind of workers compensation or employment injuries legislation. Some systems take the form of compulsory social insurance; in others, the employer is legally required to provide certain benefits, but insurance is voluntary. In most countries, employers finance some type of employment injury benefits for workers.

In common law countries, such as the United States, workers compensation is based upon a doctrine of strict liability, or liability without fault. This is a departure from the principle of tort law in which the injured party receives no damages unless it can be shown that someone else maliciously or negligently caused the damage. The rationale for the “social fault doctrine” is that, under conditions of modern industrial employment, employers are in the best position to prevent accidents and disease, and they should therefore be given economic incentive to take preventive action.

In 1911, after failed legislative attempts in Massachusetts and New York that had been ruled unconstitutional, Wisconsin successfully followed the lead of Germany and England and became the first state in America to enact a workers compensation statute. Over the next few years, the rest of the nation followed suit. Today, our 50 states have 50 different laws.

One might be tempted to say that what we really have are 50 bottles of identical wine with 50 different labels, but the differences go far beyond that. Benefits differ by state, as do systems for medical reimbursement. The workers compensation system in most states operates through some form of private insurance, but in some states, such as Ohio and West Virginia, the system is operated by the public sector; there are even two states, Texas and New Jersey, that make workers compensation insurance optional for employers.

The differences that abound among the states in their approaches to workers compensation lead to some states having economically “healthier” systems than others. Nowhere is this difference in wellness more vivid than in California, the state that, if it were a country, would have the fifth leading gross national product in the world. (Read the full article).

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