Perez Vows to Reform Workers’ Comp Via Bully Pulpit

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By Stephen Lee

Oct. 5 — Workers who suffer injuries are “at great risk of falling into poverty” as a result of gaps in state workers’ compensation programs, the Labor Department said in an Oct. 5 report.

At the same time, “increasingly bold” efforts by some state legislatures to reduce employer costs and restrict workers’ benefits, such as those that have been attempted in Oklahoma, Tennessee and South Carolina, are shrinking the scope of the workers’ compensation safety net, the report found.

“We have all these other social safety nets—Medicaid, Medicare,” Labor Secretary Thomas Perez said at an Oct. 5 briefing. “In the Medicaid program, there’s a floor. In the [Unemployment Insurance] program, we frequently have to sanction states who go below the floor that they’re required to provide.”

Perez: ‘Silenced No More.’

Workers’ compensation is administered at the state level, except for federal workers. State control over the program sharply limits the Labor Department’s ability to enact nationwide reforms. Still, Perez said, the department does have some clout.

“Our leverage is our bully pulpit,” he said. “Our bully pulpit was silenced for a time in 2004, and it will be silenced no more.”

That year, budget cuts ended a Labor Department program that monitored states’ compliance with a series of federal recommendations issued in 1972.

Perez didn’t specify any reforms he would undertake, but the report makes a series of recommendations, including reinstitution of the tracking system, establishment of standards that would trigger closer federal oversight if a state fails to meet them, and formation of a national commission to study the problem.

Fewer Incentives to Fix Hazards

Employers pay only a fraction of the overall costs of occupational injury and illness, the report concluded, giving employers “fewer incentives to eliminate workplace hazards and actually prevent injuries and illnesses from occurring.”

Last year, the Center for Effective Government reported that employers are paying less into the workers’ compensation system than in past years, in the process shifting the cost burden to workers.

Fully half of the cost of worker injuries is now borne by workers and their families, according to the report, which cited Occupational Safety and Health Administration data. Workers’ compensation now covers only 21 percent of the costs. Federal, state and local governments account for an additional 16 percent.

‘Geographic Lottery.’

Many states have justified their efforts to limit workers’ compensation benefits by arguing that they must compete with other states to attract employers. But panelist Emily Spieler, a labor law professor at Northeastern University, said that approach leads inevitably to a “downward spiral” in which states jockey for position to offer the lowest costs.

“You’ve got to win the geographic lottery if you’ve been injured on the job, because in some states you can sustain yourself, and in other states you can’t,” Perez said.

Spieler also said she was troubled by new state laws that require claimants to prove the workplace was the major contributing cause for their impairment. Workers with pre-existing conditions commonly get caught in that trap and see their benefits either slashed or cut altogether, Spieler said.

She further said the growth of “Kafkaesque” state bureaucracies mire claimants in confusing communications and lengthy waiting periods. “The process is alarmingly complex at this point,” Spieler said.

Rising Costs, Sinking Benefits

During the same briefing, the National Academy of Social Insurance released its own report, finding that workers’ compensation costs are rising for employers, a signal that the U.S. economy is continuing to recover from the recession.

“As employment increases, the number of workers covered by workers’ compensation increases along with the number of work-related injuries,” the report concluded. “Thus, workers’ compensation benefits and costs increase as well.”

Employer costs in 2014 hit $92 billion, a 20-year high, Christopher McLaren, one of the report’s authors, said during the panel discussion.

The report also found, however, that benefits are falling. In 2014, employee benefits reached $62 billion, down for the second year in a row.

When the authors controlled for changes in employment, benefits per $100 of payroll fell in 46 states, reaching the lowest point—91 cents per $100 in payroll—in the past 30 years, McLaren said. Costs, meanwhile, rose in 31 jurisdictions.

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To contact the editor responsible for this story: Larry Pearl at

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