367 D'AGOSTINO 3/11/2013 2:02 PM NEW YORK STATE‘S 2007 WORKERS‘ COMPENSATION REFORM: SUCCESS OR FAILURE? Mary L. D‘Agostino* I. INTRODUCTION In comparison to other forms of liability, the notion that an employer is responsible for compensating an employee for an injury occurring in the course and scope of his or her employment is a relatively recent development.1 Germany has long been credited with enacting the world‘s first workers‘ compensation statute, when the country enacted the Bismarck Accident Insurance Law of 1884.2 Several years later, in 1910, New York State became one of the first * Editor-in-Chief; J.D. Candidate, Albany Law School, 2013; Le Moyne College, B.S. Human Resources Management and Industrial Relations, 2006. My sincerest thank you to Christine Sgarlata Chung for her continuing support and guidance, the membership of the Albany Law Review for their editorial support, and to Joshua and Lucca Bennett for their endless encouragement. 1 At the turn of the twentieth century in the United States, workers injured on the job were compensated via the ―negligence liability system‖ which was the ―common law rule[] of negligence combined with the defenses of assumption of risk, fellow servant, and contributory negligence.‖ PRICE V. FISHBACK & SHAWN EVERETT KANTOR, A PRELUDE TO THE WELFARE STATE: THE ORIGINS OF WORKERS‘ COMPENSATION 28 (2000). When President Theodore Roosevelt delivered his State of the Union Address to Congress in late 1908, he noted that there was no other area where state and national legislation lagged ―so far behind practically the entire civilized world.‖ Theodore Roosevelt, President, U.S., Eighth Annual Message (Dec. 8, 1908), reprinted in JOINT COMM. ON PRINTING OF THE HOUSE & SENATE, 16 A COMPILATION OF THE MESSAGES AND PAPERS OF THE PRESIDENTS 7198, 7208 (1917); see also J. HAMPDEN DOUGHERTY, CONSTITUTIONAL HISTORY OF THE STATE OF NEW YORK 363 (The Lawbook Exchange, LTD, 2d ed. 2004) (explaining that President Roosevelt mentioned the lack of liability and compensation legislation in the United States in his 1908 address). 2 See generally John M. Kleeberg, From Strict Liability to Workers‘ Compensation: The Prussian Railroad Law, the German Liability Act, and the Introduction of Bismarck‘s Accident Insurance in Germany, 1838–1884, 36 N.Y.U. J. INT‘L. L. & POL. 53, 61–62 (2003) (tracing the roots of modern liability schemes by examining them in the context of Germany‘s enactment of the first modern strict liability act to the first modern workers‘ compensation act). Other European countries soon followed Germany‘s lead, with Austria enacting a workers‘ compensation statute in 1887, Norway in 1894, Finland in 1895, and Great Britain in 1897. E. Clarence Aiken, Accidents—Workmen‘s Compensation, 1 N.Y. ST. B. ASS‘N BULL. 361, 361 (1929). Italy, Denmark and France soon followed suit by enacting laws in 1898. Id. In addition, Spain, the Netherlands, Greece, and Sweden enacted statutes after the turn of the century. Id. 367 367 D'AGOSTINO 3/11/2013 2:02 PM 368 Albany Law Review [Vol. 76.1 states to enact a compulsory workers‘ compensation scheme.3 Although the New York State Court of Appeals ultimately declared the statute unconstitutional,4 a series of events had been set in motion that lead to the passage of a predecessor form of New York‘s current workers‘ compensation system in 1914.5 Despite New York‘s progressiveness, in the years after the workers‘ compensation statute was enacted, it was much maligned and condemned by parties on both sides of an extraordinarily adversarial system.6 While some of the criticism focused on how expensive the system is for New York‘s employers,7 other criticism focused on perceived benefit inequities faced by injured workers.8 These well-founded criticisms were primary driving factors behind the New York State Workers‘ Compensation Reform Bill, a piece of legislation passed in 2007, which was aimed at remedying both of these system denunciations.9 3 See FISHBACK & KANTOR, supra note 1, at 103. All but six states passed some form of a workers‘ compensation scheme between 1911 and 1920. REPORT OF THE NATIONAL COMMISSION ON STATE WORKMEN‘S COMPENSATION LAWS 34 (1972). Mississippi was the last state to enact a workers‘ compensation statute in 1949. Id. at 45; P. Blake Keating, Historical Origins of Workmen‘s Compensation Laws in the United States: Implementing the European Social Insurance Idea, 11 KAN. J.L. & PUB. POL‘Y 279, 301 (2001–02). 4 See infra Part II.A. Wisconsin, in 1911, was the first state to enact a workers‘ compensation scheme that was able to withstand judicial review. Eston W. Orr, Jr., Note, The Bargain is No Longer Equal: State Legislative Efforts to Reduce Workers‘ Compensation Costs Have Impermissibly Shifted the Balance of the Quid Pro Quo in Favor of Employers, 37 GA. L. REV. 325, 325 (2002) (citing Martha T. McCluskey, The Illusion of Efficiency in Workers‘ Compensation ―Reform‖, 50 RUTGERS L. REV. 657, 669 (1998)). Since the Wisconsin workers‘ compensation statute was elective for Wisconsin‘s employers, it more easily withstood a constitutional challenge. See Borgnis v. Falk Co., 133 N.W. 209, 218 (Wis. 1911). 5 Prior to 1978, New York‘s system was commonly referred to as ―workmen‘s compensation‖ until the title of the law was changed to ―workers‘ compensation.‖ 1978 N.Y. Laws 5. The change was made to ―obviate any sexist distinction‖ between workers and bring New York into conformance with other states already using the term ―workers‖ in their respective statutes. MEMORANDUM OF THE WORKER‘S COMPENSATION BOARD, S. 5049, 201st Sess. (1978), reprinted in N.Y. STATE LEGISLATIVE ANNUAL 1978, at 103. 6 N.R. Kleinfield & Steven Greenhouse, For Injured Workers and Their Bosses, a Costly Legal Swamp, N.Y. TIMES, Mar. 31, 2009, at A1 (―New York, a pioneer of the [workers‘ compensation system,] . is widely recognized as the most adversarial.‖). 7 See, e.g., Erik Kriss, Local Lawyer Nominated to Head Workers Comp Board, SYRACUSE HERALD-J., Mar. 14, 1995, at C8 (statement of Governor Pataki) (―‗Skyrocketing workers‘ compensation costs are one of the main obstacles to economic growth and opportunity.‘‖); see also Alan Wechsler, Proposal Would Cap Payment Length, TIMES UNION (Albany), Mar. 24, 2004, at E1 (―[T]he cost of workers‘ compensation is driving business out of New York.‖). 8 See, e.g., Robert Grey, Op-Ed., The Claim Game, N.Y. TIMES, Oct. 1, 2006, § 14, at 13 (arguing that the benefits received by employees injured on the job are woefully inadequate and too many premium dollars paid by employers are kept by insurance companies). 9 See generally Press Release, Workers‘ Compensation Legislation Will Reduce Costs and Increase Benefits (Mar. 13, 2007) (on file with author) (internal quotation marks omitted) (―[When an agreement was reached, New York State was] reversing a trend that hampered 367 D'AGOSTINO 3/11/2013 2:02 PM 2012/2013] New York Workers‘ Compensation Reform 369 In commenting on the passage of the bill, Senator Joseph Bruno, then the Majority Leader, noted that ―[t]he workers‘ compensation reform law is a tremendous victory for workers who will receive increased benefits, and for businesses that will see a significant reduction in premiums.‖10 Then-Governor Eliot Spitzer expressed a similar sentiment and hailed the reform legislation as a win for New York‘s employers as well as a win for New York‘s injured workers.11 Despite what seemed to have been nearly universal praise of the bill,12 since 2007, both employers and injured workers have expressed their unhappiness with the legislation; however, it seems that it has at least minimally accomplished what it set out to do: reduce employer premiums and increase injured worker benefit levels. This note begins by tracing the history of the workers‘ compensation system in New York and providing a broad overview of how the system has generally operated since the system was enacted.13 Part III examines the events, circumstances, and concerns that lead to the passage of the 2007 reform legislation.14 Part IV examines the changes that were implemented to the system by the legislation, with a focus on premiums paid by employers and benefits paid to injured workers.15 Finally, Part V analyzes and considers whether employers have seen a reduction in workers‘ compensation premiums concomitantly with injured workers seeing a weekly benefit increase since the 2007 reform legislation was passed and suggests that New York should consider additional legislative action to ensure the long-term success of the reforms.16 II. BRIEF HISTORY OF THE WORKERS‘ COMPENSATION SYSTEM IN business growth for years and‖ will be ―better protecting workers in the event of a job-related injury.‖). 10 Id. 11 Steven Greenhouse & N.R. Kleinfeld, Deal in Albany Overhauls Pay For Worker Aid, N.Y. TIMES, Feb. 28, 2007, at A1 [hereinafter Deal in Albany] (statement of Governor Eliot Spitzer) (―‗This is a remarkable win-win situation for both workers and employers.‘‖); see also Press Release, Landmark Workers‘ Comp Accord Benefits Business and Labor (Feb. 27, 2007) (on file with author) (statement of Governor Eliot Spitzer) (―‗[W]e‘ve developed an approach that will achieve the twin goals of helping injured workers and improving the state‘s competitiveness.‘‖). 12 See generally Press Release, supra note 9 (providing statements supporting the legislation from multiple state leaders). 13 See infra Part II. 14 See infra Part III. 15 See infra Part IV. 16 See infra Part V. 367 D'AGOSTINO 3/11/2013 2:02 PM 370 Albany Law Review