If I could not see a plausible road to the federalization of workers’ compensation last September and October—and I could not—I certainly can’t see such a road in the wake of the events of November. Think of the case that was being made in support of federalization at that time: Cost shifts occasioned by innovations like opt-out will place pressure on other, federal benefits systems, with unpredictable and pernicious results. Let’s just say that those kinds of arguments are likely to have less impact on the incoming administration than on the outgoing.
Furthermore, if the policy hope of federalization proposals was that an eroding, unstable state benefits structure might be buttressed with a stable, politically unassailable federal regime, what hope can such a policy garner now? We are about to embark on a period in which we will be arguing in the context of Social Security and Medicare about the desirability of “individual accounts” financed by “premium supports” (my favorite buzz phrase of the very new season). What this boils down to is the distinction between defined benefit and defined contribution models. Will everyone have a right upon retirement to a sum-certain (a defined benefit) and medical care, as long as we have made minimum threshold contributions to the system during our lives? Or will “entitlement” depend upon the wealth of individual contributors to the system, such that the wealthy will receive a lot of a benefit and the poor will receive not much (and possibly a plainly inadequate quantity) of the benefit.
This leads me back to workers’ compensation opt-out, which I would argue is in reality a first attempt at workers’ compensation “federalization.” Be careful what you ask for. I have taught both administrative law and traditional labor law and am keenly aware of the reality that often federalization—a federal structure that preempts state and local law—means empty preemption. ERISA is a wonderful example of empty preemption. While marvelously protective of employee rights in certain respects, notably I connection with defined benefit pensions (which are increasingly rare birds), ERISA has also created many regulatory dead zones—gaps in which no state regulation is allowed, but where no federal substantive regulation is present. The result is a gap—“emptiness.” ERISA preemption has had much to do, for example, with why states have not been permitted to innovate in health care delivery reform. To the extent state laws regulate employer-provided health plans (which is most health plans), they are preempted by ERISA. Were that not the case the national health care scene would look dramatically different.
This leads to my final point. What opt-out is really “about” is empty ERISA preemption. But the reason empty preemption is so dangerous in the opt-out context is that ERISA is premised on the notion that employer benefits—especially employee welfare benefits—are entirely voluntary. An employer need not provide ERISA-governed benefits, if an employer does provide benefits it has exclusive control of the level of benefits it will provide, and an employer can terminate its benefits at any time under the Settlor Function doctrine (a trust law concept). This, of course, is at complete odds with the idea of a statutorily-mandated benefit. My great concern is that, in the chaotic reconfiguration of benefits we are about to witness, the distinction between mandatory and voluntary benefits will be entirely lost, and that people will forget the connection between workers’ compensation “benefits” and the right to a remedy for personal injury, which I will argue to my dying breath should be a Constitutional right (it is at least as important as property rights, in my opinion). If this loss of the distinction is codified in some mega-federal statute, it will be big trouble. I am becoming by degrees a staunch proponent of fighting out everything that needs to be fought out in the workers’ compensation realm on a state by state basis; a tedious process, but one less likely to leave workers’ compensation rights distorted, or lost in the shuffle.
In recent months, some folks have been inwardly laughing at me (politely, I am sure) as I have written about the stakes at play and their connection to Magna Carta. I suspect at least some of them are not laughing anymore, and my students will hear much about this theme as I teach my ERISA and Workers’ Compensation Law courses in the upcoming spring semester.
Michael C. Duff