New York State's 2007 workers' compensation reform: success or failure?

• Author: D'Agostino, Mary L.

1. 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 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)

   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)

2. Brief History of the Workers' Compensation System In New York State

   1. Initial Unsuccessful Attempts

      Originally, the common law in New York State provided no remedy for on-the-job accidents, absent negligence on the part of the employer. (17) In 1909, the New York State Legislature established a committee, known as the Wainwright Commission, to study industrial accidents in the state and ultimately make legislative recommendations. (18) More specifically, this committee was charged with investigating "the liability of employers to employees for industrial accidents," the "efficiency, cost, justice, merits and defects of [other states' and countries' workers' compensation] laws," as well as "the causes of accidents to employees." (19) Thereafter, those appointed to the committee were required to report their findings to the legislature along with their recommendations for "legislation by bill or otherwise" to the 1910 New York legislature. (20)

      The Wainwright Commission's investigation was extensive; it conducted fourteen executive sessions, eleven public hearings across the state, examined 121 witnesses, and sent questionnaires to members of the judiciary, labor organizations, and employers located in New York. (21) When it reported to the legislature, the Commission advised that it was "strongly of [the] opinion that the present legal system of employers' liability in force in this State ... is fundamentally wrong and unwise and needs radical change." (22) The Wainwright Commission noted that almost every country in Europe had moved away from the fault-based system--then in place in New York--to a workers' compensation system which provided benefits to injured workers without regard to fault. (23)

      The Wainwright Commission recommended that the legislature make changes to existing laws, adopt an elective compensation plan for some categories of employments, and adopt a compulsory compensation plan for other categories of employments. (24) The Compulsory Compensation Act, as it was envisioned by the Wainwright Commission, would have provided employees of "certain very dangerous employments" with compensation for their injuries that would have kept the worker out of "absolute destitution." (25) The legislature heeded the Wainwright Commission's recommendations and passed New York's first workers' compensation statute on May 24, 1910. (26) Taking effect on September 1, 1910, (27) the Act provided that when an accident arose "out of and in the course of the employment," the employer was "liable to pay compensation under ... the rates set out in" the Act. (28)

      On September 2, 2010--the day after the Act became effective in New York--Earl Ives, an employee of the South Buffalo Railway Company, injured himself while working as a switchman with the railroad. (29) As a result of his injury, Mr. Ives was incapacitated from his position with the railroad for seven weeks. (30) Since the statute provided that benefits did not start until an injured worker had been either totally or partially incapacitated from gainful employment for at least two weeks, (31) Mr. Ives was due five weeks of compensation. (32)

      Following his on-the-job injury, Mr. Ives brought suit under New York's newly enacted workers' compensation statute. (33) In his action, Mr. Ives alleged that he was injured by virtue of the "risk or danger of his employment" with South Buffalo Railway Company, (34) and was entitled to five weeks of compensation. (35) South Buffalo Railway Company admitted every allegation contained within Mr. Ives' complaint and unsuccessfully advanced three arguments before the trial court as to why New York's statute was an infringement of both federal and state constitutions. (36) First, the employer argued that the enacted statute was barred by the U.S. Constitution as it deprived the employer of equal protection and of due process rights to liberty and property. (37) Second, the employer argued that the statute violated New York State's constitutional protection of the right to trial by jury. (38) Third, the employer argued that the statute violated the New York State Constitution by "limit[ing] the amount recoverable in actions to recover damages for injuries resulting in death." (39) In rejecting the employer's assertions, and directing a judgment for the plaintiff on the pleadings, the trial court noted that "every presumption is in favor of the constitutionality of the act." (40)

      After the Appellate Division, Fourth Department affirmed the judgment without opinion and Justice Williams dissenting, (41) the defendant appealed to the Court of Appeals of the State of New York. (42) After oral arguments were held on January 16, 1911, (43) the Court of Appeals issued an opinion, authored by Justice Werner, which lauded the thoroughness and excellence of the Wainwright Commission's report, (44) but found that the compulsory compensation statute was void as it unconstitutionally took property from employers without the benefit of due process by virtue of the liability imposed by the statute. (45) The court took pains to note that although the system dealing with workplace accidents in New York State was unlike the systems that existed in other countries; other countries were constitutional monarchies, unprotected by the "rigidity of a written Constitution." (46)

   2. From the Triangle Shirtwaist Factory Fire to a Constitutional Amendment

      The implications of the Court of Appeals' March 24, 1911 decision in Ives v. South Buffalo Railway Co. were soon realized. On Saturday, March 25, 1911, the day following the Ives decision, a rapidly-spreading fire broke out on the eighth floor of the ten-story Asch Building, located in Greenwich Village at the corner of Greene Street and Washington Place, (47) killing nearly 150 employees of the Triangle Shirtwaist Company. (48) For ninety years--until the September 11th tragedies occurred at the World Trade Center--the Triangle Shirtwaist fire notoriously remained New York's deadliest workplace disaster. (49)

      The Triangle Shirtwaist Company was responsible for the manufacture of "shirtwaists--inexpensive lightweight bodices made of cotton or linen that were popular with women at the time." (50) The 600 employees of the company (51) occupied the eighth, ninth, and tenth floors of the Asch Building. (52) The majority of Triangle Shirtwaist employees were young, female immigrants. (53)

      The building, named after owner Joseph J. Asch, was ten thousand square feet. (54) Based on this size, the building should have had three staircases, but instead had only two. (55) At that time, no law existed which would have required fire sprinklers to be installed or fire drills to be held in a factory building such as the Asch Building. (56) Further, the working conditions on the three floors occupied by the factory were so overcrowded that many workers were "performing their jobs literally on top of one...