The Working World Before and After the 'Grand Bargain'

In the days before workers’ compensation first came to America in 1912, workers injured on the job had to sue their employers and prove negligence in order to receive compensation for their injuries. The tort process took time — lots of it — and in the interim the worker had no income and no way to pay medical expenses. If the worker was at fault, there was no remedy. Workplace injury often led directly to dire poverty.

Workers’ Compensation was a “Grand Bargain” designed to solve the problem of worker impoverishment. Workers gave up their right to sue their employers, and employers agreed to provide modest but certain benefits — indemnity for lost wages, all medical expenses, and depending upon the state, loss of function and/or lost earning payments. In today’s atmosphere of relentless cost saving from state to state, with eligibility requirements tightening up and benefits harder to access, many now think the “grand bargain” is no longer grand or much of a bargain for workers.

Which brings us to the gig economy and a world where workers’ compensation protections no longer exist. Handy Technologies, a web-based platform, has secured legislation in six states that makes it crystal clear that Handy workers hired by homeowners to clean, paint, or even assemble Ikea furniture are independent contractors and not employees of Handy. The model legislation reads:

The marketplace contractors performing services arranged through the marketplace platform’s digital network are independent contractors and are not agents or employees of the marketplace platform.

This legislation, which would apply to any of the many digital platforms that offer services, has passed in Indiana, Utah, Kentucky, Tennessee, Florida and Iowa. It almost passed in Georgia, but they ran out of time.

Working in the Post Comp World

Once states have embraced the notion of independent contractors and slammed the door on employee benefits, obvious questions arise: When these gig workers are injured and disabled from work, who pays the medical bills? And how does the worker survive without an income?

When a person shows up at a hospital or urgent care center with an injury, the medical provider wants to know: Did this injury occur at work? The answer here would be yes, it occurred at work, but because the individual is an independent contractor there is no workers’ comp coverage. If they have health insurance, there would likely be some coverage, albeit with co-pays and deductibles; at some point health carriers may balk at covering work-related injuries. If the individual lacks health insurance (which is no longer required), treatment would be covered by taxpayers.  

And what happens to wages when gig workers are unable to work for an extended period? There may be access to safety nets such as Social Security Disability or welfare, but eligibility is complex, time-consuming and often humiliating. Meanwhile, these “independent contractors” may well become destitute.

So we have come full circle: When workers’ compensation is taken away, injured workers and their families are on their own, virtually back in the 1800s. If a third party is liable, they can sue; if the worker is at fault, there is no recourse. The world after workers’ comp mirrors the world prior to it: Full of risk, uncertainty and chance. Not exactly a bargain, grand or otherwise. 

 About the Author:

Since 1990 Jon Coppelman has trained thousands of business owners from Main Street to Fortune 500 on the fundamentals of workers’ compensation cost control. From 2006 to 2012 he was a principal writer for the Workers’ Comp Insider, LynchRyan’s first-in-the-nation blog dedicated to risk management issues. He currently divides his time between his consulting businesses and his role as Senior Workers’ Compensation Consultant for the Renaissance Alliance, an aggregator based in Wellesley, MA serving more than 90 local agencies across New England.

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