Challenges to the grand bargain of Workers’ Compensation

Challenges to the grand bargain of Workers’ Compensation

In many states, there are workers that are not required to be covered under Workers’ Compensation. (Photo:

Workers’ Compensation was established over 100 years ago as a “grand bargain” between employers and labor. Injured workers gave up their right to sue employers in civil court for workplace injuries, making Workers’ Compensation the “exclusive remedy” for such injuries. In exchange for this, Injured workers received statutory benefits in a no-fault system. Over time, we have seen a number of different challenges to this grand bargain.

Is exclusive remedy exclusive?

The answer to this question is clearly no. Nearly every state has a very narrow statutory exception to exclusive remedy if the injury was caused by an “intentional act” of the employer. Some states have a lower threshold if it is determined that the employer’s actions were “substantially certain” to cause injury. In both of these cases, there are rarely successful lawsuits filed by Injured workers against their employer, and most suits do not survive past summary judgment.

However, there are many other ways in which the exclusive remedy of Workers’ Compensation can be circumvented. These include:

  • Statutory exceptions – New York employers in the building trades are still exposed to civil litigation in addition to Workers’ Compensation under the Scaffold Law. This allows workers in the construction industry to file suit against their employer if the injury arose from an “elevation-related hazard.” New York is currently the only state that still has such legislation in place, with Illinois repealing their Structural Work Act in 1995.
  • Third-party-over actions – Some states allow civil litigation surrounding a work injury under a third-party-over action. In such cases, the employee sues a third party for contributing to their injury and then the third party brings in the employer on a contributory negligence action. For example, if an accident involves machinery, the machine manufacturer can bring the employer into the suit alleging that they inadequately trained their employees, that the machine was not properly maintained, or that it was modified by the employer.
  • Dual capacity suitsDual capacity suits allow the employee to sue their employer as supplier of a product, provider of a service or owner of premises. For example, if a worker is injured using a machine manufactured by their employer, some states allow that injured employee to file suit against the employer based on their negligence as the manufacturer.
  • Constitutional challengesConstitutional challenges are the latest avenue for attempting to circumvent exclusive remedy protections. There was much attention given to the Padgett case in Florida where a judge ruled that the Workers’ Compensation statutes were unconstitutional because statutory changes that reduced benefits to workers and raised thresholds of compensability had eroded the “grand bargain” to the point that it was no longer valid. This case was reversed on appeal because of a technicality so the higher courts never ruled on the merits of the argument.

Is no fault really no fault?

Again, the answer is clearly no. Many states allow for a Workers’ Compensation claim to be disputed if it is proven that the injured worker was intoxicated at the time of the accident. In addition, some states allow for a reduction in benefits if the accident occurred because the worker violated a safety rule, such as not following lock-out/tag-out procedures or not using protective gear.


Unintended consequences of statutory change and litigation

Courts in Missouri, Illinois and Pennsylvania have ruled that, if a work injury is excluded under the Workers’ Compensation statutes, the employee can bring a civil suit against their employer. The courts are hesitant to provide no means for an injured worker to pursue compensation, so when statutory language is tightened up and certain conditions are excluded from Workers’ Compensation coverage it opens the door for potential civil action.

This issues also arises when the Workers’ Compensation claim is denied because the worker is not in “course and scope” of employment. If the worker falls on the employer’s premises, and the employer denies the claim under Workers’ Compensation, then the employee can sue under civil liability.

Not all workers are protected

In many states, there are workers that are not required to be covered under workers’ compensation. In 14 states, smaller employers with five employees or less do not have to secure coverage. In 17 states, there is no legal requirement for coverage of agricultural workers. Finally, half the states do not require coverage for domestic workers and five states specifically exclude coverage for these employees.

Opt-out legislation

Opt-out legislation, by its very nature, allows for an option to the grand bargain of traditional Workers’ Compensation. What many don't realize is that Workers’ Compensation has always been optional in Texas. Both employers and workers can choose to opt out of the Workers’ Wompensation system and, instead, be subject to civil litigation in the event of employee injuries.

Oklahoma now allows employers an “option” to traditional Workers’ Compensation. Plans must be approved by the state and must provide the same level of benefits as Workers’ Compensation. Such plans provide employers greater control over choice of medical providers.

Opt-out legislation is currently being considered in Tennessee and South Carolina, and it's likely that similar legislation will be introduced in additional states in the future.

Causation thresholds

There is significant variation among states in the threshold for a condition to result in a compensable Workers’ Compensation claim. In Tennessee, the injury must “primarily arise the work” (50% or greater) for the condition to be considered work related. However, in California and Illinois, if the work is a contributing factor (1% or greater), the employer is responsible for that condition under Workers’ Compensation. Employers argue that these low Causation thresholds undermine the grand bargain by greatly expanding what is considered a Workers’ Compensation injury.


As workers’ compensation has evolved, there have been many exceptions to the original premise behind the “grand bargain.” The courts have continued to allow exceptions to exclusive remedy and expanded causation standards. Statutory reforms have also resulted in classifications of employees and work conditions that are excluded from Workers’ Compensation. These trends are expected to continue into the future. 

Related: 3 keys to a successful Workers' Compensation fraud investigation

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