Study On Compulsory Workers’ Compensation

The history of work injury in the course of employment is as long as human history oflabour. However, the severity of work injury only attracted enough attention till the era ofindustrial revolution when it became a social problem need to be resolved. Historically,different countries had explored different remedial measures for work injury, i.e., fromfault-based liability with “unholy trinity of defenses”, to restricted use or repeal of defensesunder employers’ liability act, to non-fault-based liability, all within the framework of tort law.It was proved, with hindsight though, that tort law couldn’t provide timely and sufficientremedy for injured workers; at the same time, employers were plunged into countlesslitigation and confronted with uncertain amount of compensation. Both parties reachedconsensus on the necessity of reforming the then-existing regime. Consequently, workers’compensation was established based on the historical compromise which is the starting andreference point for our study on workers’ compensation. Due to different nationalcircumstances, workers’ compensation systems are very diverse worldwide and can beclassified into three categories: public, private and the mixture of public&private workers’compensation system. Based on the well-recognized criteria for evaluating workers’compensation, i.e., universal coverage, promotion of safety and effective delivery, publicworkers’ compensation system has obvious advantages over two other systems and becomesthe overwhelmingly predominant mode of workers’ compensation globally.The key elements of public workers’ compensation system, originated from German, canbe summarized as two: statutory protection and collective liability. The former element meansthat the compensation to injured workers is statutorily stipulated and certain, keep off fromthe influence of the bargaining power of the workers or the discretion of judges, etc. Thisrepresents more certain compensation for workers. The latter means collective assumption ofrisk of industrial accident of all employers, by the workers’ compensation fund which is therepresentative for all employers. This guarantees the solvency of the payer and representsmore secured compensation. These two elements are mutually supportive and complementaryto each other. Together they can guarantee the higher level of protection for injured workers.Collective liability means the “assessment pool” funded by employers is the one to assume and digest the “risk pool” formed by aggregation. The theory of risk and insurancedetermines that workers’ compensation should follow “law of large numbers”: under thepremise that the overall level of risk of work accident at a designated time is relatively stable,widening sources of funding and larger “assessment pool” means enhanced capability toassume risks. The practice in many countries illustrates that social insurance regime can takethe advantages of collective liability into full play: universal coverage of social insurance canguarantee the largest possible scale of “assessment pool” by mandating employers tocontribute on a fixed rating; at the same time, automatic transfer of all risks of employersconforms with the rule of stable overall level of risks of industrial accident.It is the statutory nature that helps social insurance to take the advantages of collectiveliability into full play. Under the framework of social insurance, workers’ compensation fundis managed and operated by government agencies or public agencies; the legal status ofworkers’ compensation board determines that the legal relation incurred in workers’compensation is administrative legal relation which includes two relatively independent layersof relations: the relation between employers and workers’ compensation board under whichemployers are legally required to contribute to the fund; and the relation between workers’compensation board and injured workers under which the board is legally required to delivercompensation. The administrative legal relationships are the ones governed by public law, inwhich mandatory rules prevail. The compulsory nature penetrates in the whole time span ofthe legal relationship incurred by workers’ compensation, and is binding on all partiesinvolved, including employers, employees, and workers’ compensation fund: with regard tothe first layer of legal relationship, employers are legally required to contribute to the fund,while workers’ compensation board has powers to take measure in order to ensure compliance;with regard to the second layer of legal relationship, workers’ compensation fund shoulddelivery compensation to injured workers, and its status as government agency guaranteesthat it will follow this requirement. The reach of compulsory nature extends to both layers oflegal relationship in order to guarantee proper remedy be provided to injured workers.Our workers’ compensation system has been positioned as social insurance since thevery beginning. It is said that this system includes key elements of statutory protection andcollective liability, and established its compulsory nature as a matter of course. However, thedetails of the system betray the self-positioning as social insurance: certain items of thecompensation are borne by the employers; defaulting employers will have to pay all the compensation out of their own pocket as the punishment for non-compliance; the employerswho violate their duties of filling application for validating work injury will have to pay allthe compensation out of their own pockets during the period of violation. These arrangementsrepresent widely-existed self-insurance elements in our workers’ compensation system; worsestill, it also includes a uni-directional conversion mechanism from social insurance elementsto self-insurance elements. This fact degrades our workers’ compensation system from puresocial insurance to a hybrid of social insurance and self-insurance. As a result, the collectiveliability mechanism inherent in the workers’ compensation is vanishing. It also adverselyinfluences the compulsory nature of workers’ compensation. The compulsory nature can’tfully reach the afore-mentioned second layer of legal relationship, because besides theworkers’ compensation board, employers also become liable to pay compensation to injuredworkers. Under current workplace dispute resolution mechanism, the disputes on workers’compensation benefits between injured workers and employers will be regarded as workplacedisputes to which the workplace dispute resolution mechanism will be applied. For employers,this reduces the compulsory rule to nothing as they can legally refuse to pay till the workplacedisputes are resolved. Due to the fact that workers’ compensation doesn’t carry with it theadvantages of collective liability, more employers are induced/encouraged to opt out of theworkers compensation system. This will further impair the function of collective liability, andcompulsory rule becomes nothing more than black letters on white paper. Here comes thevicious circle.Upon realizing the defects and drawbacks of the existing workers’ compensation system,our legislatures react with promulgation of reform measures, including enhancement ofcompulsory nature and establishment of advance payment mechanism. The first measure willfurther empower workers’ compensation board to take more measures to ensure compliance;however, under current rule of defaulting-employers-pay-compensation, the workers’compensation board lacks both the momentum and the pressure to take these measures. Thesecond measure intends to partly restore the collective liability mechanism in the sense thatonly those items payable by the workers compensation board will fall within the sphere ofadvance payment. However, it is directly contradictory with the current workplace disputeresolution mechanism and can’t restore the collective liability mechanism as intended. Theremeasures are no more than minor mending of the current system, hence can’t eliminate theproblems caused by malfunctioning collective liability and defects of compulsory rule. This bitter fact prompts us to explore new ways of reform.The future reform toward our workers’ compensation system should avoid thenarrow-minded thinking of fixing compulsory rule for the sake of compulsory rule, and takeconcerted efforts to restore the its social insurance nature. Firstly, we should sort out the legalrelationships incurred in workers’ compensation and make sure compulsory rule can reachboth layers of legal relationship: workers’ compensation board shall pay statutorycompensation to injured workers, regardless of whether employers contribute to the fund ornot. This measure will cut off the uni-directional conversion mechanism from social insuranceelement to self-insurance elements, and also equip the workers’ compensation board withmomentum and pressure to ensure employers’ complianceSecondly, we should establish the rule regarding exclusive assumption of all risks ofindustrial accidents by workers’ compensation fund. This means elimination of items ofcompensation payable by employers, and makes all items of compensation solely paid byworkers’ compensation board. This measure will eliminate the self-insurance elements fromthe source, and restore the social insurance nature. The re-establishment of collective liabilitymechanism can safeguard smooth functioning of workers’ compensation system from thesubstantive perspective; it can also fix the problem of malfunctioning of compulsory rule andbetter protect injured workers.Lastly, complementing with the above-mentioned measures, we should introduce the baron action clause, stripping the right of action from the injured workers. This won’t affect theworkers’ interests because they have access to the secured workers’ compensation. This clausejust echoes the collective liability mechanism: being covered by workers’ compensationmeans all risks of industrial accidents are automatically transferred to workers’ compensationfund; the possibility of disputes between employers and injured workers has been ruled out.This is the due protection shall be enjoyed by employers under collective liability mechanism.The introduction of bar on action clause can safeguard the smooth functioning of workers’compensation from the procedural perspective.