Who does not participate in workers' compensation programs? Certainly, there are examples of businesses that break the law and avoid both the benefits and burdens of workers' compensation. As a result, they may find themselves sued for damages in tort. But, many states do not require small businesses to participate in workers' compensation. There are various exemptions in the state systems, including employers with less than a specified number of employees, "sole proprietors," "independent contractors," "domestic help," and more. This is nothing new.
According to Forbes, some thirteen percent of American workers claim to be "independent contractors," or "self-employed." Pew (no, not the @RxProfessor, the "other Pew") concludes that 150 million Americans work. Thirteen percent of that is roughly 20 million. In recent years, a great deal of angst has been expressed about Americans who lack health insurance, but possibly 20 million American workers are not covered by workers' compensation under existing state law accommodations. That 20 million has gleaned little or no media coverage or angst.
As an aside, Forbes also questions whether "traditional jobs" are "running their course and going the way of the typewriter and eight-track tape?" Frankly, that hits a little close to home as I have owned several of each of those over the years. There was a time when most cars had a big, clunky box of eight tracks on the back seat and an after-market player bolted to the underside of the dash. I know someone who still has both an eight-track player and a collection of tapes. Shouldn't that be their choice?
The subject of a "gig" economy was recently discussed in this blog in The Gig Economy, Can it Be Socialized (March 2018). That focused on the suggestion by National Public Radio that some methodology should be developed to deliver socialistic benefits to people who suffer accidents, but who have opted not to exercise their eligibility for traditional workers' compensation. The NPR discussion focuses on the "gig economy" and the seemingly non-traditional work relationship of drivers in New York.
While NPR and others advocate some separate benefit system, they ignore that any employer can easily elect workers' compensation coverage in any state. Though small employers are not forced into coverage, there is nothing preventing their participation. They are choosing not to underwrite the risk of injury. Choice is a large part of the concept of freedom upon which this country was founded.
While NPR and others advocate some separate benefit system, they ignore that any employer can easily elect workers' compensation coverage in any state. Though small employers are not forced into coverage, there is nothing preventing their participation. They are choosing not to underwrite the risk of injury. Choice is a large part of the concept of freedom upon which this country was founded.
But, how large is the population of American workers that are not covered by traditional workers' compensation? A recent survey by Insureon suggests that it may be significant. This provider of insurance products surveyed 1,200 "small business" owners regarding the kinds of insurance they had purchased. The conclusion was that only 17% of them had workers' compensation coverage. The corollary is the suggestion that as many as perhaps 83% lack coverage, whether they are exempt under the law or merely dodging responsibility.
That result has to be tempered by the admission that there is no universal definition of "small business," and there is no geographic information regarding the survey participants either. What, if any, employers must participate in workers' compensation is a state law issue. In Texas, participation is voluntary for any size employer, that 83% is perhaps not of as much concern if this is a Texas (voluntary market) survey, perhaps more concerning if not. And, as mentioned above, the various states have different parameters for mandatory participation with many making workers' compensation optional for sole proprietorship owners or even businesses that have a certain number of employees. Despite this, 83% seems significant.
It is noteworthy that the Small Business Administration (SBA) says that "small businesses" make up 99.7 percent of U.S. employer firms and 42.9 percent of private-sector employment. That is a larger population than the "independent contractors" or "self-employed," subset discussed above, The SBA definition of "small business" (500 employees or less) includes businesses larger than sole proprietors (not subject to mandatory WC coverage); it includes a significant volume of businesses that are mandated to participate in WC (except in Texas).
But, the SBA information supports that a significant volume of American workers are employed by "small businesses." There is therefore a potentially significant number of businesses that do not have workers' compensation coverage, affecting something well beyond the 20 million workers discussed above. That decision not to participate in workers' compensation may be legitimate under various state laws, or of those without insurance may instead be skirting the law, by misclassification (January 2015). But, it is a decision nonetheless. The effect of electing not to participate in workers' compensation clearly affects a significant population of American workers.
But, the SBA information supports that a significant volume of American workers are employed by "small businesses." There is therefore a potentially significant number of businesses that do not have workers' compensation coverage, affecting something well beyond the 20 million workers discussed above. That decision not to participate in workers' compensation may be legitimate under various state laws, or of those without insurance may instead be skirting the law, by misclassification (January 2015). But, it is a decision nonetheless. The effect of electing not to participate in workers' compensation clearly affects a significant population of American workers.
Some of those employers may be individuals, whose election to eschew coverage may implicate only themselves. However, the survey results nevertheless suggest there is likely a significant population of employee workers not covered by workers' compensation through their employer's choice. If the prognosticators are correct, and if "gig employment" continues its trend, many more workers might find themselves injured and either without workers' compensation, or some substitute and instead dependent upon some socialist program operated by the federal government, such as Medicaid or Medicare. Those employers elect to be "covered" only by the socialistic safety nets which taxpayers collectively finance.
As intriguing in the Insureon study are the responses regarding other insurance coverages. Only 6% of the small businesses surveyed have business interruption insurance. While that coverage may seem a "want" rather than a "need" to some, the fact is that hurricanes, tornadoes, wildfires, mudslides, volcanic eruptions, and more have shown their potential to interrupt life as we know it, and that includes business. When a disaster interrupts the operation of a business, it is likely that will mean an interruption of paychecks to at least some employees for some period. Those individuals may likewise find themselves dependent on social safety nets like unemployment, food stamps, or similar programs.
More intriguing still is that Insureon found that only 2% of small businesses had cyber insurance. In the days of hacking, skimming, ransomware, and more, that seems an incredibly low number of businesses. Virtually every retailer is at least involved with debit and credit cards, and many businesses gather and store far greater data volumes. As they gather data, they may be targets of thieves just like major retailers. More than 500 credit card "skimmers" were found on Florida gas pumps in 2017, a seemingly "small business" concern. Data breaches can affect any size of business, but 98% of small businesses are not purchasing insurance for the risks.
But, perhaps the most curious results of the survey are for general liability insurance. In fact, zero percent of the respondents reported having general liability insurance. General liability insurance is intended to defend and indemnify claims for bodily injury, property damage, personal injury, and more. This would compensate visitors and customers. The survey included 1,200 small businesses, and not one of them had general liability coverage. Admittedly, those respondents reported that 28% had a business owner's policy and 21% had professional liability insurance. Those policies might include some measure of coverage for particular events. But none, zero, had a specific general liability policy.
The overarching theme is the potential for events and losses for which there is no coverage. States mandate the purchase of some insurance coverage. Examples include mandatory coverage for property damage or injury from auto accidents, as well as mandatory workers' compensation coverage for employers exceeding some size parameter (except in Texas, a voluntary WC state). There is discussion of further mandating workers' compensation coverage in response to the "gig economy," to avoid "shifting" injury burden to the socialistic state.
But, perhaps the Insureon survey illustrates that workplace injuries are not a singular concern, but merely a subset. Non-work injury losses can result in economic stress. Someone injured visiting a business (general liability) is as likely to suffer lost wages or medical costs as a worker injured at that business. An employee laid off due to the impact of a natural disaster (business interruption) is as likely, at least temporarily, to rely upon societal support as someone physically injured. A customer defrauded of savings or credit through cybercrime (cyber insurance) or an employee "downsized" by a cybercrime-devastated business may be just as likely to turn to social safety nets for subsistence and recovery.
Certainly, the absence of insurance does not mean that customers and employees cannot seek relief from these businesses when damages occur. However, without insurance for such losses, small businesses may prove unable to compensate for losses that occur. Bankruptcy and closure may be more likely than compensation and continuity. As there is discussion of "cost-shifting," in the realm of workers' compensation and socialistic safety nets, perhaps the conversation should include whether workers' compensation is really unique. It appears that a significant volume of various societal risks remains uninsured. Compromise has mandated certain coverages and left others permissive. Compromise has placed various burdens on society and taxpayer-supported socialistic programs. Some businesses "shall" provide workers' compensation, but need not provide premises liability to protect its customers.
Is workers' compensation really any different? Should more employers be mandated to participate? Should businesses be mandated to participate in other indemnification coverage to similarly manage or minimize the impacts on social safety nets? Are injured employees really different than injured customers? Are physically injured customers different than financially ruined customers? Should we all be free to choose 8 tracks if we prefer, or is mandating "progress" preferred? Are our mandating approaches and distinctions consistent and rational, or are they merely expedient? Is workers' compensation really any different?
But, perhaps the Insureon survey illustrates that workplace injuries are not a singular concern, but merely a subset. Non-work injury losses can result in economic stress. Someone injured visiting a business (general liability) is as likely to suffer lost wages or medical costs as a worker injured at that business. An employee laid off due to the impact of a natural disaster (business interruption) is as likely, at least temporarily, to rely upon societal support as someone physically injured. A customer defrauded of savings or credit through cybercrime (cyber insurance) or an employee "downsized" by a cybercrime-devastated business may be just as likely to turn to social safety nets for subsistence and recovery.
Certainly, the absence of insurance does not mean that customers and employees cannot seek relief from these businesses when damages occur. However, without insurance for such losses, small businesses may prove unable to compensate for losses that occur. Bankruptcy and closure may be more likely than compensation and continuity. As there is discussion of "cost-shifting," in the realm of workers' compensation and socialistic safety nets, perhaps the conversation should include whether workers' compensation is really unique. It appears that a significant volume of various societal risks remains uninsured. Compromise has mandated certain coverages and left others permissive. Compromise has placed various burdens on society and taxpayer-supported socialistic programs. Some businesses "shall" provide workers' compensation, but need not provide premises liability to protect its customers.
Is workers' compensation really any different? Should more employers be mandated to participate? Should businesses be mandated to participate in other indemnification coverage to similarly manage or minimize the impacts on social safety nets? Are injured employees really different than injured customers? Are physically injured customers different than financially ruined customers? Should we all be free to choose 8 tracks if we prefer, or is mandating "progress" preferred? Are our mandating approaches and distinctions consistent and rational, or are they merely expedient? Is workers' compensation really any different?
