Coping With Comp ... Workman's Comp, That Is

(Ed. note:  We were among those who received a copy of the letter below.  Workman's comp is one more burden on the person trying to do business in Vermont.  It is an especially heavy load on the small business person doing, say, tree work and hiring three or four people on a seasonal basis.  The legislature has been disinclined to reform workman's comp despite  pleas such as this.  We consider this a masterpiece of constituent mail, despite the fact that Warren Kitzmiller is a representative, not a senator.  Otherwise, the letter is spot on.)

Dear Sen. Kitzmiller,

I am in receipt of your following statement:

WORKERS COMP:
One of the major subjects I dealt with this session (only one, there were many) was the always thorny issue of workers comp. This program is a compact between workers and employers that seeks to protect both sides from excessive costs. When an employee gets injured and is out of work, business suffers. If the injury is caused by negligence, without workers comep, the worker could sue for damages and the employer could be held liable. However, this is a lengthy process that can leave the employee without income to pay medical bills and put food on the table. Our system has avoided that pain by creating a no-fault system that protects the employer from lawsuits and gives the injured employee medical coverage and a replacement of his/her wages while he/she recovers. Many in the business community were disappointed that I refused to slash benefits (really, they are not benefits, they are only partial indemnification for the loss a worker suffers), but I think the program needs to be recognized as a balance, not a "cost" to business.

As an accountant with many clients who pay workers compensation insurance expense, I would like to take issue with your statement that it is not a cost to business.  Learning of your belief on this concerns me as it relates to your current position as a state Senator. Specifically I worry that this view is so unrealistic as to be nonsensical.  I would like to share with you the experience of one of my clients.  This client, a commercial drywaller hired a person who worked for 90 minutes before claiming an injury to his foot.  No one on the jobsite saw this man be injured.  Over the next three years the "injured" worker collected workers compensation on my client's account, whose workers compensation premiums rose from less than $25,000 to $67,000 annually.  To pay for the additional premiums my client took a second mortgage on his home in the amount of $100,000 which he and his wife are still repaying.  I wonder if you would like me to put you in touch with these very hardworking folks so you could explain to them that this is not actually a "cost" to them, but is in fact only partial indemnification.  I feel certain they would be willing to take the time to discuss this with you.  This is a serious offer.

In addition to this offer, I do have a question for you.  You define the "thorny issue" of workers compensation as a "compact" between workers and employers, not mentioning that it is mandated by the state.  My question is this: If as you state, both the employer and employee benefit from this insurance and as we all know, it is mandated by the state, why then is the entire cost (what you call indemnification) paid by only the employer?  Could you please explain this to me?

I'd suggest that a fairer system would one wherein all those who benefit from it participate in its cost (what you call indemnification).  What about the Legislature implementing a new tax (something on which it has an excellent track record) only this time a tax on employees to assist in the cost (what you call indemnification) of workers compensation.  I'm willing to wager that employers would volunteer to do government's job once again and collect this tax and turn it over to the insurance company for the worker.  Perhaps at the same time you are explaining why only the employer pays workers compensation insurance expense, you could explain why it is only the employer who pays unemployment insurance expense.  In my 25 years as an accountant it has always struck me as odd that it is the employee who collects unemployment compensation but it is only the employer who pays it.  I do have to admit, fairness is something that is very important to me.

In your haste to tell your constituents what a tireless advocate you are of the employee/worker/victim and someone who is ever vigilant lest employers try to "slash workers compensation benefits" etc. do you ever consider that many employers are just regular folk trying to scratch out a living?  I wonder where this huge chip on your shoulder has originated that you seem to carry against businesses.  I have observed that at times it appears as a borderline vendetta.  In my accounting practice I have many business clients and would report that I do not see any of them trying to take advantage of employees.  I just cannot understand why you and the majority in the Legislature are so distrustful of business people.  I just don't get it.

Looking forward to your answers to my questions, I remain...

Very truly yours,

Robert Rich
South Burlington

Comments

[GreggB]

Hoo Boy. Isn't rep. Kitzmiller one of VT's famously successful business people? Who all knowingly speaks out about the evil of profits and publicly proclaims he votes the way he does because he likes his job. Oh well I guess we get all the government we deserve.

[Lazarus Long]

The answer is simple. "They" view business people as "The Rich" and the rich only get that way by taking every possible advantage of the noble "Worker". After all, it is a "Workers Paradise", isn't it?

[jim georg]

Workers compensation is a compromise that works in every state. It's not a VT problem. The alternative, at the time that the early laws were passed would surely have been fewer and fewer defenses from lawsuits for employers, resulting, undoubtedly, in higher costs than the original workers compensation laws generated. Workers compensation also relieved the state of the social burden of the disabled and their dependents.

From working with at least 7 different state laws over more than 30 years before I retired to VT, I became familiar with the strengths and weaknesses of those laws. When I moved to VT and hired a contractor to do some work on my house, the high cost of VT workers compensation came up, so I did a little research for him. (by the way, he wasn't a rich evil man trying to take advantage of the poor workers) What I learned from reviewing VT's law was that it has many provisions that were expunged from other laws because of the onerous burden that they put upon employers... The pendulum had swung too far to the left and it had to come back to the right a bit to maintain a viable business comunity and keep jobs from moving south where benefits were not as liberal. I found incentives for employees to stay off work and collect compensation in the VT law that I had never seen before.

I also learned that the VT legislature had spent good tax dollars to have an independent analysis of the VT workers compensation law. It was available on line. At the time I found no legislative action to bring VT's law into balance with other states as suggested by the report.

Having enjoyed the Tiger for a while now this is no longer a surprise to me. Nor is it a surprise that the small contractor had difficulty finding workers compensation insurance from private insurers at a reasonable rate. My recollection is that he could only get one or two quotes and that the rates were almost twice the per $100 payroll rate for similar employment in NY, PA, MD, or CA (and CA had a very liberal law). And, he had no losses. His choice, and that of many others? Don't grow your business. Keep it small. That way, you don't have the premiums to deal with!

[James Ehlers]

Dear Mr. Georg,
You are absolutely correct. In the 90's, I had a residential tree service. We also did small logging jobs and firewood. We had plenty of work, and actually made some money. We had so much work,in fact, we wanted to hire other folks--that is until we came up against WC. Our choices, employ people and make no money; employ people illegally; or employ no one. We chose the latter and kept the business going until we both decided to pursue other opportunities. We just sold off equipment and folded. I believe in the old adage: don't go away mad, just go away. So we did just that. Shame though, really. I sometimes wonder what that company would like today and how many people would we employ were WC and community rating in VT not what they are. Oh well.

Apparently entrepreneurs of our sort were not really welcome anyway, I came to find out. Something about the muddy boots, I guess. Anyway, we were young fools then thinking people actually wanted people employing other people. I am not so sure of that now, unless the company has some politically pre-approved image. And, at times, I really think some elected officials only give private sector employment lip service because they feel they must for appearances. Otherwise, why would they ask us what we needed from the state in order to create more jobs, and then ignore our answeres based on experience? Especially given many of our legislators have not created a single job, ever.

Tomorrow's another day.

Sincerely,
James Ehlers

[Myopic]

I think the title of the following article is pretty accurate. Vermont business is drifting farther and farther out to sea, and going down for the third time. Guess that's what you get when the press and the politicians convince the people that unbridled capitalism is at fault for all our evils...

VERMONT SWIMS AGAINST THE FREE MARKET TIDE
by Randolph T. Holhut
American Reporter Correspondent
Dummerston, Vt.

DUMMERSTON, Vt. - The Vermont Chamber of Commerce loves to gripe about how Vermont's taxes are too high, its regulations are too onerous and how the state legislature needs to do something about both.

It's what you expect to hear from business leaders. Most seem to believe that in a perfect world, there would be no taxes, no regulations and no infringements on their God-given right to make as much profit as they can.

But there was one discordant voice in the choir singing the familiar "Vermont Is Anti-Business" hymn that the chamber's members do so love to sing.

State Rep. Warren Kitzmiller, D-Montpelier, is chairman of the House Committee on Commerce. He is also the former owner of Onion River Sports in Montpelier. As the head of the House committee that will be dealing with the Chamber's gripes, Kitzmiller reminded the Chamber at a recent economic forum that business leaders may be overstating their case.

"I'm in the camp that thinks Vermont is a darn good place to do business," Kitzmiller said. "If you're somebody with an idea who wants to start a business, it's easier here than anywhere else."

As for taxes and regulations, Kitzmiller said every state has them, but Vermont's landscape and lifestyle are what attracts people into the state. "If the only thing you're looking at is profit...that's a very myopic view of life," he said.

That last statement made conservatives around the state go ballistic. Why? Perhaps because it got to close to the truth about capitalism.

Yes, any enterprise needs to achieve and maintain a reasonable level of growth to survive. The question will always be, what is the price of that growth? Is it acceptable to outsource jobs and put people out of work for a higher quarterly dividend? Is it acceptable to pollute the environment to increase the return to shareholders? Is it acceptable to pay your workers as little as possible while the CEO gets a multimillion dollar bonus?

Under the current rules of capitalism, the answer is yes, yes and yes. The only obligation of a business is to make a ever-higher profit each quarter. How it makes that profit does not matter.

If you are a disciple of economist Milton Friedman, the patron saint of free market capitalism, you believe that government has no role in the economy. You believe that public ownership of anything is an abomination. You believe that nothing should interfere with the divine right of capital.

That's why Friedman's rival, economist John Kenneth Galbraith, once observed that "the American conservative is engaged in one of man's oldest exercises in moral philosophy; that is the search for a superior moral justification for selfishness."

Kitzmiller was not so much questioning the profit motive as he was questioning it being the sole reason for the existence of a business. Is it possible to make a reasonable profit without exploiting workers or the environment? In Vermont, the answer to that question is yes.

There are lots of businesses in Vermont that are here by choice. There may be cheaper places to do business, but there are few places that have the quality of life that Vermont offers. If you are a business person who believes that it is possible to be socially responsible and profitable, that it is good business to pay your workers fairly, and that taxes are the price one pays for a civilized society, Vermont is a good fit for your values as well as your bottom line.

You won't hear the Chamber and its allies in the Republican Party talking about this ongoing revolution in the Vermont business community. You won't hear them talking about how new generations of entrepreneurs create new styles of doing business. The Chamber and the GOP are still stuck in the old paradigm.

Yes, there are businesses who roam the planet looking for constantly lower taxes and labor costs. And there are places which will happily oblige and give these businesses everything they desire. But Vermont doesn't need to join the race to the bottom of the global economy - a race where a select few people profit and everybody else suffers. That's because of the power of what some call "the Vermont brand."

The image of Vermont as a human-scaled, environmentally-friendly and socially progressive place is what draws people here. Entrepreneurs who share these values are choosing this state as a place they want to do business in.

While profit is essential, it is absolutely true that any enterprise that only sees the world in terms of how it affects its bottom line is myopic. This is the discussion that needs to happen not just in Vermont, but in the rest of the world.

[G. Cross]

First let me assure readers that I too am concerned about abuses to the worker comp program. Such should not be tolerated. However, the cause and effect statement in the original post, "Over the next three years the "injured" worker collected workers compensation on my client's account, whose workers compensation premiums rose from less than $25,000 to $67,000 annually." cries for further data. What was the growth in payroll during those three years? How many additional workers were hired? What other claims came forward in the time period? Were any old claims reopened? Were there any major reclassifications of employees in the time period, etc. etc? If it was suspected that the worker in question filed a fraudulent claim, what did the insurance carrier do to investigate the case? My experience tells me that the carriers do not always do even a casual investigation. More than once, it was my office pushing the carrier to ensure the creditability of the claim. Part of my job, contrary to popular belief, was to keep the district budget as low as possible and increases in insurance premiums were always painful.

[Gregory J. Roque]

I would like to see Robert Rich run for Vermont State Representative and put Warren Kitzmiller out of a job; who better to represent Vermont Business owners in Vermont. Mr. Rich is a lifetime Vermont resident, educated in Burlington, property and small business owner who’s voice is of the populous of Vermont business. I could not think of a better candidate for a “True” public servant like Mr. Rich. Montpelier; take note of the common sense approach of state management……………….