How does the workers' compensation scope of coverage influence the OH&S mandate?

Governments implement legislation to fulfill a specific societal desire or “social policy objective”.   One social policy objective is:

to protect workers from work-related injury, disability, illness and death in a compassionate and sustainable way that still allows the economic activity and innovation necessary for societies to operate and thrive.

The statutes created by legislators to achieve that objective vary.  There is, however,  a set of “levers” that can be used to achieve the objective .  Governments create “statutory agencies” to control the levers.  Where the percentage of “employed labour-force”  covered by workers’ compensation approaches 100%, it makes sense to place all the levers of control in the hands of a single statutory body that can set, adjust, and fine-tune the levers to achieve the social policy objective.  This is exactly what we find in practice in Canada. 

The following table is based on data from the Association of Workers’ Compensation Boards of Canada (AWCBC.org):

For the statutory agencies near the top of the list, the workers ’ compensation board of commission generally controls all the levers (workers’ compensation and OH&S).  In jurisdictions towards the bottom of the list, workers’ compensation levers can have no impact on those outside the scope of coverage.  The ability of one  statutory agency  to fine tune or set the full range of levers  for the part of the labour force not covered is lost. 

In order to achieve consistency across the economy, jurisdictions with low percentages of employed labour force covered must struggle to achieve the social policy objective with only half the tool set  for those outside the scope of coverage.  The need for consistency across all workplaces, however, requires the enforcement, regulation, education/training and prevention levers  that influence the health and safety outcomes in the workplace be applied (largely) independently from what happens in workplaces within the scope of workers’ compensation coverage.  The tool set that can be used by the statutory agency responsible for OH&S  is restricted.  To achieve the social policy objective, the incentives tend to be more “stick” oriented (including increased use of prosecution and fines).

The statutory agencies responsible for workers’ compensation in these low-coverage jurisdictions have a limited tool set as well.  Often, this spawns more aggressive use of  the levers within its exclusive control like experience rating, classifications, surcharges, discounts and other  incentives (including retrospective rating systems and rebates).  This dichotomy—even in the presence of extensive consultation—can result in perverse outcomes including claim suppression. 

There may be other social policy reasons to decide to exclude significant portions of the employed labour force from workers’ compensation coverage.  It is up to each jurisdiction to determine if some other objective is of greater importance to justify that exclusion.  There is nothing inherently wrong with doing so.  It is up to the constituency of each jurisdiction to determine its own priorities.  My point is simply that decisions on the scope of coverage for workers’ compensation systems have consequences for workers and employers both inside and outside the scope of coverage.  It also has consequences for the range and precision of the levers that can be applied and coordinated to achieve safe and healthy workplaces in a thriving economy.  

What is the "social policy objective" of workers' compensation?

There is no shortage of work for those of us connected with workers’ compensation and occupational health & safety (OH&S).  People continue to get hurt, develop disease and even die as a result of work-related activity.  Investigating injuries, adjudicating claims, caring for victims and families while reducing and eliminating the causes to prevent future occurrences are the obvious “reasons” behind what we do.   Exactly how we organize and what we do vary greatly with the jurisdictions in which we work.  Virtually every developed and developing nation has systems and organizations that deliver workers’ compensation and OH&S services.  So, what is the underlying “social policy objective” each society is trying to address?

The ubiquity of workers’ compensation and OH&S public policies reflect an underlying and universal social policy objective:  to protect workers from work-related injury, disability, illness and death in a compassionate and sustainable way that still allows the economic activity and innovation necessary for societies to operate and thrive.  This social policy objective recognizes that all human activity takes place in the presence of hazards to the health and safety of individual workers.  It also recognizes societal expectations that a vibrant economy is desirable. 

In deciding how to achieve this social policy objective, legislators have a series of direct and indirect levers they can adjust that will impact workers, employers, work activities and work processes.  These control mechanisms cluster under the general headings of workers’ compensation and OH&S. 

On the workers’ compensation side, legislators can determine the scope of coverage—both who and what will be covered.  Making workers’ compensation coverage mandatory imposes a cost on firms and an oversight obligation on behalf of authorities.  Premiums can be modulated to achieve effects.  Bringing hearing loss into the scope of workers’ compensation, for example, increases compensation costs and therefore premiums.  The increased premiums can provide an incentive for reducing noise induced hearing loss in the workplace.  The same argument may be made for mental injuries and illnesses due to stress and bullying.  Bringing these outcomes into the scope of workers’ compensation can certainly provide an incentive for prevention.   Experience rating (also called experience modification) is another lever that can be fine-tuned to apply economic pressure to firms with greater frequency or claims costs.  To mitigate costs, greater investment in prevention and rehabilitation/return-to-work and work accommodations are the typical workplace responses.  Other incentives including retrospective rating, rebates and discounts for specific prevention or RTW initiatives round out the control panel on the workers’ compensation side.

On the OH&S side, there are four main levers:  regulation, enforcement, education/consultation, “prevention” promotion.  The regulation lever can be set widely or narrowly and adjusted towards being more prescriptive or performance based.   All regulation has a cost in terms of the freedom of an enterprise to extract economic gains from a process.  Whereas workers’ compensation policies will impose costs associated with injuries to the firm, regulation on the OH&S side may increase production costs but prevent injuries or exposures that would lead to workers’ compensation claims. 

The enforcement lever can be set with respect to intensity and severity.  Who gets inspected , how often and with what consequences (financial penalty, stop work order, etc.) are the main policy desisions.  The effectiveness of this control for well-performing firms is really not an issue.  For poor performers who ought to know better, the enforcement lever will only be effective if set to level where the expected cost of detection (financial and reputational) of regulatory violation  exceeds the expected value of gains possible by violating the regulation.   

The education/consultation control  has little impact on high-performance organizations (they already know and do what needs to be done).  For workplaces who do not know or who have a new or difficult safety or health issues, increasing resources and efforts in this area can be effective. 

Finally, the prevention promotion lever can be set broadly or narrowly but lacks precision.  It is great for increasing awareness and shifting attitudes at a societal or sectoral population (health care workers, welders for example) level but requires sustained exposure to target audiences to achieve intended results. 

Those are the levers that legislators have to achieve the social policy objective.  Legislators typically delegate the authority to set and adjust the controls to commissions, statutory agencies or other bodies.  Often, feedback mechanisms or oversight agencies or reports are also mandated to determine the performance of the system in achieving the social policy objective. 

My own view is that these levers must be operated in concert.  The setting of each control has an impact on the overall movement toward the desired objective.  Where the scope of what is covered is wide and the percentage of employed labour force covered is high, it makes sense to create statutory structures with the high degree of control over all the levers that can impact the social policy objective.