Impact of the Executive Order on workers’ compensation

The Obama administration’s Executive Order today Nov 21, 2014) will affect many aspects of work life. This is a slightly revised version of an article of mine published on November 18, in anticipation of the Order, in WorkCompCentral.
I analyzed the impact of workers’ compensation. The Order will force the workers’ compensation field to address issues that have been lying in plain sight for some time. After all, one-fifth of work injuries are likely sustained by a foreign-born workers, 10% by undocumented workers, whether or not they are reported.
Will the administration’s policy cause a jump in claims? Will it close down grey market labor abuses or open up a Pandora’s box? Will it make it easier to enforce work safety standards or sow confusion?
An initial analysis leads me to project that the impact on workers’ comp claims will likely be smaller than many may think but the impact on employer, insurer and regulator practices may be pervasive.
Here are six questions worth asking, with their tentative answers:
Q. Does the Administration plan to provide legal protection to all undocumented workers?
A. No, but the practical effect of protecting an estimated somewhat less than 3 million out of eight million workers may well complicate the entire workers’ compensation system. Regulators, courts and employers will now have three legal classes of workers (existing legal, newly protected and undocumented). That could create a legal nightmare. It might also induce many decision makers to reset their approaches to immigrant workers as a whole.
Q. Who are the workers the plan appears to target?
A. According to media reports, it focuses on undocumented persons who have been here for a long time and have children who, mostly by being born in the United States, are citizens.
The plan addresses a fundamental demographic shift during the past 15-20 years in undocumented households. The average tenure of these households in the United States has increased. Over 60% of undocumented adults have been in the country for at least 10 years, and one-fifth have been in the U.S. for two decades or more.
These households have always produced relatively more children than native-born households by virtue of adults being more concentrated in childbearing age ranges. Their children include some “DREAM Act” beneficiaries, minors born outside the country. But the great majority of their children – over four million of them – are born here, and are therefore citizens.
Public data suggests that perhaps a third of undocumented workers have children who are American citizens. Some 87% of these workers come from Latin America; the rest from Asia and elsewhere.
Q. Where do these parents work?
A. According to the Pew Hispanic Center, undocumented workers form the highest share of workforces in Nevada (10%), California (9.7%), Texas (9%) and New Jersey (8.6%). California has the largest number of people in the labor force who are unauthorized immigrants (1.85 million), followed by Texas (1.1 million), Florida (600,000) and New York (450,000.).

Q. What industries are most affected?

A. I have analyzed federal data to locate not only which industries employ undocumented workers, but those jobs that result in a high number of lost-time compensable injuries.
Among the largest 100 jobs, undocumented workers account for about 4.5% of all workers. Because they tend to hold more injury-prone jobs, they likely incur about 8% of lost-time compensable injuries – or would if they filed claims at the same rate as authorized workers do.
For example, about 12% of janitors and building cleaners are undocumented, but virtually no elementary and middle school teachers. Janitors are over four times more likely to be injured than teachers.
Major sectors with undocumented worker employment are farming, construction, hospitality, and institutional (building and grounds maintenance). About four out of every 10 farm workers are undocumented, hence the expectation, of which we will hear more, that providing work rights to these workers will cause food prices (especially fresh produce) to increase. However, farming’s size is dwarfed by the combined size of these other sectors, in which an average 12% of workers are illegal.
Take construction. A fifth to one quarter of lost-time compensable injuries sustained by all undocumented workers are sustained in construction. The typical image of the illegal construction worker is the low skilled laborer. About a fifth of them are estimated to be unauthorized. But a fair number of painters and other skilled workers are also illegal.
Take hospitality, which includes lodging and restaurants. About 20%-25% of room cleaners and cooks are undocumented workers.
For every 10 lost-time compensable injuries sustained by undocumented workers, about five of them take occur in either construction or hospitality. Maybe only one takes place in farming.

Q. Will workers’ compensation claims increase?

A. This may happen in earnest in selected situations, where undocumented workers have reported relatively few of their injuries and now feel empowered to file claims, with claimant bar and activist group encouragement. For the workers’ compensation field as a whole, the impact could be modest. Even if the number of lost-time compensable claims of undocumented workers increased by 50%, the total increase of such claims in the workers’ comp field would be, I expect, a couple of percentage points, spread over several years.
Q. How will the new policy impact employers?
A. Undoubtedly, employers, insurers and regulators will take greater care in addressing the direct and indirect ramifications of a legally more empowered workforce.
For example, undocumented workforces are entangled in the underground economy and in independent contractor abuses. As these workers gain more legal protection, and law enforcement agencies, in alliance with workers’ compensation regulators, may begin to attack these challenges with greater vigor.
In the key industries (farming, construction, hospitality and institutional services), employer associations which have fretted over what they see as unfair competition by law-skirting companies that exploit undocumented workers, may prod law enforcement agencies more aggressively. In some industries, such as hospitality and transportation, labor organizing may blossom, with worker health and safety a key campaigning topic.
And, wages will likely trend upward as workers seek jobs in other industries now open to them (such as health care and government), putting pressure on employers. Expect to see greater investment by employers in labor-saving, injury-avoiding technology.

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