If You Hate Paying For Workers Comp, You Should Count Your Blessings


Early 1900s Railroads Wanted Exemption from Workers Comp
In the early 1900s various states were discussing some form of workers’ compensation system. The owners of the large railroad companies did not want to deal with workers’ compensation claims in many states.  The railroad companies lobbied Congress to exempt the railroads from workers’ compensation laws of the various states.  The railroad companies got through Congress a statute where the employee had to prove that the railroad was negligent before the employee could collect any compensation for an injury.  In 1908 Congress passed the Federal Employer’s Liability Act (FELA) exempting railroad companies from state workers’ compensation laws.
FELA Exempted Railroads, Heavily Favored Employers
Basically, the FELA law exempted railroad employees from all state workers’ compensation laws and continued the system of tort claims for deciding compensation to an injured employee.  The FELA law in 1908 used contributory negligence and assumption of risk as its guide in determining negligence. If the injured employee could not prove the railroad company was solely at fault for his injury, the employee would not receive any compensation for the injury, even in extreme cases of amputations or death.  If the railroad could prove that 1% of the cause of the injury could be contributed to the employee’s own negligence, the employee was barred from any recovery. 
1937 Case Brought Major Change
In 1937, Eugene Sexton was working for the L&N railroad.  As a part of his job as a switchman he would join together individual railroad cars or strings of railroad cars.  One day as he started to join two railroad cars, the train jerked, hitting him and causing him to fall on the railroad track.  The train rolled over both arms, amputating one arm above the elbow and amputating the other arm below the elbow.  The L&N railroad’s response to the horrendous accident was “too bad, you should have been more careful”.  Mr. Sexton’s and the switchman’s union response was a lawsuit in tort, and a campaign to change the FELA law.  (Mr. Sexton did after several years of litigation receive a life time pension from the railroad).
The only major change in the FELA law came about as a result of the Sexton case and some other bad injuries and deaths that occurred about the same time.  In 1939 the FELA law was changed removing the defense of assumption of risk and changed the law from contributory negligence to comparative negligence. As a result of 1957 and 1963 Supreme Court decisions, the FELA law now makes it a jury question if the railroad company played any part in causing the injury
Railroads Still Not Part of Worker Comp, Heavily Favors Employees
FELA kept the injury claims of railroad company employees in the tort law system.  Under tort an injured person can recover all their medical bills from the party at fault for their injuries, and can also recovery their full income (not the two-thirds of income as often paid in work comp claims) for both past and future income.  The injured person in tort can also receive compensation for permanent injuries. In addition to being paid for all their medical bills and income loss, the injured person in tort can recover “pain and suffering” compensation from the party at fault. 
With comparative negligence and all questions as to the amount of negligence being a jury case, even an employee who negligence was 90% of the cause of the accident could recover 10% of the damages.  The result of this was lawsuits for astronomical amounts of pain and suffering and compromise settlements, even when the injured employee was primarily the cause of his own injuries. Compromise settlements often occur even with minimal or no negligence on the railroad company’s part, as the railroad company knows the jury will see them as the billion dollar corporation and will be sympathetic to the injured employee.
The FELA law as it was originally enacted was heavily in favor of the employer and provided very limited benefits to injured workers.  The pendulum now has swung to the other extreme where injured railroad employees’ often obtain substantial settlements for minor injuries. What started out as a law to circumvent workers’ compensation is now an albatross around the financial neck of the railroad companies.
Legal Liability Crushing for Small Companies
The approximate 650 railroad companies in the United States are classified by size into 3 classes.  Class I entails the 7 major railroads serving multiple states.  Class II and III railroads normally serve a single county or multiple counties within a state.  While the major railroads like the CSX and the Burlington Northern have the financial capability to deal with the FELA lawsuits (and pass the cost of the FELA litigation claims on to their customers), the smaller railroad companies are often forced out of business due to a variety of economic circumstances including FELA lawsuits.
Railroad Companies Wish They Had Workers Comp
The large railroad companies have been struggling for years to get out from under the FELA burden or to bring it more into balance.  The railroad companies have tried to get FELA repealed and to place their employees’ injury claims in the various state workers’ compensation systems.  The different unions representing various crafts in the railroad industry and the plaintiff attorneys representing injured workers have been able to jointly defeat all attempts to change the current FELA law.
The next time you wish your company did not have to have workers’ compensation insurance, stop and think about the smaller railroad companies who, even with liability insurance, are often only one employee injury lawsuit away from being put out of business.

Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact: RShafer@ReduceYourWorkersComp.com.


Editor Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher.  www.reduceyourworkerscomp.com Contact mstack@reduceyourworkerscomp.com




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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.


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