Workers’ Compensation in Construction: Workers’ Benefits under Alternative Dispute Resolution Systems

Abstract

Because of slow benefit delivery, fraud, and other problems, traditional, state-run workers’ compensation (WC) programs have come under increasing criticism in recent years in the United States. In a research project funded by the Electrical Contracting Foundation, several alternative WC systems were identified and analyzed. Unfortunately, some of the most efficient WC systems identified by the research are statutorily forbidden in most U.S. states. The performance of several alternative dispute resolution (ADR) programs was analyzed; but only in the state of Maryland was quantified data successfully procured from both the state and a functioning, independent ADR program. Worker benefits under traditional and ADR WC programs are analyzed using administrative data from the state of Maryland. Direct comparisons of benefits between the two programs indicate that the levels of benefits and the probability of receiving benefits are lower under the ADR program. However, the only statistically significant effect attributable to ADR regards the probability of receiving temporary total or permanent partial indemnity payments rather than on the levels of the two indemnity payments. The involvement of attorneys is found to play a significant role in the receipt of benefits in ADR and traditional programs. A strong claim made by ADR proponents is that an injured worker receives benefits much quicker under that system. Although those interviewed indicated the truth of these claims, unfortunately, the data supplied by the state of Maryland did not contain the data necessary to validate or invalidate the claims. Also claimed by ADR advocates is that ADR programs prevent the extremely large payouts, usually for pain and suffering, that are reported in the news media on occasion. The data tend to support this claim.