Bredesen: Workers' comp system hurts state's industrial recruiting

By Scott Shepard
Memphis Business Journal
Updated: 8:00 p.m. ET May 16, 2004

Workers' compensation reform in Tennessee came to a forced head this week and could be up for a final vote within days. But that will only happen amidst plenty of politicking.

In his January State of the State address, Gov. Phil Bredesen made workers' comp a central pillar of economic development, arguing that Tennessee's system is so generous to injured plaintiffs compared to surrounding states that industry was locating elsewhere. In particular Bredesen likes the Arkansas system, which leans on arbitration instead of courts and speeds injury awards, which he says is good for workers and employers.

That argument was highlighted last week when Tokyo-based Hino Motors Ltd. said it would build a truck parts factory in Marion, Ark., eventually employing up to 2,200.

"I worked with Hino to sell them on the Ripley site, and here they went right across the river," says state Sen. Mark Norris, R-Collierville. "I have no doubt that it was in part due to Tennessee workers' comp."

Norris has been a driver of workers' comp reform this session, and is sponsoring what may become the primary bill this year; most Republicans and a number of Democrats have signed on to it. Bredesen has his own bill but could not find a Democrat to sponsor it. Earlier this week, Norris met with the administration to work out an amendment that Norris could attach to his own bill.

The whole process nearly died when Sen. Jerry Cooper, D-Morrison, chairman of the Commerce, Labor and Agriculture Committee, abruptly adjourned before completing the workers' comp bill.

When it didn't die, trial lawyers mobilized to squash it again. The issue hasn't just been the reality of reform, but also the details and what any 2004 vote would lead to in the future.

"I'd like to see an acknowledgment that reform needs to be ongoing and not a one-shot deal this year," Norris says. "And I want to give serious consideration to redefining a workplace injury."

Tennessee defines an injury with just four sentences, broad enough that almost anything can be a workers' comp claim, he says. By contrast, the Arkansas code is very detailed over four pages.

"Arkansas limits the definition sufficiently to eliminate a number of claims, especially in the area of back injuries, carpal tunnel and things that are not compensable in many other states," Norris says. "Our workers' comp is to injured workers what TennCare is to illegal aliens."

Truly injured workers should get their due, he says, but being hurt should not be treated like winning a contest with a big prize. His bill would also lower the award multiplier from 2.5 to 1.5. That's a number used to amplify the size of an award, so whatever a court decides, the final payout is 2.5 times bigger.

To make the point about industrial recruiting, Bredesen named Matt Kisber, commissioner of the Tennessee Department of Economic and Community Development, as point man on the issue.

That focus on big factories could be a mistake, says Karl Peterson, marketing director for Birmingham-based Sheffield Group, a workers' comp carrier specializing in small business. Kisber is also tasked with nurturing more small, high-tech businesses in the state, which are considered more stable and better for the economy.

Sheffield underwrites small business in Alabama and Tennessee.

"I'm not sure this legislation is addressing all the important issues," Peterson says.

Small business typically has a different culture when it comes to job injuries, compared to workers on the shop floor who are several layers removed from management.

"If you're a day care center, then the boss is right there making sandwiches and changing diapers with you," Peterson says. "She cuts her finger and treats it with a Band-Aid, then you're probably going to do the same."

Bigger companies that have much more formal policies and lack the intimacy of a small business. If reform has a benefit for small employers, it's the overall effect on rates once current cases are played out.

"There are two sides to economic development," Norris says. "Attracting new employers is one thing, but the other is retaining the jobs you've got. We are losing existing employers. If you lower the multiplier you reduce a lot of exposure. Even if you don't have a million-dollar payroll, it's still relative."