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and miscellaneous charges, we reach a rate of at least 35 percent as the increase in overall costs of compensation claims.
Unfortunately, the rate of 35 percent, startlingly high as it is, does not by any means represent the full increase in costs which this bill would impose on industry. For example, although we have taken medical costs out to compute our cost rise, we do believe that an increase will certainly occur in medical costs also because of added disability and claims of disability which will inevitably result from this amendment.
It is our belief that one of the indirect results of the rate increase would be to produce a prompt increase of like amount in benefits provided by State compensation laws, at least in the maritime States. This, we believe, would have a rather shocking impact on the entire industry of a large part of the country. And since cost increases of the proportions here being considered can certainly not be absorbed by industry, this impact will find its way to the general economy.
With regard to the maximum weekly benefits provided by the Longshoremen's and Harbor Workers' Compensation Act, we would not oppose increasing the maximum weekly wage to $140 with maximum compensation to be computed at 6623 percent of that figure. We feel, however, that additional allowance for dependents is unfair. There is no reason which we can see why a single man earning the same wage as a married man should be discriminated against in the event of injury by receiving less compensation than the married man. We believe that such a provision would, moreover, be awkward to administer and would lead to excessive litigation. Furthermore, the traditional rate of 6623 percent has worked well and equitably during the life of this act. Because of present tax structure, we believe, in fact, that there is definitely less reason for raising the rate now than there has ever been in the past. When State and Federal taxes of various kinds have been taken into account, it seems apparent that many disabled workers would, under this proposal, make almost as much while not working as while working. There is an old saying in the compensation business that "the money may not be so good, but you can't beat the hours." Under this provision, the disabled worker would have both the money and the desirable hours. We believe that the incentive for malingering would be very powerful.
We can see no good reason for increasing contributions to the special fund in fatal cases where there are not survivors, from $1,000 to $5,000, as provided by section 13(a) of S. 2485, although the section does not, on its face, appear to threaten any very serious increase in costs.
The reduction of the waiting period, as provided by section 2, from 28 to 21 days would, of course, increase compensation costs still further. It would also seem to place the Longshoremen's Act at even greater variance with most State compensation laws in this respect. For these reasons we must oppose this section.
As to the portion of the bill which relates to the proposed user's tax, we would point out that proceedings before the deputy commissioners and claims examiners of the Bureau of Employees' Compensation are, in practice, adversary proceedings. That one of the parties to such proceedings should be required, or permitted, to pay the administralive costs thereof seems to us highly improper. Also, this portion would naturally increase further, by an amount not known to us, the compensation costs to stevedores. We therefore oppose the amendment which seeks to place the burden of financing administrative expense by assessment upon insurance carriers and self-insurers.
To us the amendment proposed to section 28(a) by section 12 of SS. 2485, to provide for payment of legal and other services by insurers or self-insurers in certain cases, sounds very much like a threat that we should not avail ourselves of remedies and defenses provided by the act unless we wish to be assessed even more costs. In my experience in appearing before the Bureau of Employees' Compensation in my district, and it has been an extensive one, I do not believe that I have seen a case in which a claimant has needed an attorney where the Deputy Commissioner has not so advised him. By practice, also, the Deputy Commissioner invariably takes meticulous care to see that an unrepresented claimant is fully informed of his rights under the act and that he fully understands them.
The temptation of claimants' attorneys to initiate unnecessary and extended litigation at the expense of the helpless insurance carrier or self-insurer would be great. Such litigation would work to the disadvantage of the injured employee by causing delays as well as to that of the carrier or self-insurer by imposing additional costs which could be more suitably directed to payment of benefits to the employee.
While a limit on total compensation payable is basic, we believe, to any compensation law, it is particularly essential to this one. Because there is no provision in the act for rating back or head injuries for permanent disability and because there is no practical procedure by which to settle disputed cases, it has been necessary for claimants and defendants in the field to work out a practical method of resolving cases of this kind. That method has, perforce, been based on use of percentages of maximum compensation as guidelines for determining the amounts which reasonably represent the loss due to injury. Elimination of the compensation limit would put these cases right back in the morass of uncertainty which otherwise exists in the law.
Consider for a moment that a man with a questionable claim for disability of the back, for example, faces the alternative possibilities, in taking his case to a formal hearing, of getting nothing at all or a weekly continuing award for actual wage loss or for loss of wage earning capacity, which award could conceivably run until maximum compensation under the act had been paid. This man may have a true disability but may have serious difficulty in proving that it relates to his job. Under formal procedure he might very well get nothing, but under practical procedure, possible only with a compensation limitation, he would, in all probability, receive payment in some degree commensurate with his disability.
Consider for a moment, also, the matter of loss of wage earning capacity. This is a term whose application is extremely vague. Often it is not in any way susceptible of proof. A claimant may receive payment under this theory, at any rate which happens to appeal to the Deputy Commissioner granting the award, for an indefinite period of time. Thus, under the present law, a man may receive a weekly allowance for loss of wage earning capacity which may eventually reach the maximum of $24,000 compensation. During this time this man could have worked at his regular job making as much as, or more than, he had made before injury. Furthermore, the man does not have to
have a serious disability, he just has to live a sufficient length of time.
a This man, therefore, will have received $24,000 for something which he did not have, since he has demonstrated the capacity to earn as much as, or more than, he did before injury by doing so. Compare this with the fact that a man who has had one hand amputated will receive a permanent disability payment of only $17,080 and it will become apparent that until an effective method of formal settlement or rating can be established, a practical one must be used. A compensation limit makes that possible. Furthermore, it seems to us that it would be most unfortunate to make it possible for claimants such as the one mentioned above to receive even more than $24,000 for a theoretical, and quite possible nonexistent, disability. We therefore oppose section 3B of this bill.
As to the proposal of section 8, we do not believe that employers or their insurance carriers should be burdened with the education of adult children" of a deceased employee. If we are to accept children to the age of 23 as dependents this year because they are students, then an excuse may well be found to extend the benefits next year to men and women of the age of 25 and perhaps in a year not too long after that to those of the age of 30. We do not believe that there is justification for increasing the age limit for dependent children who are students, but if that limit is to be increased we certainly do not believe that it should be placed beyond the 21st birthday.
We do not understand the reasoning behind section 6 of this amendment. The idea of resuming payment of temporary disability after permanent disability rating has already been awarded strikes us as illogical, to say the least. If a condition has become permanent then an award may be issued for permanent disability in accordance with the rating schedule which the act provides. The purpose of such an award is to compensate the injured workman for future loss because of residual disability. Therefore, any further payment after payment of the award is an obvious duplication. We also oppose this section.
We note that the supporters of this bill say that it seeks to overcome the major deficiency of the Longshoremen's and Harbor Workers' Act by increasing the limits of compensation benefits. To our way of thinking, an equally important deficiency of the act is the fact that its obvious intent, as expressed in section 5, is being thoroughly circumvented by allowance of claims of unseaworthiness against third-party shipowners and, in turn, of indemnity claims against stevedore employers. While we feel that most of the fault for this unfortunate situation lies in interpretations which have made vessels liable to longshoremen for unseaworthiness, it is, nevertheless, true that more and more claims back against stevedores are being allowed and the sequence of events in many of these cases would be almost farcical were it not so serious in its effect on the shipping industry;
The longshoreman alone, with perhaps a few other shore-based shipworkers also subject to the Longshoremen's Act, of all American workmen is in the position of being able to have his cake in the form of a right to sue for unseaworthiness and to eat it in the form of receiving compensation benefits while awaiting outcome of the suit.
We think that legislation to correct such inequities is most urgently needed.
May I conclude this statement by saying that we agree that the Longshoremen's and Harbor Workers' Compensation Act does need amending, particularly in order to eliminate the possibility of unseaworthiness claims for longshoremen, in order to provide a basis for rating back and head injuries as to permanent disability, and in order to make settlement practical in disputed cases. We do believe, however, that the present proposal, Senate bill 2485, should be revised along the lines which I have suggested.
Thank you very much.
Senator YARBOROUGH. I have no questions at this time, Mr. Greenough, and in the interest of time we plan to finish with all the list of witnesses today, but, Senator Morse, do you have any questions?
Senator MORSE. I have some questions.
Your statement is accumulative of what is already in the record but that is desirable. Let's get at your understanding of the theory. You state in your prepared statment that there is no reason which we can see why a single man earning the same wage as a married man should be discriminated against in the event of injury by receiving less compensation than the married man. You believe that such would lead to excessive litigation. What is your understanding of the theory behind this amendment? Why is it being asked for?
Mr. GREENOUGH. I think on the theory that the married man has more expense to take care of his family. But I might say in that respect, sir, that I think the single man might have expenses, might be contemplating marriage. He is making the same wage as the married man and I think he should have the same compensation.
Senator MORSE. Is there any theory involved that the married men provide the industry, with a more steady labor supply, they buy their homes, they are available at all times and that is a value to the industry? Do you think that theory is involved at all? Mr GREENOUGH. I really don't know, sir.
Senator MORSE. I don't know either. I will find out when we get the labor people on the stand, but I am interested in knowing what the theory of this is. Thank you very much.
Senator YARBOROUGH. Mr. Greenough, you have given us a good many fact situations, hypothetical fact situations. It will make it easier for us to understand the objections. Thank you for the contribution.
The next witness is Mr. Fred Smith, Seattle, Wash.
Mr. Smith, come down and if you have any counsel or staff or other people with you, bring them with you.
STATEMENT OF FRED R. SMITH, PRESIDENT, SEATTLE STEVEDORE
CO., SEATTLE, WASH.
Mr. SMITH. Mr. Chairman, my name is Fred R. Smith. Some 32 or 33 years ago. I appeared before one of my very, I feel, close friends and then advisers in the labor field for many years by taking his ruling. He arbitrated the first arbitration on the Pacific coast in room 26, Leopold Hotel, Bellingham, Wash., second floor, which was the top floor in Bellingham. So it seems like some 32 years later I am back here again asking to arbitrate something. I want you
Senator MORSE. According to my memory, it was just yesterday.
Mr. SMITH. So, Senator Yarborough, I am most happy you allow me to be here. I will try to make this short. There are a few points I would like to touch on from the standpoint of an employer.
Senator YARBOROUGH. Proceed, Mr. Smith, in your own way. The purpose of our holding these hearings out here and taking this time is to get all the facts we can.
Mr. SMITH. I have heard many remarks here, I have read much testimony. I am not here pleading for a full employment bill for the lawyers. I am not going into that any further.
I am going to plead for a full employment bill for our longshoremen working in the areas where I work and no place else. I think it will have a bearing in the overall picture if these considerations are given. I am not a technical man, I am not an attorney, even though I have an attorney in my employ that happens to be my son.
He has been in the company for 10 years. He couldn't get in the union which has almost as good a shop as the attorneys have, but he is now an attorney in his own right, so I will proceed.
Senator MORSE. You haven't changed in those 30 years.
My name is Fred R. Smith. I am president of Seattle Stevedore Co., and also am an officer and stockholder in the Twin Harbor Stevedoring Co., Olympia Stevedoring Co., Everett Stevedoring Co., and Bellingham Stevedoring Co.
I am connected with stevedore operations from Willapa Harbor, Wash., through Blaine, Wash. I am also chairman of the board of Southeast Stevedoring Corp., Ketchikan, Alaska, which operates throughout southeastern Alaska.
This is not in the script but I think I am in Alaska today.
With these varied interests I am, therefore, a member of the Management Advisory Cargo Handling Safety Committee and on the board of directors of the Pacific Maritime Association and Master Stevedoring Contractors' Association.
I am making this statement on behalf of the various companies that I represent in the States of Washington and Alaska.
In reference to S. 2485, I would like to first address my comments to the situation we now find ourselves confronted with with reference to the so-called third-party suit which has become an increasing cost to our industry. As you are aware, from other testimony, one of the costly items for both employers and employees is the third-party suit that arises too often after an injury aboard a vessel that is supposedly covered under the Longshormen's and Harbor Workers' Compensation Act. We were led to believe that the original concept of the Workmen's Compensation Act, namely, the relief of the injured worker and the stability of an insured business, would give to the employee the maximum amount of dollars when he is injured on the job and would also give to the employer some method of properly allocating his cost of such injuries within his cost structure. The result under the Longshoremen and Harbor Workers' Act has been for the employer to continue to cost his compensation under the act but with the additional problem of third-party suits, he is now placed in a nebulous field, depending upon the whims of a judge and/or jury which, in many respects, are not familiar with the industry we are involved in, and which results in very unusual judgments all the way from very high