William & Mary Business Law Review


Jason Ohana


2011 William & Mary Business Law Review Best Student Note Award


Workers' Compensation is often described as a bargain between employers and employees. Employees give up the right to sue their employers in negligence for workplace injuries, and, in return, employers agree to pay predictable, statutorily mandated benefits to injured employees. Over time, this “bargain” became compulsory in every state but one. Texas is the only state in which employers and employees can decide whether or not to enter the workers' compensation bargain. This elective system has some fairly serious problems, and many have advocated its abandonment. This Note analyzes the system's history, compares the system to conventional compulsory systems, analyzes some of its weaknesses, and concludes that with some modifications, the system could be a useful model for other states interested in fostering innovation and cost reduction in their own occupational injury systems. This conclusion is based on the experience of a small but significant number of Texas employers that opt out of the workers' compensation system and yet provide, at a lower cost, substantially the same benefits to injured employees as would be available under workers' compensation. The existence of this parallel occupational injury system directly benefits those employers that are able to construct cost-saving alternative benefit programs. In addition, it has the potential to indirectly benefit even those employers that participate in the workers' compensation system as cost saving techniques innovated in the less regulated occupational injury benefits market trickle into the more highly-regulated workers' compensation market.