Associated Oregon Industries

Oregon Public Policy Issues: Workers' Compensation

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History

Oregon's Workers' Compensation system has a long and increasingly complex history. In 1913 the Legislature formed a commission of three individuals to handle virtually all aspects of Oregon's fledgling system. Today, the Workers' Compensation Division, Workers' Compensation Board, OR-OSHA, and the Workers' Compensation Ombudsman's Office all play significant roles in what has become an enormous and costly process. Two significant reform packages passed in the 90s have brought Workers' Compensation costs under control.

Oregon's Workers' Compensation system evolved from the original State Industrial Accident Commission (SIAC), which was created by the Oregon Legislature in 1913. Originally, SIAC was comprised of three commissioners who had authority to make, enforce, and administer rules and regulations needed to ensure safety in the workplace.

An Industrial Accident Fund was created to provide compensation to injured workers or their survivors. Employers in hazardous occupations had the option of paying into the Fund and thereby be immune to lawsuits arising out of workplace injuries. Employers opting out of the Fund were subject to unlimited liability under the Employer's Liability Act. (Employers in non-hazardous industries could voluntarily elect to participate in the Fund and receive its protections.) Unlike current law, both employers and workers were required to contribute to this self-supporting fund.

From 1913 to 1965 the responsibilities of the SIAC remained relatively constant with some notable changes, including:

• 1929 -- the records of the Commission were declared to be open to public inspection except for information related to payrolls and confidential reports.
• 1935 -- SIAC was given the additional responsibility for the Unemployment Compensation Commission, created in a special legislative session that same year.
• 1943 -- the scope of the law was increased to include occupational diseases, create a medical review board to resolve disputed final orders, and give the commission the responsibility to investigate and enforce safety statutes, order compliance, and halt work operations for failure to comply with safety statutes.
• 1959 -- SIAC was given the responsibility to require annual and periodic inspections of places of employment, as well as jurisdiction for enforcing safety codes relating to motor vehicles used to transport workers to and from places of employment.
• In 1965 the functions and responsibilities of the commission were split into two agencies, the Workers' Compensation Board (WCB) and the State Compensation Department. Their respective responsibilities were allocated as follows:
• The Workers' Compensation Board was charged with general supervision of accident prevention, rehabilitation, providing compensation, and enforcement of the Oregon Safe Employment Act and Oregon's Workers' Compensation Law. The Board, in concert with the Insurance Commissioner, had power to establish an Assigned Risk Pool and to establish reasonable rates for reimbursement for medical services provided to injured workers.
• The State Compensation Department assumed the duties and responsibilities relating to insurance coverage, actuarial determinations, claims processing and payment, contribution collection, safety, accounting and other powers as insurers.
• The 1965 law made workers' compensation coverage mandatory for all but a very limited group of employers. Additionally, employers could now self-insure for the purposes of workers' compensation. Under the three-way system, employers can discharge their obligation in any of three ways:

1. obtain insurance from the State Compensation Department;
2. buy insurance coverage from a licensed workers' compensation carrier; or
3. by being self-insured

• In 1969, the State Compensation Department was renamed the State Accident Insurance Fund (SAIF). Two years later, SAIF began operation as a competitive workers' compensation carrier authorized to buy, sell, lease, construct, furnish, rent, own, an d manage real property in its own name for offices and to pay for such property out of the Industrial Accident Fund, as well as to pay administrative costs out of the Fund.
• In 1977, the Legislature created the Workers' Compensation Department, consisting of a Board and a Director. The Director was vested with authority in the areas of administrative, regulatory and rule-making duties, except those specifically reserved to the Workers' Compensation Board.
• In 1979, the Legislature established SAIF as a public corporation, with a Board of five directors appointed by the Governor.
• In 1990, Oregon's workers' compensation system had reached a state of crisis. Employer premiums were among the highest in the nation, yet worker benefits were low (see chart). Litigation costs were making Oregon an uncompetitive place in which to do business. Clearly, something had to be done.

In a dramatic moment, Democratic Governor Neil Goldschmidt, convened the two parties for which the workers' compensation system was originally designed-- Labor and Management -- and charged them with reforming Oregon's crippled system. By eliminating all other special interests from the discussions, Goldschmidt's fourteen member Mahonia Hall team, seven named by the AFL-CIO and seven named by AOI, managed in a few short months to virtually rewrite Oregon's workers' compensation law. The product of their work, SB 1197, was passed in a one-day legislative session in May of that year.

The results of the Mahonia Hall Compromise had immediate impact on Oregon's rates and benefits. Starting in 1991, Oregon rates have fallen each year for a total of 52.4% -- reflecting how far out of balance the system had been, as well as the significance and scope of the reforms. And employee benefits, which were once ranked among the worst in the nation, are now at or above the national median.

Oregon Workers' Compensation Premium Rate Changes (by year)