Opinion ID: 1891446
Heading Depth: 2
Heading Rank: 1

Heading: Background to the 1979 Amendment

Text: On April 4, 1911, Governor Woodrow Wilson signed New Jersey's first workers' compensation law. Hon. Fred H. Kumpf, Occupational Disease Claims Under the Workers' Compensation Reforms, 12 Seton Hall L.Rev. 470, 470 n. 2 (1982). The law represents carefully balanced tradeoffs between employees, employers, and insurers. Price V. Fishback & Shawn Everett Kantor, The Adoption of Workers' Compensation in the United States, 1900-1930, 41 J.L. & Econ. 305 (Oct.1998). Moreover, the law is designed to place the foreseeable cost of accidents on the employer who can easily factor it as an expense of doing business. Livingstone, supra, 111 N.J. at 94-95, 543 A. 2d 45; Fishback & Kantor, supra, 41 J.L. & Econ. at 309-10. This Court long ago noted that the law is designed to place the cost of accidental injuries which are work-related upon the employer who can make these funds available out of his operating expenses, and that this legislative goal must always be kept in mind when considering factual patterns presented. Hammond v. The Great Atl. & Pac. Tea Co., 56 N.J. 7, 14, 264 A. 2d 204 (1970). Implicit in the Act is the realization that when employers and insurers can foresee and calculate their costs, they will pass some or all of those costs on to their consumers. Wyatt v. Metropolitan Maintenance Co., 74 N.J. 167, 174, 376 A. 2d 1222 (1977) (Schreiber, J., dissenting) (The economic reality is that consumers will probably be called upon to pay in whole or in part for the employer's operating expenses.). That cost-shifting purpose is why, prior to the 1979 amendment, we focused not on whether the employer ought to be held responsible, but rather, whether the cost of a particular accident is one that should be imposed upon the consuming public as an appropriate production expense. Wyatt, supra, 74 N.J. at 174, 376 A. 2d 1222 (Schreiber, J., dissenting) (emphasis added). Put another way, [compensability should be resolved by asking] is the cost of that accident reasonably includable in the price to be charged for the employer's product or service? Id. at 173, 376 A. 2d 1222 (Schreiber, J., dissenting). If the cost to employers is unanticipated or becomes excessive, those employers may be forced to reduce their workforce or otherwise compensate for their losses at the expense of their employees. Id. at 175, 376 A. 2d 1222 (Schreiber, J., dissenting). Consistent with that cost-shifting rationale and with certain exceptions not relevant to this appeal, the Act covered accidents arising out of and in the course of employment. N.J.S.A. 34:15-7 (as enacted by L. 1911, c. 95, § 7). Courts in New Jersey and across the country construed that and similar language to mean that coverage should be provided only for accidents occurring on the employer's premises, leading Professor Larson to designate the popular restriction as the premises rule. 1 Arthur Larson, The Law of Workmen's Compensation, § 15.10 (1990). Under that rule, [t]he line between compensability and noncompensability ... is very strict. Under th[e premises] rule unless an employee is within the physical confines of the premises when an injury occurs, it is noncompensable. Cressey v. Campus Chefs, Div. of CVI Serv., 204 N.J.Super. 337, 344, 498 A. 2d 1274 (App.Div.1985) (citation omitted). The premises rule had and continues to have two important justifications. First, by restricting coverage to only those accidents that occur on the employer's premises, employers and insurers gain certainty concerning the expected cost of accidents. Because they know the unique hazards presented by their industry, employers are able to incorporate those costs as operating expenses. Livingstone, supra, 111 N.J. at 94-95, 543 A. 2d 45; Hammond, supra, 56 N.J. at 14, 264 A. 2d 204; Wyatt, supra, 74 N.J. at 176, 376 A. 2d 1222 (Schreiber, J., dissenting); Fishback & Kantor, supra, 41 J.L. & Econ. at 309-10. If coverage of accidents was permitted for any accident occurring to an employee, not only would employers and insurers be unable to forecast their expected costs, but those costs also would become exorbitant. Wyatt, supra, 74 N.J. at 175, 376 A. 2d 1222 (Schreiber, J., dissenting). Second, restricting coverage to accidents occurring on the premises of the employer comports with a sense of fairness because employers should be responsible for the safety of their employees when at work. Since industry must carry the burden, there must then be some causal connection between the employment and the injury, or it must have had its origin in some risk incident to or connected with the employment, or have followed from it as a natural consequence. Morris v. Hermann Forwarding Co., 18 N.J. 195, 198, 113 A. 2d 513 (1955); Bryant v. Fissell, 84 N.J.L. 72, 76, 86 A. 458 (Sup.Ct.1913) (denying compensability unless risk was reasonably incidental to employment). Because employers benefit from the work of their employees, we have rightly held employers responsible for accidents that befall those employees at the workplace. Thus, [t]he touchstone for determining whether the accident arises in the course of employment is whether it arises out of work for which benefit accrues to the employer. Zelasko v. Refrigerated Food Express, 128 N.J. 329, 345, 608 A. 2d 231 (1992) (Handler, J., dissenting). Conversely, requiring employer responsibility for any accident occurring to an employee, regardless of the time or place, is tantamount to asking employers to pay even for those accidents that are not the result of activities that benefit the employer or pose a unique hazard to the employee. As a necessary corollary to the premises rule, the courts developed the going and coming rule, which ordinarily precluded an award of compensation benefits for injuries sustained during routine travel to and from an employee's regular place of work. Livingstone, supra, 111 N.J. at 96, 543 A. 2d 45 (internal quotation marks omitted). Despite some contrary usage, the going-and-coming rule refers to the presumed lack of compensability for injuries occurring while an employee was going from or coming to work. 1 Larson, supra, § 15.11. Like the premises rule from which it arose, the going-and-coming rule allows employers and insurers to predict their expected accident costs. The rule also insures fairness to employers because an employee's routine trip to and from work yields neither special benefit to the employer nor results in a special risk to the employee. Ibid.; Morris, supra, 18 N.J. at 197-98, 113 A. 2d 513. The rule served the State and the entire country, and served us well, for over sixty years. Starting about 1970, New Jersey began what has been described as an abortive... ill-fated ... experiment of carving out exceptions to the premises rule. 1 Larson, supra, § 15.12(b), at 4-12. The exceptions began with courts concluding that because travel to and from work obviously is essential to the work itself, an injury occurring off the employer's premises was compensable. Hammond, supra, 56 N.J. at 13, 15, 264 A. 2d 204. Once begun, the exceptions had neither legal limit nor logical end. An accident occurring on the highway many miles from work might be considered compensable. So, too, might an injury occurring in the employee's home as the employee prepared to go to work. Such preparation might have been viewed as essential to the work itself. Thus, gradually but invariably, [t]he basic going and coming rule ... became diluted by a series of exceptions. Livingstone, supra, 111 N.J. at 96, 543 A. 2d 45. Those numerous exceptions met with stern scholarly criticism. See 1 Larson, supra, § 15.12. Professor Larson explained how a court can be led astray when comparing a case under consideration only to another isolated case, leading to incremental, but inevitable, extensions. In Professor Larson's words, New Jersey's workers' compensation jurisprudence in the decade of the seventies serves as an example of making law by measuring only the distance to the last precedent while completely losing sight of the essential principle involved in the rule. 1 Larson, supra, § 15.12(b), at 4-14. Predictably, the judiciary's de facto abandonment of the premises rule had fiscal consequences. The costs of workers' compensation insurance became substantial. Perez v. Pantasote, Inc., 95 N.J. 105, 112, 469 A. 2d 22 (1984). In just one year, 1976, insurance company underwriting losses for workers' compensation increased 160 percent. Wyatt, supra, 74 N.J. at 175, 376 A. 2d 1222 (Schreiber, J., dissenting) (citing Robert R. Heckman, Chairman of the Compensation Rating and Inspection Bureau of New Jersey). By that same year, New Jersey ranked third highest in the nation in cost of workers' compensation insurance. Id. at 175 n. 1, 376 A. 2d 1222 (Schreiber, J., dissenting) (citing 2 Governor's Econ. Recovery Comm'n Report app., at C-52, D-65 (1976)). The costs became so high that some businesses departed from this state and others [were] deterred from establishing plants here. Id. at 174, 376 A. 2d 1222 (Schreiber, J., dissenting). New Jersey's competitive position vis-a-vis other states diminished and the high cost of workers' compensation insurance was seen as a significant cause of that weakened position. Id. at 175, 376 A. 2d 1222 (Schreiber, J., dissenting). Specifically, one cause of the skyrocketing costs was thought to be the everbroadening scope of workers' compensation benefits applied by the courts in marginal cases. Ibid. (Schreiber, J., dissenting). Accordingly, a blue-ribbon panel, the Governor's Econ. Recovery Comm'n, recommended that the Legislature amend the Workers' Compensation Act, with the objective of becoming competitive with other states. Ibid. (Schreiber, J., dissenting) (citing 1 Governor's Econ. Recovery Comm'n Report 43 (1976)). That recommendation would serve as the prelude to the 1979 amendment, and was thought to signal the end of New Jersey's failed experiment with improving upon the premises rule.