Thirty Years of Workers’ Comp Mediation
By Judge J. Randolph (“Randy”) Ward
This year marks the 30th anniversary of mediation in North Carolina‘s Workers’ Compensation system, introduced by a pair of North Carolina Bar Association CLEs presented live on September 21, 1992, at the Raleigh’s Velvet Cloak Inn. “Mediation for Workers’ Compensation Counsel” was held in the morning, and “Worker’s Compensation for Mediators” followed after lunch. Video replays were shown through February in Raleigh, Jacksonville and Charlotte. (See brochure, infra.)
When I was appointed to the N.C. Industrial Commission in early 1989, the state and its workforce had outgrown the agency’s resources. North Carolina was at or near the top in attracting new businesses, with an attractive climate and workforce, strong educational assets, and entrepreneurial banks. Industrial employment grew to 29% of the workforce in the early nineties. When I arrived, the Commission had twelve Deputy Commissioner positions, but only nine were hearing cases. I was told that there was a twelve- to eighteen-month backlog of cases awaiting hearings. Although the three Commissioners heard appeals from the Deputy Commissioners’ hearing decisions, I was the only lawyer on the Commission.
Litigation delay can be particularly tragic in the workers’ compensation system, which was initially designed to deliver “swift and sure compensation” for injuries by taking away common tort claims and defenses and simplifying the calculation of benefits. Many claimants “lived check to check” (as a recent poll shows that 21% of Americans do now), and all too often when the checks stopped, the injured worker lost a truck, or the money to send a child to college, or their house, or a spouse.
A series of appellate decisions in the late eighties significantly increased the possibility that a claimant could receive weekly compensation for an extended period of time. Rising medical costs had spurred the Federal government to impose dramatic limits on medical fees in its pervasive programs, and providers shifted costs to other payers, primarily the privately insured and their employers. The Industrial Commission routinely awards “medical compensation” together with cash benefits. It had maintained a fee schedule for physicians and allied professions since the 1930s, but had adopted the hospital fees paid by the State’s largest private insurer. Employers’ hospital medical compensation costs, involving primarily traumatic injuries, grew by 17% to 20% for three consecutive years. Medical compensation, which had historically been about 10% of compensation costs, went above 50%. The Commission was enjoined from repealing its hospital rule, costing employers an estimated seven million dollars (worth roughly fourteen million today) before the Supreme Court dissolved the injunction. All of these developments led to more – and more contentious – litigation in workers’ compensation cases.
The Commission desperately needed a fair and accessible case diversion strategy. Fortunately, we were not alone. I became a member of the N.C. Bar Association’s Alternative Dispute Resolution (ADR) Committee in 1987, after serving as an arbitrator in Durham, one of the three model districts for the ADR Committee’s District Court arbitration program, which eventually went statewide. Because the compensation bar at that time was small and sharply stratified into defense and claimant representatives, a knowledgeable corps of arbitrators was not available. But I tried two or three other ideas generated by the ADR Committee, including a “Settlement Day.” That entailed renting meeting space in a Charlotte hotel for a full workday to accommodate comp adjusters and the attorneys they invited to discuss settlement. Very few cases actually settled on that day, but a surprising number of participants were positive about the event because their face-to-face meetings had started promising negotiations.
While the District Court program was being rolled out the statewide, the ADR Committee began to focus on Florida’s “mediation” program. That drew my attention because Florida’s legislature had held four special sessions to deal with problems in their workers’ compensation system, and colleagues there touted mediation as a way to speed up dispositions. While in Florida for a conference, I also observed a mediation. It involved a “TMJ” injury – a notoriously difficult to prove or disprove soft tissue injury of the jaw. The human dynamics of mediation were on full display, the case settled, and I left a believer.
After decades of successful mediations, it is hard to recapture the skepticism that many trial lawyers had in the early 1990s about mediation and “alternative dispute resolution” generally. The first reaction of many attorneys was that they already settled the vast majority of their cases, and that it would be just another meeting that added expense and delayed relief for their clients. (I know – I was one of them.) Some attorneys were concerned about their business model. My father, Judge Hiram H. Ward, along with another U.S. District Court judge from Alabama, appeared before a U.S. Senate subcommittee to advocate for mediation in the Federal courts. They were disappointed that the panel seemed to be persuaded by representatives of an attorneys’ organization that a mediation order should be allowed only after discovery and prehearing motions were exhausted. With its relative lack of formality and procedure, descriptions of mediation in particular sounded like we wanted to just irritate parties into settling.
Consequently, in the preparation and run-up to the CLEs, I stressed that we were encouraging mediation on a voluntary basis, and I probably would not have been able to recruit some of the influential speakers and participants otherwise.
However, by the summer of 1992, I was able to cite “heartening success” with mediation in the state’s eight experimental Superior Court districts, backed with statistics carefully kept by one of the State’s most respected jurists, Superior Court Judge Jim Long. (See Business Weekly op. ed.) I suggested to claims managers that the wholly voluntary status of the program made it a good time to for them to take the initiative. (See Memo to Claims Managers.)
In the 1993 Session of the Legislature, Senator Roy Cooper, who had previously helped us get a significant increase in the Commission’s budget and some important forward looking “technical amendments” to our statute (e.g., “electronic records”), filed a bill to give the Industrial Commission the ability to order mediation, patterned on the Superior Court rules. Representatives Martin Nesbitt, Phil Baddour, and others later filed a similar bill. The House bill came to a vote first, and became law on July 19, 1993.
Following the superior court model, the Industrial Commission began ordering compensation cases into mediation as a matter of course in 1994. The volume of cases mediated was second only to the superior courts, and it was arguably the most successful program, with settlements in 71% to 74% of cases mediated annually, compared to roughly half of the other civil court cases. The difference is likely attributable to the statutory definitions of the compensation the injured employee is entitled to (primarily in § 97-28 – 31), and the additional time and attention that simplification allows the parties to deal with other, thornier issues in mediation.
By the spring of 1997, the Industrial Commission had caught up with its backlog of cases. Additional personnel, particularly including expansion of the Commission to seven members and twenty Deputy Commissioners, was a vital factor. But it is not clear that the backlog would have ever been overcome without the mediation program.
Judge J. Randolph (“Randy”) Ward served on the Industrial Commission from January 1989 until May 1997. In private practice, he was on the mediation panel of the Duke Private Adjudication Center, and later mediated in association with the Academy of Superior Court Mediators. He recently retired after eight years as a Judge of the N.C. Office of Administrative Hearings. He can be reached at [email protected].
