Every craftsman needs the proper tools with which to complete their tasks. Each tool has a different scope and purpose, intended to perform a function within the overall mission at hand. Knowing what tool to use and when to use it is as much a part of a master’s skillset as the use of the tool itself. Selecting the wrong tool at the wrong time often slows the project and damages the result.
Two of the tools available in a workers’ compensation regulator’s toolbox are the carrot and the stick. And the knowledge of when to use either would be another tool in their quiver.
The “carrot and the stick” allegory dates to the industrial revolution. It relates to the approach of motivation and is based on the principles of reinforcement. It is originally credited to philosopher Jeremy Bentham, who described the theory via the story of an old donkey. The best way to move the donkey was to put a carrot in front of him and jab him with a stick from behind. The carrot was a reward for moving while the stick was the punishment for not moving fast enough or in the direction his master intended.
A number of years ago at my former company we had an inquiry from a large customer who was a subscriber to a regulatory compliance product we provided. They described a unique situation for managing claims in one state for which the statutory and regulatory guidelines weren’t particularly clear. They asked if we could provide guidance to confirm they were managing the situation properly.
Now, we weren’t attorneys and never provided legal advice. However, questions like this were not uncommon, and we would try to research the issue and get to the right sources in support of our customers. In this case, it meant emailing the specific question to the state workers’ compensation regulatory agency. We did not name the insurance company and made it clear they were simply looking to ensure they were acting within the state’s requirements. It would be a number of days before we received any response.
And when that response finally arrived, it was not what we anticipated. Our inquiry had been referred to the agency’s Special Investigations Unit, and the terse reply was simply one line.
“Tell us the name of the carrier that asked that question.”
We declined to do so, and the increasingly heated email exchange that followed over the next few days did nothing to clear the air. The agency insisted we must disclose their identity. Our position was that there was nothing relevant to disclose. We simply asked a question on behalf of a company that was trying to do the right thing.
Ultimately, the agency never learned the name of the company, but the more important point was we never actually got an answer. This particular regulatory body, at this single point in time, had selected a stick when a carrot would have been the better choice. Their focus was on punishing potential errors rather than encouraging positive direction. It was entirely the wrong tool selection, and no one was better as a result.
That is not to imply that the stick doesn’t have a legitimate spot in the toolbox. In 2018, I delivered the keynote address at the 47th Annual Conference of the Washington Self Insurance Association (WSIA). Immediately after my presentation, Joel Sacks, Director of Washington’s Department of Labor and Industry, addressed the conference. As I wrote at the time, Sacks reviewed his agency’s progress toward five goals that were established 6 years prior at the beginning of his term as Director.
My blog post at the time said:
One of Sack’s objectives was to improve the working relationship with the business community his agency serves and oversees. To that end, they have made efforts to achieve better compliance by partnering with business to improve education and communication. The belief has been that many employers will do the right thing if they are aware of the expectations and responsibilities they have when it comes to workers’ comp. They have done the same with unions since employees in Washington must bear about 25% of the premiums for workers’ comp coverage. This makes them more direct clients than they might be considered in other states.
It was when the conversation turned to “bad actors” that Sacks presented a very significant concept that would be useful for all regulatory agencies. Referring to enforcement actions against employers who intentionally flout the rules; underreporting payroll, misclassifying personnel, failing to purchase comp coverage or the like, Sacks very plainly stated that “bad guys deserve a different L&I.” It was a point that should not be taken lightly, as it delineates a clear difference between the customer friendly partner and a stern regulatory body.
Sack’s was absolutely correct. Different players require “different” regulators – or at least a different regulatory approach. Knowing the difference is as important as the tools themselves.
This conversation came to light again recently during the recent annual SAWCA conference (Southern Association of Workers’ Compensation Administrators). My new business partners and I had many meetings discussing our new WorkCompCollege.com program. It was pointed out to us by more than one person that our “Whole Person Recovery Management” philosophy could be useful in the regulatory realm as well. One regulator indicated they believed their staff could benefit from such a program. The reality is, that regulators aren’t the only ones who have access to carrots and sticks. Just about everyone has access to those in the course of their job and knowing what to use and when is key to effectively achieving the outcomes we desire.
It has dawned on me that the certification program we are building, focused on workers’ recovery and a more holistic approach that incorporates the bio-psychosocial needs of the injured worker, is really centered on helping people select and employ the right tools for the job. Both the carrot and stick have their purpose, but we may find that the former has more positive effects than the latter. Learning what to use when will be a big part of the job for all of us.
Besides, why should regulators have all the fun?
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