(2) Distribution of production expense: 15 Production costs are assigned to each class of product or type of shipment, as the case may be, for the object of allocating these expenses is to ascertain a separate cost of such classes of output as might be the object of special price or rate policies. There would be no real purpose served by separating the costs to every item of output, for even the direct costs of particular bits of business vary as a result of accident, weather, or irregularities which cannot be controlled, until two manufactured products of identical pattern, or two identical shipments moved between the same two points on the same truck trip, may have cost very different amounts. Costs within each production department or transportation service are made up of direct and indirect costs. The direct costs as the name indicates, are assigned directly to the class of output for which they were incurred, but the indirect or overhead costs must be apportioned by use of some cost unit that is common and uniform to each class of product or weight group of shipments within the department. Different cost units may be used for various types of indirect expenses, or the same cost unit may be used for all indirect expenses within a department, depending upon which cost unit the expenses are related to. Conclusion: A good cost system embraces accounting principles, economic theories, statistical apportionments and engineering studies. For this reason, the same principles and theories are applicable in developing manufacturing costs and transportation costs as illustrated in the comparison set forth hereinabove. The economist is concerned chiefly with the effect of costs on prices under natural competitive conditions, or with estimating monopoly profits as an excess over the earnings that competition would normally bring, or with establishing a fair level of prices and earnings in public service industries. Each of these deals with the long range concept of costs. The cost accountant is charged with the responsibility of ascertaining the efficiency or inefficiency of particular departments of the plant or of the plant as a whole. To this extent the accounting approach which goes to the short period concept of cost finding or cost control may differ from the economic approach. However, the cost accountant is also concerned with the cost of manufacturing each type of product in order to guide the management in its price policies, selling campaigns, and production schedules. It is this latter type of manufacturing cost finding which is similar to transportation cost finding. The accountant and the economist are not out of harmony in the approach to cost finding so far as their aims and purposes coincide. 15 The classes of output in the producing departments refer to the different groups of products or groups of shipments and not individual parts of the group. For example, the units of output in the paper mill might be newsprint, stationery, wrapping paper, etc., and not the individual reams of paper within each group, and the units of output for a motor carrier are the various weight groups of shipments such as 0-499 pounds, 500-999 pounds, etc., and not the individual shipments within the weight group. The writer, in his official capacity, was requested to prepare a report and make recommendations regarding a Federal workmen's compensation act. At the request of the Executive Secretary, this "study" has been revised for publication in the JOURNAL. While the study is entirely factual, such statements as are herein contained represent the views of the writer, and are not necessarily the views of The American Short Line Railroad Association, which has taken no action on the subject. Attempt has been made to prepare a study, in narrative form, which would reflect the development of the subject to the present time, because, as Mr. Justice Holmes said, "a page of history is worth a volume of logic." Following the philosophy of Bellamy, it is only by looking backward that we may evaluate the future. Based upon what is developed in this study, the following conclusions seem to be justified: 1. Congress has the constitutional authority to enact a workmen's compensation law applicable to railroad employees. 2. Workmen's compensation laws are sound in principle, and have been enacted in each of the forty-eight states and in eight Canadian provinces. The Congress has enacted workmen's compensation laws applicable in the District of Columbia, to Federal employees, and to longshoremen and harbor workers. Workmen's compensation laws are in the interest of railroad employees, and a proposal for a Federal Workmen's Compensation Law applicable to railroad employees would be supported by most of the railway labor organizations. Such a proposal would, however, be opposed by the BRT and by the seamen's organizations if such proposal were made as a substitute for the Federal Employers' Liability Act. 4. A Federal Workmen's Compensation Law applicable to railroad employees would require a pay-roll tax of at least 3 per cent, and progressive "liberalization" would probably require a pay-roll tax of 6 per cent. 5. There are now no known facts upon which to base a conclusion as to what a Federal Workmen's Compensation Law would cost the railroads as compared with their costs for employee injuries and deaths under the Federal Employers' Liability Act and the state workmen's compensation laws. The Principles of Employer Liability 1. The Common-Law Liability of an Employer At common law an employer was under the duty to protect an employee from injury while he was engaged in the performance of the operations of his job. At the same time, the employee assumed the normal risks inherent in the line of work he engaged to perform. In order to protect the employee from the hazards of his work, the employer was required to provide a safe place in which to work, keep the work area in reasonable repair for normal use, and make inspections frequently enough to insure that proper working conditions were being maintained. The employer was required to provide safe tools and appliances for the employee to use. The employer had the duty to warn of danger, when he knew or discovered it, and to formulate, display, and enforce such rules and regulations as would afford employees obeying them a reasonable degree of protection while in the performance of their duties. The employer was also under the obligation to use reasonable care in the selection of competent fellow servants and to select them in numbers sufficient to insure the safe performance of all assigned tasks. These duties, being the sole responsibility of the employer, could not ordinarily be delegated to another.1 At common law, the liability of employers arises only where it can be shown that their negligence was the proximate cause of the injury or disability sustained by their employees. Thus, at common law, where an employer fails to take the foregoing described precautions, he has not acted as a reasonable and prudent man would have done under similar circumstances and would be considered negligent in exercising his duty toward his employees. Under the common law, injuries and fatalities could not be compensated through the courts unless it could be proved that the employer was negligent. 2. The Basis of the Federal Employers' Liability Act The basis of any action under the Federal Employers' Liability Act 2 is negligence on the part of the railroad, so that there is no liability unless and until negligence is proved to the satisfaction of the jury.3 3. The Principles of Workmen's Compensation Laws Workmen's compensation laws differ from the Federal Employers' Liability Act in that the theory of a workmen's compensation law is that an employee is insured against the results of an injury received in the course of his employment, without reference to his contributory negligence, and without reference to common law liability. 1 Clark, The Legal Liability of Employers for Injuries to Their Employees, in the United States, BLS (Bureau of Labor Statistics) Bulletin 74, 3-19. 2 U. S. C., Title 45, Sections 51-60. 3 Urie v. Thompson, 337 U. S. 163. Workman's compensation laws, being designed to give an injured worker prompt medical care and a reasonable part of the wages lost, at the expense of the employer, and to provide his dependents with reasonable sustenance during the loss of normal, expected wages, most of them cover the following fundamental points: Provide certain, prompt and reasonable compensation to victims of work accidents and their dependents; 2. Free the courts from delay, cost, and the work load of mass personal injury litigation; 3. Relieve public and private charities of the financial drain caused by uncompensated industrial accidents; 4. Eliminate economic waste in payment of fees to lawyers and witnesses, and save the time ordinarily consumed by court trials and appeals; 5. Supplant concealment of fault in accidents by a frank study of causes, diminishing preventable accidents and reducing cost and suffering. 4. The Federal Employers' Liability Acts For many years the remedies for personal injuries of railroad employees engaged in interstate commerce were governed by the negligence laws of the various States. Congress, recognizing the difficulties under which railroad employees engaged in interstate commerce labored in obtaining redress for injuries, enacted the original Employers' Liability Act of June 11, 1906.4 This Act abolished the "fellow servant" rule and modified the "contributory negligence" rule. That law, by its terms, was applicable to all employees of railroads engaged in interstate commerce, without regard to whether or not the particular employee, at the time of injury, was engaged in interstate commerce. was held unconstitutional in Employers' Liability Act Cases,5 because, in the view of the Supreme Court of the United States, it transgressed upon powers reserved to the several States. The law President Theodore Roosevelt, in a special message to the Congress, on January 31, 1908, said: "The Supreme Court has decided the employers' liability law to be unconstitutional because its terms apply to employees engaged wholly in intrastate commerce as well as to employees engaged in interstate commerce. By a substantial majority the Court holds that the Congress had power to deal with the question insofar as interstate commerce is concerned. "As regards the employers' liability law, I advocate its immediate re-enactment, limiting its scope so that it shall apply only to the class of cases as to which the Court says it can constitutionally apply, but strengthening its provisions within this scope. state employment being thus covered by an adequate national law, the field of intrastate employment will be left to the action of the 4 34 Stat. 232. 5 207 U. S. 463. 642 Cong. Rec. 1372. Inter several States. With this clear definition of responsibility the States will undoubtedly give to the performance of their duty within their field the consideration the importance of the subject demands." Congress, accepting the recommendations of the President, reenacted the Federal Employers' Liability Act on April 22, 19087 and corrected the defect in the earlier law by expressly limiting its application to interstate railroad employees who, at the time of injury, were engaged in the interstate commerce business of the railroad. That law was amended by the Acts of April 5, 1910 and March 3, 1911,9 and, again on August 11, 1939.10 Under the Act of April 22, 1908 it was generally supposed that the several States held concurrent jurisdiction with the Federal Government in applying the provisions of the law. Following a number of jurisdictional disputes in the courts, Congress clarified this aspect of the law by the amendment of April 5, 1910 11 which specified that the State courts would be vested with such concurrent jurisdiction. The constitutionality of the Act of April 22, 1908 was sustained in Second Employers' Liability Cases.12 With respect to the power of Congress, the Court, at page 55, said: "It does not admit of doubt that . . . Congress, in the assertion of its power over interstate commerce, may regulate the relations of common carriers by railroad and their employes, while both are engaged in such commerce, subject always to the limitations prescribed in the Constitution, and to the qualification that the petitions in which those relations are regulated must have a real or substantial connection with the interstate commerce in which the carriers and their employes are engaged." IV History of Past Efforts to Obtain a Federal Workmen's It has been well said by Mr. Justice Holmes that "The life of the law has not been logic: it has been experience." Therefore, any consideration of this subject should include a study of past efforts to obtain a Federal workmen's compensation law. Two years after the Federal Employers' Liability Act of April 22, 1908 was passed, Congress created an "Employer's Liability and Workmen's Compensation Commission," under the chairmanship of Senator Sutherland, and instructed it to study the whole problem of liberalizing statutory remedies for injured railroad employees. This commission 735 Stat. 65. 8 36 Stat. 291. |