A campaign by some of America’s biggest companies to “opt out” of state workers’ compensation — and write their own plans for dealing with injured workers — was dealt a major blow Friday when an Oklahoma commission ruled the alternative system unconstitutional.
Company plans were supposed to provide equal benefits to workers’ comp. But in its unanimous ruling, the Oklahoma Workers’ Compensation Commission compared that notion to “a water mirage on the highway that disappears upon closer inspection.”
In addition, the U.S. Department of Labor said in a letter obtained Monday that it is evaluating whether opt-out plans in Texas and Oklahoma violate workers’ rights under federal law.
The opt-out effort was the focus of an investigation by ProPublica and NPR last fall, which found that the plans almost universally had lower benefits and more restrictions than workers’ comp.
Typically, when a worker gets hurt on the job, employers are required to pay for their medical care and lost wages under a state-mandated benefits system. Under this system, which has been in place for more than a century, workers give up their right to sue.
But in recent years, well-known corporations, led by Walmart and Lowe’s, have been pushing states to let them handle injuries themselves, arguing they can provide better care, higher wage benefits and a more efficient system if freed from the bureaucracy of state workers’ comp. In 2013, Oklahoma became the first state to pass a law allowing employers to opt out, joining Texas, which has never required businesses to have workers’ comp.
Last year, the corporations’ offensive appeared to be gaining steam. Tennessee and South Carolina were seriously considering bills. A national campaign drew support from Nordstrom, Whole Foods, Macy’s, Sysco and Safeway, among others. And supporters said they planned to get laws passed in as many as a dozen states within the next decade.
But months after the ProPublica and NPR story, which was republished in several news outlets, the movement appears stalled. The Tennessee bill was pulled from discussion earlier this year, while South Carolina’s bill hasn’t moved since the spring. Two other states that were expected to consider opt-out legislation this year, Georgia and Mississippi, have yet to see bills introduced. Nordstrom dropped out of the national coalition. And only a handful of firms in Oklahoma have opted out since October.
Then, on Friday, the Oklahoma commission ruled that the opt-out law had created an unequal system of justice for workers employed by companies that created their own plans. The ruling came in response to an appeal from a Dillard’s department store worker whose benefits were denied.
Bob Burke, a workers’ comp attorney who has filed 17 cases challenging the law, said the decision will “put a cold, wet rag” on the opt-out movement.
The commission, which is considered business-friendly, noted that the plans give employers significant power to deny claims by letting them define what constitutes a workplace injury. For example, workers sickened by asbestos can generally receive workers’ comp. But most opt-out plans in Oklahoma specifically exclude asbestos exposure from coverage.
The commission’s decision is likely to be appealed to the Oklahoma Supreme Court. Several legal and insurance experts who have been following the issue have already floated the argument that the commission acted outside its authority in ruling the law unconstitutional.
Such decisions are typically left to courts rather than administrative agencies like the commission. But in its order, the commission noted that the way the new workers’ comp law was written designated it as a “court of competent jurisdiction,” giving it the power to decide constitutional questions.
The case at hand involves an employee at Dillard’s department store, Jonnie Yvonne Vasquez, who said she hurt her shoulder and neck lifting various boxes of shoes at the store in September 2014. Dillard’s denied her claim as a preexisting condition.
Under workers’ comp, Vasquez’s claim might not have been denied. The commission noted that opt-out plans contain more restrictive rules for coverage when workplace injuries aggravate preexisting conditions.
Under the Dillard’s plan, Vasquez also faced other substantial differences not noted by the commission. She could only see doctors picked by the department store chain. Under workers’ comp, she would have been able to choose a doctor from a list of three provided by the company. And if she wanted a second opinion, she could have asked the commission for an independent medical exam.
Other workers have encountered additional obstacles because nearly all the company plans require workers to report injuries by the end of their shifts or within 24 hours — or risk losing all benefits. In contrast, Oklahoma workers’ comp gives employees 30 days.
In Friday’s order, the commission took aim at several benefits touted by proponents of opt-out plans.
Rather than creating a more efficient process for handling disputes, the system developed by the plans adds several layers that may actually make the process longer, the commission said.
Promoters of opt-out plans say they come with a number of checks and balances to protect workers’ rights. But the commission ruled that the opt-out law unjustly bars injured workers’ access to the courts when their accidents don’t fall under their employers’ definition of “injury.” Under the law, such workers wouldn’t have remedies under their companies’ plans, but are also not allowed to sue their employers for negligence.
In defending the case, Dillard’s argued that the opt-out law served “a legitimate government goal” by lowering the cost of doing business compared with surrounding states.
But the commission dismissed the argument as one that the business community has “annually trotted out for the past decade” to support changing workers’ comp laws.
Such arguments, the commission said, were irrelevant to whether the law treated workers equally.
“We can conceive of no rational basis,” it ruled, to create a “subclass of injured workers,” who are subject to benefit plans in which the employer “can determine when it will be liable and when it will not be liable.”
The Association for Responsible Alternatives to Workers’ Comp, the coalition pushing opt-out bills, said in a statement that the case is far from over.
“It is almost certain there will be further legal and legislative efforts,” the group said. “Option plans are resulting in better medical outcomes for injured workers compared to traditional workers’ compensation.”
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Bill Minick, the Dallas lawyer who has written most of the plans, didn’t respond to requests for comment. Earlier this month, his firm PartnerSource released a statement that under opt-out plans Oklahoma employers had saved 73 percent over what they would have paid under workers’ comp.
The U.S. Department of Labor began reviewing the opt-out phenomenon after 10 high-ranking Democrats in Congress asked the agency to investigate.
“We agree that some of the trends in changes to state workers’ compensation systems are cause for concern,” Sharon Block, principal deputy assistant secretary of labor, wrote in a letter last week to Sen. Sherrod Brown, D-Ohio.
“One of the starkest developments in state workers’ compensation laws is the emergence of the ‘opt-out’ provisions that enable employers to set up their own plans, including setting their own exclusions and procedures, or to leave workers completely on their own.”