Friday, April 25, 2014

Opt out experiment is progressing in OK state

There is news this week about the “Oklahoma Opt Out,” which made a splash last spring. Essentially, the Oklahoma legislature passed a opt-out from workers’ compensation, which is available at the sole discretion of the employer. That law was immediately challenged under the Oklahoma Constitution. Because of a specific provision of Oklahoma law, that challenge proceeded upon a very expedited calendar, and was heard by their highest court before the end of 2013. That is very fast to say the least.

The Court denied the Constitutional challenge. Leading some to report that the Oklahoma opt out “is Constitutional.” Others caution that the Court’s decision in Coates v. Fallin is not an affirmation of the opt out, but merely a conclusion that the process used to pass the law was not infirm. The challenge in that litigation was to the process, which would be similar to a Florida “single subject” challenge. In short, the plaintiffs in Coates alleged that the statute that was passed addressed more than one subject and so should be stricken, the court disagreed. That is really the extent of the Coates decision.

The Coates dissent points out that despite the conclusion that the law was passed using an appropriate process, there are concerns about due process under the new opt out. Judge Reif expressed an opinion that “under the opt out system, the employer and any “appeals” committee chosen by the employer cannot satisfy the impartiality requirement of due process.” This is an interesting advisory opinion by the Judge. Some question whether it leaves any doubt as to what this particular judge’s opinion may be after the facts and argument on that particular challenge are raised and considered by the Court. Some have questioned whether this judge has already, prematurely, decided that and other constitutional issues.

According to WorkCompCentral on Friday, three carriers in Oklahoma are now marketing policies under which employers in that state could offer the “equivalent of” workers’ compensation and opt out of Oklahoma workers’ compensation. They report that Safety National, OneBeacon, and Great America Insurance have all received the approval necessary to offer the Oklahoma Option. None of these are among the biggest carriers. Will the large workers' compensation providers spend the resources to offer such policies/programs?

In case you missed the previous blog posts on this subject, the opt out is being watched coast-to-coast. It allows employers to create their own workers’ compensation processes, complete with tort immunity (the existing opt-outs in Texas and New Jersey law do allow opt out, but at the price of tort immunity). Employers with such processes will not be subject to that state’s workers’ compensation judge’s jurisdiction. Disputes will be decided through processes defined by the employer’s plan.

This is not something new. It is getting a significant amount of press and being referred to as “unprecedented.” However, the same opt out has been available in many states for many years, including Florida, but only for employers with a collective bargaining agreement. That is, unionized companies have had the ability to opt out for a long time, and many have. In Florida, the most recognized examples have been sports teams, but there have been others.

Those employers opted out through a negotiated agreement with labor. The unprecedented element of the Oklahoma law is that it allows that opt out at the sole discretion of the employer.

Critical questions are coming in the months ahead, as these Oklahoma plans are adopted, standing is created, and the constitutional merits of the law are challenged. Is the employee/labor union participation in formation of the alternative process the critical element upon which collective bargaining plan opt outs have succeeded? Does that participation sufficiently protect due process in the collective bargaining opt outs, and is the absence of such participation in the Oklahoma employer opt out the Achilles heel?

Some think that it is. Some think that it is a distinction without a difference. Virtually all that I have spoken with think that if the Oklahoma opt out survives, it will spell the end of workers’ compensation as we know it. The contention is that with such employer control will come significant reductions in cost for Oklahoma employers.

If that comes to pass, the proponents say that other states will be forced to adopt such opt outs, or watch business leave their state for the greener pastures of Oklahoma. Some think that this option could spread across the country in a matter of years, effectively ending attorney involvement in the vast majority of work injury cases. Time will tell. As the attendant recently said on flight I took, "please make sure that while seated you keep your lap belt loosely fastened, there is always a chance of turbulence."

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