Oklahoma: Workers’ Compensation “Opt-Out” Provisions Become Law

On Tuesday (May 7), Oklahoma Governor Mary Fallin signed into law Senate Bill 1062, a legislative piece that purports to reform the state’s workers’ compensation system in two broad fashions: (a) by joining the ranks of virtually all other American jurisdictions in utilizing an administrative process, rather than a judicial system, to handle comp claims; and (b) by creating a controversial “opt-out” arrangement in which employers can jettison the state-run system altogether, provided they put in place a written benefit plan that affords the same sorts of disability and medical benefits to injured employees as those employees might enjoy under the standard Oklahoma system.

SB 1062 was essentially a second bite at the apple. Last year a bill that would have allowed large Sooner employers (and a few others with poor safety records) to opt out of the state system seemed headed for passage at the end of the 2012 legislative session. Due to last minute concerns over fairness and comments by some legislators that the 2012 bill’s use of ERISA as the opt-out mechanism amounted to a nationalization of the state’s workers’ compensation system–at least one legislator referred to the 2012 bill as “Obamacomp”–Oklahoma’s business lobby snatched defeat from the jaws of victory.

Earlier this year, proponents of the opt-out legislation dusted off the 2012 bill, added some important changes to the administrative of claims and, importantly, sanitized the legislation from most of the “nationalization” criticism by removing all references to ERISA. The opt-out mechanism remained otherwise essentially intact. Reintroduced with its “made in Oklahoma City, not in Washington, D.C.” dust jacket, the legislation moved through both sides of the Oklahoma legislature on pretty much a party-line basis, with most Republicans favoring the bill and most Democrats opposing it. Governor Fallin effusively signed it, saying that “for decades, Oklahoma has had one of the most expensive and inefficient workers’ compensation systems in the country, a constant obstacle for business owners looking to expand operations or create more jobs.” She added …, “[t]his is an important pro-growth policy that will help us attract jobs and build a stronger and more prosperous Oklahoma….”

No doubt Governor Fallin was facing South when she offered her competitive comments. For decades, some Oklahoma employers have fawned over the “rough ’n ready” comp rules in place within Texas. As most in the comp world know, workers’ compensation coverage is not mandatory in Texas; employers actually have to “opt in” or there is no coverage at all. “Non-complying” Texas employers are subject to tort liability and lose the basic common law defenses (contributory negligence, assumption of the risk, etc.) when sued by injured employees. Many don’t seem to mind, saying the risk of a large tort award is more than made up for with virtually no payout for injured workers.

Texas employers can also chose a privately arranged employee benefit plan that provides some measure of benefits if they like and a number have done so, particularly employers with large numbers of employees. For the most part, the benefits in these Texas “opt-out” plans are doled out in a more miserly manner than within the state-run Texas comp system, but again, since the employer need not provide any coverage to the injured employee at all, there are no constitutional due process or equal protection issues within the Lone Star state. The issue may be different in Oklahoma.

It seems that national politicians make frequent runs to Texas, hoping some of the Texas success will rub off on them. Texas Democrats today are celebrating a parousia of sorts as President Obama is there today, talking up the successes of and within a state that bears so little resemblance to our nation’s capital. Governor Fallin and other Oklahoma politicians are in some respects doing the same, even from their desks to the North, no doubt hoping that their decision to feint toward an opt-out system somewhat like that in Texas will pay important and last economic dividends.

The proof will be in the pudding. I have some doubts. For all the alleged similarities between the Texas system and the one being inaugurated in Oklahoma, there are vast and important differences–differences that cannot be ignored. I’ll highlight some of those differences and I’ll discuss the specifics of the Oklahoma legislation in a later post.

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