Oklahoma Option Supreme Court Appeal

September 13, 2016

The Oklahoma Supreme Court has ruled in a 7-2 decision that the entire Oklahoma Employee Injury Benefit Act, 85A O.S. 2014 ยงยง201-213 is unconstitutional because it is not a constitutionally permissive special law.   Oklahoma's constitutional allows laws to apply dififerently to different segments of the group to which the law applies only in special circumstances. The court ruled that employees of Opt-Out employers are not guaranteed to receive the same benefits that are employees of employers in the Workers' Compensation System.  The entire ruling can be read here.

September 1, 2016

The Oklahoma Employee Benefit Act was enacted in conjunction with a rewriting of the State's Workers' Compensation laws in 2013.  The new law allows qualified employers to opt-out of the Administrative Workers' Compensation Act (ACWA) in favor of what is known as the Oklahoma Option.

Oklahoma employers choosing the Oklahoma Option are required to establish an employee benefit plan that provides benefits at least equal to or greater than those provided by the Administrative Workers' Compensation Act.  The plan does not have to match the ACWA with respect to the definition of covered injury, medical management, or dispute resolution.

The Oklahoma Workers' Compensation Court ruled in the case of Jonnie Yvonne Vasquez v. Dillard's, Inc. that  Section 203 of the Oklahoma Employee Benefit Act is unconstitutional because it:
(1) unconstitutionally deprives injured workers of equal protection;
(2) is a special law; and
(3) in conjunction with Section 209 deprives injured workers access to courts.
Dillard's, Inc. appealed the decision to the Oklahoma Supreme Court on March 17, 2016.  Briefs have been filed by both parties and the State Attorney General.  A group of insurance company trade associations have also filed a brief in support of the Workers' Compensation Court's ruling.    A petition for oral arguments was denied.  So the appeal is now under consideration by the Supreme Court.

The purpose of this article is not to weigh in on the merits of either side's case nor to attempt to predict how the Supreme Court will rule.  The purpose is simply to discuss the implications of the Supreme Court upholding the Workers' Compensation Court's ruling.

The Oklahoma Option was enacted by the State Legislature due to the efforts of a group of employers that had good experience with Workers' Compensation Non-subscription in Texas.  While the Oklahoma Option provides employers some of the advantages of Texas Non-subscription and incorporates some of the practices the Non-subscribing Texas employers utilize, the legal bases for the Oklahoma Option and Texas Non-subscription are completely different.

Texas is unlike every other state in that no employer is required to fall under the Texas Workers' Compensation Act.  Any employer that does not want to fall under the act simply chooses to not buy workers' compensation insurance and then provide notice to the State of Texas and post the appropriate notices to its employees that it is not subject to the Texas Workers' Compensation Act.  Their employees are then free to sue the employer for any workplace injuries.Many Non-subscribing employers, out of a sense of responsibility to their employees and to lessen the likelihood of being sued, enact work injury benefit plans falling under ERISA to fund employee medical expenses, lost wages, and lost earning ability.  A common feature of those plans is the requirement that any disputes be settled through binding arbitration.

Oklahoma's approach to an alternative to Workers' Compensation is to provide a statutory framework that imposes some requirements on employers and still provides some of the advantages of Non-subscription in Texas.  One of the requirements for an employer that wants to be exempted from Workers' Compensation is to establish a written benefit plan that provides, in short, at least the same or greater benefits as the AWCA provides.  The benefits must be provided on a no-fault basis.  The employer's liability under the benefit plan is exclusive and in place of all other liability for a covered employee's occupational injuries.

Administration of the plan and dispute resolution methods are not specified by law, being left to the employer's discretion.  The common practice is to require any disputes be settled through binding arbitration.

The Workers' Compensation Court ruling that the Oklahoma Option is unconstitutional stems in one part from the benefit plan being the sole remedy for workplace injury claims and binding arbitration without access to courts, thereby preventing due process as required by the State Constitution.  The Dillard's benefit plan falls under ERISA, which further limits the employee's access to courts.
The law allows the benefit plan to define what is a covered injury.  That contributes to the assertion that The Oklahoma Employee Injury Benefit Act is unconstitutional because it creates a special law which is prohibited by the State Constitution.

The fate of The Oklahoma Option is in the hands of the Supreme Court.   It will be very interesting so see what happens if the court rules against Dillard's.  Will the court declare only parts of the Act unconstitutional or all of it?  And if any of the Act is unconstitutional, will the Legislature correct the problems or let the Oklahoma Option fall by the wayside?