Oklahoma’s Workers’ Comp Opt-Out Act Ruled Unconstitutional

By Stephanie K. Jones | March 7, 2016

The Oklahoma Workers’ Compensation Commission has determined that the opt-out portion of the state’s 2013 workers’ compensation statute is unconstitutional.

Ruling on an appeal under the provisions of the Oklahoma Employee Injury Benefit Act, or Opt-Out Act, the three judge panel found the act to be unconstitutional and “not enforceable.” The ruling in Vasquez v. Dillards opens the way for an appeal to the state supreme court.

The Oklahoma Employee Injury Benefit Act was created by Senate Bill 1062 in 2013 as an alternative system that employers may use to satisfy state requirements to provide benefits to injured workers. That bill also established the Oklahoma Workers’ Compensation Commission to replace the former Oklahoma Workers’ Compensation Court.

The restructuring of the state’s workers’ comp system and the Employee Injury Benefit Act were held to be constitutional by the Oklahoma Supreme Court in December 2013 in response to various legal challenges.

The Opt-Out Act allows qualified employers to opt out of the Oklahoma workers’ compensation system by establishing an Employee Benefit Plan (Plan) under the provisions of Federal law, the Employee Retirement lncome Security Act (ERISA).

The case under Commission review revolves around the denial of a work injury claim filed by Dillards Inc. employee Jonnie Yvonne Vasquez, who injured her shoulder and neck while lifting shoe boxes at her workplace. Dillards denied her claim saying Vasquez’s injury was “a pre-existing condition and not an ‘injury’ as defined by the Plan,” according to the Commission’s order.

The Commission noted that the Vasquez case was the first appeal brought before it due to a denial of benefits under the Opt-Out Act.

In investigating Vasquez’s appeal, the commission addressed the issue of whether plans under the opt-out provision provide benefits and protections equal to the benefits provided under the Administrative Workers’ Compensation Act. It found the Opt-Out Act wanting.

“Although at first blush it appears that the Opt-Out Act requires that injured workers under an authorized benefit plan must be afforded benefits equal to or better to those under the Administrative Workers’ Compensation Act, this is decidedly not so. A closer look at the statutorily authorized plan requirements reveals that the benefit plans permitted to be used to opt-out establish a dual system under which injured workers are not treated equally,” the order states.

The order goes on to state: “The appearance of equal treatment under the dual system is like a water mirage on the highway that disappears upon closer inspection.”

Responding to the Commission’s ruling, the Association for Responsible Alternatives to Workers’ Compensation (ARAWC), which helped to craft the 2013 law, posted the following message on its website:

“The Oklahoma Workers’ Compensation Committee on February 26, ruled that the Oklahoma Option is invalid under the Oklahoma state Constitution. … This decision is not the final word on the Oklahoma Option. The case is far from over. It is almost certain there will be further legal and legislative efforts in response to the decision. In the relatively short time since the Oklahoma Option was created, Option plans are resulting in better medical outcomes for injured workers compared to traditional workers’ compensation. ARAWC continues to support the Option as a voluntary alternative with better medical outcomes, fewer benefit claims disputes and greater cost savings for employers.”

The Commission itself recognized that its decision is immediately appealable to the Oklahoma Supreme Court. “[T]hat Court is required to retain the appeal and must consider the case on an expedited basis,” the Commission’s order states.

The Oklahoma Supreme Court has previously declined to take up a similar case challenging the constitutionality of the Opt-Out Act. That case, Judy Pilkington et al. v. State of Oklahoma et al, like Vasquez, claimed that the act denies injured workers process of the law. Judy Pilkington also worked for Dillards.

Oklahoma Insurance Commissioner John Doak, who was a proponent of the 2013 workers’ comp overhaul, was named as a defendant in Pilkington.

In an email to Insurance Journal, Commissioner Doak said he appreciates “the difficult work the Commission has performed during its first two challenging years and their dedication to our collective goal of protecting Oklahoma’s workers.”

Commissioner Doak said the commission’s order “anticipates an appeal and stays its referral until appeals are decided, and I look forward to a complete and careful review of these issues by the judicial branch. My department will continue to perform its statutory responsibilities while this consideration occurs, and we will support our legislators as they continue to develop Oklahoma’s workers’ compensation system this session. I believe that addressing these issues head-on will enable our state to provide the best care possible for Oklahomans at a price employers can afford.”

Opt-out plans such as those in Texas and Oklahoma were criticized in a searing article published in October 2015 by ProPublica and NPR. That article states that the ProPublica/NPR investigation found that the “plans almost universally have lower benefits, more restrictions and virtually no independent oversight.”

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