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The Rise of Opting-Out?

Written By: Byron Lindberg, Esq.

Texas has always allowed employers to “opt-out” of its workers’ compensation system. Nonetheless, most employers in Texas have traditionally elected to eschew the Wild West uncertainty of liability proceedings for customary workers’ compensation and the shelter of exclusive remedy protection. That approach, however, has seen some defection in recent years among some trucking companies and larger employers who are able to facilitate and implement alternative/hands-on programs to handle on-the-job injuries. In fact, the option to opt-out appeared to be starting to take hold, with some revisions, outside of Texas.

In Oklahoma, beginning in 2014, employers were able to opt-out of the state workers’ compensation system so long as they paid fees, met certain financial criteria, complied with ERISA, and among other things, offered similar benefits to the state system. Unlike Texas, Oklahoma’s “opt-out” option still required employers to provide some type of benefit plan to cover injured workers; preserving exclusive remedy protection.

On February 26, 2016, however, the three-judge panel of the Oklahoma Workers’ Compensation Commission held the Oklahoma opt-out provision to be unconstitutional under the Oklahoma Constitution and unenforceable. Essentially, the Commission determined that the opt-out plans did not provide benefits equal to or better than the state workers’ compensation system. The ruling of the Commission has been appealed to the Oklahoma Supreme Court.

Other states, including, Tennessee have seen recent legislative interest in giving opt-out a shot. In February of 2015, a measure, borrowing ideas from Oklahoma and Texas, was proposed (H.B. 997 and S.B. 721) that would allow employers to opt-out of the Tennessee workers’ compensation system. A hearing on the bill was recently canceled and it has not made it out of subcommittee.

Similar pushes for opt-out provisions are underway in other states, including, West Virginia, Florida, Alabama, and Georgia. Proponents promote lower costs, more control, and better outcomes for employees. Opponents question the effectiveness of medical care, federal preemption, and unequal treatment.

The opt-out wave is something to keep an eye on, especially in the Southeast where the legislative push is being focused.