Tuesday, September 13, 2016

Oklahoma Opt Out Law Struck by Oklahoma State Supreme Court

In a not-unexpected development, the Oklahoma Supreme Court has today struck down that state's workers' compensation"opt out law," the Oklahoma Injury Benefit Act. The Court narrowly based its decision on a portion of the Oklahoma constitution regulating "special laws":

Laws of a general nature shall have a uniform operation throughout the State, and where a general law can be made applicable, no special law shall be enacted.  

The Injury Benefit Act (IBA) purported to be an alternative to the conventional Oklahoma Act - the Administrative Workers' Compensation Act. While the IBA required opt out employers to provide the "same form of benefits" as under the conventional Act, it also explicitly permitted them to establish alternative benefit plans not complying with large swaths of the conventional Act. Thus, when the plaintiff suffered an injury allegedly contributed to by a preexisting condition, the employer's alternative benefit plan concluded that the resulting disability was not an injury as defined by the plan. Because the IBA also provided that the terms of an alternative plan were the exclusive remedy for an injured employee, the failure of coverage left the plaintiff with no remedy. Because employees of non-opt-out employers were not summarily excluded from coverage under the conventional Act, the plaintiff was treated differently than similarly situated employees of non-opt-out employers. Furthermore, the IBA on its face created the conditions for systemic disparate treatment of injured employees and was accordingly a prohibited special law.

Although there will be broad expectation that the Oklahoma decision has "stopped opt out," I would be hesitant to reach such a sweeping conclusion. The state constitutional provisions in Oklahoma differ significantly from those in many other states. Typically, legislatures are given broad latitude as a matter of state constitutional law to effectuate changes to injury remedies under a deferential "rational basis" standard of review. For that reason it is not at all clear that the Oklahoma ratio deciendi could be persuasive outside of Oklahoma. Moreover, the ERISA issues that would likely be central to opt out litigation outside of Oklahoma were only cursorily addressed in a concurrence to the majority opinion. While a full ERISA analysis is beyond the scope of this post, suffice it to say that there remain substantial ERISA questions that can only be resolved by the federal circuit courts.

Still, perhaps the architects of "opt out" statutes will conclude that the battle to establish similar statutes throughout the country is not worth the cost, both in terms of money and of negative public relations. My suspicion, however, is the this was the first round in a multi-round fight. Download Vasquez supreme court opinion

Michael C. Duff


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