The Oklahoma Workers’ Compensation Commission: Push Them on ERISA and They’ll Push Back Updated

By Daryl Davis

February 29, 2016
[Updated to include legal analysis by Mark Blongewicz (of Hall-Estill) on 3/31/16]

 

On Friday, February 26, 2016, the Oklahoma Workers’ Compensation Commission (WCC) offered one of the most bizarre decisions in the history of any such tribunal in the world. The agency, which sits within the executive branch of the state’s government, resorted to a tactic traditionally reserved for the judiciary by pronouncing portions of a state statute unconstitutional—a move that has sent shock waves throughout the workers’ compensation (WC) industry nationwide. This essay is provided to explain how and why such an unprecedented and unexpected event took place.

Although scheduling constraints required the publication of this piece before we at WorkersCompensationOptions.com could incorporate the feedback of Attorney Mark Blongewicz (of Hall-Estill), Mark’s insights are so valuable that we have inserted them in text boxes throughout this updated version of the essay (which first appeared in Insurance Thought Leadership, without such text boxes, on 2/29/16).

Mark Blongewicz on the unusual context of the Vasquez ruling:

How and why Oklahoma’s WCC decided to take on the Vasquez case in the way that it did is even more puzzling than the ruling itself. The WCC acknowledges the typical assumed limitations on its powers by its citation (and quotation) of Dow Jones & Co.  However, in doing so, it avoids mention of the most pertinent language of that decision:

We agree with the Commission that, as an administrative agency, it is powerless to strike down a statute for constitutional repugnancy. Within the framework of Oklahoma's tripartite distribution of government powers, the authority to invalidate an unconstitutional enactment resides solely in the judicial department. Art. 7, § 1  [of the Oklahoma Constitution] confers on administrative agencies only that quantum of “judicial power” which is necessary to support their exercise of adjudicative authority in individual proceedings brought before them. The power assigned to boards and commissions is not coextensive with that which is vested in the courts
Dow Jones & Co., Inc. v. State ex rel. Okla. Tax Comm’n, 1990 OK 6, para. 6 (emphasis added).

At the same time that the WCC relies on the language of Section 211 to declare itself a court of competent jurisdiction, it fails to recognize that the same section expressly limits its “judicial power” to the rendering of decisions “to recover benefits due to the claimant under the terms of the claimant’s plan, to enforce the claimant’s rights under the terms of the plan, or to clarify the claimant’s rights to future benefits under the terms of the plan” 85A O. S. 211 (B)(5).

 

What Does a WCC Do?

The Oklahoma WCC was born in February, 2014. It employs dozens of people and performs numerous governmental agency tasks, but when its three commissioners hear appeals of occupational injury cases, they are referred to as sitting en banc. To our knowledge, all states, territories and the federal government have similar tribunals. Over the past two years, the Oklahoma commissioners sitting en banc have heard dozens of appeals. All of those cases—up until last week—were of the fact-based WC variety.[1] Prior to last Wednesday’s hearing,[2] the WCC was never in the business of offering opinions on the constitutionality of any laws; it simply, methodically and impressively played an administrative (rather than an interpretive) role.

Mark Blongewicz on what Oklahoma’s WCC normally doesn’t do:

The WCC leans heavily on section 211 from the Oklahoma Employee Injury Benefit Act (OEIBA) as if it exists in a vacuum, but the first constitutional challenge of the OEIBA (Coates v. Fallin, decided on December 16, 2013) led to the Oklahoma Supreme Court upholding the law against a “log rolling” challenge and indicating that “all sections of the new law are inter-related and refer to a single subject.” The OEIBA is part of Title 85A, which includes multiple acts with sections numbered sequentially from 1-401. Nevertheless, the WCC ignores sections 19-22 of the Administrative Workers’ Compensation Act (AWCA)—presumably because the AWCA is not included in the OEIBA. Note, however, that there is nothing in those sections expressly declaring that the WCC has the authority to declare portions of the AWCA unconstitutional, although that authority may be present in section 27, which discusses the jurisdiction of administrative law judges, under the provisions of the AWCA, to “determine all questions in relation to claims for compensation” (emphasis added).

 

Vasquez v. Dillard’s: Background

In September of 2014, Jonnie Yvonne Vasquez claimed that she had injured her shoulder and neck while moving boxes as an employee in the Dillard’s shoe department in Shawnee, Oklahoma. Ultimately, Dillard’s denied the claim, pointing to evidence of a pre-existing medical condition. The commissioners en banc routinely review such disputes to determine whether a denial should be upheld or overturned.

Under traditional WC in Oklahoma, Vasquez’ appeal would have gone first to an administrative law judge (ALJ), next to the WCC en banc and finally, if necessary, to the Oklahoma Supreme Court.

However, because Dillard’s had, prior to the claimed occurrence, become a Qualified Employer per the Oklahoma Employee Injury Benefit Act (OEIBA—think Oklahoma option), the process for appealing this denial followed a different path. One of the hallmarks of opt-out is to avoid litigation,[3] and to that end Dillard’s provided Vasquez an appeals committee—which is similar to what happens across the country in disputes regarding ERISA-governed benefits (e.g., major medical, long-term disability, etc.). The denial of Vasquez’ claim was upheld through the appeals committee process.

Section 211 of the OEIBA stipulates that the next forums for appeal after the appeals committee are the WCC en banc followed by the Oklahoma Supreme Court (mirroring the second and third steps of the appeals process under WC).[4]

Hence, Vasquez appealed to the commissioners en banc. Dillard’s, however, relying on an ERISA argument which has long been promulgated by Bill Minick of PartnerSource,[5] attempted to remove the case to the federal level (as ERISA is a federal law). In September, 2015, Judge Stephen Friot of the U.S. District Court for the Western District of Oklahoma remanded the case back to the WCC in no uncertain terms:

The court concludes that the [OEIBA] is part of Oklahoma’s statutory scheme governing occupational injuries and workplace liability; in other words, the OEIBA is part of Oklahoma’s statutory scheme governing workmen’s compensation.[6]

Since this was the second of two cases that the federal court system drop kicked back to the state level, it seemed to put the argument concerning ERISA’s governance of occupational accidents under the Oklahoma option on the back burner for the foreseeable future. So after this high-profile and unnecessary federal detour, the case came back to the Oklahoma state agency known as the WCC.

The WCC Hearing

When the commissioners took on the Vasquez case, they presumably had no predisposition to offer rulings on the constitutionality of the OEIBA, since their duties do not ordinarily require them to tackle such issues. [7]

Additionally, Vasquez’ counsel stated that ERISA (a federal law) had no applicability to Vasquez’ claim under the Oklahoma option (attempting to appear consistent with the two federal judges who had declined to exercise jurisdiction over such matters). The Vasquez camp did not even believe the WCC had the authority to rule on the constitutionality of the OEIBA (a reasonable position on its face).[8]

Dillard’s disagreed on both counts, arguing not only that ERISA governed the Vasquez claim, but that the WCC was transformed—for the purposes of this OEIBA case—into the state court of competent jurisdiction under ERISA (29 U.S.C. §1132(d)(1)) with the power to deem statutes constitutional or unconstitutional.

This argument may well have caught the commissioners off guard, as it was completely unprecedented for the WCC. I attended the hearing and estimate that over 90% of the time was spent on esoteric legal concepts mostly unrelated to the matter of whether Ms. Vasquez really did have a pre-existing medical condition that justified the denial of her claim. This was all new territory for this state agency.

As described in more detail below, the WCC granted Dillard’s a hard-fought victory when it ruled, astonishingly, that ERISA applied to Vasquez’ claim. “By golly,” Minick can finally gloat, “we now clearly have case law demonstrating that ERISA applies to the occupational accident aspects of the Oklahoma option!”

But I doubt that Dillard’s bargained for what happened next.

A Pyrrhic Victory

The commissioners accepted the powers Dillard’s argued they had and then used them to rule the OEIBA unconstitutional, simultaneously remanding the Vasquez case to an ALJ to hear within a traditional WC framework and stripping Dillard’s of the perceived advantages of leaving traditional WC to begin with.

The commissioners accomplished this with an unexpected interpretation of Section 211 of the OEIBA. That section spells out the role of the commissioners en banc when hearing appeals. This point is extremely nuanced, so please bear with me as I provide some historical context.

In 2012, the Oklahoma legislature did not pass HB 2155—a bill co-authored by Minick and clearly drafted with the intent to have ERISA as a guiding force. In fact, HB 2155 was littered with the “ERISA” acronym, creating easy fodder for opponents, who used epithets such as “Obamacomp” to strike fear into a very Republican electorate. A year later, the attitude on the Oklahoma option had consolidated: no ERISA. SB 1062 passed with flying colors without one usage of the acronym for the federal law. That cake (SB 1062) baked by the legislature in 2013 was free of any ERISA ingredients—save for one sprinkle on top. The sole remaining vestige[9] that directly points to ERISA is found in Section 211.B.5.:

If any part of an adverse benefit determination is upheld by the committee, the claimant may then file a petition for review with the Commission sitting en banc within one (1) year after the date the claimant receives notice that the adverse benefit determination, or part thereof, was upheld. The Commission en banc shall act as the court of competent jurisdiction under 29 U.S.C.A. Section 1132(e)(1), and shall possess adjudicative authority to render decisions in individual proceedings by claimants to recover benefits due to the claimant under the terms of the claimant’s plan, to enforce the claimant’s rights under the terms of the plan, or to clarify the claimant’s rights to future benefits under the terms of the plan. [Emphasis added.]

ERISA includes 29 U.S.C.A. Section 1132.

Even so, the instructions of this subsection might appear to restrict the commissioners to focus merely on the facts of such cases and not on the constitutionality of the statutes governing the cases.

 

Mark Blongewicz on the WCC’s (unnecessary) stretch to find ERISA applicable:

I am not sure why the commissioners felt it necessary to conclude that ERISA applies to the Vasquez case. Of course, they apparently do so in order to identify themselves as a “court of competent jurisdiction,” thereby justifying their foray into the constitutional arena. However, OEIBA—not ERISA—declares the WCC a court, so it’s puzzling that the commissioners felt that they needed ERISA to do so as well. The necessity of such a leap in logic becomes even more confounding when the WCC then holds that ERISA’s pre-emptive effect is only partial because of Vasquez’ “independent state claims” (which, of course, are not claims at all, but are more accurately characterized as counterarguments to Dillard’s position that ERISA applies to its plan and that the Act is constitutional).

 

However, the commissioners—feeling their oats as a temporarily recognized court of competent jurisdiction—reasoned that Vasquez’ claims for benefits were “inextricably intertwined” with constitutional challenges, and, hence, that they must address those issues in order to determine Vasquez’ rights.

Effectively, the commissioners accepted the ERISA arguments advanced by Dillard’s, analyzed them, and then stuffed them into a missile so that they could fire a very loud—even if potentially feckless—shot across the bow of opt-out proponents.

I do not interpret this shot as being fired from a group innately opposed to opt-out. I interpret it as a warning: “Get your $*!# together!”

Mark Blongewicz on whether the reach of the WCC exceeded (or fell short of) its grasp:

In its discussion of the constitutional issues, the WCC also appears to be reaching out to find problems with the Act even though it had no need to do so with respect to issues not presented by the Vasquez case (e.g. the distracting reference to the differences concerning treatment of asbestos-related cases under the AWCA as opposed to the Dillard’s Plan). Perhaps the WCC dragged in such seemingly irrelevant examples to highlight the dueling definitions of “aggravation of a pre-existing injury” that were of more direct import to Vasquez, but the WCC purports to be conducting only a limited review as noted by the specific and express declination to address due process challenges asserted by claimant (see paragraph 15 of the Opinion).  Given the WCC’s willingness to take on a constitutional challenge at all, it seems unusual to then claim to exercise judicial restraint and not address other (comparable) issues.

 

For at least three reasons, I’m grateful to the WCC for the timing and meaning of this challenge to the Oklahoma option. First and foremost, as someone who doesn’t belong to the Oklahoma option-ERISA camp, I appreciate the implication that if opt-out proponents continue to rely on ERISA in Oklahoma, they will set themselves back several years by destroying the only viable alternative to WC in the country aside from Texas nonsubscription.[10] Second, the Dillard’s legal team now has time to step back, take a deep breath, and reconsider its strategy before making its case to the Oklahoma Supreme Court. Third, if the in-session legislature so chooses, the law itself can easily be improved upon. The option works, and it is not a sign of weakness but of adaptability to acknowledge that modifications are necessary (as the WCC’s order clearly indicates).

Although Dillard’s appealed this decision on March 17th, we hazard no guess as to what trajectory that appeal will take. As a reminder, I am not an attorney and nothing in this essay—including the remarks of Mark Blongewicz, who has generously agreed to share his expertise for educational (rather than legal) purposes—should be mistaken for legal advice. I should also mention that I do not speak for any associations or lobbyists.

Finally, I am compelled to point out once more that when WC was initially being enacted a century ago, our society was riddled with equal protection, special law and due process concerns. I suspect the Oklahoma option will take less time than WC did in maturing and adequately addressing these issues—if that is what the people of Oklahoma want.

 



[1] As an example of a fact-based claim, consider the case of a truck driver who lives in one state, is employed by a company with facilities (including payroll) in another and is injured in yet a third while driving on a route. All three states have different WC systems, and an argument could be made for the claim to be handled in any of the three venues. A tribunal such as the Oklahoma WCC would simply focus on the facts of the case to establish some basis to determine which is the correct and best venue.

[2] On Wednesday, February 24, 2016, the WCC en banc was scheduled to hear two appeals: Vasquez v. Dillard’s at 1:30 pm, and Pilkington v. Dillard’s at 2 pm. The fact that all parties agreed (just six minutes into the session) to combine both cases into a single protracted hearing was only one of many head-scratching developments. All told, the event took about one hour and forty-five minutes.

[3] This hallmark is also the call to arms for attorneys, judges and support staff of all stripes who are stakeholders in traditional WC.

[4] There was some ambiguity between the original law (SB 1062) and the original rules set forth by the WCC regarding the post-appeals committee process. That process clearly and statutorily changed for all occurrences after 11/1/15 thanks to the passage of SB 767—last year’s “clean up” bill. Currently, the next steps for appeal—post-appeals committee—are ALJ, followed by the commissioners en banc and, if necessary, concluded with the Oklahoma Supreme Court (mirroring all three steps from traditional WC). While this complication is relegated to footnote status in this essay, SB 767’s due process improvements are noteworthy on a going forward basis and a reminder of the legislature’s power to improve/modify the law where appropriate.

[6] For details, see our more thorough analysis, An Open Postscript from Daryl Davis and Mark Blongewicz Regarding the Applicability of ERISA to the Oklahoma Option. In that article, we deliberately did not address any circuit split issues between the 5th and 10th Federal Circuits, but will be happy to help explain them to readers who are interested in alternatives to traditional WC.

[7] The WCC’s decision to rule on Vasquez as opposed to Pilkington may be more significant than the current state of commentary on the hearing suggests. The three commissioners for the WCC are Mark Liotta, Robert Gilliland and Leroy Young. None of these three had a conflict of interest that would have prevented them from ruling on the Pilkington case. However, Commissioner Young—a long-time medical provider—recused himself from Vasquez because the claimant had undergone an independent medical examination at the office of one of Young’s business partners. Because of that recusal, the WCC’s composition for the Vasquez decision changed when Neal Leader joined Liotta and Gilliland while Young watched from the sidelines. Special Commissioner Leader was a longtime state employee borrowed from the Attorney General’s office, who retired the very next business day after the WCC’s Order and Opinion were released.

[8] This is not to diminish the fact that Bob Burke, counsel for Vasquez, “raised several constitutional issues” and during the hearing spent well over 20 minutes ranting about the unconstitutionality of the OEIBA as a matter of habit. The irony of this outcome is accentuated by Burke’s remark when asked if he thought the WCC could rule on the constitutionality of the OEIBA: “No, I don’t think you can. But I wish you could, because I’ve got a number of constitutionality cases in front of the Supreme Court and I wish I could bring them to you to decide.” To be clear, it was the Dillard’s defense team that insisted the commissioners had such powers.

[9] Some may argue that “plans” and “appeals committees” are inextricably linked to each other and to ERISA. In fact, to read some of Minick’s prose on plans, one would think that any plan ever written is governed by ERISA. University of Oklahoma football coach Bob Stoops, when writing down his game “plan” against Texas next season might consider calling PartnerSource for advice on ERISA compliance. Even industry insiders are often shocked to learn that ERISA never explicitly addresses appeals committees. The reality is that ERISA incorporates several good ideas. The still-maturing OEIBA has demonstrated that it is not at all reluctant to revise, improve upon and/or incorporate older ideas.

[10] Of course, ERISA is key in Texas nonsubscription. My goal is to craft the best alternatives to traditional WC programs legally possible. More and more, PartnerSource appears to share that goal only if ERISA is involved.