Oklahoma Opt Out Act found unconstitutional in Vasquez v. Dillard, Inc case

In Vasquez v. Dillard, Inc., 2016 OK 89 (Sept. 13, 2016), the Oklahoma Supreme Court ruled that an Oklahoma statute allowing employers to provide work injury benefits outside of the requirements of the Oklahoma workers’ compensation law was unconstitutional.

In Vasquez, the claimant suffered a neck and shoulder injury while lifting shoe boxes. Because the employer had opted out of the Oklahoma workers’ compensation act in exchange for providing benefits under a separate benefits plan, the claim was filed under Dillard’s Opt-Out insurance plan (“Plan”) allowed by the Oklahoma Employee Injury Benefit Act (OEIB).

The claim was denied by the Plan and as required by the OEIB, Ms. Vasquez appealed the denial by filing a claim with the Oklahoma Workers’ Compensation Commission. Since the employer had opted out of the workers’ compensation system, the employer requested the federal court to hear Ms. Vasquez’s claim because Ms. Vasquez’s claim was not a workers’ compensation claim, but a federal law claim under the Employee Retirement Income Security Act (ERISA).  The federal court disagreed with the Plan and held that the Workers’ Compensation Commission was to decide the outcome of the claim. The Commission issued an order in the case in September of 2015 finding that the Opt Out Act was unconstitutional. Dillard’s filed for a review with the Oklahoma Supreme Court.

In addressing the constitutionality of the Opt Out Act and the OEIB, the   Oklahoma Supreme Court applied a three part test. It considered the following: (1) whether the law is a special law; (2) if so, whether a general law applied; and (3) whether the statute is a permissible special law. After finding that the OEIB was a special law and the Oklahoma workers’ compensation act is a general law that applied, the court opined that the OEIB was not a permissible special law and “creates impermissible, unequal, disparate treatment of a select group of injured workers.”

Specifically, the state Supreme Court found that the OEIB did not provide equal rights to employees injured at work as provided under the general workers’ compensation law and the underlying goals of the OEIB did not support the constitutionality of the statute.  In reaching this conclusion, the Supreme Court referred to the specific language of the Opt Out Act that  stated in part “ no other provisions of the Administrative Workers’ Compensation Act defining covered injuries, medical management, dispute resolution or other process, funding, notices or penalties shall apply or otherwise be controlling under the Oklahoma Employee Injury Benefit Act, unless expressly incorporated.”

In hope of still moving the case to federal court under ERISA, the employer argued that if the OEIB was found unconstitutional, that ERISA applied and the claim should be heard by a federal court. In consistently disagreeing with the employer’s arguments, the Oklahoma Supreme Court noted that the OEIB specifically stated that in the event the OEIB was found unconstitutional, the Oklahoma workers’ compensation law applied.

In an interesting concurring opinion, Justice Gurich, joined by Justice Colbert, provided a comparison between the Texas law allowing employers to opt out of the Texas workers’ compensation law and the OEIB. The judges noted that unlike Oklahoma, the Texas workers’ compensation law: allowed both the employer and the employee to opt out of the workers’ compensation law (also called “non-subscriber”); if the employer is a non-subscriber, the employees was allowed to sue as a personal injury claim; and the non-subscriber was not regulated in any way by the Texas workers’ compensation law. Further, the concurring opinion pointed out that in the event a claim was denied, the OEIB directed the employee to file an appeal with the Oklahoma workers’ compensation commission. Thus, an employer under the OEIB did not completely opt out of the Oklahoma workers’ compensation law.

As a result of this decision, the Vasquez claim will be decided under the Oklahoma workers’ compensation law by the Oklahoma workers’ compensation Commission. Further, employers in Oklahoma will not be able to opt out of the state workers’ compensate law under the OEIB and must provide workers’ compensation benefits as required by the Oklahoma workers’ compensation law.  We will keep you posted as more case law develops.

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