After all the debate and maneuvering on reform over the last months, the issue has boiled down to one very contentious proposal: giving workers the option of settling their workers’ compensation claims with a lump-sum payment rather than negotiating a lifetime disability pension.

Like many other states dealing with massive budget shortfalls as the economy slowly recovers, Washington State lawmakers are focused on slashing programs and reforming services that are seen as bleeding money.  As we have reported here, Workers’ Compensation emerged as a flash point in the budget debate when it was reported by several media sources and government agencies that about 85 percent of all workers’ comp costs came from just 8 percent of all claims.  These claims involved injured workers who received long term benefits or were awarded lifetime pensions.  While these sorts of settlements are often necessary to meet the long term needs of injured workers, the oft quoted “85 percent” figure has become the clarion call for groups aligned with big business against labor rights.  Speaker Frank Chopp is the most vocal opponent to the lump sum settlement option.

The Seattle Times Editorial Board has come out strongly against efforts by Chopp to stall the budget in order to protect labor rights.  They cast the fact that Washington has no settlement option for workers as limiting to all parties involved: injured workers, employers, attorneys, and the Labor & Industries system.  They argue, “Now the workers’ comp system gives them a pension and tells them they are done working for life.  The new idea is to allow them to take a lump sum and find different work.”  They note further, “Now the system pensions them.  It has been handing out more than 1,000 new lifetime pensions a year, a practice that has been become expensive…for labor, too, because a payroll tax is a tax on the creation of jobs.”

This formulation of the workers’ comp fix directly echoes arguments made by Republicans and the Association of Washington Business that offering lump sum settlements is an obvious, simple fix for the Labor & Industries system.

However, Labor Rights activists note that the devil is very much in the details.  As we have noted here in this blog, “Buried in the back of the bill is a section that may limit the ability for workers to be compensated for separate and totally unrelated injuries, merely because they were unfortunate enough to have been injured multiple times.”  Further, many groups aligned with Labor point out that the temptation to accept a lump sum can be overwhelming a worker who is injured and anxious about his or her future. The Seattle Times quotes David Groves of the Washington State Labor Council when he points out “People who are in desperate circumstances are going to be pressured to take buyouts that re against their best interests.”

In a letter posted to the Times on May 11, Kelly McQuade makes perhaps the most telling point about the lump sum option for injured workers.  She notes, “Where is that person going to turn when the lump sum is gone?  Other state-funded services (if they even exist in the future) will pick up the slack.  This is a Band-Aide that will hurt Washington labor for years to come and cost more in the long run.”

Governor Chris Gregoire has indicated that forcing the Legislature into special session over this matter would be unacceptable.  As she works behind the scenes to come to a compromise, we will keep you updated on how this crucial issue plays out.  As this crisis makes clear, injured workers should seek the advice of a Seattle Labor & Industries Attorney who is an expert at navigating the rapidly shifting landscape of Washington Labor & Industries Law.  Visit us soon here for major updates…

A federal district court recently ruled in favor of an employee suing several human resources executives after he was allegedly fired for requesting time off under the Family and Medical Leave Act (FMLA).  The ruling may set a precedent in which individuals can be held personally liable for damages allowed through FMLA, including financial loss from a denial of benefits, compensation for back pay, lost wages and attorney fees.

The suit was brought against Cardone Industries and five of its senior HR executives by Dmitry Narodetsky, a tool designer who worked for the company for nearly twelve years before his termination.  His case includes a three-count complaint for violation of the Family Medical Leave Act, the Consolidated Omnibus Budget Reconciliation Act (COBRA), and the Employee Retirement Income Security Act (ERISA).

Several weeks prior to his termination, Narodetsky was diagnosed with a leg injury requiring surgery.  His wife promptly notified Narodetsky’s managers that her husband would need time off for the upcoming operation, and requested that they provide short-term disability for his medical leave.  Following the conversation, three of the company’s HR executives and another manager conducted a forensic examination of Narodetsky’s work computer, uncovering evidence of a pornographic email he allegedly forwarded to a coworker over a year earlier.  Before scheduling the surgery, Narodetsky was called into a meeting attended by the defendants, shown the email he had allegedly forwarded, and fired.

Narodetsky alleges that his employers conducted the computer search solely to find a pretext for terminating his employment so they could avoid granting him leave. He filed a suit alleging that not only the company, but also the five individual defendants interfered with his rights under FMLA and the Employee Retirement Income Security Act.

Attorneys for the defense argued that none of the individual claims were warranted because Narodetsky’s suit did “little more than simply list each such defendant’s title,” and because it failed to include “any facts showing how each defendant was involved in plaintiff’s alleged request for medical leave or the decision to terminate.”

Yet U.S. District Judge Thomas N. O’Neill of the Eastern District of Pennsylvania refused to dismiss Narodetsky’s claim, noting that it went well beyond the narrow characterization of the defense by alleging that each of the individual defendants “participated in the forensic search of [the plaintiff’s] computer with the goal of finding a reason to justify his termination because he had requested FMLA leave.”  O’Neill also maintained that the executives and manager were properly named as defendants since each possessed the authority to fire and played a role in the decision to terminate Narodetsky. “The allegations support an inference that each of the defendants exercised control over the plaintiff in the decision to terminate him,” O’Neill wrote.  The judge also stated that “Given the timing of his termination–falling right on the heels of his request for medical leave–I find that it is reasonable to infer that the defendants terminated his employment for the purpose of interfering with his plan benefits.”

Both the individual defendants and Cardone Industries, Inc. have declined to comment publicly on the ruling.  The case is now proceeding to adjudication in a new trial. See O’Neill’s full opinion in Narodetsky v. Cardone Industries Inc. (pdf)

Citation: Narodetsky v. Cardone Industries et al., Case #09-4734; February 24, 2010, U.S. District Court, Eastern District of Pennsylvania.

Companies that cut costs by misclassifying regular employees as “independent contractors” will face tighter regulations and stricter penalties in 2010. The Obama administration has already begun to crack down on companies that misrepresent worker status, recently hiring one hundred additional enforcement agents to effect compliance with the law. Meanwhile, auditors at the IRS have launched an intensified campaign to determine if over 6,000 major companies are using misclassification as a way to cheat on taxes.

Business experts have shown that a growing number of companies wrongfully classify regular workers as “independent contractors” to avoid paying unemployment insurance premiums and Social Security and Medicare taxes on the wages of their employees. Since taxes are not generally paid on the compensation of independent contractors, employers reduce business costs by improperly applying this designation to individuals who should be regarded as regular employees (some of these “contractors” even have company office space and work the same hours as employees).

In a recent New York Times article, Steven Greenhouse indicated that companies wrongfully classify about 3.4 million workers as contractors; the Department of Labor largely corroborates these figures, and estimates that up to 30% of U.S. companies participate in worker misclassification at some level.

The practice has enormous economic repercussions. In Ohio, for example, close to 100,000 misclassified workers have cost the state an estimated $35 million a year in unemployment insurance taxes, and over $100 million in worker’s compensation premiums. With federal and state governments currently struggling under record deficits, businesses can expect a significant increase in penalties for misclassification in the near future. Steven Greenhouse reports that the attorney general of California is currently seeking $4.3 million from a single construction company accused of misclassifying its workers. When implemented on a comprehensive, nation-wide scale, these measures could yield significant results. According to the Obama administration’s 2010 budget estimates, tightened enforcement could translate into $7 billion in revenue over 10 years.

Yet wrongful classification of workers is not merely a matter of concern for government officials; the practice has implications on a more personal level as well, denying basic employment rights to workers. Employers often misrepresent regular W-2 employees as contractors to circumvent minimum wage, overtime and antidiscrimination laws. If workers are designated as contractors and then laid off, they are ineligible for unemployment insurance. Those who are injured on the job cannot receive workers’ compensation benefits.

Prominent members of the business community have responded to the impending crackdown with alarm. When the IRS or state tax authorities identify instances of wrongfully misclassifying workers, companies often face fines and penalties, and can be liable for back-taxes on the reclassified employee. Most employers maintain that worker misclassification is unintentional, resulting from confusion and ambiguity in the legal distinctions between independent contractors and regular employees.

While current developments demonstrate a growing political will to enforce compliance with the law, cases of misclassifying workers have repeatedly emerged in the national spotlight in recent years. Last year the attorneys general of several states threatened to sue FedEx Ground for wrongfully classifying its drivers.  According to allegations by the Teamsters, FedEx has used misclassification to prevent drivers from unionizing (since independent contractors, unlike traditional employees, cannot form unions).

Yet perhaps the most prominent case of misclassification surfaced in 2007, when the private security firm Blackwater USA came under investigation for evading payment of millions of dollars in taxes by classifying workers in Iraq as “independent contractors.” Henry Waxman, chairman of the House Committee on Oversight and Government Reform, accused Blackwater of engaging in an “illegal tax scheme” that allowed it to avoid an estimated $31 million in employment-related taxes in the last year of its contract alone. The company also attempted to prevent one of its guards from contacting members of Congress after the worker discovered this illegal practice. In a letter to Blackwater’s CEO, Waxman wrote that “it is deplorable that a company that depends on federal tax dollars for over 90 percent of its business would even contemplate forbidding an employee to report corporate wrongdoing to Congress and federal law enforcement officials.” Despite the fact that it routinely misclassifies workers as contractors, Blackwater has been awarded more than $1 billion in government contracts since 2001.

According to guidelines established by the IRS, an employee is defined as anyone who works for an employer when that employer controls what will be done on the job and how those services will be performed. Independent contractors, on the other hand, are defined in a such as way that the payer or employer can only control the result of the work performed, but not the means of accomplishing that result. This distinction is codified in revenue ruling 87-41 (generally referred to as “the twenty factor test”). For a more extensive discussion on properly classifying employees and contractors, see the official guidelines as detailed on the IRS website.

Of the many concerns that today’s workers face, one of the most troubling is the prospect of losing income during an injury or prolonged illness. Sick or injured workers may suddenly find themselves unable to pay bills, maintain their current standard of living, protect their families from debt, or even keep their homes.

While most Americans carry insurance for possessions like cars and homes, the majority do not carry private disability insurance. At first glance, this makes it easy to see why someone would insure his or her ability to work and earn income—perhaps an individual’s most valuable asset of all.

Yet the issue becomes more difficult when workers try to determine the actual risk of experiencing disability in the course of a working lifetime. Much of the existing data and information is confusing, contradictory, or downright misleading. For example, the National Safety Council estimates that 31 million American workers suffer from a disabling injury each year; but when you look closely at the details, that figure is anything but straightforward. The NSC defines “disability” quite loosely: in a recent interview, NSC spokesperson Amy Williams noted that a disability could be anything that “interferes with normal daily activity one day beyond the day of injury.” She clarified that the condition doesn’t have to be serious enough to prevent an individual from going to work: in fact, it could just mean that someone “twisted their ankle and couldn’t go to Pilates that night.”

Such concessions, however, do not stop insurance companies from playing fast and loose with the statistics, as Ron Lieber argues in his recent article, “The Odds of a Disability are Themselves Odd.” For example, Lieber points out that the Council for Disability Awareness, a consortium of disability insurance companies, draws on the above NSC figures to claim that Americans have an 80% chance of experiencing disability. Framing the discussion in this way invests the prospect of disability with a sense of inevitability—and, consequently, sells insurance policies.

Of course many workers have legitimate reasons for insuring their ability to work and earn an income, even if insurance industry figures are overblown. Yet given the gaps and inconsistencies in available data on an average worker’s odds of experiencing disability, policy-shoppers should be wary. Reputable disability insurance agents may cite more conservative odds—perhaps as low as 50%. But some assessors in major insurance firms like Guardian will admit that those figures themselves are still inflated. During a recent interview, the spokesperson for Guardian’s Berkshire Life unit revealed that her organization’s current information was outdated, and estimated that the odds of disability were probably closer to 30%. Estimates on websites for insurers like Metlife as well as the U.S. Social Security Administration concur with that lower figure.

Yet workers who want to make informed decisions about the actual value and necessity of purchasing disability insurance will need to consider other factors in order to accurately assess their risk. The website for the Council for Disability Awareness provides a “Personal Disability Quotient” tool to estimate the odds for different occupations and lifestyles, but there can be substantial discrepancies in the results when additional outside factors are calculated. White-collar workers have lower rates of injury and illness than their blue-collar counterparts; exaggerated or fraudulent claims skew actuarial data across the board; and in recent years, many professionals facing reduced income and benefits have increasingly turned to using their disability policies as a kind of retirement plan—a trend recently verified by Jack Luff, a researcher with the Society of Actuaries.

Given this ever-shifting constellation of factors, the lifetime disability odds for a given worker could turn out to be in the single-digits—a figure that is hardly suggested by the Council for Disability Awareness, which warns that “Every :01 second another disabling injury occurs. That’s 60 per minute, 85,000+ each day.”

Workers can expect to find more accurate information on the website of the U.S. Bureau of Labor Statistics, which regularly updates its figures on disability rates and coverage. And of course a number of employees already have some disability coverage through their workplace—although the Bureau of Labor Statistics shows that this is only true for about 30% of American workers, and those policies generally cover only a portion of a worker’s income and tend to run out quickly. One should also bear in mind that workers’ compensation and L&I benefits can only be received for injuries that occur on-the-job. Meanwhile, disability benefits through Social Security amount to only a few thousand dollars a month, and the Social Security Administration defines disability very narrowly in evaluating eligibility.

Whatever a worker’s concern, it is clear that one should not solely rely on generalized insurance industry figures and across-the-board warnings. Those who are considering disability coverage face considerable research challenges, but Ron Lieber’s New York Times article has already generated a lively online discussion, and offers a number of additional resources for help. The guidelines in his blog post Questions to Ask Before Buying Disability Insurance may provide workers with an excellent place to start.

For more information, please visit Emery Reddy, PLLC online, or contact us via telephone at (206) 442-9106.

Emery Reddy represents plaintiffs in L&I, employment law and personal injury matters. The firm and its attorneys are trusted advocates for Washington workers who experience job related injuries.

Washington Labor and Industries is in the process of overhauling its website, www.lni.wa.gov. The revisions to the Washington L&I website are the result of user feedback collected over a significant period of time, as well as the efforts of L&I website designers. The new look improves the homepage, streamlines navigation and uses space more efficiently.

The new Washington L&I homepage, the content of which provides details on injured workers’ employment and workers’ compensation rights, provides better visuals and a more welcoming portal to the rest of the L&I site. Online services like the Claim and Account Center simplify the search for injured workers’ rights and remedies, workers’ compensation information, and specific claim information.

Streamlined navigation was a major focus of the L&I site revisions, and the result is a menu that includes headings for Safety, Claims and Insurance, Workplace Rights, and Trades and Licensing. These headings are continuously available. The new L&I site also restricts views to exactly what workers need, eliminating the confusing overload of unnecessary information. An injured worker pursuing a claim will find it easier to review his or her workers’ compensation and Washington L&I rights, understand workers’ comp injury data and statistics, verify workers’ comp coverage, and complete insurance forms. These changes promise to ease the burden on workers who depend on this web tool for information about injury claims.

The new L&I website also makes the most of its available space by consistently packaging information into succinct titles and removing duplication of information, such as contact information and Spanish translation for non-ESL workers.

Of the many revisions to the L&I site, one of the most effective is a new tool that permits a site user (commonly a worker with an L&I covered injury) to maintain a set of links packaged specifically for that worker. For example, a worker who suffered a back injury on the job could build links and bookmarks about necessary claim information, PPD awards related specifically to his or her injury, relevant contact information, and crucial information the worker would need if he or she found it necessary to appeal a claim with the Washington Board of Industrial Insurance Appeals. These links would remain consistently available regardless of the user’s navigation to other locations on the site. A review of the new site is available at http://www.lni.wa.gov/refresh.

Previously, an injured worker in need of advice might navigate the L&I website without access to important links that remained buried in inconspicuous locations. New content and links refer an injured worker directly to information about pursuing claims or appeals for his or her injury.

For more information, please visit Emery Reddy, PLLC online, or contact us via telephone at (206) 442-9106.

Emery Reddy represents plaintiffs in L&I, employment law and personal injury matters.  The firm and its attorneys are trusted advocates for Washington workers who experience job related injuries.