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Federal Workplace Law Fails To Protect Employees Left Out Of Workers’ Comp
Schiller spends time with his Yorkie-doodle, Maxine, at his apartment. As a result of his mounting medical bills and his inability to work, he says he is now “next to poverty.”
Brandon Thibodeaux for NPR
Schiller sought treatment from specialists at his own expense — about $90,000. They diagnosed a traumatic brain injury. A Social Security judge declared him disabled.
If Macy’s had stayed in the state workers’ comp system, Schiller could have appealed the company’s denial of benefits to the Texas Division of Workers’ Compensation and to state courts, where he would have expected an independent review of his case.
ERISA blocks state action “because this is a federal question,” says Richard Faulkner, an arbitrator and attorney in Texas who advised Schiller’s attorneys. “ERISA says we’re the federal law. We’re superior. State law, you’re irrelevant.”
Schiller was turned away by the state workers’ comp agency and a state court, which cited a mandatory arbitration agreement in the Macy’s opt-out plan. Most of the 50 Texas plans obtained by NPR and ProPublica contain mandatory arbitration clauses.
So Schiller first went through an internal appeals process at Macy’s, which is typical of opt-out plans in Texas and Oklahoma. People paid by employers decide whether employers are fair. Macy’s rejected Schiller’s appeals.
“There is no unbiased arbiter, so there can never be any true fairness,” says Bob Burke, a former Oklahoma commerce secretary who leads legal challenges to Oklahoma’s opt-out law.
Workers theoretically have an easier time taking their cases to federal court. But federal judges, under ERISA, must first determine whether employer decisions are “arbitrary and capricious” and can only reject benefits decisions if employers were unreasonable or did not adhere to their plans.
“You really have to show that [benefits decisions are] irrational or contrary to the terms of the plan,” says Karen Handorf, a private ERISA attorney who spent 25 years enforcing ERISA at the Labor Department.
So as long as employers follow their plans, they are likely to prevail. It doesn’t matter how unfair the plans or decisions may be.
Even if injured workers win in federal court, they get only the benefits they were denied. There are no multimillion-dollar awards for pain and suffering. And if workers lose, they can be forced to pay the legal expenses of their employers.
“Consequently, you have to think long and hard about what exposures you may be generating for a client if you attempt some of these ERISA remedies,” says Faulkner. “ERISA can be incredibly dangerous for. an injured worker.”
Schiller’s attorneys decided a federal court appeal was too risky.
These hurdles to going to court may explain why many employers include in their plans provisions that directly violate ERISA, according to Handorf.
In Oklahoma, almost every opt-out plan includes mandatory settlements. Employers alone decide when to cut off benefits and pay lump-sum settlements. They also decide how much to pay. And if workers refuse to accept, they lose all their benefits.
Injured workers also lose benefits in many plans in both Texas and Oklahoma if they don’t report injuries by the end of their shifts or within 24 hours, even if supervisors are witnesses or the injuries initially don’t seem serious.
These provisions are “an impediment to bringing claims and really isn’t what ERISA is designed to do,” says Handorf. “ERISA is based on the idea that you get your right to make the best claim you can for benefits.”
There’s also some question about whether ERISA governs opt-out plans. The federal law explicitly states that it does not apply to plans “maintained solely for the purpose of complying” with state workers’ comp law.
So Minick and PartnerSource added a strategic benefit to 90 percent of the opt-out plans in Oklahoma. It pays $1,000 for deaths that have nothing to do with work.
“That’s the magic language to have ERISA apply,” Minick argues, because the plans then don’t “solely” exist to provide workplace injury benefits or comply with state law.
Minick says that any misuse or violations of ERISA will be addressed by federal regulators.
“The U.S. Department of Labor has enforcement authority,” Minick says. “So there are a variety of checks and balances in the process.”
But Faulkner says the agency isn’t paying attention.
“The Department of Labor has civil and criminal authority that if it chooses to exercise it can go in, look at these things and stop it.”
L abor Department officials declined multiple requests for interviews. Spokesman Michael Trupo says the agency “is aware of, and studying, the issues you note.”
From The Department Of Labor
Labor Department spokesman Michael Trupo provided the following statement in response to NPR inquiries about ERISA and the opt-out alternative to state workers’ compensation:
“First and foremost, the well-being of workers and their families should be the priority when it comes to workers compensation arrangements. States should not be in a race to the bottom when it comes to minimizing workers comp costs at the expense of workers. To date, the department has no records of receiving complaints regarding opt-out plans.This may be due, in part, to workers not knowing they have rights under the Employee Retirement Income Security Act. If a worker believes they have been treated unfairly in a workers-compensation opt-out plan, they should contact one of our Benefits Advisors at www.askebsa.dol.gov , or via telephone at 1-866-444-EBSA.”
Trupo also says the agency has never litigated a single case involving possible misuse or violation of the law by employers who have opted out of state workers’ comp.
The agency has not received a single complaint, Trupo adds, which “may be due, in part, to workers not knowing their rights under [ERISA].”
ERISA requires employers to inform workers of those rights and of the process for filing complaints. Plans reviewed by NPR and ProPublica typically contain that information, but most are more than 50 pages long.
“ERISA’s been turned on its head, really. because initially it was passed for the protection of workers,” says Jeffrey Dahl, an ERISA attorney in San Antonio who represents injured workers. “But it in fact has become a shield for employers that operate these plans.”
When Schiller’s case went to mandatory arbitration, his lawyers worried about a process they consider pro-employer. Arbitration resulted in a mixed decision for Schiller and Macy’s.
Schiller, who now relies on disability payments from Social Security to get by, says he has gotten “no justice.” Brandon Thibodeaux for NPRhide caption
Brandon Thibodeaux for NPR
Schiller, who now relies on disability payments from Social Security to get by, says he has gotten “no justice.”
Brandon Thibodeaux for NPR
Arbitrator John Allen Chalk Sr. concluded the incident actually happened and resulted from Macy’s negligence. Schiller, Chalk ruled, suffered a “mild” traumatic brain injury and was subjected to “scattered, intermittent [and] non-focused” medical treatment.
Chalk also said medical records failed to show “any serious attempts to thoroughly examine, diagnose, and treat Mr. Schiller’s job-related injury.”
But Schiller would likely recover within five years, Chalk ruled. Schiller received $713,000.
Ted Lyon, Schiller’s attorney, believes his client would have done far better if the case had gone to state court.
Schiller “would have worked until he was 65, so that’s a million and a half dollars at least,” Lyon says. “In addition to that, [given] pain and suffering damages and the egregious way that they treated him, I could have easily gotten $5 million from a jury in this case.”
And if Schiller’s case had gone to court, every detail would be public. The mandatory arbitration clauses in opt-out plans impose secrecy. Arbitration hides cases like Schiller’s and shields employers like Macy’s.
We know the details of Schiller’s case because he decided to talk about it. He wants others to know what can happen to injured workers, despite the promised protections of ERISA.
“I’m just getting by,” he says. “Thank God for Social Security Disability. And. after dealing with the whole process I went through and nowhere to go. I mean I’ve gotten no, no justice.”
Most of the arbitration award paid legal fees, arbitration costs and existing medical bills. The rest is in a trust that pays ongoing living and medical expenses. And most of the award is gone. Schiller says he’ll run out of money before he runs out of time.