More Takeaways from the Demise of the Oklahoma Option in Workers’ Compensation

Today’s post comes from guest author Jon Rehm, from Rehm, Bennett & Moore.

The Oklahoma Supreme Court’s decision to strike down the so-called “Oklahoma Option” in Vasquez v. Dillard’s was one of the biggest events in the world of workers’ compensation. Vasquez represents a growing trend by advocates for injured workers recognizing that workers’ compensation is a matter of constitutional law. But the Vasquez decision is important for other reasons.

Opt-Out is Still Viable

Though some commentators declared the defeat of the Oklahoma option was the death of opt-out, many justices on the Oklahoma Supreme Court who overturned the Oklahoma option would disagree.

A concurring opinion contrasted the Oklahoma opt-out system with the Texas opt-out system. In Texas, employers are not required to have or “subscribe” to workers’ compensation. But if Texas employers do not subscribe to workers’ compensation, injured Texas employees can sue their employer in tort with all affirmative defenses stripped away. This encourages employers to carry workers’ compensation insurance. Nebraska has a similar law for agricultural employers who are exempt from having to carry workers’ compensation.

Oklahoma’s “opt-out” created separate workers’ compensation systems: the state system under the Administrative Workers’ Compensation Act (AWCA) or the private systems under the Oklahoma Employee Injury Benefit Act (OEIBA), where employees were eligible for the same benefits but where employers could draft their own rules for eligibility. Regardless of whether an employee was covered under the AWCA or the OEIBA, employers still had to be covered under one system or another, and employees could not sue their employer in tort for work injuries. What doomed the Oklahoma option was the fact that unfair procedures under the OEIBA created separate but unequal workers’ compensation systems.

The contrast between the now defunct Oklahoma option and the still-viable Texas opt-out system was reinforced when the Vasquez court rejected Dillard’s argument that Vasquez’s claim was pre-empted by the federal Employee Retirement Income Security Act (ERISA) law. Under the Oklahoma option, plans under the OEIBA were to be governed by the ERISA law. However, since OEIBA served as workers’ compensation and ERISA plans that serve as workers’ compensation plans do not pre-empt state workers’ compensation laws, the OEIBA was not pre-empted by federal law. In contrast, state law claims against employers on disability insurance plans who are “nonsubscribers” in Texas are pre-empted by ERISA.

Few, If Any States, Are Going to Implement the Oklahoma Option

The Oklahoma option was struck down on equal-protection grounds based on the Oklahoma state constitution. Most other states have similar provisions in their state constitutions. In Nebraska, that provision is found at Article III, Section 18 of our state constitution. This provision concerns itself with disparate treatment in much the same manner as does the language of the 14th Amendment of the U.S. Constitution, which prohibits a state from making or enforcing any law that denies any person within its jurisdiction “the equal protection of the laws.” Distinctive Printing & Packaging Co. v. Cox, 232 Neb. 846, 443 N.W.2d 566 (1989). Even in a state without an equal protection clause in the state constitution, separate but unequal workers’ compensation systems could be likely be struck down on equal-protection grounds under the U.S. Constitution.

Injured Workers Are a Protected Class

Injured workers are sometimes subject to retaliation for bringing workers’ compensation claims. In 2013, the U.S. Supreme Court distinguished “discrimination” or “protected status” from “retaliation” or “protected activity” cases under Title VII and held that there was a higher burden of proof for employees bringing a retaliation case than for an employee bringing a discrimination case. However, if injured workers are thought of as a protected class, then discrimination in the form of termination should be thought of as a form of discrimination, and those claims should be subject to a more relaxed burden of proof than required in the Nassar case.