State: OK Bills Target Noncompliance by Employers, Comp Fraud:

By Bill Kidd, Central Bureau Chief

Oklahoma lawmakers are taking aim at employers who don’t carry required workers’ compensation coverage – and at anyone engaged in workers’ compensation fraud – with proposals to raise penalties and to increase regulators’ resources.

Senate Bill 1878 by Sen. Harry Coates, R-Seminole, a construction firm owner, would increase the maximum penalty the state labor commissioner can assess for failing to carry workers’ compensation from $250 per employee to $500 per employee for a first offense – and $1,000 per employee for employers in “hazardous industries,” as identified by the labor commissioner.

An additional $100 per employee would be assessed for each month (up to 36 months) the employer was not in compliance. The total penalty would be doubled for subsequent offenses.

The commissioner would be allowed to negotiate with employers to mitigate the penalties.

The legislation also provides that an individual who reports an employer who has failed to obtain coverage may be awarded, at the discretion of the commissioner, up to 25% (with a cap of $10,000) from a penalty assessed against the employer. The bill has been referred to the Senate Judiciary Committee.

Rep. Charles Key, R-Oklahoma City, has filed similar legislation as House Bill 2317. The penalty bills have proposed effective dates of Nov. 1.

Coates told WorkCompCentral on Tuesday that the legislation is intended to “put a little teeth” into the requirements that businesses carry workers’ compensation coverage.

Currently, the law provides “a very minimal penalty,” Coates said, which may encourage employers not to comply.

The senator explained that he wants to cause businesses to “think twice about violating the law.”

However, Labor Commissioner Mark Costello raised concern about the adequacy of the current fine structure after an Aug. 4 accident at a Kremlin grain elevator in which two 17-year-old workers each lost a leg. Costello reported that Zaloudek Grain Co. had not carried workers’ compensation insurance for five months prior to the accident, although the company was required to have the coverage.

Zaloudek contends that it had — or believed it had — a workers’ compensation policy in force with CompSource Oklahoma at the time of the accident. CompSource contends the policy had been canceled months earlier. Zaloudek is suing CompSource in an Oklahoma County district court.

Under current state law, the Oklahoma Department of Labor is limited to a fine of $75 per employee if a business without coverage comes into compliance within 30 days after the department learns the business isn’t complying.

Zaloudek Grain obtained coverage five days after the accident, Costello said, so the maximum fine he could impose on the company was $750, based on the company’s two injured teenage workers and eight other employees.

Costello told WorkCompCentral in September the low penalty “borders on the ridiculous” and indicated the fine structure provided “practically no economic incentive” for businesses to comply with the requirement for coverage.

In an email to WorkCompCentral on Tuesday, Costello noted that he has “expressed my frustration with the existing penalty structure…and believe stronger penalties proposed by Sen. Coates and Rep. Key should remove the economic incentive to avoid providing workers’ compensation coverage.”

Workers injured on the job “should have full knowledge of their medical care and lost wages will be covered through workers’ compensation insurance,” the commissioner said.

The department assessed $323,607.52 in workers’ compensation–related penalties in fiscal year 2011.

Meanwhile, bills aimed at workers’ compensation fraud are working their way through the legislative process.

SB 1060 by Sen. Bill Brown, R-Broken Arrow, would amend existing law to require that an insurer with “reason to believe that a person or entity” is committing insurance fraud is to immediately notify the Workers’ Compensation  Fraud Unit of the Attorney General’s Office, as well as the Anti-Fraud Unit of the Insurance Department.

Current law requires notice to the department, but not the attorney general. SB 1060 has been referred to the Senate Retirement and Insurance Committee. If passed, the bill would take effect immediately.

SB 1174 by Sen. Dan Newberry, R-Tulsa, would authorize the attorney general to contract for “investigative or legal services to carry out the responsibilities given to the Workers’ Compensation Fraud Unit.”

The bill, which would take effect Nov. 1, is being reviewed by the Senate Judiciary Committee and the Appropriations Committee.

SB 1321 by Sen. Rick Brinkley, R-Owasso, would authorize the attorney general to contract with retired police officers for investigative services related to the fraud unit’s duties.

The Senate Judiciary Committee has recommended that SB 1321 pass. The bill would take effect on Nov. 1.

Lt. Gov. Todd Lamb (R), in a report to lawmakers earlier this year, recommended beefing up the fraud unit, and suggested it could be done by contracting for services rather than adding new state employee positions.

SB 1246 by Sen. Brian Bingman, R-Salpulpa, also has been sent to the Judiciary Committee.

The legislation provides that if a claimant in a workers’ compensation case  is charged with workers’ compensation fraud, “any pending workers’ compensation proceeding shall be stayed until the final disposition of the criminal case.” SB 1246 would take effect on Nov. 1.

The 2012 session is to adjourn by May 25.

Source: WorkCompCentral