Thursday, February 21, 2013

OK Reform - Arbitration Lacks Protections

Yesterday I commented that the 260 page Oklahoma SB 1062 reform bill's proposal to create an administrative dispute resolution process was a good idea.

But I'm not so sure about SB 1062's provisions for permitting any employer in the state to use arbitration as a means for resolving workers' compensation disputes is a good idea. In fact, I think its lousy.

The arbitration provisions in the bill are quite extensive. I'll summarize them the best I can without, hopefully, unduly boring you.

Sections 134 through 162 of the bill establishes the "Workers' Compensation Arbitration Act".

There are three ways an employer can create an arbitration obligation: 1) provide notice to both the employee and the employer's carrier of the existence of an arbitration agreement and file an alternative dispute resolution plan with the Workers' Compensation Commission (hereafter "Commission"); 2) the employer's Certified Medical Plan files an alternative dispute resolution plan with the Commission; or 3) the arbitration agreement is subject to the Federal Arbitration Act.

This last qualifier is particularly broad as nearly any contract that provides for arbitration of disputes falls under the terms of the FAA. Thus if the employer makes use of "contracts" in its employment policies there is likely subjugation to the FAA.

Also, the "notice" is very broadly, and liberally, construed in favor of the employer in this bill - anything that  "is reasonably necessary to inform the other person" is notice regardless of whether there is actual knowledge.

The way I read the bill, while the parties may not waive the substantive provisions of the underlying workers' compensation act (i.e. provisions dealing with medical treatment or indemnity) they may otherwise waive some of the due process or legal procedure protections of the underlying act and the arbitration provisions do this quite nicely without any further agreement between the parties.

Written agreements to submit disputes to arbitration are "irrevocable except on a ground that exists at law or in equity for the revocation of a contract." From my law school days, there are three broad categories that would permit such a challenge: fraud in the inception; fraud in the performance; or mutual mistake of fact. All of them are very high hurdles to overcome.

In addition, if a party contests the validity of arbitration, the arbitration may continue pending final resolution of the issue by the Commission unless otherwise ordered which largely negates a concomitant challenge of validity.

By the way - the Commission is empowered to "summarily" decide the validity of an arbitration agreement and order the parties to arbitration "unless it finds that there is no enforceable agreement to arbitrate."

There are provisions for the issuance of provisional remedies either prior to the appointment of an arbitrator or after the appointment of an arbitrator, depending upon the circumstance, that appear to provide some protection of justiciable issues pending further procedures - I'm assuming that this is to protect, for instance, payment of temporary disability indemnity or medical treatment pending further adjudication.

While there are also provisions dealing with potential conflicts of interest or other matters that may call into question the impartiality of an arbitrator, the typical remedy in the bill is that another arbitrator is selected/appointed.

Arbitrators are given the same immunity that is bestowed upon judicial officers.

And arbitrators are given judicial powers including subpoena power, ability to hold conferences and hearings as necessary, weigh and determine admissibility of evidence, ask questions of witnesses, issue protective orders, etc.

While an arbitrator may amend, modify or correct an award on various grounds (which may be on order of the Commission), or if the Commission determines that there was some failure to abide by the law (i.e. fraud, failure to disclose a conflict, mathematical error, legal error) there is effectively no appeal. Depending upon the basis for the error the matter is either returned to the original arbitrator or a new arbitration is ordered.

Though the district court has jurisdiction hear appeals from Commission sanctioned arbitration orders, the reality is that such appeals will be ineffective because there would need to be a showing of fraud, or other similar misapplication of justice - otherwise the Commission has exclusive jurisdiction "to enforce and enter judgment confirming, vacating, correcting or modifying an award under this act."

Note that there is no employer size limit to the arbitration provision, whether union representation is present, whether an employee affirmatively assents to arbitration, and the employer pays the arbitrator's fees...

No wonder the Oklahoma Chamber of Commerce has come out so strongly in favor of SB 1062.

I like administrative dispute resolution processes for specialty legal topics, like workers' compensation.

I have disdain for arbitration in such situations though, particularly where one party (the employee in these situations) has no bargaining position prior to or during employment, and where the opposing party (i.e. employer/carrier) has far greater resources.

This is a reform item that is clearly one sided and, while it certainly will lower the cost of workers' compensation claims in Oklahoma, it lacks the protection mechanisms necessary for the fair treatment of injured workers who don't agree with medical treatment or indemnity determinations.

Finally, there is nothing that prohibits an employer, at any point in time from declaring that employment is conditional upon agreeing to work place injury arbitration - thus creating a mandatory condition.

That's certainly one way to get disputes out of the civil courts.

I hope this doesn't become a trend.

1 comment:

  1. David,

    Once again I find myself agreeing with your take on an issue. Arbitration can be a useful tool, but forced arbitration is a bad idea. Seldom used, arbitration is an option in Texas with mutual agreement of the parties. What I see as the underlying problem is the creation of an unbalanced system. Over reaction by one side or the other makes for bad law. It almost ensures another reform in a few years. It is a fine line to walk, but protecting workers' rights and giving employers a fair shake are not mutually exclusive goals. Business would be better served by creating a stable system. I find responsible employers want to take care of employees injured on the job. They don't want to be taken advantage of or feel their side of a dispute will not be taken seriously. Most workers want to do a good job and, if injured, to get back to the job with as little disruption as possible. They don't want to feel helpless in the system. While no system is perfect the grand compromise that is workers' compensation needs to work for both employees and employers.