Friday, April 17, 2015

No Religion For True Religion

An industry friend reminded me the other day that exclusive remedy, and indeed all of workers' compensation, came about, not to protect the injured worker, but to protect the employers. 

And that is absolutely true.

When workers' compensation was first being bandied about in the political circles of the United States, labor unions wanted nothing to do with it. They did not want to relinquish big damages for possible big injuries. In the Industrial Age, when work comp came about, the prospect of some seriously debilitating injury was more prevalent.

People didn't stop working unless they absolutely could not work, and if they absolutely could not work then it really was serious.

Remember back then there was no health or medical insurance. There were no alternative social safety systems. If a worker lost a leg he lost his job, and his life, and so did his family.

But when a worker did succeed against an employer, that employer went out of business.

This would have disastrous repercussions, not only for employer which would go out of business and the owners/shareholders would lose their investment, but the injured workers' family would still end up on the streets, desperate and destitute. Hundreds of other workers would lose their jobs, government would lose tax revenue - the implications were exponential.

Still there are business owners that don't want to participate in workers' compensation, that don't believe in social order, or the Rule of Law (and I'm not talking about Texas where participation is voluntary because that IS the law there, and consequently businesses, their employees and communities - just look at West, Texas - are subject to the aforementioned risks to business and community).

California Insurance Commissioner David Jones announced yesterday that the Department of Insurance in conjunction with the Los Angeles District Attorney's office was pursuing charges against subcontractors for True Religion Jeans who proved, once again, that it is employer fraud that is responsible for most fraudulent activity.

Sung Hyun Kim, 57, former chief executive officer of Meriko Inc., and her sister Caroline Choi, 59, CEO of SF Apparel Inc., were arrested Wednesday and charged with 18 felony counts of workers' compensation insurance fraud and tax evasion. Their certified public accountant, Jae Kim, 71, was also arrested Wednesday and is charged with 18 felonies.

The three are accused of conspiring since 2007 to underreporting $78.5 million in payroll to State Compensation Insurance Fund, Tower Insurance, Star Insurance Co., Granite State Insurance Co., Insurance Co. of the West, National Liability and Fire Insurance Co and Cypress Insurance Co.

Jones said during a press conference on Thursday that Kim and Choi employed as many as 600 workers at their factory on South Santa Fe Avenue in the Los Angeles suburb of Vernon, but reported to carriers that they had as few as 80 employees.

They got tripped up when, in 2012, State Fund identified discrepancies between payroll reports it received from Meriko and SF Apparel and payroll reports the companies filed with the Employment Development Department. An EDD investigation uncovered evidence that many employees were being paid under the table through a bank account that was never disclosed to the department or to carriers.

While True Religion was not accused of any wrong doing, this is a blow to the brand's reputation, which is based on fair employment practices and working with vendors who do the same. Jones was quick to state that True Religion was fully cooperative - sure, why wouldn't they be?

But they are hypocrites deep down - if they really did have a concern for their workers and those of their contractors they would have been much more proactive in detecting this fraud. Nope, they get no compassion from me because we all know what they REALLY were concerned about was how cheaply they could get their overpriced jeans produced.

So while workers' compensation perhaps isn't all that it's cracked up to be, it is better than what it replaced, and still there are scoundrels that abuse labor, abuse society, all for their own greed.

Frankly this is no different than the devastating Rana Plaza building fire in Bangladesh in 2013 - sure people didn't die as a consequence of this fraud, but it is just as despicable in my mind because even in this modern age there are people who don't value humans, don't value the law, don't value society.

In the end, governments in the United States are formed to "promote the General Welfare" (Preamble to the Constitution). Any act must support the public welfare. We may not agree on whether or not work comp does this well, or if it could be done better, but in the least workers' compensation accomplishes the mission if the laws are followed.

Bail is set at $700,000 for Sung Hyun Kim, who faces up to 28 years in state prison. Bail is $430,000 for Choi, who faces up to 15 years in prison. Kim faces 22 years in prison and his bail is set at $520,000. 

That's too little punishment, too late.
Here's my advice - if you, as a business owner, don't like to pay for workers' compensation, then go operate in Bangladesh. When you violate the labor laws there they just put you to death.

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