WORKERS COMPENSATION OPTIONS FOR TRIBES IN WASHINGTON STATE

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1 WORKERS COMPENSATION OPTIONS FOR TRIBES IN WASHINGTON STATE Peter S. Hicks WILLIAMS KASTNER & GIBBS PLLC ALL RIGHTS RESERVED Peter S. Hicks

2 I. INTRODUCTION. This paper provides an overview of the Washington State Industrial Insurance Act and the applicability or inapplicability of such state workers compensation laws to tribal and nontribal employers doing business on the reservation. 1 The paper will further provide a discussion of potential advantages and disadvantages to electing to cover employees under the Washington State Industrial Insurance Act or choosing to establish your own workers compensation system to process workers compensation claims for tribal employees and employers. II. THE WASHINGTON STATE INDUSTRIAL INSURANCE ACT. Enacted in 1911, the purpose of the Washington State Industrial Insurance Act ( the Act ), or Title 51 of the Revise Code of Washington is set forth in RCW : The common law system governing the remedy of workers against employers for injuries received in employment is inconsistent with modern industrial conditions.... The state of Washington, therefore, exercising its police an sovereign power, declares that all phases of the premises are withdrawn from private controversy, and such sure and certain relief for workers, injured in their work, and their families and dependents is hereby provided regardless of questions of fault and to the exclusion of every other remedy, proceedings or compensation, except as otherwise provided in this title; and to that end all civil actions and civil cause of action for such personal injuries and all jurisdiction of the courts of the state over such causes are hereby abolished, except as in this title provided. RCW (citations omitted; emphasis added). In essence, the State Legislature intended to replace the common law of employer-employee liability with a no fault industrial insurance system. This intent has been upheld by both the Washington State Supreme Court and the U.S. Supreme Court. State v. Mountain Timber Co., 75 Wash. 581, (1913) aff d, 243 U.S. 219 (1917). To accomplish its purpose, the Act requires that all employers carry workers compensation coverage for any employees working within Washington State. RCW ; To further insure coverage, the courts have indicated that the Act is to be liberally construed in favor of the worker whenever possible. Peet v. Mills, 76 Wash. 437, (1913). A. Who is an Employer? RCW defines an employer as: [A]ny person, body of persons, corporate or otherwise, and the legal representatives of a deceased employer, all while engaged in this state in any work covered by the provisions of this title, by way of trade or business, or who contracts with one or more workers, the essence of which is the personal labor of such worker or workers. 1 This issue was comprehensively addressed by the Attorney General of Washington in an April 9, 1997 letter from Senior Assistant Attorney General James Pharris to Gary Moore, former Director of the Washington State Department of Labor & Industries. Much of the analysis contained in this paper tracks that in Mr. Pharris letter. Peter S. Hicks

3 Notwithstanding this definition, the Act is essentially silent with respect to tribes or tribal employees. RCW explicitly includes state, county and municipal workers under the Act s coverage, but does not mention tribes or their employees. Similarly, RCW provides that the purpose of the Act is intended to embrace employees working on projects on all lands and premises owned or held by the United States of America, but makes no reference to tribal or reservation lands. Finally, RCW applies the Act to employers and workers (other than railways and their workers) engaged in intrastate and also interstate or foreign commerce, but once again does not apply the Act to tribal enterprises or employees. B. Who is an Employee? RCW begins with a general policy statement consistent with the Act s stated intent: [t]here is a hazard in all employment and it is the purpose of [the Act] to embrace all employments which are within the legislative jurisdiction of the state. RCW (emphasis added). The Act therefore broadly defines Employee and worker " to include every person in this state who is engaged in the employment of an employer, including officers of the state, state agencies, counties, municipal corporations, or other public corporations or political subdivisions. RCW Thus, for all practical purposes, with only limited exceptions, all employees in Washington are entitled to workers compensation coverage. III. APPLICABILITY OF THE ACT TO BUSINESS CONDUCTED ON THE RESERVATION. Given the Act s liberally construed purpose to provide no fault workers compensation coverage to all employees in the State of Washington, many ask whether a tribe can elect to implement its own workers compensation system in lieu of the Industrial Insurance Act. Although the State Legislature has elected to extend the coverage of the Act to workers on federal projects and in interstate or foreign commerce, the Legislature has generally provided such coverage only to the extent permitted by federal law. It therefore appears the State may defer to federal law in evaluating a tribe s right to establish its own workers compensation regime that is not subject to the provisions of the State Act. Although the federal U.S. Constitution grants to Congress the power to regulate commerce with Indian tribes, and makes the statutes and treaties of the U.S. the supreme law of the land, Congress has not passed any statute explicitly relating to workers compensation. U.S. Const. arts I 8, VI. The U.S. Congress regulates state workers compensation laws under 40 U.S.C. 290, not withstanding, which provides: States shall have the power and authority to apply such laws to all lands and premises owned or held by the United States of America by deed or act of cession, by purchase or otherwise, which is within the exterior boundaries of any State, to all projects, buildings, constructions, improvements and property belonging to the United States of America, which is within the exterior boundaries of any State, in the same way and to the same extent as if said 2

4 premises were under the exclusive jurisdiction of the State within whose exterior boundaries such place may be. However, other states, such as Arizona and Minnesota have concluded that this federal statute was not intended to apply state workers compensation laws to tribal activities on Indian reservations. See Tibbetts v. Leech Lake Reservation Business Comm., 397 N.W.2d 883 (Minn. 1986); Swaztell v. Industrial Comm n., 277 P.2d 244 (Ariz. 1954) (petitioner was a non-indian employee); White Mountain Apache Tribe v. Industrial Comm n., 696 P.2d 223 (Ariz. 1985). A. Tribal employers employing tribal members: It is well settled federal law that the states lack civil regulatory jurisdiction over Indian tribes and that tribes are sovereign entities over which state law has no force, unless Congress expressly provides otherwise. See Cherokee Nation v. Georgia, 30 U.S., 8 L.Ed 25 (1831). As an extension of their sovereignty, tribes are generally immune from suit in both federal or state court. See Santa Clara Pueblo v. Martinez, 436 U.S. 49 (1978). Thus, unless a tribe elects to subject itself to the Industrial Insurance Act, Tribal businesses employing tribal members will be subject to tribal law rather than the provision of the Act. See Fisher v. District Court, 424 U.S. 382, reh g denied, 425 U.S. 926, 772 (1976). B. Tribal employers employing non-tribal members: Although the Washington courts have not rendered any opinions regarding a tribal employer s obligation to provide workers compensation coverage for non-tribal members under the State Act, we believe a tribal employer has a right to establish its own workers compensation code for non-member tribal employees. In 1997, the Mashantucket Pequot Tribal Council enacted its own workers compensation code and requested that the Connecticut Attorney General provide an opinion regarding the Tribe s right to apply the code to non-member employees. The Connecticut Attorney General concluded that the Tribe had authority to establish and enforce its own workers compensation code to govern any tribal employees workrelated injuries that arose on the reservation. See 1997 Conn. Op. Atty Gen., December 19, Drawing support from the Connecticut Attorney General s opinion, the same consideration should hold true in Washington tribes can adapt and enforce their own workers compensation laws relative to member and non-member workplace injuries. C. Non-Tribal employers conduction business on the reservation: In contrast to situations involving tribal employers, the Act is likely applicable to nontribal employers doing business in Indian Country. Begay v. Kerr-McGee Corp., 682 F.2d 1311 (9 th Cir. 1982); State of Idaho, ex rel. Industrial Commission v. Indian Country Enterprise, 944 P.2d 117 (Idaho Supreme Ct. 1987); Johnson v. Kerr McGee Corp., 631 P.2d 548 (Ariz. 1981). In each of these cases, the courts have concluded that 40 U.S.C. 290 permits states to regulate non-tribal companies conducting business on reservations. The court s rationale, seem to be that non-tribal enterprises should not be permitted to shirk their obligation to provide adequate 3

5 workers compensation coverage for their employees, not that tribes do not have sovereign non- Indian authority to regulate workplace injuries. IV. COVERAGE OPTIONS Notwithstanding a tribe s right to enact its own workers compensation code, there is no law that explicitly requires a tribe do so. However, it is sound tribal policy to afford protection to injured tribal employees, be they Indian or non-indian. Accordingly, tribes should evaluate their options for providing workers compensation coverage to tribal employees. A. Opt in to coverage under the act The Interlocal Cooperation Act, codified under RCW 39.34, provides: (1) Any power or powers, privileges or authority exercise or capable of exercise by a public agency of this state may be exercised and enjoyed jointly with any public agency of this state having the power or powers, privileges or authority, jointly any with any public agency of any other state or of the United States to the extent that such laws of such other state of or the United States permit such joint exercise or enjoyment. Any agency of the state government when acting jointly with any public agency may exercise any enjoy any and all of the powers, privileges and authority conferred by this chapter upon a public agency. (2) Any two or more public agencies may enter into agreements with one another for joint or cooperative action pursuant to the provisions of this chapter. RCW A public agency is defined to specifically include any Indian tribe recognized as such by the federal government. RCW In accordance with this language, tribes are permitted to enter into various agreements with the Washington State Department of Labor and Industries to to subject themselves to the regulations and employer obligations imposed by the Industrial Insurance Act. Tribes that opt-in to coverage under the Act have two options with regard to how workers compensation claims are administered: (1) Insure through the Department (State Fund): First, a tribe may simply elect to pay workers compensation premiums to the state and thereby obtain insurance from the Department of Labor and Industries. Under this option, the Department not only has final say regarding all issues regarding compensation, including acceptance or denial of claims, payment of any benefits and closure of claims, but L&I also serves as the claims processing agent and take step to move the claims to closure. (2) Self-Insure: Second, a tribe can elect to be subject to the Act, but operate as a self-insured employer. Under this option, the tribe may act as its own workers compensation insurer and administer its 4

6 own claims. To do so, however, the tribe will be required to post a substantial bond. Under this option, the tribe will be permitted to administer its own claims and make decisions such as when to schedule independent medical examination, when to pay time loss compensation and how to move a claim toward closure. The Deparment of Labor & Industries retains final authority over the claim and issues all decisions regarding acceptance or denial, time loss compensation, vocational services and claim closure. B. Enact Own Code and Commision As discussed in detail above, given the sovereign status of all Indian tribes, a tribe is also permitted to enact its own code and compensation system. Such a system can operated completely independent from the Industrial Insurance Act, to cover tribal businesses that employ both member and non-members. Enactment of a tribal workers compensation code not only requires drafting and implementing regulations for evaluating claims, but also requires the establishment of some system of tribal claims processing and adjudication. Moreover, some type of tribal dispute resolution process is necessary to resolve any decisions that are contested by either the employer or employee. The advantages to this option are many. First, and perhaps most significantly, the tribe can tailor its own system to fit the needs and goals of the tribe. Control of the system will not reside with people in Olympia who may have a limited understanding, if any understanding, of the unique employment issues in Indian Country. Secondly, by enacting its own code and compensation system, the tribe will retain control and final authority over all claims. This will greatly reduce the costs associated with workers compensation claims and may provide for the adjudication of claims in a manner that is more consistent with the goals, philosophy and values of the tribe. Finally, the tribe can set its own rates and premiums and will not be subject to the rating system prescribed by the Department of Labor & Industries. The tribe can therefore choose to enact a system that encourages the grow and expansion of tribal businesses. V. WHAT OPTIONS SHOULD A TRIBE CHOOSE? A number of considerations go into choosing which workers compensation option is best for a particular tribe. Accordingly, tribes should carefully consider their options rather than simply electing to subject themselves to the provision of the Act. Some of the considerations inherent in this analysis are listed below: A. Policy and Goals What are the tribes overriding goals with respect to tribal businesses and their employees? How is the Act consistent with the tribe s policies and goals? 5

7 If the Act is inconsistent with the tribe s policies and goals, can the tribe formulate a code that more appropriately fulfills those goals and policies? Does the enactment of a code or self-insurance make sense given the size of the tribal businesses and the nature of the businesses? B. Adequate Reserves What is the injury history of the tribal businesses? Does the tribe have adequate resources to establish reserves to meet potential claims while tribal employers being paying premiums? What type of policy will the tribe implement with regard to borrowing against workers compensation reserves and how will it insure that adequate reserves exist? C. Coverage and Exclusions What type of conditions and employments does the tribe wish to include or exclude from workers compensation coverage? Shall workers compensation be the sole and exclusive remedy for workplace accidents? If not, what private right of action shall workers have? D. Adjudication/Appeals Process How does the Act s appeals process correspond to the tribes process for resolution of disputes? Does the tribe have the resources or desire to establish its own appeals process? If so, can the tribal court handle the additional work involved and does it have the necessary expertise? is a Member in the Seattle office, whose practice focuses on employment and workers compensation disputes. He assists tribal governments and employers in Washington, Oregon and Montana with such matters. 6

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