Galif., tribes battle over workers' comp

A California state assemblyman has stepped squarely in the middle of a dispute between two Indian tribes--which claim that they have the right to offer their version of workers' compensation insurance to California businesses--and state agencies that vehemently disagree.

California Assemblyman Bill Maze, R-Visalia, on Feb. 20 introduced AB 2780, which would allow Indian tribes to self-insure and provide a version of workers' compensation insurance to California firms. Maze introduced the legislation at the behest of the Fort Independence tribe.

That tribe and the Blue Lake Rancheria tribe would be allowed to hire employees as a temporary staffing agency or professional employer organization (PEO). Employees of the staffing agency or PEO would be covered under the tribe's workers' compensation-like insurance. The tribe would then lease those employees out to businesses in the state.

California Labor Code Section 3700 requires that employers obtain coverage for workers' compensation through an insurer authorized to write workers' compensation insurance in California or that employers meet the standards set out for businesses to self-insure.

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The California Department of Industrial Relations and the California Department of Insurance (CDI) assert the right to enforce state regulations regarding workers' compensation insurance, even in situations in which the rules seem to conflict with Indian tribes' sovereign immunity, which exempts them from some state regulation.

On Nov. 7 the state labor commissioner shut down 13 California businesses that used a workers' compensation-like plan offered by Mainstay Business Solutions, which is owned and operated by the Blue Lake Rancheria tribe. Mainstay provided a version of workers' compensation insurance to approximately 300 California businesses employing more than 7,500 employees. The state asserted that, because the tribe's workers' insurance plan was not state regulated, the businesses did not have acceptable workers' compensation coverage for their employees.

The companies reopened after obtaining workers' compensation insurance through state-approved carriers. The Blue Lake Rancheria tribe later sued the state, asserting that the state had no right to regulate it or its businesses because of its tribal sovereignty. That case is pending.

Mainstay's product is called an "occupational injury indemnity plan," according to a spokesperson for CDI. This type of plan is not recognized by the agency as workers' compensation insurance. Furthermore, the tribe's claim to sovereign immunity does not extend to commercial entities that are "separate and apart" from the tribal government, said CDI attorney Rebecca Westmore.

A private employer can meet its obligation to provide workers' compensation insurance for its employees by buying insurance from a licensed company or becoming a licensed self-insured employer, said state Insurance Commissioner John Garamendi. The state oversees all workers' compensation insurance plans and guarantees that the plans are solvent and comply with state law. Otherwise, he said, "there is no assurance that [an] Indian tribe or any other entity offering this product will have sufficient financial reserves to pay claims due over the extended life of a workers' compensation benefit."

Maze said the tribes are willing to enter into an accord with the state government, similar to agreements that exist for tribes that sponsor gambling on reservations. Such an accord would set the standards tribes would have to meet to self-insure. It would keep the tribe's claim of sovereign immunity while bringing it into compliance with state guidelines, he stated.

Any business that purchased workers' compensation or work injury insurance from an Indian tribe would agree to have its employees' workers' compensation cases heard in a tribal court.

A similar legislative situation could erupt in Oklahoma. The state insurance commissioner has ordered a group of companies claiming tribal sovereignty through an affiliation with the Ponca tribe of Nebraska to stop doing business in Oklahoma. The tribe claimed immunity from state oversight.

COPYRIGHT 2004 Society for Human Resource Management
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