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Thursday, Mar 28, 2024

Contractor Win For Farm Team

By law, every company in California with employees must have workers’ compensation coverage. Usually that involves buying a policy from a private insurance carrier – a pricey requirement for businesses in risky industries such as construction, security or agriculture. But there’s another option: Large companies can self-insure. That strategy worked for the state’s big farm labor contractors – until they received a letter from state regulators last year revoking their permission to self-insure, sparking a major legal battle. Last month, 63 farm labor contractors, represented by Woodland Hills law firm Roxborough Pomerance Nye & Adreani, won the case with the Department of Industrial Relations, confirming their right to self-insure, and thus save lots of money. “This case had huge repercussions,” said Nicholas Roxborough, co-managing partner at the firm. “While it’s wonderful for 63 companies to save millions and millions of dollars, it also has precedential value. … That’s the big thing that came out of it.” Whose employees? When companies self-insure, they assume the risk to pay workers’ comp claims by their employees. However, by assuming that risk the companies can save a lot of money in insurance premiums and claims. “If you do it right and have controls in place, you could actually save a lot of money, create more jobs and create more capital for expansion,” Roxborough said. Also, by handling coverage directly, employers have more control in the event of an accident and subsequent claim. “Employers have a lot more say when they decide to go into self-insurance,” said Jason Kim, partner at the L.A. office of law firm Hinshaw & Culbertson, who has experience in workers’ comp law but was not involved in the farm contractor case. “(The companies) have more power to oversee claims, to litigate the fraudulent claims and pick their battles. The key difference is when they go with traditional insurance, the insurance company pretty much calls the shots, so there is friction there.” Typically, a company applies for a certificate to self-insure, and once approved by the state, hires a third party to manage the program. It also puts internal procedures in place to enhance safety. In the agriculture sector, farm labor contractors can have hundreds to thousands of employees, separated into different harvesting crews, working at different locations. The contractors provide the trucks, equipment and machinery as well as the proper uniforms and training necessary for farm laborers to properly harvest crops. They also supervise work in the field. More than a year ago, the state Office of Self Insurance Plans, a program within the Department of Industrial Relations, revoked farm labor contractors’ self-insurance certificates under the assumption that those companies were “in the business of providing employees to other employers.” The California Labor Code specifically prohibits the issuance of self-insurance certificates for workers’ comp to businesses such as payroll and staffing companies that hire employees to work for other companies. The Office of Self Insurance Plans believed farm labor contractors fell under that category and initially gave them 90 days to find private insurance carriers. However, Roxborough Pomerance successfully argued that farm labor contractors don’t belong in that category because farm laborers engage in specialized work that is controlled by the contractors. The system differs from staffing and payroll companies, where the bulk of the control is assumed by the company receiving the employees. Dave Johnson, a partner at Ontario’s Self Insured Solutions, a company that manages self-insured groups, including one involved in the farm labor case, said it is a lot easier for a staffing company to misrepresent the level of risk its employees engage in than it is for other companies. For instance, a staffing firm can say the majority of its employees are involved in clerical work as opposed to riskier labor such as construction. Past abuses of that ambiguity may have resulted in the legal exception for staffing companies. “(Certain staffing and payroll companies) mischaracterized what employees did,” Johnson said. “It’s easier for (those kinds of businesses) to do that and you can slight the system.” Johnson speculates these instances were part of the reason the Office of Self Insurance Plans tried to revoke farm labor contractors’ certificates to self-insure to begin with. Legal logic Last June, Roxborough and Ryan Salsig, another attorney with the firm, went before Hearing Officer Nathan Schmidt to present their case. They represented 63 different labor contractors, including Esparza Management and Services Inc. in Bakersfield, Valley Harvesting & Packing Inc. in Heber and 60 others that are a part of Self Insured Solutions’ California Farm Management self-insured group. The self-insured group alone insures about 100,000 farm workers. The case hinged on the difference between farm labor contractors and staffing firms, according to Salsig. “The thing that made this complicated is in the statute it says you can’t self-insure in the business of providing employees to other employers but that isn’t defined anywhere,” he said. “There is no generally accepted test for what that is. And so one of the first things we faced was what does that even mean?” To prove their clients were not like staffing firms, representatives from Esparza, Valley Harvesting and Self Insured Solutions testified and provided documentary evidence to establish that farm contractors are “responsible for hiring, disciplining, firing, training, supplying, directing and supervising all aspects of its employees’ work lives,” as stated in the decision of the case. The farm labor system differs from that of staffing companies, which have less authority and control over their employees than the companies where the workers are contracted to work. The decision of the case, given by Department of Industrial Relations Director Christine Baker, found that farm labor contractors are not in the business of providing employees to other employers and that their certificates to self-insure were wrongfully revoked. All 63 certificates were reinstated. Kim, the workers’ comp attorney, said cases such as this are positive for all employers and business in California in general. “There’s a history of government trying to overstep their powers,” said Kim. “They basically ship good employers out of the state from doing business, because it’s so hard to do business in California. … In this difficult environment, my thought is that we need to have all the options available for employers, especially the options that are allowed per the laws.”

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