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Home / Legislative Action Center / Issues - Law & Courts / Washington Supreme Court Unanimously Rejects Further Expansion of "Wages" in Key Workers' Comp Case |
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Washington Supreme Court Unanimously Rejects Further Expansion of "Wages" in Key Workers' Comp Case |
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Written On: September 29, 2005 |
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OLYMPIA – The Association of Washington Business scored a major victory in today’s decision of the Washington Supreme Court rejecting a costly expansion of "wages" for the purposes of workers' compensation. In Gallo v. Dept. of Labor & Industries, the Supreme Court was faced with five consolidated cases seeking to include a variety of fringe benefits as "wages" for the purposes of workers' compensation benefits.
The Gallo plaintiffs’ arguments were based on the court’s landmark 2001 ruling Cockle v. Dept. of Labor & Industries, which changed the historic approach set by the Legislature in 1971 for calculating payments to injured workers while they are off work. In Cockle, the court held that time-loss benefits must be calculated not only with an injured worker’s wages, but also any health or dental insurance benefits the employer paid on behalf of the worker. Previously, the practice of the Department of Labor & Industries was to calculate time-loss and other workers’ comp benefits based only on workers’ wages and not wages plus fringe benefits paid by the employer.
Cockle created a rush to the courthouse door as over 1,400 plaintiffs filed claims with L&I asserting that various fringe benefits now constituted “wages” just like health and dental insurance. The five Gallo plaintiffs were the tip of that spear, arguing for inclusion of union dues, training benefits, life insurance, disability insurance, and retirement contributions as wages. If successful, the plaintiffs would have blown a costly hole in Washington’s already fragile and expensive workers’ compensation system. Washington workers enjoy a very rich benefit package through workers’ compensation. According to the National Academy of Social Insurance, Washington has the fourth highest level of workers’ comp benefits paid compared to all other states.
AWB, joined by the Washington State Farm Bureau and Associated General Contractors of Washington, filed an amicus curiae (“friend of the court”) brief requesting the court overturn Cockle because of the havoc it has caused workers’ comp, or at the very least refuse to extend Cockle to the benefits sought in this case. AWB’s General Counsel Kris Tefft then joined L&I in oral argument before the court last fall to reinforce the importance of this case to our state’s economy.
“The tax and benefit costs of our state’s workers’ comp system has been a persistent competitiveness concern,” added AWB President Don Brunell. “We saw substantial double-digit rate increases forced upon employers in the past few years at a time when our economy was struggling to recover. Cockle’s expansion of wage replacement was a cost-driver for those rate increases, and we’re happy to see the Supreme Court put important limitations on that decision.”
Writing for a unanimous court, Justice Barbara Madsen applied the Cockle analysis to the benefits at issue, and noted “the Legislature did not intend that all forms of consideration, in cash or in kind, be included for purposes of time-loss compensation calculations. Rather, the Legislature intended to include in wages only those items of in-kind consideration that a worker must replace while disabled and that are critical to the workers’ health or survival.” None of the benefits sought in Gallo, Justice Madsen reasoned, rise to that level.
“Clarifying the definition of wages has been a key legislative objective since Cockle,” noted AWB’s Governmental Affairs Director for Workers’ Compensation Amber Carter. “We hoped the Supreme Court would overturn Cockle, but short of that, the court has put a very high fence around Cockle, and it should help stem the tide of frivolous workers’ comp litigation that Cockle started. The decision will also provide useful guidance to the Legislature as we continue to work on ways to reform workers’ compensation and contain costs.”
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