A Temporary War of Words Over Workers’ Compensation Liabilities
By Robert Warne - June 18, 2002A two-year battle over claims, liabilities and workers’ compensation is set to come to a head at the Labor Ready annual shareholder meeting June 19. The Building and Construction Trades Department, AFL-CIO has been breathing down Labor Ready managements’ necks in an attempt to get shareholders to demand they step down.
In the latest exchange of words, Edward C. Sullivan president of the Building and Construction Trades Department, AFL-CIO capitalized on Labor Ready’s 8-K report to the Securities and Exchange Commission (SEC) to drive home it’s message.
Sullivan said that his union has “revealed numerous concerns with Labor Ready’s practices: high injuries and terrible wages for its blue-collar temp workers, improper deductions, trampling on workers’ rights, workers’ comp irregularities including large-scale misclassification, fund under-reserves, questionable accounting and reporting…”
Labor Ready was quick with its response.
“Once again, there is nothing new in the union’s allegations,” said Joe Sambataro, Labor Ready president and CEO. “Consistent with our obligations as an SEC-regulated company, we keep investors apprised of ‘risk factors’ inherent in our company and industry. The union is trying to use this transparency as a tool for distorting the well-being of our company.”
As required by the SEC, Labor ready in its 8-K filing spelled out the risk factors associated with investing in its offering of convertible subordinated notes. The majority of these factors revolved around workers’ compensation issues and other work related liabilities.
One of the items Sullivan seized on was that Labor Ready might not be able to fully recover funds from bankrupt carriers Reliance and Legion. It was also noted that Labor Ready currently has a workers’ compensation policy with Kemper to cover employees in states the company isn’t self-insured. But in order to limit insurance costs Labor Ready significantly increased its per occurrence insurance deductible and dropped its aggregate stop loss coverage, which means there in no limit to its potential liability.
Sullivan also keyed in on the Labor Ready statement that “We may be exposed to employment-related claims and costs that could harm our business, financial condition or results operations.” He particularly pointed out the part that said, “We cannot assure you that we will not experience these problems in the future or that our insurance will be sufficient in amount or scope to cover any of these types of liabilities.”
Another charge made by Sullivan in the past is that Labor ready is guilty of misclassifying a large portion of its workforce to qualify for lower workers’ compensation rates.
He cited a 1996 case in West Virginia where a Labor Ready construction worker was coded as a maid and even as a piano tuner/taxidermist.
Sambataro said that the actual classification for the employee was “miscellaneous repair and maintenance,” and that piano tuner/taxidermist was one sub category among many under the main classification.
He said, “The union’s claim of a pattern of workers’ compensation misclassification is false.”
Sambataro attributed the latest remarks as the union’s ongoing campaign against the nation’s temporary work force. | 
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