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| | WC Loophole Big Enough to Drive a Hummer Through
By Robert Warne - November 3, 2003 Department of Industrial Relations officials stopped into three Eureka area Denny’s a week ago, but it wasn’t for a grand slam breakfast. No, the state officials were there to offer their own grand slam menu item by hitting the owner with $14,000 in fines and issuing a stop work order Oct. 24.
The order required the owner, Safar Ghaffari to close his restaurants until he could prove that he was in compliance with state workers’ compensation laws.
Ghaffari’s business is the first in the state to be shut down, as officials step up efforts to stop Indian tribes from selling their sovereign immunity to non-sovereign entities.
Ghaffari’s troubles began when he declined a $225,000 policy from State Fund for an attractive $100,000 alternative from Mainstay Business Solutions, a staffing company owned and operated by the Blue Lake Rancheria tribe in Humboldt County.
Mainstay’s product, occupational injury indemnity and medical benefit coverage (OIIMBC), is basically a form of what various tribes offer their casino employees, which is required by law to be comparable to work comp.
Mainstay, which state officials think could be currently covering 18,000 workers through the alternative program, requires an employer to sign over its complete staff. As the employer of record, Mainstay provides the sovereign coverage and leases the employees back to the company.
With no employees on its books the company can then file a work comp exemption with the Contractor's State License Board.
Because the Department of Insurance (DOI) and the Indian tribes both cite federal and state court decisions to bolster their positions, it looks like this may take awhile to sort out. But the DOI maintains that a California employer that leases its employees is considered a co-employer and is subject to the state's labor laws, including workers' comp requirements.
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