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Mainstay Business Solutions is fed up with Insurance Commissioner John Garamendi and Chuck Cake, the acting director of the California Department of Industrial Relations for shutting down its clients. So in defense of its alleged legitimacy, the company filed a lawsuit against the DOI and the DIR, Nov. 18.

Mainstay, a professional employer organization (PEO) wholly owned by the Blue Lake Rancheria, a federally recognized Indian tribe has received much attention recently because of its controversial business model.

The occupational injury indemnity and medical benefit package Mainstay offers through its services is similar to what a tribe legally offers its casino workers.  Going one step further Mainstay has come up with a way to extend that coverage to regular businesses, which has already landed some brokers, IHOP and Denny’s franchises in hot water.

Employers' rights attorney Nicholas Roxborough, of Roxborough, Pomerance & Nye LLP is representing Blue Lake in the suit doesn’t agree with the recent DOI and DIR challenges.  He wants the court to preserve Blue Lake's right to engage in the temporary staffing business, and to enforce the tribe's right to enjoy sovereign immunity from state regulation guaranteed by the United States Constitution as well as federal and state law.

"Recent actions by the Department of Insurance (DOI) and Department of Industrial Relations (DIR) have attempted to disrupt Mainstay's business affairs and unfortunately interfere with its sovereign immunity," said Roxborough.

He also emphasized that because of their sovereign immunity the Blue Lake Rancheria and Mainstay are not held to state laws requiring workers' compensation insurance. Roxborough defends the benefits Mainstay offers to employees and said they are equal, if not superior to, those provided under the statutory workers' compensation system.

"I understand the concerns of the DOI and DIR, but those concerns cannot ignore Congress' exclusive right to regulate Indian tribes. Such is especially the case considering the horrible state of California's workers' compensation system, which has been described as being broken, dysfunctional, and the most expensive in the nation," Roxborough added. "How could this Indian tribe's occupational benefits program be any worse than what is currently available? Instead, jobs are being created, and to the extent work-related injuries occur, they are administered quickly and efficiently for the injured workers."