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February 14, 2002

L&I settles Wal-Mart decertification case; workers win protections

TUMWATER - The Department of Labor & Industries (L&I) has reached a settlement in its self-insurance decertification case against Wal-Mart. The settlement allows the Bentonville, Arkansas-based retailer to remain self-insured, but prohibits it from self-administering its workers' compensation claims in Washington for at least the next eight years.

L&I moved to decertify Wal-Mart after five audits, conducted between 1993 and 1999, showed the company failed to open legitimate claims, and was not processing open claims in a timely manner. Wal-Mart is one of about 400 large companies in Washington that are self-insured.

The settlement provides greater workers' compensation protection for Wal-Mart employees. Under its terms, Wal-Mart must hire an independent third-party administrator to handle claims. The administrator must be certified to do that job in Washington State, and cannot have any affiliation with Wal-Mart. The company that currently processes their claims, Claims Management Inc. (CMI), is a subsidiary of Wal-Mart.

Under the agreement, Wal-Mart claims will have to be handled more quickly than is required of other self-insured employers, and the handling of those claims will be closely scrutinized by L&I auditors during a two-year corrective action phase. Wal-Mart cannot apply to again self-administer its self-insurance program until 2010.

Also, when Wal-Mart appeals a decision by the department on a workers' compensation claim to the Board of Industrial Insurance Appeals, the settlement agreement requires the company to pay its injured workers all benefits ordered by the department pending the outcome of the appeal. This does not apply to claims where allowance of the claim is at issue. This provision will be in effect for eight years, and is an additional worker protection not required of other self-insured employers under existing law.

"Wal-Mart has said that it wants to create a model workers' compensation program here," said Gary Moore, director of the Department of Labor & Industries. "This agreement allows that to happen. It's a good settlement. Our goal has always been to ensure that workers' rights were protected."

In addition to the settlement, the company has donated $175,000 to Kids' Chance, a non-profit organization created by business and labor to provide scholarships to the children or survivors of workers catastrophically injured or killed on the job in Washington.

The settlement is contingent upon Wal-Mart building a regional food distribution center in Washington State. The 870,000-square-foot warehouse is expected to cost $40 million to build and will eventually employ 600 to 700 people. When fully operational, the distribution center's annual payroll is estimated to be $18 million. Under the agreement, Wal-Mart will start construction of the food distribution center within 18 months.

L&I's audit findings were supported by complaints from numerous Wal-Mart employees, who said the company denied them benefits they were entitled to under Washington State law. In November 2000, L&I moved to decertify Wal-Mart, taking away its right to self-insure.

Wal-Mart appealed the state's actions to the Board of Industrial Insurance Appeals and to Thurston County Superior Court. L&I prevailed in Superior Court, and Wal-Mart appealed that decision to the state Court of Appeals.

Wal-Mart wanted to settle the decertification case as part of its decision to locate in Washington State. The company also raised questions about the state's new ergonomics rule, which takes effect July 1 and will be phased-in over the next five years. Wal-Mart's deadline for complying with the rule is July 2004.

Wal-Mart was concerned about the food distribution center meeting the rule's requirements. Moore contacted Wal-Mart representatives and offered to conduct an ergonomics assessment at one of the company's food distribution centers. In December, L&I staff evaluated a distribution center in Texas similar to the one Wal-Mart plans to build in Washington State.

L&I officials found the warehouse to be ergonomically well-designed. On Jan. 7, Moore sent a letter to the company's executives, telling them, " . . . we are confident that you can locate a similar food distribution center with comparable operations in Washington and be in compliance with the Washington State Ergonomics Rule."

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