In Washington State and Elsewhere, Bad Guys Deserve a Different Regulatory Agency

I spoke in Washington State last week, providing the Keynote at the 47th Annual Conference of the Washington Self Insurance Association (WSIA). My presentation was followed by Joel Sacks, Director of Washington’s Department of Labor and Industry. Sacks reviewed his agency’s progress toward five goals that were established 6 years ago at the beginning of his term as Director. I certainly like much of what I heard. 

L&I is Washington’s exclusive provider of workers’ compensation coverage for the state (they prefer the term “exclusive” rather than monopolistic).

One of Sack’s objectives was to improve the working relationship with the business community his agency serves and oversees. To that end they have made efforts to achieve better compliance by partnering with business to improve education and communication. The belief has been that many employers will do the right thing if they are aware of the expectations and responsibilities they have when it comes to workers’ comp. They have done the same with unions, since employees in Washington must bear about 25% of the premiums for workers’ comp coverage. This makes them more direct clients than they might be considered in other states. 

It was when the conversation turned to “bad actors” that Sacks presented a very significant concept that would be useful for all regulatory agencies. Referring to enforcement actions against employers who intentionally flout the rules; underreporting payroll, misclassifying personnel, failing to purchase comp coverage or the like, Sacks very plainly stated that “bad guys deserve a different L&I.” It was a point that should not be taken lightly, as it delineates a clear difference between the customer friendly partner and a stern regulatory body. 

The night before the conference,  I had dinner with Director Sacks and Vickie Kennedy, the Assistant Director for Insurance Services at Washington L&I. Kennedy and I have worked together for several years on the Disability Management and Return to Work Committee of the IAIABC. That evening we touched on this very topic, and I expressed my concern that some state regulatory bodies are very  quick to punish violators, with little concern or determination of intent. They simply seemed interested in catching and punishing mistakes, with much less focus towards preventing the mistakes in the first place. I’ve had some personal experience in this area.

In November of 2017, I wrote about an incident where we were assisting a client insurance company with the clarification of reporting requirements surrounding a somewhat obscure scenario (see Killing the Regulatory “Gotcha”). When we contacted the state in question and explained what we were doing, the response was to immediately refer us to their enforcement division, who bluntly demanded we identify the insurance company who was seeking the clarification. We refused to provide that information, as the company in question was just trying to make sure they were following state mandates. That agency never got the name, and we never received the answer. It was a regulatory body that appears to have no interest in helping companies; only one that wanted to punish them when they were left in the dark and stumble into the wrong process. 

At dinner that evening, Sacks discussed their desire to be partners first (my words, not necessarily his), and provide assistance to employers so that errors and mistakes could be minimized. It was a lesson it appears he brought from his days at the Clinton administration OSHA, where there had been an emphasis at the time on building more of a partnership role for the agency. He was clear, however, that every agency “still needs a stick” – the ability to punish and correct improper activities. 

His portrayal in the session defining the difference between the two “agencies” was one of the best I’ve heard. By declaring that bad actors deserve a “different” L&I, he was bluntly stating that his agency can be customer focused and be the best of partners, but they are willing to be a malefactors worst nightmare if and when the need arises. It is a lesson that some other agencies could learn from. 

It does appear that this dialogue is indeed more than just talk, and that his agency has made great strides in meeting their partnership goals. His very presence at an event such as WSIA was evidence of that. Additionally, several L&I employees, including Kennedy, were present and participated in presentations for the organization. That was a strong indication that they were willing to walk the partnership talk. 

And L&I’s “big stick for bad guys” approach appears to be much more than just “big schtick.” Sacks told me they have worked with their State Attorney Generals office to put some teeth behind enforcement violations. Even where the violations regarding workers’ comp may be treated lightly from a criminal perspective, such inter office cooperation can mean big trouble for fraudsters who likely have been dishonest in other areas as well. 

I respect the stated approach that Washington Labor and Industry seems to be embracing. It is refreshing. Some agencies are far too willing to swing a big club without regard to the intent of their target.  It could be a crook or a baby seal; it does not matter to them and the results are often not pretty.

We should all have access to customer friendly, service oriented agencies willing to educate and assist their stakeholders. Knowing that the agency is no patsy and won’t tolerate intentional misdeeds shouldn’t bother anyone who is interested in doing the right thing. 

Instead, it is somewhat comforting to know that they actually understand the difference.