With Florida Non-Subscriber Proposal, Will Employers Understand the Risks?

Last Wednesday, Florida Representative Cord Byrd released proposed legislation that, if passed, would include a provision making workers’ compensation coverage optional for businesses in the state. Already being misidentified by Florida media as an “Opt Out” proposal (please see “For the Last Flippin' Time, Texas is NOT an Opt Out State” for a more detailed explanation), it would allow Florida to become a “non-subscription” state similar to Texas.

While this bill has just been introduced, and in fact is still to be formally filed as the Legislature is not yet in session, it signals that workers’ comp will likely be a major issue for Tallahassee this year. Some have conjectured that the legislature would do what it often does here in the Sunshine State; they would ignore the issue for years until the pain became too great before acting with a stupid and poorly thought out solution. I guess I had best stop conjecturing that.

Looks like we’re moving to the poorly thought out solutions faster than I anticipated. (This proposal also has a provision to shift the cost of attorney fees directly to the injured worker. You may visit Judge David Langham’s excellent post for more about that.)

While we have no way of knowing what the end result of this proposal will look like, if the state does adopt a non-subscriber capability, will our employers truly understand the risks involved? For the small, independent business just struggling to survive on a day to day basis, my guess would be “no”.

While larger, more sophisticated employers will understand the risks associated with “going naked”, and develop alternative plans designed to mitigate that risk, many small employers in the state are likely not to grasp the consequences of dropping workers’ comp coverage. For many of those businesses, workers’ comp has become a nuisance expense; a mandated cost on their annual budget that, to them, provides no real value. Many small employers are not aware of the “grand bargain” that provides them protections from tort actions that could result from their negligence. The narrative on comp has evolved to the point where it is portrayed as protection for their employees, when in fact the system protects the boss as well. As an industry, we don’t tell both sides of the story well.

We already see the lack of appreciation for comp in the state today. The widespread abuse of the “independent contractor” by employers in Florida is largely driven by a perceived need to avoid workers’ compensation coverage for employees. I’ve had conversations with small business owners – people who are aware of the business I am in – that clearly reveal an ignorance about the law and protections afforded them by a solid workers’ compensation policy. One such owner, who runs a commercial cleaning business, called me because a new client was asking for proof of workers’ compensation coverage. His “solution” was to try to figure out a way to make all his employees corporate officers so they would somehow be exempt from comp coverage. I assured him that, not only was his plan illegal, it was ill advised from a liability perspective to boot.

I have no idea if the message actually got through.

Florida already has a limited “non-subscription” capability. With the exception of those within the construction industry, any business with less than 4 employees is not required to carry workers’ compensation insurance. I do not have statistics on how many of those businesses opt for workers’ compensation coverage, but I suspect a significant number do not. Not only is there a great lack of awareness about what workers’ comp does, for any of these employers it is difficult to find coverage. Many agents do not like dealing with companies of that size (an agent friend told me years ago he hated writing comp for any employer with less than 10 people. Calling them a “pain in the ass”, he indicated he made very little money and became their default HR person for every little issue in the process). Personal anecdotes are not my only source or observation point; this website has had over 60,000 such businesses pass through its virtual doors looking for coverage in the last 10 years or so. For them, finding coverage or even someone willing to help them has been difficult.

Making it “voluntary” will not be, in my opinion, the solution that works for everybody.

I am on record as not being a fan of non-subscription systems. It is estimated in Texas that as many as 500,000 workers are employed by companies that have no injury coverage plans in place. If injured they are potentially on their own; or headed to dependency on an overburdened SSDI system and support of the taxpayer for the remainder of their lives. It is a disastrous system for employees (and taxpayers) in that situation. We should not encourage replication here.

The bottom line is, just because workers’ comp may not be required it does not mean the liability for the on the job injury goes away. If the non-subscription option becomes a reality in Florida, the industry needs to be prepared to counter with that message. Otherwise some employers, and their workers, will get a very expensive, and perhaps unexpected, lesson in being properly prepared. 

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