Tennessee Legislature Considers “Workers’ Compensation Option”

Joining the trend set by Texas and Oklahoma, the state of Tennessee is looking at a statute that will create a “free market” alternative to the requirement that Tennessee employers carry a policy or workers’ compensation insurance. Sponsors say there is strong legislative support to amend the state’s workers’ compensation laws to reduce costs to employers while still protecting workers and their families.

The main thrust of the proposed law is to allow private employers to “opt-out” of the state’s currently mandated workers’ compensation program and set up their own plans for compensating injured workers. The statute would require that employers meet certain financial requirements to qualify to opt out. The plan would not be accessible to employers in either coal mining or construction, because of the inherent job risks.

Proponents say the bill would allow many businesses to cut workers’ compensation costs in half.

One of the essential components of the workers’ compensation program in Tennessee, as in New Jersey and other states, is the “exclusive remedy” provision. As a general rule, when employers have a valid policy of workers’ compensation insurance, an injured worker must use the state’s workers’ compensation system as his or her “exclusive remedy” to recover for workplace injuries. Under the proposed Tennessee law, employers would lose this protection if they opt out of the state-mandated program.

Sponsors of the bill point to alleged successes in Texas and Oklahoma, citing statistics that show that approximately one out of every three employers in Texas opt out of the state’s workers’ compensation program. Nonetheless, employers have been able to successfully manage their own injury protection plans. Sponsors also note that the state currently allows cities, counties and school districts, as well as employers with fewer than five employees, to opt out.

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