What Will the Division’s Withdrawal of Proposed Enforcement Rules Mean to Carriers and Employers?

Last week we noted that the Division had withdrawn proposed enforcement rules after strong public comment criticized the agency’s rulemaking efforts. The proposed rules were drafted in an effort to comply with Senate Bill 1895, a 2017 bill that instructed the Division, in effect, to direct its compliance efforts away from imposing penalties for minor violations of the Act or Rules. The Division proposed amendments to existing rules to implement the legislation earlier this year.

Last week the Division withdrew those proposed amendments to Chapter 28 of Texas Administrative Code Sections 180.26 and 180.8 that it had announced in May because of stakeholder comments it received. A new version of the proposed rules has been scheduled for public hearing at 10AM November 15, 2018 at the DWC Central Office, 7551 Metro Center Drive, Suite 100, Austin. The Division will accept public comments on the proposed rules through December 3, 2018.

A number of our clients have asked us for our opinion regarding what may be happening with respect to these rules.

Senate Bill 1895 was a reaction to DWC’s prior enforcement priorities with respect to EDI violations. The legislature appears to have agreed with carrier complaints that the Division’s enforcement efforts had unfairly penalized carriers for purely technical violations where there is no adverse impact to injured workers. The legislation was designed to give the Commissioner of Workers’ Compensation additional relevant factors to consider when reviewing technical compliance issues in order to rationalize penalties for such technical violations.

Subsequent to the effective date of SB 1895 (9-1-17) we noticed that the penalties on EDI violations had been significantly reduced as we had expected. We also observed that the Division had begun to add language to its proposed consent orders that required the carriers to attest that DWC had adequately explained the factors that the agency had utilized in determining the penalty amount.

Earlier this year, in connection with the Division’s publication of proposed rules 180.8 and 180.26 the agency heard testimony from several stakeholders. The basic complaint from the stakeholders was that the Division was still issuing penalties on violations without providing the affected party information that explained how the penalties had been calculated. Carriers complained that all the Division had done in their proposed consent orders was to identify all of the potential factors for determining penalties (which were already set out in Sec. 415.021 and rules 180.8 and 180.26).

In other words, carriers complained that the Division was not identifying the specific factors that had been utilized when determining the particular penalty determination. DWC’s position seems to be that it will not identify how it has arrived at a specific penalty. Therefore, the only way to know how DWC calculated a particular penalty is to take a case to SOAH and depose the persons who made the penalty determinations.

We believe that the Division’s withdrawal of proposed rules 180.8 and 180.26 has to do with carriers’ complaints that the Agency’s consent orders fail to identify specific factors that resulted in the penalty amounts. However, we do not believe that the rules the Agency has proposed in their place adequately address those complaints.

The Division has proposed new rule language that will require the agency to include on the notice of violation a statement of aggravating or mitigating factors that it considered when determining the sanction. Also, consent orders will be required to contain a statement acknowledging that the DWC and the entity being fined communicated about how the Division determined the amount of the penalty.

In the newly proposed rule, Associate Commissioner of Enforcement Marisa Lopez Wagley was quoted as saying that the proposed regulation does not change the circumstances under which an administrative penalty is assessed and enforced, but is “just a memorialization of current practices of providing additional information to persons subject to administrative penalties.” If that is the case, then nothing will have changed as a result of these rules – despite the mandates of SB 1895.