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August 17, 1972
Honorable R. Ted Bottiger
State Representative, 29th District
8849 Pacific Avenue
Tacoma, Washington 98444
Cite as: AGLO 1972 No. 63 (not official)
By letter previously acknowledged you have requested an opinion of this office on three questions relating to workmen's compensation coverage under the state industrial insurance act for employees of the city of Tacoma. Your questions read as follows:
"1. Are the City of Tacoma General Government and the City of Tacoma Utilities Board or Department of Public Utilities one legal entity under the provisions of RCW 51.08.070, which defines an employer under the Workmen's Compensation Act?
"2. If the General Government and Public Utilities are one employer under the purview of the Act, may the City of Tacoma self insure as to its General Government section and leave the Public Utilities in the State Workmen's Compensation Fund?
"3. Is an employer who self insures under the provisions of RCW 51.16.140 required to pay 100% of the medical aid assessment? Or may he pay 50% of the assessment and deduct the other 50% from his employees' earnings?"
We answer question (1) in the affirmative; question (2) in the negative; and question (3) in the manner set forth in our analysis.
The underlying reason for your request, as we understand it, is certain recent legislation (chapter 289, Laws of 1971, 1st Ex. Sess.) whereby some employers of persons engaged in occupations covered by the state industrial [[Orig. Op. Page 2]] insurance act are now permitted to "self-insure" with respect to the payment of workmen's compensation benefits as an alternative to covering their employees under the state industrial insurance system through the payment of industrial insurance premiums to the state. The proposition to be considered is whether the city of Tacoma can self-insure itself insofar as its general governmental employees are concerned while, at the same time, continuing to cover the employees of its public utilities board under the state industrial insurance program through payment of premiums into the state fund.
Your first question goes to the issue of whether the Tacoma public utilities board can be separated from the remainder of that city's governmental structure so as to qualify the utilities board as a separate and distinct "employer" under the industrial insurance act.
The coverage of public employees under the industrial insurance act is provided for in RCW 51.12.050 as follows:
"Whenever the state, county, any municipal corporation, or other taxing district shall engage in any . . . work, or let a contract therefor, in which workmen are employed for wages, this title shall be applicable thereto. . . ."
The term "employer" is defined in RCW 51.08.070 as meaning:
". . . any person, body of persons, corporate or otherwise, and the legal representatives of a deceased employer, all while engaged in this state in any work covered by the provisions of this title, by way of trade or business, or who contracts with one or more workmen, the essence of which is the personal labor of such workman or workmen."
The city of Tacoma, of course, is a city of the first class operating under its own "home rule" charter pursuant to Article XI, § 10 of the state Constitution. Article IV, § 4.8 of this charter provides for the Tacoma public utilities board to maintain and operate the city's system of public utilities as follows:
"There is hereby created a Public Utility Board to be composed of five members, appointed [[Orig. Op. Page 3]] by the Mayor and confirmed by the Council, for five‑year terms; provided, that in the appointment of the first Board, on the first day of the month next following the taking of office by the first Council under this charter, one member shall be appointed for a term of one year, one for a term of two years, one for a term of three years, one for a term of four years, and one for a term of five years, and at the expiration of each of the terms so provided for, a successor shall be appointed for a term of five years. Members of the Board shall be removed only for cause by the Mayor and Council and only after charges have been filed and published and the member has been given a reasonable opportunity to defend himself in an open public hearing before the Council. Vacancies shall be filled for the unexpired term in the same manner as provided for regular appointments."
Section 4.3 of this Article allows the city to impose rates and charges for supplying such utility services as are provided by it; section 4.4 authorizes the city council to impose upon the city-operated utilities a reasonable gross earnings tax with certain limitations; and section 4.5 controls the use of the revenues of utilities owned and operated by the city. It therefore seems clear to us that the public utilities board is not a separate employing entity, but rather is merely a division of the city of Tacoma. Thus it is the city itself, and not the board, which is the single employer of all employees assigned to the board who are engaged in occupations covered by the industrial insurance act.
Your second question assumes the foregoing answer and asks, in effect, whether a single employer may split its payroll so as to self-insure itself as to some of its employees while at the same time covering others through payments into the state fund.
The basic thrust of chapter 289, supra, (insofar as your immediate questions are concerned) is set forth in § 26 (RCW 51.14.010) as follows:
[[Orig. Op. Page 4]]
"Every employer under this title shall secure the payment of compensation under this title by:
"(1) Insuring and keeping insured the payment of such benefits with the state fund; or
"(2) Qualifying as a self-insurer under this title."
In order to qualify as a self-insurer an employer is required by § 27 of the act (RCW 51.14.020) to establish to the director's satisfaction
". . . that he has sufficient financial ability to make certain the prompt payment of all compensation under this title and all assessments which may become due from such employer." (Emphasis supplied.)
The term "self-insurer" is defined in §80 (RCW 51.08.173) as meaning:
". . . an employer who has been authorized under this title to carry its own liability to its employees covered by this title."
We think the legislature's intent to be derived from these statutes is clear; a qualified employer may self-insure itself with respect to all of its workmen's compensation liabilities or it may disregard this new legislation and continue to cover its eligible employees under the statutory system through payment of premiums to the state fund ‑ but it may not do both by splitting its employees into classes and covering some by self-insurance and others by statutory premium payments. Accordingly, we answer your second question in the negative.
Finally you have asked:
"Is an employer who self insures under the provisions of RCW 51.16.140 required to pay 100% of the medical aid assessment? Or may he pay 50% of the assessment and deduct the other 50% from his employees' earnings?"
RCW 51.16.140, which you have cited, provides as follows:
[[Orig. Op. Page 5]]
"Every employer who is not a self-insurer shall deduct from the pay of each of his workmen one‑half of the amount he is required to pay, for medical benefits within each risk classification. Such amount shall be periodically determined by the director and reported by him to all employers under this title: . . . It shall be unlawful for the employer, unless specifically authorized by this title, to deduct or obtain any part of the premium or other costs required to be by him paid from the wages or earnings of any of his workmen, and the making of or attempt to make any such deductions shall be a gross misdemeanor." (Emphasis supplied.)
Thus it will be seen that this statute is expressly inapplicable to employers who have qualified as self-insurers under RCW 51.14.010, et seq., supra. Such employers as these pay no medical aid premiums to the state fund and, instead, are directly responsible for payment of bills rendered for care and treatment of injured workmen which conform to the promulgated rules, regulations and practices of the director. See, RCW 51.04.030.
Also to be noted is RCW 51.48.050 which provides that:
"It shall be unlawful for any employer to directly or indirectly demand or collect from any of his workmen any sum of money whatsoever for or on account of medical, surgical, hospital, or other treatment or transportation of injured workmen, other than as specified in RCW 51.16.140 and 51.40.040, . . ."
Of the two exceptions to this prohibition, the first, RCW 51.16.140 is above quoted and pertains only to employers who are not self-insurers. The other, RCW 51.40.040, concerns certain payments by employers who have entered into medical aid contracts for the benefit of their employees ‑ an exception not here in issue. Thus, in the case you have posited by your third question, it would be unlawful for the employer, as a self-insurer, to deduct a portion of its costs incurred in paying medical bills for its employees from the salaries or wages of those employees.
[[Orig. Op. Page 6]]
We trust the foregoing will be of assistance to you.
Very truly yours,
FOR THE ATTORNEY GENERAL
Robert G. Swenson
Assistant Attorney General