October 17, 2023
by Christine Olson

All Washington Self-Insured Employers Should Be Aware of (And Attend if Possible) the Department of Labor & Industries “Listening Sessions” Regarding the Newly Enacted “Bad Faith” Laws

The Washington legislature passed one of two pieces of legislation that creates new duties and standards for some self-insured employers. Substitute House Bill 1521 is scheduled to go into effect on July 1, 2024, and the new laws are set to apply to worker’s compensation claims regardless of date of injury/manifestation.

While originally SHB 1521 cast a broader net to all self-insured employers, the bill as passed and signed by Governor Jay Inslee imposes a duty of “good faith and fair dealing” on self-insured municipal employers, self-insured private sector firefighter employers, and third-party administrators for both types of employers that are set to apply to “all aspects” of the Industrial Insurance Act (Title 51). Unprecedented penalties and new standards for withdrawing a self-insurer’s certification can result from a finding a violations of the good faith and fair dealing duties. A summary of the changes to existing statutes, including which employers fall under the umbrella SHB 1521 created, as well as new statutes SHB 1521 enacts, is below.

Although the current wording of SHB 1521 as enacted does not apply to all self-insured employers, the Department of Labor & Industries recently announced it is holding “listening sessions” with the employer community to discuss and provide feedback for the Department’s impending administrative rules to enforce SHB 1521. Perhaps unsurprisingly, the Department has already indicated it intends to write the administrative rules in such a way that applies to all self-insured employers and their third-party administrators. The rationale for such broadly worded administrative rules that are currently not authorized by the Washington legislature or statute is that if the legislature expands the good faith and fair dealing requirement to all self-insured employers, the rules will already be in place.

The Department’s “listening sessions” are scheduled for Wednesday, November 1, 2023 from 10 a.m. to noon, and Monday, December 4, 2023 10 a.m. to noon. They are scheduled to occur both online and in-person at the Department’s Tumwater location. The Department is asking those who intend to attend to RSVP via this link.

SBH strongly encourages all self-insured employers take notice of the possible scope and breadth of the Department’s impending administrative rules, and if possible, attend one of “listening session.” As set out in further detail below, the Department’s administrative rules are expected to address many issues, not the least of which is a definition of “good faith” and “fair dealing” as well as the guidelines and/or standards for determining whether a self-insured employer should be assessed a penalty up to 52 times Washington’s average weekly wage. Now is the time for self-insured employers to communicate with the Department about the as-of-yet enacted administrative rules that could apply to all of them in the future.

Now that SHB 1521 is set to go into effect on July 1, 2024, what exactly are the provisions of this landmark bill? The session law can be found here. Here is a summary of the specific statutes that have been amended or will go into effect as of July 1, 2024:

RCW 51.48.080(2) will permit the Department to assess a penalty not more than three times the penalties authorized under subsection (1) ($1,000 for violation or failure to obey, observe, or comply with any statutory provision in Title 51 or Department rule promulgated under the authority of Title 51).

RCW 51.48.017(5) will permit the Department to assess a penalty for violating subsection (3) (unreasonable delay or refusal to pay benefits and the penalty amount owed within 30 days upon request of the claimant) in an amount not to exceed the greater of $1,000 or 25% of either the amount due (total amount of payments due at the time of calculating the penalty) or each underpayment made to the claimant.

A new statute, RCW 51.48.17, will read:

  1. All self-insured municipal employers and self-insured private sector firefighter employers and third-party administrators have a duty of good faith and fair dealing to workers related to all aspects of this title. The duty of good faith requires fair dealing and equal consideration for the worker’s interests.
  2. A self-insured municipal employer or self-insured private sector firefighter employer or third-party administrators violates its duty to the worker if it coerces a worker to accept less than the compensation due under this title, or otherwise fails to act in good faith and fair dealing regarding its obligations under this title.
  3. The Department shall adopt by rule additional applications of the duty of good faith and fair dealing as well as criteria for determining appropriate penalties for violations. In adopting a rule under this subsection, the Department shall consider, among other factors, recognized and approved claim practices within the insurance industry, the Department’s own experience, and the industrial insurance and insurance laws and rules of the state.
  4. The Department shall investigate each alleged violation of this section upon a filing of a written complaint or upon its own motion. After receiving notice and a request for a response from the Department, the municipal ER, private sector firefighter ER, or TPA may file a written response within 10 working days. If they fail to file a timely response, the Department shall issue an order based on the available information.
  5. The Department shall issue an order determining whether a violation of this section has occurred, in conformance with RCW 51.582.050, within 30 calendar days of receipt of a complete complaint or its own motion. An order finding that a violation has occurred must also order the employer to pay a penalty of one to 52 times the average weekly wage at the time of the order, depending upon the severity of the violation, which accrues for the benefit of the worker.

A “private sector firefighter employer” is defined to include any private sector employer that employs over 50 firefighters, including supervisors, on a full-time, fully compensated basis as a firefighter of the employer’s fire department, only with respect to their firefighters.

RCW 51.14.080 is amended to allow certification of the self-insurer withdrawn by the Department Director upon one or more grounds, now includes:

  • (g)(i) Self-insured municipal employers found to have violated good faith and fair dealing three times within a 3 year period.
  • (g)(ii) The three year time period is based on the date of the Department’s order, and a subsequent order by the Department, Board of Industrial Insurance Appeals, or courts affirming a violation relates back to the date of the Department order.
  • (g)(iii) Errors or delays that are inadvertent or minor are not considered violations of good faith and fair dealing for the purposes of this assessment.

RCW 51.14.080 is also amended to include a new subsection (2) which states that the Director may delay withdrawing the certification of an self-insured municipal employer while the employer has an enforceable contract with a licensed third-party administrator that may not be terminated, but the self-insured municipality may not renew or extend the contract.

A new statute will be added to Chapter 51.14 stating that nothing in this act (Title 51) shall be interpreted as allowing a private cause of action outside the original jurisdiction of the Department to assess penalties and rights of appeal as provided in this title.

A new statute will be added to Chapter 51.14 stating that this act applies to all claims regardless of the date of injury/manifestation.

A new statute will be added to Chapter 51.14 stating this act takes effect July 1, 2024.

If you have questions about these impending statutes and/or the Department’s “listening sessions,” please feel free to contact me at  or 503-412-3117.

Posted by Christine Olson.