Good Faith and Fair Dealing: Harsh Penalties and Hazy State Guidance Leave Employers At Risk in Washington
Audits, corrective actions, and withdrawal of certification, oh my! These penalties can cause any seasoned self-insurance administrator to break into a cold sweat, and RCW 51.14.180 grants the Department of Labor and Industries (‘Department’) the right to penalize any employers who run afoul of RCW 51.14.180, the “good faith and fair dealing” statute.
Senate Bill 5463 (later codified as RCW 51.14.180) was signed into law by Washington Governor Bob Ferguson on May 17, 2025. It expanded principles espoused from an existing statute, RCW 51.14.080. That statute imposes the duty to engage in good faith and fair dealing on all municipal employers and their third-party administrators. SB 5463 has expanded that duty to engage in good faith and fair dealing to all employers that operate as self-insured entities in the Washington workers’ compensation system.
But what does it mean to show “good faith and fair dealing” as a self-insured employer or a third-party administrator, and just as important, what happens to self-insured employers or third-party administrators who violate RCW 51.14.180?
The text of RCW 51.14.180, in part, reads, “An employer or third-party administrator 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.”
In other words, shortchanging employees their benefits will count as a violation of this new law, but RCW 51.14.180 fails to clarify what specific acts an employer or administrator would have to complete (or not complete) to violate principles of “good faith and fair dealing”. Luckily, WAC 296-15-270 and WAC 296-15-272 offer some additional guidance on these details.
WAC 296-15-270 clarifies that “if a self insured employer or third-party administrator…manages the workers’ compensation claim in a manner which demonstrates greater concern for the self-insured employer’s interest than the worker’s interest, the SIE/TPA will be in violation of its duty to engage in good faith and fair dealing.”
WAC 296-15-270(1)(a-o) provides a laundry list of actions, that, if engaged in frequently enough to constitute a general business practice, would qualify as violations of RCW 51.14.180: unreasonable delays without a factual, legal, vocational or medical basis; failure to ensure appropriate handling of claims; failure to request claim denial or interlocutory order within 60 days; failure to authorize medical care without a valid basis; failure to pay time-loss compensation when owed; failure to provide a copy of the claim file; failure to communicate with injured workers; requesting denial of claims without a valid basis; and failure to forward protests or appeals to the Department on a regular basis would all constitute business practices that would violate RCW 51.14.180.
WAC 296-15-272 offers additional insight into what behavior will trigger RCW 51.14.180. Realistically, this WAC sets a low bar for the employer and third party-administrator, as WAC 296-15-272 confirms that if an employer or third-party administrator intentionally refuses to provide an SIF-2 to prevent a worker from filing a claim, or intentionally refuses to forward an application to reopen a claim within five working days or intentionally refuses to forward a protest or appeal to the department within five working days, in order to interfere with the worker’s ability to collect properly owed benefits, the employer or TPA has violated their duty to engage in good faith and fair dealing.
As this statute has existed for less than eighteen months as of the time of this blog post, the Board of Industrial Insurance Appeals has yet to produce any significant decisions that grant employers and claimants additional insight into what behaviors and practices beyond those explicitly stated in the WACs may trigger the severe penalties imposed by RCW 51.14.180. Due to this lack of clarification from the BIIA, the definitive answer as to what behavior can constitute a violation of good faith and fair dealing remains hazy, and in contrast, the penalties for violations are clear.
RCW 51.14.180(5) and (6)(a) clarify that if a self-insurer violates this new law twice or more within a 3-year period, corrective action must be imposed by the Director, including probationary status, audits for compliance with the new rules, and a financial penalty of 1x to 52x the average weekly salary of the employee. Additionally, should a self-insurer violate the law again while on probationary status, RCW 51.14.180(6)(b) confirms that the Department must withdraw the self-insurer’s certification.
These harsh penalties make the state of Washington’s position clear, self-insurers must know the law and follow it closely, even when that law is still being fine-tuned before the judiciary. Violations of RCW 51.14.180 could result in severe harm to the self-insured employer’s business, so stay in the know, or hire a firm that does.
Contact me at or at 971-369-5856 if you have further questions, or are worried about your compliance with RCW 51.14.180. At SBH Legal, we ensure that our clients stay on the right side of the law, and avoid the harsh penalties that come with unwanted violations.
Posted by Andrew Stewart.
