SENATE BILL REPORT

SB 6010

BYSenators Barr, Vognild, Newhouse, McMullen and Anderson

Allowing certain employee purchased businesses to qualify as industrial insurance self-insurers.

Senate Committee on Economic Development & Labor

Senate Hearing Date(s):February 28, 1989

Senate Staff:Dave Cheal (786-7576)

AS OF FEBRUARY 27, 1989

BACKGROUND:

Employers who wish to self-insure their obligations under workers' compensation laws must demonstrate to the satisfaction of the Director of the Department of Labor and Industries that he or she has the financial strength and stability to meet current and future obligations.

When employees buy the business they work for a new entity with new ownership is created even though the work force, the plant, the markets, and many other features of the business may remain the same.

Usually, an employee buyout involves a substantial amount of debt accruing to the new company.

Current law favors longevity and stability in evaluating applications for group self-insurance.  Rules adopted by the department provide that an applicant must have been in business for a minimum of three years.

Employee buyouts can be a valuable tool for economic development and job preservation.

SUMMARY:

The Department of Labor and Industries is required to adopt separate rules for evaluating self-insurance applications from employee buyout companies.  The rules must consider the financial health of the predecessor and the goodwill value of the business.

Applications may not be denied solely on the basis of the applicant being new if:  the applicant is an employee buyout; the predecessor was a self-insurer; the applicant will conduct essentially the same business; and the applicant demonstrates a high probability of continuity as a result of access to the same markets and a clear ability to maintain production and sales levels.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested