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The Select Family of Staffing Companies will appeal a judgment against it in a case brought by the State Compensation Insurance Fund, a provider of workers’ comp coverage in California, that could cost the company $50 million.
A jury in San Francisco ruled in favor of State Fund last month in a case against Select and Onvoi Business Solutions Inc. State Fund is seeking $50 million from Select as a result of the jury’s decision, according to Business Insurance, a sister publication to Staffing Industry Analysts.
“We are quite disappointed in the verdict that was returned from the jury — which included three dissenting votes,” said Select Chairman and CEO Steve Sorensen. “The jury was understandably overwhelmed by the complex nature of the workers’ compensation issues raised in this matter. Unfortunately, the effect is that Select is being held responsible for Onvoi’s actions — even though we have no affiliation with our one-time vendor. We are aggressively pursuing an appeal of this judgment and are optimistic that our position will be ultimately vindicated.”
The suit claimed Onvoi, a now defunct professional employer organization, employed Select workers to allow Select to use Onvoi’s lower “experience modification” to improperly pay a reduced workers’ comp rate in a practice known as “piggybacking,” Business Insurance reported. The incidents allegedly took place in 2002 and 2003.
State Fund worker’s comp premiums are based on annual gross payroll of employers, job classifications being employed and loss experience developed over time known as an “experience modification rate” and other things. Onvoi’s experience modification rate was 69 percent in 2002 and 93 percent in 2003, and Select’s was 260 percent in 2002 and 256 percent in 2003, according to court filings by State Fund.
Sorensen said Select’s relationship with Onvoi lasted less than 15 months and the companies parted ways in 2003, and State Fund employees waited seven years to add Select to the lawsuit despite being aware of the Onvoi/Select relationship.
“The affiliation was sanctioned as rational and legitimate by both financial and legal consultants before proceeding,” Sorensen said. “The fact is that we paid nearly $6 million in workers’ comp premium for $80 million of payroll. That works out to about $7.50 per $100. We paid a fair and full price.”
Select is presently insured by workers’ comp carriers A+ ratings, the company said, and Business Insurance magazine has given the company its “Risk Manager of the Year” award.