After 21 years as a building engineer for Macy's department stores, Kevin Schiller was left unable to work as the result of a 2010 workplace accident. Schiller keeps a note on his refrigerator to remind him to take his medicine every morning. Bill Minick, president of PartnerSource, a Texas company that writes and administers opt-out plans for employers who want an alternative to state workers' compensation laws, says ERISA ensures that injured employees are treated fairly. With 21 years on the job, the building engineer for Macy's department stores had been in and out of every nook and cranny of many of the retail giant's Texas stores, including the storage room in the Macy's in Denton, Texas. Schiller has hardly worked since, given persistent headaches, memory loss, disorientation and extreme sensitivity to bright light and loud sound.
He now has to post notes on the front door and refrigerator of his apartment, reminding him to take medications and keep appointments. In case he is stopped by police, he carries a letter from his doctor that says he may appear drunk owing to a head injury.
Millions more may join them as more states consider giving employers the right to opt out of state workers' comp systems. As NPR and ProPublica have reported, many employers prefer this opt-out alternative to workers' comp, because the state systems, employers claim, result in expensive and long-lasting benefits, costly litigation and delays in treatment of injured workers.
When employers opt out, they avoid state regulation and write their own workplace injury plans, which make it easier to deny and cut benefits, control medical care and limit appeals of their decisions.
But don't worry, employers contend, injured workers are still protected by a federal law — the Employee Retirement Income Security Act, or ERISA.
The 1974 law initially applied to pension plans but has evolved to include health care and other workplace benefits. Minick and his company, PartnerSource, dominate a cottage industry, writing and supporting opt-out-workplace injury plans and lobbying for opt-out legislation in other states. But ERISA didn't do much for Schiller, and NPR found the law doesn't provide the protections promised by opt-out promoters. They'd tell me point-blank, 'We're here to observe you, not treat you.' " Macy's did not respond to NPR's multiple requests for comment about Schiller's case. Legal documents, including witness statements, medical records, depositions and internal emails, show Macy's was skeptical of Schiller's injury from the very beginning. If Macy's had stayed in the state workers' comp system, Schiller could have appealed the company's denial of benefits to the Texas Division of Workers' Compensation and to state courts, where he would have expected an independent review of his case. ERISA blocks state action "because this is a federal question," says Richard Faulkner, an arbitrator and attorney in Texas who advised Schiller's attorneys. State law, you're irrelevant." Schiller was turned away by the state workers' comp agency and a state court, which cited a mandatory arbitration agreement in the Macy's opt-out plan.
Most of the 50 Texas plans obtained by NPR and ProPublica contain mandatory arbitration clauses. So Schiller first went through an internal appeals process at Macy's, which is typical of opt-out plans in Texas and Oklahoma.
But federal judges, under ERISA, must first determine whether employer decisions are "arbitrary and capricious" and can only reject benefits decisions if employers were unreasonable or did not adhere to their plans. These hurdles to going to court may explain why many employers include in their plans provisions that directly violate ERISA, according to Handorf. Injured workers also lose benefits in many plans in both Texas and Oklahoma if they don't report injuries by the end of their shifts or within 24 hours, even if supervisors are witnesses or the injuries initially don't seem serious. These provisions are "an impediment to bringing claims and really isn't what ERISA is designed to do," says Handorf. The federal law explicitly states that it does not apply to plans "maintained solely for the purpose of complying" with state workers' comp law.

So Minick and PartnerSource added a strategic benefit to 90 percent of the opt-out plans in Oklahoma.
Minick says that any misuse or violations of ERISA will be addressed by federal regulators. Spokesman Michael Trupo says the agency "is aware of, and studying, the issues you note." Trupo also says the agency has never litigated a single case involving possible misuse or violation of the law by employers who have opted out of state workers' comp. The agency has not received a single complaint, Trupo adds, which "may be due, in part, to workers not knowing their rights under [ERISA]." ERISA requires employers to inform workers of those rights and of the process for filing complaints. Plans reviewed by NPR and ProPublica typically contain that information, but most are more than 50 pages long. Schiller, Chalk ruled, suffered a "mild" traumatic brain injury and was subjected to "scattered, intermittent [and] non-focused" medical treatment. Chalk also said medical records failed to show "any serious attempts to thoroughly examine, diagnose, and treat Mr. Schiller's job-related injury." But Schiller would likely recover within five years, Chalk ruled.
Ted Lyon, Schiller's attorney, believes his client would have done far better if the case had gone to state court.
Schiller "would have worked until he was 65, so that's a million and a half dollars at least," Lyon says.
He wants others to know what can happen to injured workers, despite the promised protections of ERISA. I mean I've gotten no, no justice." Most of the arbitration award paid legal fees, arbitration costs and existing medical bills. Transcript RENEE MONTAGNE, HOST: We return now to an ongoing NPR and ProPublica investigation of workers' compensation. That is now possible to do in Texas and Oklahoma, but NPR's Howard Berkes has found that federal law doesn't protect injured workers as promised.
HOWARD BERKES, BYLINE: Fifty-four-year-old Kevin Schiller sits in the dark in his apartment outside Dallas, holding a doctor's note addressed to police. Schiller was a building engineer at a Macy's department store five years ago when a mannequin fell 12 feet from a shelf.
KEVIN SCHILLER: All I heard was a loud crack, and I found myself looking up on people looking down on me. BERKES: Stuttering, memory loss and confusion persist, along with headaches from bright light. But Macy's downplayed the injury, according to legal documents including medical records, witness statements, internal e-mails and depositions.
I have made $80,000 a year at times, and I'm going to give that up to be on a Social Security check or food stamps? But workers are still protected by federal law, they say - the Employee Retirement Income Security Act, or ERISA.
BILL MINICK: ERISA comes in and says the benefits must be administered in the best interest of employees. BERKES: Bill Minick and his company, PartnerSource, sell and service benefits plans that are alternatives to workers' comp.
BILL MINICK: And there are very detailed claim procedures that must be followed to make sure that the employee gets a full and fair review of their claim, including opportunity to appeal any denial of benefits, and then access to state and federal courts.
He wasn't able to appeal to the independent Texas Workers' Comp agency because Macy's had opted out of the state system. State court was cut off by mandatory arbitration, a feature of most Texas plans we've reviewed.

BERKES: ERISA also strictly limits the role of federal courts when they consider benefits denials according to Karen Handorf, a former ERISA official at the Labor Department.
KAREN HANDORF: You really have to show that it was irrational or contrary to the terms of the plan. BERKES: So employers will likely prevail no matter how unfair their plans may seem, as long as they don't violate the plans.
RICHARD FAULKNER: Consequently, you have to think long and hard about what exposures you may be generating for a client if you attempt to pursue some of these ERISA remedies because ERISA can be incredibly dangerous for an injured worker. BERKES: So Schiller was stuck with the Macy's appeals process, where people paid by Macy's decide whether Macy's is fair. Employer-controlled are common in dozens of alternative injury plans in Oklahoma and Texas, where Jeffrey Dahl is an ERISA attorney.
JEFFREY DAHL: ERISA's been turned on its head, really, in my mind, because initially, it was passed for protection of workers, but it in fact has become a shield for employers that operate these ERISA plans.
They also get nothing in Texas and Oklahoma if they don't report injuries right away, even if they seem minor at first or are witnessed by supervisors. Former Labor Department official Karen Handorf calls these rules - HANDORF: An impediment to bringing claims, and really isn't what ERISA is designed to do.
ERISA is based on the idea that you get your right to make the best claim you can for benefits. BERKES: But Bill Minick of PartnerSource says employers who defy ERISA risks sanctions from federal regulators. Department of labor has enforcement authority over that, so there are a variety of checks and balances in the process. RICHARD FAULKNER: The Department of Labor has civil and criminal authority that, if it chooses to exercise it, can go in, look at these things.
He also confirmed that the agency has never had an ERISA case involving this alternative to workers' comp. If Schiller's case made it to state court, he would have won big, says his attorney, Ted Lyon.
TED LYON: He would have worked 'til he was 65, so that's a million and a half dollars at least. In addition to that, pain and suffering damages and the egregious way that they treated him.
Most of it paid legal fees, arbitration expenses, medical bills and living costs, and most of it's gone. The arbitrator did find that Macy's was negligent and failed to thoroughly examine, diagnose and treat Schiller's traumatic brain injury. And after dealing with the whole process I went through and nowhere to go, I have gotten no justice. It hides cases like Schiller's, and protects employers like Macy's, which did not respond to NPR. We only know about Kevin Schiller because he decided to talk about the failed promise of ERISA protection.

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