IR # 97-20
Thursday, April 3, 1997

Rick Rice
(415) 972-8835
Richard Stephens
(415) 975-0700

DWC Approves New Construction Industry "Carve-Out" Program

SAN FRANCISCO -- The contractors and unions building the Inland Feeder Project, a $1.1 billion water distribution pipeline in southern California, have been found eligible to establish the latest workers' compensation "carve-out" program, announced Lloyd W. Aubry Jr., the Director of the Department of Industrial Relations.

"Carve-outs are a unique and relatively new way for parties in the construction industry to create alternatives to the traditional workers' compensation system in their collective bargaining agreements," Director Aubry said. "The success of these programs, reflected in early data we have been able to collect, has shown there are low losses as well as reduced litigation for the participants. We remain optimistic that this approach will prove to be an equitable alternative for construction industry employers and workers, and that it can eventually be expanded into other industries as well."

Responsibility for the review and approval of these programs falls on Casey L. Young, Administrative Director of DIR's Division of Workers' Compensation. Young said the goal is to allow parties in these agreements to realize lower costs, better medical care for injured workers, and expedited resolution of disputed workers' compensation claims.

Major features of carve-outs are that they include exclusive lists of medical providers to treat on-the-job injures, and that they establish alternative dispute resolution systems that may preclude the need to litigate disputed claims before the Worker's Compensation Appeals Board.

The Inland Feeder Project, the ninth carve-out to be approved to date, is being constructed by the Metropolitan Water District of Southern California. The carve-out provisions are contained in the project labor agreement between MWD and the California Building & Construction Trades Council and will be binding on all of the contractors and subcontractors who will work on the multi-year project. The agreement is expected to cover some 1,400 skilled workers.

The pipeline, when complete, will begin in the Devil Canyon area north of San Bernardino, tie into the Colorado River Aqueduct south of Lake Perris and continue in a southwesterly direction terminating at the junction of the Casa Loma and San Diego canals. It will provide water to some 16 million citizens in southern California.

In addition to approving the Inland Feeder Project agreement, the Division of Workers' Compensation also announced that three major public works contractors have joined an earlier carve-out program. The three, Penhall Company, Spancrete of California, and Kewitt-Pacific, have signed the master carve-out agreement contained in a contract between the Southern California District Council of Laborers and four different multi-employer groups: the Associated General Contractors of California, Inc., the Building Industry Association of Southern California, Inc., the Southern California Contractors' Association and the Engineering Contractors' Association.

Each individual contractor chooses whether to sign the master agreement in that program.

The mechanism to establish eligibility for the carve-out approach is contained in Labor Code section 3201.5, a key piece of legislation that was enacted following the 1993 reforms of the state's workers' compensation system.