By Shawna Fruin, Attorney at Law
Effective January 1, 2026, Senate Bill 5463 will significantly broaden the duty of good faith and fair dealing within the Washington workers’ compensation system. This legislation extends the good faith and fair dealing obligations (and extraordinary penalties) to all self-insured employers and their third-party administrators. But, the expansion comes with a silver lining: while the prior good faith rules included an automatic “three strikes, you’re out” provision—decertifying self-insured employers with three violations within three years—the new law allows remediation after two strikes.
The key elements of Washington’s good faith and fair dealing (GFFD) rules and changes under Senate Bill 5463 are as follows:
- Who: The current GFFD laws only apply to self-insured municipal employers and private sector firefighter employers. But, effective January 1, 2026, the laws will apply to all self-insured employers.
- When and which claims: Senate Bill 5463 goes into effect January 1, 2026, and will apply to all claims at that time, regardless of the date of injury. (When the original rules went into effect, Department representatives indicated that they would only consider GFFD penalties for violations that occurred after the law’s effective date, but that nuance is not explicit in the law).
- Duty: The GFFD statute, RCW 51.14.180, defines GFFD to require equal consideration of the worker’s interests, avoiding coercion for workers to accept less than the compensation due under Title 51, and acting in good faith and fair dealing regarding all obligations under the title. The Department has also promulgated GFFD rules, WAC 296-15-270 and WAC 296-15-272, which note claim administration mistakes that could trigger a GFFD violation. (These duties currently apply to municipal employers are unchanged in the new legislation).
- Monetary penalties: There are two layers of monetary penalties for GFFD violations: (1) a mandatory penalty of 1 to 52 times the State’s average weekly wage under RCW 51.14.180(5); and (2) a discretionary penalty of up to three times the normal rule violation or delayed benefit penalties in RCW 51.48.080(2) and RCW 51.48.017(5). (These penalties currently apply to municipal employers are unchanged in the new legislation).
- Decertification: Currently, municipal employers subject to the GFFD duty will be decertified if they have three GFFD violations within a three-year period, per RCW 51.14.080(1)(g). However, Senate Bill 5463 changes that rule to say that decertification will occur if “The self-insurer has failed to comply with a corrective action under RCW 51.14.180(6) or decertification is otherwise required or directed under RCW 51.14.180(6).” The new bill also changes RCW 51.14.180 to note that if an employer has two GFFD violations in a three-year period, the Department will impose corrective action (suggesting that successful corrective action will avoid decertification); but, if the self-insured employer has another violation during the corrective action, fails to comply with the corrective action, is likely to commit future violations, or has two more violations within ten years of a corrective action, the employer will be decertified after all.
Given the extraordinary penalties and risks with GFFD violations, it is important that every Washington self-insured employer comply with the Department’s expectations under these rules. Our firm has created a GFFD checklist, summarizing the requirements under the Department’s rulemaking, available here: RW’s GFFD checklist. Additionally, the legislature’s vague definition of good faith and fair dealing could allow for even broader application. If you have questions about GFFD or would like an RW attorney to provide training for your organization, please feel free to reach out to our Washington team—we are here for you and happy to help.