PROVIDENCE -- State investigators have identified 517 nightclubs, restaurants, bars, taverns, social halls and other venues that serve liquor for which they can find no record of the required workers' compensation insurance.
The list of potential violators is the first stage in a sweeping review by the state Workers' Compensation Fraud Prevention and Compliance Unit aimed at enforcing the state workers' compensation law in the wake of The Station nightclub fire on Feb. 20.
But the review process itself is posing its own challenges. Of the 517 businesses for which the state has so far turned up no record of coverage, it is impossible for investigators to be sure at this point how many of them are violators, said David B. Groeneveld, chief investigator of the Workers' Compensation Fraud Prevention and Compliance Unit.
The reason is as simple as it is complex: a business operating under one name may have an insurance policy under a different one.
So far, the unit has issued formal complaints to 23 of those 517 businesses; 6 of them have been ordered to answer the complaints at hearings scheduled over the next two weeks before the state Department of Labor and Training.
"As we go through this process, I predict we're going to be scheduling more hearings," Groeneveld said. "There's little question in my mind on that."
Determining whether a business has a workers' compensation policy is a tedious, time-consuming process that involves manually entering the name of each liquor-license holder into the agency's proof-of-coverage database.
If there is no match, Groeneveld says, investigators then do their own research -- checking with the secretary of state's office, calling the business's owners and sending letters to them requesting information -- before filing a formal complaint.
There are 1,725 liquor-license holders in the state, not including liquor stores, according to Groeneveld, whose investigators gathered the records from the various cities and towns.
Investigators have completed an initial review of 1,184 liquor-license holders and found that 517, or roughly half, are not found in the proof-of-coverage database, according to Groeneveld. The other 667 showed up in the database as having coverage, he said. Another 541 have yet to be checked.
"Our goal is to check all of these," Groeneveld said. "It's a physical process. You sit at the computer and da da da da, enter."
The intensive effort to target violators follows the discovery, in the days after The Station burned to the ground, that the company that owned it, Derco LLC, had been without coverage for nearly three years since Jeffrey and Michael Derderian bought the nightclub.
The fire killed 99 people, including a waitress, two bouncers and a ticket-taker who were working at The Station that night.
The state Department of Labor and Training, the agency that oversees Groeneveld's unit, has ordered the Derderians to pay a $1.06-million penalty and has referred the case to the attorney general's office for criminal prosecution. The penalty is the largest ever imposed by the state in a workers' compensation case.
The nightclub's owners have appealed the ruling to the state Workers' Compensation Court. A hearing on the appeal is scheduled for Wednesday.
A state law passed in 1999 requires all businesses in Rhode Island with one or more employees to carry workers' compensation insurance. (Prior to 1999, coverage was required only for businesses with four or more employees.)
Unlike other types of insurance, workers' compensation covers businesses in the event that an employee gets hurt on the job or dies as a result of such an injury. The coverage generally pays a portion of an employees' lost wages, plus medical care.
In the case of a death, the insurance provides $15,000 for burial expenses, plus a portion of lost wages to the deceased's spouse or dependent children until they reach age 18 or, if they are in college, until age 23.
Investigators initially had planned to focus its efforts only on nightclubs, Groeneveld said, but ultimately decided to expand the scope to all places that serve alcoholic beverages.
"It just got too intertwined between restaurants, social clubs, halls," Groeneveld said. "I said, 'This is ridiculous! Why don't we just do all liquor-license establishments?' "
There are seven investigators, each assigned to a different slice of the state. Their main tool is the agency's proof-of-coverage database, which contains information provided by insurers about workers' compensation policies.
That database, officials say, is not set up to cross-check information against another key source of information about employers: the state payroll tax records. (The state Department of Labor and Training is seeking proposals to develop a computer system that will perform this type of cross-checking automatically.)
Of the 1,725 businesses serving liquor that investigators are checking, the communities with the largest number on the agency's list are Providence, with 292; Warwick, with 134; Newport, with 103; and Cranston, with 102. In West Warwick, where The Station was located, there are 53.
The six businesses the unit has scheduled for hearings on complaints of violating the state workers' compensation law are: Snubs, Inc. of Providence; Jovans Lounge, Ltd., of Providence; Wong Restaurant Corp. dba Rickshaw Inn, of East Providence; Royal Panda Restaurant dba Wong Palace, Inc., of Cumberland; Dolce's Restaurant, Inc., dba Bovi's Tavern, of East Providence; and Cumberland Hillside Café, of Cumberland. Celtica, LLC, dba Celtica Public House, of Newport, avoided a hearing after agreeing to make payment to the state Department of Labor and Training.
Lynn Arditi, a Journal staff writer, can be reached at larditi@projo.com
