WORKERS' CLAIMS IN LIMBO JUDGE TO RULE IN HOSPITAL CASE.

Byline: Naush Boghossian Staff Writer

SANTA CLARITA - Workers who have been injured on the job at Henry Mayo Newhall Memorial Hospital could be shortchanged if a judge backs the hospital's plan to settle their claims in U.S. Bankruptcy Court rather than through the state, a workers' compensation official said Wednesday.

The state Department of Industrial Relations fears that the 20 workers with outstanding claims of close to $10 million would join hundreds of creditors for a share of the bankrupt hospital's assets.

The hospital's effort is unprecedented, said Dean Fryer, spokesman for the department.

``They are trying to settle for pennies on the dollar in Bankruptcy Court rather than pay the full amount,'' Fryer said. ``That's the only reason.''

The hospital counters that it is simply following the processes of the Bankruptcy Court, where all claims prior to the Nov. 26 filing become part of the federal bankruptcy process.

``The workers' compensation claims are protected by the court for 100 percent payment in full,'' said hospital spokeswoman Andie Bogdan. ``This is not a dispute about paying the workers' compensation claims, because they certainly would be paid. This is a dispute about who would be administering the claims.''

The hospital proposed in its business plan to pay the full amounts of the claims, but since the Bankruptcy Court has not yet approved the plan, the full payment is not guaranteed.

When the hospital stopped paying compensation benefits to its injured employees in May, about six months after filing for Chapter 11 reorganization, the Department of Industrial Relations turned over the hospital's security deposit - a safeguard should the hospital be unable to pay - to another state agency.

That agency, the Self Insurers' Security Fund - created to ensure continued payment of compensation benefits to insured workers' claims - is currently making the payments from the security deposit.

``The fund will cover the payment for all these claims,'' Fryer said. The claims were filed from 1983 to 1995.

Newhall Memorial has filed an emergency motion that would remove jurisdiction of those workers' appeals from the state's Workers' Compensation Appeals Board to the Bankruptcy Court, and it is seeking sanctions against the state for using the security deposit to make payments. The hospital says the money is part of the hospital's assets and should be a part of the bankruptcy.

State officials believe that if the court rules in the hospital's favor, it would set a precedent that would allow employers to shortchange workers who have filed workers' compensation claims.

``The implications of that are employers probably would take advantage in Bankruptcy Court where they can settle for pennies on the dollar instead of paying the full amount they should for compensation,'' Fryer said.