A Washington state vocational school lost its workers' compensation provider status – and owes the state more than $147,000 – a fter audits exposed years of overbilling.
The Court of Appeals of the State of Washington, Division II, handed down a published decision on April 28, 2026, siding with the state's Department of Labor and Industries (DLI) on every issue. The ruling affirms DLI's authority to recoup overpayments from service providers without being constrained by the shorter time limits that apply when the state seeks to recover benefits paid directly to injured workers.
The school, a private vocational provider, had been approved to deliver retraining services for injured workers since 2010. Under Washington's Industrial Insurance Act, DLI contracts with schools to teach new job skills to workers who cannot return to their permanent work. The arrangement was not small: DLI approved roughly 85 workers per year for training at the school, and between 2015 and 2020 paid it more than $1 million annually at an average tuition rate of about $12,300 per student.
Trouble began surfacing as early as 2014, when workers, DLI staff, and vocational counselors raised concerns about the school. By June 2019, DLI launched a formal audit covering July 2015 through June 2018. What it found was not encouraging. The school provided incomplete records in response to audit requests. Its minimum typing speed requirement for graduates was 20 words per minute – half the 40 words per minute considered average by most employers – and three out of 13 sampled graduates had not even met that low bar. When asked to identify graduates who found employment, the school named just 15 out of 388 workers who had attended during the audit period, producing a job placement rate of roughly 3.9 percent. Washington regulations require vocational providers to maintain at least a 50 percent placement rate.
DLI also found that the school had overbilled in seven of 19 sampled cases, where workers either never started their programs or the school misreported student end dates and failed to issue required tuition refunds. The first audit identified $25,434.50 in overbilling.
A second audit followed in August 2020, this time covering 430 workers who enrolled between January 2015 and March 2020. DLI found overbilling in 48 of those cases and assessed $122,069.50 in overpayments plus $42,559.37 in interest.
In total, DLI ordered the school to repay nearly $148,000 in principal across the two audits, plus accrued interest. The department also terminated the school's provider number and stopped approving new retraining plans involving it.
The school appealed, and the case wound through the Board of Industrial Insurance Appeals and then superior court before reaching the appellate court. Along the way, its litigation strategy took some unusual turns. When DLI moved for partial summary judgment on the provider termination question, the school initially filed a notice of non-opposition – effectively declining to fight it. It later reversed course at the hearing, saying the non-opposition had been based on settlement talks that fell apart. The administrative judge overseeing the proceeding was not persuaded, noting that the school had waived its objections by failing to challenge DLI's evidence before the ruling.
The central legal argument on appeal was about time limits. The school contended that DLI was bound by a one-year window to claim overpayments, citing a provision in the workers' compensation statute that requires the department to seek recoupment of erroneously paid "benefits" within one year. Because the audits covered periods years before DLI issued its orders in 2021, the school argued that the claims were too late.
The appellate court disagreed. It found that the one-year limit applies specifically to benefits paid to injured workers – not to overpayments collected by service providers. The court examined Washington's workers' compensation statutes and concluded that the legislature consistently treated provider payments as fees, costs, or reimbursements rather than "benefits." A separate provision imposes liability on entities that receive excess payments under the workers' compensation system and contains no time limit, while expressly excluding injured workers from its scope. The court read this as a clear signal that providers and workers are treated differently when it comes to overpayment recovery.
The school also challenged DLI's method of calculating overpayments, arguing that the department's practice of cross-referencing the school's records against its own databases to verify student withdrawal dates was inconsistent with state regulations. The court found no merit in this either, noting that the regulations in question place obligations on vocational schools, not on DLI, and that the school's own incomplete recordkeeping had made the cross-referencing necessary in the first place.
For workers' compensation professionals, the ruling is a straightforward reminder that the state's ability to audit providers and recover overpayments carries a much longer fuse than the time limits that protect injured workers. Providers who assume the shorter deadline shields them from old billing disputes may find themselves unpleasantly surprised.
