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Friday, June 9, 2023
June 9, 2023

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Barrett Business Services faces SEC probe

Probe involves workers' compensation reserves

By , Columbian Port & Economy Reporter

Barrett Business Services Inc., the Vancouver-based supplier of staffing and outsourced human resources services, is under investigation by federal authorities in a case involving the company’s workers’ compensation reserves.

In a filing with the U.S. Securities and Exchange Commission, Barrett said the SEC has launched an investigation of the company’s “accounting practices with regard to its workers’ compensation reserves.”

The company is “cooperating fully with the SEC staff in providing the requested information,” according to Barrett’s May 11 regulatory filing. The company on Tuesday declined to comment further on the matter. Meanwhile, the company’s stock price plummeted 29 percent.

During the company’s first-quarter earnings conference call held in April, Michael Elich, president and CEO of Barrett, said the company continued to maintain a “proactive, positive position” related to workers’ compensation expenses.

The context of the company’s discussion of workers’ compensation costs was its announcement in the third quarter of last year of an $80 million increase in reserves for payments of drawn-out workers’ compensation claims.

In the aftermath of that increased cost, the company faces a shareholder class-action lawsuit alleging Barrett, Elich and Miller violated federal securities laws. The suit arose after the company’s stock price plummeted on the heels of its announcement of increased workers’ compensation reserves.

In a filing with the SEC, the company said it will defend itself against the litigation and that it believes “the claims are covered under our directors and officers’ liability insurance, and we have notified our insurance carriers of the claims.”

In the first quarter of this year, Barrett reported a $5.8 million net loss. That compares with a net loss of $3.6 million during the same three-month period of 2014. The company said the net loss was consistent with its historical experience, which typically sees Barrett record first-quarter losses largely because of higher payroll taxes at the beginning of each year.

The company posted net revenue of $166.91 million in the three-month period that ended March 31, up 23.5 percent from net revenue of $135.14 million in the January-to-March period last year.

Barrett has clients with employees in 22 states and the District of Columbia through a network of 54 branch locations in California, Oregon, Washington, Idaho, Arizona, Nevada, Utah, Colorado, Maryland, Delaware and North Carolina. The company offers “professional employer organization” services. Under that system, Barrett becomes a co-employer of a client’s workforce, handling payroll, payroll taxes, workers’ compensation coverage and other administrative functions.

Its staffing services include on-demand or short-term staffing assignments, contract staffing, long-term on-site management, and direct placement. The company’s clients include electronics manufacturers, light-manufacturing industries, transportation enterprises, food processors and telecommunications firms.

The company’s stock, which trades as BBSI on the Nasdaq exchange, closed down $14.54 Tuesday, at $35.01 per share. The company’s shares have traded between $18.25 and $63.45 in the past 52 weeks.

Columbian Port & Economy Reporter