Workers' Compensation

1. Workers' Compensation Richard A. Posthuma, JD, Ph.D., SPHR, GPHR

2. Learning Objectives • Overview: • Know the legal requirements. • Understand the methods to meet requirements. • Know what benefits workers receive. • Understand what drives employer costs.

3. Learning Objectives • Risk Management: • Understand methods for WC risk management: • Risk avoidance. • Risk financing. • Loss prevention. • Loss reduction. • Learn effective ways to implement each method.

4. Workers’ Compensation Overview State laws. Texas exception (employers can opt out). Federal government employees and those in maritime industries have different laws (e.g., Longshore and Harbor Workers’ Compensation and Jones Acts).

5. Workers' Compensation Overview • Options to provide coverage (state laws differ): • Commercial insurance. • State funded. • Risk pools. • Self-insurance (for larger employers).

6. Workers‘ Compensation Overview Small employers usually buy workers' compensation insurance. Large employers may self-fund and/or self-administer. The employee gets the same benefits; the difference is in the administration and cost.

7. For workers who suffer injury or illness, the injury or illness must be work-related “in and out of the course of employment,” regardless of whose fault it was. This means the employee cannot sue his or her employer for pain and suffering for work-related injuries and illnesses. Usually, the employee’s exclusive remedy against the employer is wage-loss benefits and necessary medical or rehabilitation treatment. Eligibility for Benefits

8. Workers' Compensation Benefits • Wage loss: A percentage of the wages that the employee lost for time out of work. • States have formulas that calculate wage-loss benefits based on recent average earnings. • Example: Last 13 weeks of actual earnings (including overtime) multiplied by 70 percent, up to a specified maximum. • In many states, the wage-loss benefit depends on the type of disability: • Permanent total disability (can never do any job). • Permanent partial disability (can never do some jobs). • Temporary total disability (for now, can’t do any jobs). • Temporary partial disability (for now, can’t do some jobs).

9. Workers’ Compensation Benefits • Benefits include all reasonably necessary medical treatment. • Employers can challenge the “reasonableness” of treatment. • Employers can challenge medical bills for errors or charges in excess of state guidelines. • Rehabilitation (therapy, education). • Death benefits for survivors.

10. Workers' Compensation Cost • Employer pays entire cost. • Factors affecting employer costs: • Risk-based ratings: • Percentage of payroll by job classification. • Experience rating: • Based on prior claim experience. • Other adjustments: • Volume discounts.

11. Example of Payroll-Based Calculation of WC Premium

12. Workers'Compensationand Risk Management

13. Risk Management Approach Risk avoidance: Don’t do operations that require employees. Risk financing: How to pay for it. Loss prevention: Reduce the possibility of worker injuries. Loss reduction: Reduce the cost of injuries.

14. Risk Avoidance Don’t engage in operations that require employees. This may be difficult depending on corporate strategy. Outsource functions that require employees in higher-risk occupations. Make sure that the contractor assumes the risk of injuries. Use contracted labor to shift the risk to another employer. For example, a temporary help agency.

15. Risk Financing • The cost of WC obligations is effectively managed. • Competitive bids for WC coverage. • Alternative financing arrangements for WC premiums. • For example, retrospective rating plans that reduce premiums when there are fewer or smaller claims. • Consideration of cost-effectiveness of alternatives. • Insurance, risk pool, self-insurance.

16. Loss Prevention • Identify the most likely causes of injuries. • Implement cost-effective safety measures to reduce the likelihood of these injuries. • Don’t discriminate or retaliate against employees who file WC claims (in hiring, promotion, job assignments, pay, etc).

17. Loss Prevention • Frequent sources of injuries: • Repetitive motion. • Bending and lifting. • Falls. • Pinch-points. • Vehicles.

18. Loss Prevention • Sources of illness (more rare): • Environmental exposure. • Psychological trauma. • Ordinary diseases of life (e.g., influenza, measles): • Generally not covered by WC.

19. Loss Prevention • Telecommuting: • Employees who work out of their homes could be eligible for WC benefits if their injury occurs as part of their employment. • The risk of injury may be low if the work involves office-type computer work. • Nevertheless, employers might reduce the risk of false claims by requiring that work be done only in designated spaces and times.

20. Loss Reduction Assume that workers do get hurt; you can reduce the cost of their injuries. The goal is to manage claims to reduce overall costs.

21. Types of Claims: Medical only: No time lost from work. Wage loss: Employee misses some time from work. Some companies supplement wage-loss benefits. Loss Reduction

22. Loss Reduction • Types of Claims: • Rehabilitation: • To help workers recover their capacity to work. • Death: • From job-related causes. • Specific loss: • Eye, finger, leg, etc.

23. Loss Reduction • Claims can vary in cost; dependsontheamountofpaymentsfor: • Medical expenses. • All reasonably necessary medical expenses must be paid for. • However, there are ways to reduce these costs. • Wage loss. • Get the employee back to work sooner.

24. Company doctor. Independent medical exams. Issues: For some types of injuries/illnesses (such as back pain, headaches, soft tissue), it’s more difficult to prove or disprove disability or work relatedness. The key questions: Is the worker unable to work? Is the injury or illness work-related? Is expensive medical treatment necessary? Loss Reduction

25. Develop rapport with doctors: Requires honest concern for employee welfare. Provide a detailed job description to the doctor: Paper (physical requirements: weight, motion, frequency). Video. On-site visits. Employers are entitled to receive medical records related to WC claims, but they should be kept confidential. Focus on rehabilitation. Loss Reduction

26. Loss Reduction • Light duty, favored, supervised or transitional work: • Avoid secondary gain. Secondary gain is the extent to which having an injury serves some additional purpose (e.g., staying away from work). • Rehabilitate worker. • Diary files. • Good to be consistent with work-related and non-work-related assignments (i.e., don’t make work-related more onerous). • Do not retaliate!

27. Challenge the claim: Activity evidence: What activities was the employee involved in away from work? Private detectives: Hired to gather evidence refuting the claim of a disability. Loss Reduction

28. Loss Reduction • Coordinate benefits: • Investigate who else could be paying: • An automobile insurance policy from another driver? • The product liability insurance policy of the manufacturer of the defective product that injured the worker? • Second injury funds: • Some states have funds that will reimburse employers who have hired an employee who was injured at a previous employer’s workplace.

29. Loss Reduction • Offsets from unemployment insurance. Question: Could there be an overlap between workers' compensation and unemployment insurance? Answer: Usually not. • To get WC benefits, you have to be unable to work. • To get UI benefits, you have to be available for work. Usually, both of these can’t happen at the same time.

30. Loss Reduction • Propose lump-sum settlements. • Requires legal oversight. • May terminate benefits. • Employers should get: • A resignation. • Waiver of any and all other claims.

31. Other Relevant Laws • Family and Medical Leave Act: • Gives qualified workers the right to time off from work without losing their jobs for serious medical conditions. • Applies even for work-related injuries. • Up to 12 weeks. • Some employers require employees to use up their entitlement to FMLA leave. • After 12 weeks is up, if there is no reasonable accommodation, the worker may be terminated. • Check with your own legal counsel.

32. Other Relevant Laws • Americans with Disabilities Act: • Requires a reasonable accommodation for disabilities (even if work-related). • The accommodation must be provided if the: • Disability is a major life function (e.g., seeing, walking, hearing); and • Accommodation is reasonable (i.e., not an undue hardship on the employer) • Not too expensive but larger employers need to spend more • Employee would otherwise be able to perform the essential functions of their job; and • Accommodation will not cause undue risk of harm to the employee or others.

33. Summary Workers' compensation is legally required. The costs are variable and can be reduced. Employees should be treated with respect and dignity, and without retaliation.