Understanding the importance of Workers' Comp insurance

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For employers large and small the problem is the same: The rising cost of benefits is eroding the bottom line. And one of the costliest benefits is workers' compensation insurance.

It's natural to want to trim costs wherever possible, and maybe you've started to examine your own workers' comp bill with an eye on lessening the damage. But doing any serious cost cutting in this area presents special challenges. For one thing you can't cut benefits levels as you can with health insurance. That's because states mandate full treatment for on-the-job injuries.

Another issue: Your cost- cutting steps must be done in conformance with the law, and when it comes to workers' comp, the states make the rules. "With the exceptions of federal employees and employees working in maritime industries, state laws control workers' compensation," says Christopher M. Fox, an associate in the Philadelphia office of Littler Mendelson, a law firm devoted to representing management in employment matters.

Unfortunately, juggling the various state laws can get complicated. "Each state has specific rules regarding how you notify employees of their rights, how they can file claims and what doctors they may or may not see," adds Fox. "Your state laws will also detail what steps you must take to report workplace injuries."

You can obtain information about your own state's laws from the Web site for the U.S. Department of Labor at www.dol.gov. Click on "Topics," then "Workers' Compensation," then "State Workers' Compensation Board."

No-Fault Coverage

Nobody wants to deny an injured worker benefits for legitimate accidents. But what about those instances when accidents are partly the fault of the employee? Suppose the worker failed to use a safety device, did something foolish or worked while intoxicated? And what about a deliberately self-inflicted injury?

It is certainly possible to mount defenses in cases such as the above, but unless some clear-cut fraud is involved, prevailing in court can be difficult. "Most workers' compensation systems have become very liberal as to the definition of an accident," says James J. Moore, president of J&L Risk Management Consultants, a Raleigh, N.C.-based firm. "The fact is that courts deny benefits only rarely."

One reason for that is a matter of judgment: Legitimate claims often arise because employees were not paying attention to what they were doing or performed tasks outside of the normal work routine. Trying to draw a bright line between legitimate and improper situations can be problematic.

Another reason is a matter of perception: "In any workers' comp case it becomes the 'big bad insurance company' against the one little employee," points out Moore. "Workers' compensation judges tend to lean toward the testimony of the employee."

Lawsuits Avoided

While it seems the workers' comp laws are stacked in favor of employees, it's important to note that employers are also protected from costly lawsuits by injured workers.

"The trade-off for a no-fault system is that workers' compensation is generally the exclusive remedy for employees injured in the workplace," notes Fox. "Only in very limited instances may an employee circumvent the system and sue the employer in tort."

And what are those instances? Once again state law rules, notes Fox. "Using Pennsylvania as an example, an injured worker could sue their employer outside of the workers' compensation system if the employer failed to maintain workers' compensation insurance, or the injury was intentionally caused by the employer. That being said, Pennsylvania courts have held that even a willful violation of OSHA safety regulations will not expose an employer to civil liability."

Safety First

There is one highly effective way to control these insurance costs: Launch a workplace safety program and constantly work on improving it. If you experience fewer accidents, you will incur lower medical costs, which translate into lower premiums.

"A lot of employers come to me and ask, 'How can we reduce the cost of this claim?'" says Moore. "Unfortunately, once a claim is made you are not going to reduce the cost. The best approach is to take steps to reduce workplace accidents that lead to claims. The least expensive accident is the one that never happens."

While safety programs can become quite detailed, it's wise to start out small and build.

The first step is to identify the accidents most likely to happen. "Slips, trips and falls are by far the most common accidents for almost all employers," says Moore. "I see a ton of knee and ankle injuries resulting from what seem like minor accidents. If you cannot put your weight on your hip or your knees or your ankle you are going to be out of work a long time," says Moore. "That is very costly."

Train employees to be especially vigilant in quickly correcting conditions that might lead to slips, trips and falls. Examples include tangled rugs, wet floors, obstructions, floor surfaces and elevations.

"Studies show that stepping to different levels causes many trips and falls," says Moore. "So you need to pay special attention to stairways, any changes in floor levels, or sections of floor that are on a gradient."

Starting with stairs, install roughened safety strips across the steps that help shoes get a form hold. Place mats at the bottoms and tops of stairs to catch any water tracked in when it's raining. "Also make sure your banisters are firm and are mounted at the right height," says Moore.

Changes in floor levels need to be clearly marked, so install brightly colored strips along the division and a railing where possible. As for floors that are on a gradient, post warning signs and a walkway railing.

Other Risks

Data-entry people, cashiers who scan orders and others engaged in repetitive tasks are subject to carpal tunnel syndrome, which can spark workers' comp claims. "In any situation involving repetitive work, I recommend job rotation," says Pam Hart, director of safety and wellness programs at Doherty Employer Services, a Minneapolis-based human resources outsourcing firm. "You can also encourage frequent stretching and short breaks. Or switch hands regularly."

Negative effects of keyboarding can also be avoided by making sure workstations are structured properly so that worker's hands and wrists are kept straight, adds Hart. Consultants schooled in ergonomics can assist.

"Be especially careful about any positions that require employees to lift, pull or hold heavy items," says Claire Wilkinson, vice-president for global issues at New York-based Insurance Information Institute. "Overexertion of this kind accounts for a large proportion of injuries."

Help From The Help

Employees can be excellent sources of information on workplace hazards that should be addressed. "I highly recommend that retailers gather employee feedback throughout the safety program and incorporate employees into establishing a safe place to work," says Amy Trueblood, account manager at Awards Network, an organization in LaPorte, Ind., that sells safety awards programs.

"Many retailers regularly hold meetings at the beginning of a new shift," adds Trueblood. "I have found this presents a great opportunity for managers to discuss store safety with their employees." Discuss topics such as how to avoid a known safety hazard, how an accident was recently prevented, or how a recent accident could be prevented in the future. "These meetings also give retailers a chance to recognize employees for safety achievements in front of peers, which will positively reinforce employee attitude around safety in the workplace."

Some employers establish award programs that give employees suitable incentives for injury-free work days.

Vital as safety programs are, they can be counterproductive if poorly managed. Trueblood's four "don'ts" include:

  • Don't set up safety goals that will encourage employees to not report accidents.
  • Don't develop a safety program and then fail to establish benchmarks or track its success over time.
  • Don't cap award earnings so that people slack off during periods they cannot earn safety gifts.
  • Don't award safety gifts without considering the different tastes and preferences of employees.
Bear in mind that safety doesn't happen by itself: It must be managed. "A safe work environment starts with the attitude of top management," says Moore. "Water runs downhill: If managers don't care about safety then employees won't." And the attitude of concern must be understood by all. "If your top managers don't communicate their concerns about safety then nothing else you do to reduce accidents will make any difference."

Comments or thoughts on this article? Please e-mail [email protected].

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