Workers’ Compensation Employment Law – Richard A. Posthuma, JD, Ph.D., SPHR, GPHR.

Workers’ Compensation

Employment Law – Richard A. Posthuma, JD, Ph.D., SPHR, GPHR

Learning ObjectivesLearning Objectives

• Overview:Overview:> Know the legal requirements.Know the legal requirements.> Understand the methods to meet Understand the methods to meet

requirements.requirements.> Know what benefits workers receive.Know what benefits workers receive.> Understand what drives employer Understand what drives employer

costs.costs.

Learning ObjectivesLearning Objectives

• Risk management:Risk management:> Understand methods for WC risk Understand methods for WC risk

management.management.• Risk avoidance.Risk avoidance.• Risk financing.Risk financing.• Loss prevention.Loss prevention.• Loss reduction.Loss reduction.

> Learn effective ways to implement Learn effective ways to implement each method.each method.

Workers Compensation OverviewWorkers Compensation Overview

• Requirements:Requirements:> State laws.State laws.

• Texas exception (employers can Texas exception (employers can opt out).opt out).

> Federal government employees and Federal government employees and those in maritime industries have those in maritime industries have different laws different laws (e.g., Longshore and (e.g., Longshore and Harbor Workers’ Compensation Harbor Workers’ Compensation and Jones Acts).and Jones Acts).


• Options to provide coverage (state laws Options to provide coverage (state laws differ):differ):> Commercial insurance.Commercial insurance.> State fund.State fund.> Risk pools.Risk pools.> Self-insurance (for larger employers).Self-insurance (for larger employers).


• Small employers usuallySmall employers usually buy workers buy workers compensation insurance.compensation insurance.

• Large employers mLarge employers may self-fund and/or self-ay self-fund and/or self-administer.administer.

• The worker gets the same benefits; the The worker gets the same benefits; the ddifference is in the administration and cost.ifference is in the administration and cost.

Eligibility for benefitsEligibility for benefits• For workers who suffer injury or illness, tFor workers who suffer injury or illness, the he

injury or illness must be work-related injury or illness must be work-related “in and “in and out of the course of employment,” rout of the course of employment,” regardless egardless of whose fault it was. of whose fault it was. This means the This means the employee cannot sue their employer for pain employee cannot sue their employer for pain and suffering for work-related injuries and and suffering for work-related injuries and illnesses.illnesses.

• Usually, the employee’s exclusive remedy Usually, the employee’s exclusive remedy against the employer is wage-loss benefits and against the employer is wage-loss benefits and necessary medical or rehabilitation treatment.necessary medical or rehabilitation treatment.


• Benefits include: Benefits include: > Wage loss: Only a percentage of the wages that the Wage loss: Only a percentage of the wages that the

employee lost for time out of work.employee lost for time out of work.• States have formulas that calculate wage-loss States have formulas that calculate wage-loss

benefits based on recent average earnings.benefits based on recent average earnings.– Example: Last 13 weeks of actual earnings Example: Last 13 weeks of actual earnings

(including overtime) multiplied by 70 percent, up (including overtime) multiplied by 70 percent, up to a specified maximum.to a specified maximum.

> In many states, the wage-loss benefit depends on the In many states, the wage-loss benefit depends on the type of disability:type of disability:

• Permanent total disability (can never do any job).Permanent total disability (can never do any job).• Permanent partial disability (can never do some Permanent partial disability (can never do some

jobs).jobs).• Temporary total disability (for now, can’t do any Temporary total disability (for now, can’t do any

jobs).jobs).• Temporary partial disability (for now, can’t do some Temporary partial disability (for now, can’t do some

jobs).jobs).


• Benefits include aBenefits include all reasonably necessary ll reasonably necessary medical treatment.medical treatment.

• Employers can challenge the Employers can challenge the “reasonableness” of treatment.“reasonableness” of treatment.

• Employers can challenge medical bills for Employers can challenge medical bills for errors or charges in excess of state errors or charges in excess of state guidelines.guidelines.

> Rehabilitation (therapy, education).Rehabilitation (therapy, education).> Death benefits for survivors.Death benefits for survivors.


• Cost:Cost:> Employer pays entire cost.Employer pays entire cost.

• Factors affecting employer costs:Factors affecting employer costs:> Risk-based ratings: Risk-based ratings:

• Percentage of payroll by job Percentage of payroll by job classification. classification.

> Experience rating:Experience rating:• Based on prior claim experience.Based on prior claim experience.

> Other adjustments: Other adjustments: • Volume discounts.Volume discounts.


Example of Payroll-Based Calculation of Example of Payroll-Based Calculation of WC PremiumWC Premium

Job Classifications

Number of Employees

WC Basic Rate Payroll WC Premium

Office 387 $0.29 $15,480,000 $44,892

Maintenance 275 $4.27 $11,000,000 $469,700

Retail/Sales 3,826 $1.78 $153,040,000 $2,724,112

Warehouse 167 $5.46 $6,680,000 $364,728

Truck Drivers 45 $9.23 $1,800,000 $166,140

Total 4,700 $188,000,000 $3,769,572

WorkersWorkers CompensationCompensation Risk ManagementRisk Management

Workers Compensation Risk ManagementWorkers Compensation Risk Management

Risk management approachRisk management approach> Risk avoidance:Risk avoidance:

• Don’t do operations that require Don’t do operations that require employees.employees.

> Risk financing:Risk financing:• How to pay for it.How to pay for it.

> Loss prevention:Loss prevention:• Reduce the possibility of worker injuries.Reduce the possibility of worker injuries.

> Loss reduction:Loss reduction:• Reduce the cost of injuries.Reduce the cost of injuries.


• Risk AvoidanceRisk Avoidance> Don’t engage in operations that require employees.Don’t engage in operations that require employees.

• May be difficult depending on corporate strategy.May be difficult depending on corporate strategy.

> Outsource functions that require employees in Outsource functions that require employees in higher-risk occupations.higher-risk occupations.

• Make sure that the contractor assumes the risk of Make sure that the contractor assumes the risk of injuries.injuries.

> Use contracted labor to shift the risk to another Use contracted labor to shift the risk to another employer.employer.

• For example, a temporary help agency.For example, a temporary help agency.


• Risk FinancingRisk FinancingThe cost of WC obligations is effectively managed.The cost of WC obligations is effectively managed.> Competitive bids for WC coverage.Competitive bids for WC coverage.> Alternative financing arrangements for WC Alternative financing arrangements for WC

premiums.premiums.• For example, retrospective rating plans that For example, retrospective rating plans that

reduce premiums when there are fewer or reduce premiums when there are fewer or smaller claims.smaller claims.

> Consideration of cost-effectiveness of alternatives.Consideration of cost-effectiveness of alternatives.• Insurance.Insurance.• Risk pool.Risk pool.• Self-insurance.Self-insurance.


• Loss PreventionLoss Prevention> Identify the most likely causes of injuries.Identify the most likely causes of injuries.

• Implement cost-effective safety Implement cost-effective safety measures to reduce the likelihood of measures to reduce the likelihood of these injuries.these injuries.

> Don’t discriminate or retaliate against Don’t discriminate or retaliate against

employees who file WC claims (inemployees who file WC claims (in hiringhiring, , promotionpromotion, , jobjob assignmentsassignments, , paypay, , etc).etc).


• Loss PreventionLoss Prevention> Frequent sources of injuries:Frequent sources of injuries:

• Repetitive motionRepetitive motion• Bending and liftingBending and lifting• FallsFalls• Pinch-pointsPinch-points• VehiclesVehicles


• Loss PreventionLoss Prevention> Sources of illness (more rare):Sources of illness (more rare):

• Environmental exposure.Environmental exposure.• Psychological trauma.Psychological trauma.

> Ordinary diseases of life (e.g., influenza, Ordinary diseases of life (e.g., influenza, measles):measles):• Generally not covered by WC.Generally not covered by WC.


• Loss PreventionLoss Prevention> Telecommuting:Telecommuting:

• Employees who work out of their homes Employees who work out of their homes could be eligible for WC benefits if their could be eligible for WC benefits if their injury occurs as part of their employment.injury occurs as part of their employment.

• The risk of injury may be low if the work The risk of injury may be low if the work involves office-type computer work.involves office-type computer work.

• Nevertheless, employers might reduce Nevertheless, employers might reduce the risk of false claims by requiring that the risk of false claims by requiring that work be done only in designated spaces work be done only in designated spaces and times.and times.


• Loss ReductionLoss Reduction

> Assume that workers do get hurt; youAssume that workers do get hurt; you cancan reducereduce thethe costcost ofof theirtheir injuriesinjuries..

> The goal is to manage claims to reduce The goal is to manage claims to reduce overall costs.overall costs.


• Loss ReductionLoss Reduction> Types of claims:Types of claims:

• Medical only:Medical only:– No time lost from work.No time lost from work.

• Wage loss:Wage loss:– Employee misses some time Employee misses some time

from work.from work.– Some companies supplement Some companies supplement

wage-loss benefits.wage-loss benefits.


• Loss ReductionLoss Reduction> Types of claims:Types of claims:

• Rehabilitation.Rehabilitation.– To help workers recover their capacity To help workers recover their capacity

to work.to work.• Death.Death.

– From job-related causes.From job-related causes.• Specific loss.Specific loss.

– Eye, finger, leg, etc.Eye, finger, leg, etc.



> Claims can vary in cost; dependsClaims can vary in cost; depends onon thethe amountamount ofof paymentspayments for:for:

– Medical expenses.Medical expenses.» All reasonably necessary medical All reasonably necessary medical

expenses must be paid for.expenses must be paid for.» However, there are ways to reduce However, there are ways to reduce

these costs.these costs.– Wage loss.Wage loss.

» Get the employee back to work Get the employee back to work sooner.sooner.


• Loss ReductionLoss Reduction> Company doctor.Company doctor.> Independent Medical Exams.Independent Medical Exams.> Issues: Issues:

• For some types of injuries/illnesses (such as back For some types of injuries/illnesses (such as back pain, headaches, soft tissue), it’s more difficult to pain, headaches, soft tissue), it’s more difficult to prove or disprove disability or work-relatedness.prove or disprove disability or work-relatedness.

– The key questions:The key questions:» Is the worker unable to work?Is the worker unable to work?» Is the injury or illness work-related?Is the injury or illness work-related?

• Is expensive medical treatment necessary?Is expensive medical treatment necessary?


• Loss Reduction Loss Reduction > Develop rapport with doctors:Develop rapport with doctors:

• Requires honest concern for employee welfareRequires honest concern for employee welfare• Provide a detailed job description to the doctor:Provide a detailed job description to the doctor:

– Paper (physical requirements: weight, Paper (physical requirements: weight, motion, frequency).motion, frequency).

– Video.Video.– On-site visits.On-site visits.

> Employers are entitled to receive medical Employers are entitled to receive medical records related to WC claims, but they records related to WC claims, but they should be kept confidential.should be kept confidential.

> Focus on rehabilitation.Focus on rehabilitation.


• Loss ReductionLoss Reduction> Light duty, favored, supervised, or transitional work:Light duty, favored, supervised, or transitional work:

• Avoid secondary gain.Avoid secondary gain.– Secondary gain is the extent to which having an injury Secondary gain is the extent to which having an injury

serves some additional purpose (e.g., staying away from serves some additional purpose (e.g., staying away from work).work).

• Rehabilitate worker.Rehabilitate worker.

• Diary files.Diary files.

• Good to be consistent with work-related and non-work-Good to be consistent with work-related and non-work-related assignments.related assignments.

– i.e., don’t make work-related more onerousi.e., don’t make work-related more onerous

• Do not retaliate!Do not retaliate!



> Challenge the claim:Challenge the claim:• Activity evidenceActivity evidence

– What activities was the employee What activities was the employee involved in away from work?involved in away from work?

• Private detectivesPrivate detectives– Hired to gather evidence refuting the Hired to gather evidence refuting the

claim of a disability.claim of a disability.


• Loss ReductionLoss Reduction> Coordinate benefits:Coordinate benefits:

• Investigate who else could be payingInvestigate who else could be paying– An automobile insurance policy from An automobile insurance policy from

another driver?another driver?– The product liability insurance policy of The product liability insurance policy of

the manufacturer of the defective product the manufacturer of the defective product that injured the worker?that injured the worker?

• Second injury fundsSecond injury funds– Some states have funds that will Some states have funds that will

reimburse employers who have hired an reimburse employers who have hired an employee who was injured at a previous employee who was injured at a previous employer’s workplace.employer’s workplace.


• Loss ReductionLoss Reduction> Offsets from unemployment insurance.Offsets from unemployment insurance.

Question:Question: Could there be an overlap Could there be an overlap between Workers Compensation and between Workers Compensation and Unemployment Insurance?Unemployment Insurance?

Answer:Answer: Usually not… Usually not…• To get WC benefits, you have to be To get WC benefits, you have to be

unable to work.unable to work.• To get UI benefits, you have to be To get UI benefits, you have to be

available for work.available for work.

Usually, both of these can’t happen at the Usually, both of these can’t happen at the same time.same time.


• Loss ReductionLoss Reduction• Propose lump-sum settlements.Propose lump-sum settlements.

– Requires legal oversight.Requires legal oversight.– May terminate benefits.May terminate benefits.– Employers should get:Employers should get:

» A resignation.A resignation.» Waiver of any and all other claims.Waiver of any and all other claims.

Other Relevant StatutesOther Relevant Statutes

• Family and Medical Leave ActFamily and Medical Leave Act> Gives qualified workers the right to time off Gives qualified workers the right to time off

from work without losing their jobs for from work without losing their jobs for serious medical conditions.serious medical conditions.

> Applies even for work-related injuries.Applies even for work-related injuries.> Up to 12 weeks.Up to 12 weeks.

• Some employers require employees to Some employers require employees to use up their entitlement to FMLA leave.use up their entitlement to FMLA leave.

> After 12 weeks is used up, if there is no After 12 weeks is used up, if there is no reasonable accommodation, the worker may reasonable accommodation, the worker may be terminated.be terminated.• Check with your own legal counsel.Check with your own legal counsel.

Other Relevant StatutesOther Relevant Statutes

• Americans with Disabilities ActAmericans with Disabilities Act> Requires a reasonable accommodation for disabilities Requires a reasonable accommodation for disabilities

(even if work-related).(even if work-related).> The accommodation must be provided if:The accommodation must be provided if:

– the disability is a major life function (e.g., the disability is a major life function (e.g., seeing, walking, hearing); andseeing, walking, hearing); and

– the accommodation is reasonable (i.e., not an the accommodation is reasonable (i.e., not an undue hardship on the employer)undue hardship on the employer)

» Not too expensive but larger employers Not too expensive but larger employers need to spend more need to spend more

– the employee would otherwise be able to the employee would otherwise be able to perform the essential functions of their job; andperform the essential functions of their job; and

– the accommodation will not cause undue risk the accommodation will not cause undue risk of harm to the employee or others.of harm to the employee or others.

Workers CompensationWorkers Compensation

• SummarySummary> Workers compensation is legally required.Workers compensation is legally required.> The costs are variable and can be reduced.The costs are variable and can be reduced.> Employees should be treated with respect and Employees should be treated with respect and

dignity, and without retaliation.dignity, and without retaliation.

Workers’ Compensation Employment Law – Richard A. Posthuma, JD, Ph.D., SPHR, GPHR.

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Transcript of Workers’ Compensation Employment Law – Richard A. Posthuma, JD, Ph.D., SPHR, GPHR.