Reducing Workers Compensation Claims during a Layoff
May 2009
When facing an impending layoff, a risk
manager is confronted with a more complex labor environment in which
employees' attitudes toward workers compensation require special attention.
by Lisa Hartman, ARM
Albert Risk Management
Consultants
The recent downturn in the economy has caused many employers to confront
the prospect of downsizing through either a layoff or plant closing. Now,
more than ever, employees are becoming anxious about whether their jobs are
secure and how they will be able to provide for their families. In times
such as these, rumors fly and employees may seek an alternate source of
income before their job loss becomes a reality.
Employees that would
ordinarily shake off aches and pains may look to exaggerate them and file
for workers compensation benefits rather than face the possibility of
unemployment. For the risk manager, this can be expensive and challenging.
This article will outline the issues risk managers face and suggest
strategies to help guide them through a layoff.
Layoff Problems
Among the problems the risk manager is confronted with are:
- Employees
filing claims have little or no incentive to return to work, especially in
plant closing situation.
- Reduction in commitment to management objectives
of controlling costs by reducing the length of disability and returning to
work.
- Claims for injuries become more subjective in nature and often
include claims that involve soft tissue injuries or cumulative conditions
which are alleged to have developed over a period of years.
- More workers
compensation claims are filed since these benefits are usually better and
for longer duration than unemployment benefits.
- The percentage of injured
employees who retain legal representation typically increases as word of a
workforce reduction spreads.
- Many states now require advance notice of
plant closings, allowing employees time to pursue potential claims. The
federal Worker Adjustment Retraining Notification (WARN) Act requires
employers with more than 100 employees to provide 60 days' advance notice in
the event of a plant closing or mass layoff as the terms are defined in the
WARN Act.
Get Prepared
As soon as the risk manager is informed
of a large layoff, a number of steps should be carried out immediately.
- Notify your broker or consultant of the impending layoff as soon
as possible.
- Review with your broker or consultant the relevant
workers compensation statutes in the jurisdiction with special attention to
cumulative trauma regulations.
- Notify your insurer or third-party
administrator (TPA) of plans for the layoff and review existing claims for
potential problems.
- Be aware of each state's rate and term of
unemployment benefits, and their effect on workers compensation benefits.
- Explore the potential of other benefit programs available to
employees. For example, the second injury fund may assist the company to
offset claims expenses.
Gather Records
Accurate and complete
records of workers compensation claims and employee personnel and medical
records are essential to the defense of questionable and frivolous claims. A
complete history of, timely, and accurate records can successfully assist
the defense of late or unreported claims that may be triggered by a layoff
or plant closing.
- Make sure you know where employee records are
kept and, if they are being moved off site, obtain photocopies as backup.
- Identify an individual in management who can provide, explain, and
testify regarding these records.
- Create a photographic or video
record of plant conditions to preserve a visual image, especially if the
physical plant is to be demolished or renovated.
- Consider
termination interviews to identify potential future workers compensation
claims.
- Evaluate whether termination physicals should be given;
explore the potential merits versus risk with your broker or consultant.
- Update all claims information with key personnel so that all
available information is in file and with your insurer.
The Best Defense
The potential of claims from a large layoff or shutdown increases
the likelihood of exaggerated or fraudulent claims. Since most states have
specific time limits for response to claims, the preparation and handling of
claims is very important. Consider the following suggestions.
- Insist that the insurer or TPA centralize claims investigation and adjusting
to one claims office.
- Request that the insurer or TPA have
sufficient staff available to handle the initial caseload so that cases are
neither accepted nor denied without adequate investigation simply because of
time standard pressures.
- Request one senior claim person is
assigned so that information flow and quality of service can be maintained.
- Request that the insurer or TPA hire one defense firm to handle
all workers compensation claims. Arrange for defense counsel to visit the
plant site prior to a shutdown, if possible, to familiarize themselves with
the plant operation.
- Arrange for your broker or consultant to
assign a senior claims person to work with the insurer and defense counsel
to coordinate and monitor the progress of the cases.
- Have the
insurer or TPA identify physician(s) within specialties as experts and
familiarize them with the plant conditions prior to a shutdown.
- Make videos of certain job functions available for physicians and as defense
exhibits.
- Organize and update detailed job descriptions and locate
them for easy access by the insurer and defense counsel.
- Provide
defense counsel with names of individuals that are willing and capable to
testify regarding the functional requirements of each job.
- Create
a list of key personnel by name and title. Obtain home addresses and all
telephone numbers (cell and home) in the event they are needed for testimony
on litigated claims. Keep in contact and update these lists as necessary.
Additional Suggestions
When employees are certain where their next
check is coming from, they will be less likely to file a workers
compensation claim. Some ways to help accomplish this include the following.
- Ask local unemployment office to send a representative to
facilitate the filing of claims for unemployment and avoid allowing
plaintiff attorneys to pick up new clients at the unemployment office.
- Request governmental assistance in placing your
trained/professional employees in positions with new employers.
- Explore job placement fairs at your facility and invite area employers.
Conclusion
Risk managers must be prepared to facilitate the
effective resolution of workers compensation claims that may arise out of a
layoff or shutdown of a facility. By organizing and developing a long-range
policy and procedure that is sensitive to the problems and conditions which
accompany a large layoff/plant closing, the risk manager can help to control
the ultimate cost effect of the layoff/shutdown on their risk management
program.
To this end, it is necessary to set solid procedures for
investigating, reporting, and recording all potential workers compensation
incidents. Without detailed records, no defense may be available to
successfully refute late or questionable claims.
*The Albert Risk
Management Consultants claims management team (Glenn Brown, Lisa
Hartman, William Quinn, Jr., and David A. Tweedy) contributes articles on
claims topics. You can reach Lisa Hartman at
lhartman@albertrisk.com.
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