Enforcement and Inspection, Injuries and Illness

The Other Side of Safety: Workers’ Compensation

There is more to safety and health than dealing with Occupational Safety and Health Administration (OSHA) inspections, citations, and penalties. Workers’ compensation is the other side of it. Workers’ compensation claims are much more common than OSHA inspections.

Responsibility for ensuring regulatory compliance and administering workers’ compensation may sometimes fall on separate departments—environment, health, and safety (EHS) and Human Resources (HR)—but safety and health and workers’ compensation are not entirely separate issues.

Compliance with OSHA standards and a strong safety and health management program may rein in your company’s workers’ compensation claims. Your insurance carrier may offer resources that can help your safety and health management program and bolster your regulatory compliance.

The entire point of workers’ compensation insurance is to shield you from legal liabilities. It effectively is a “no-fault” system. Workers’ compensation covers lost wages and medical expenses after a workplace accident, injury, or illness without your having to face litigation for every safety incident at your facility or worksites.

Workers’ compensation also provides death benefits to a surviving spouse and children of a worker killed in an industrial accident.

The requirements and frameworks for workers’ compensation vary from state to state. In some states, workers’ compensation insurance is administered through a state program; the state itself is the sole insurer. Many states allow employers to purchase workers’ compensation insurance from private insurers.

There are two issues unique to workers’ compensation: establishing and managing an effective light-duty, “return-to-duty,” or return-to-work program and being mindful of how your “experience modification factor” affects your insurance premiums.

Return to work

Following a workplace accident injury, you want employees back on the job as soon as possible. Your light-duty or return-to-work program benefits both you and the employee. You can limit the costs of lost productivity and workers’ compensation insurance claims while the employee regains a sense of financial and job security.

You need a clear, written light-duty and return-to-work policy to navigate the requirements of your state’s workers’ compensation laws while steering clear of the potential legal landmines of discrimination and medical leave laws.

A return-to-work program needs to fit into an overall workplace safety and health and workers’ compensation framework. In some ways, the return-to-work program kicks in as soon as an employee is injured.

Most return-to-work programs include several common elements:

  • Steps to follow once an injury has occurred;
  • Procedures to follow when communicating with healthcare providers, supervisors, the worker, and the union if your company has a collective bargaining agreement;
  • A schedule for monitoring a worker’s needs and the progress of his or her recovery while away from work;
  • Identifying light-duty positions before the need to make a light-duty assignment arises;
  • Information sheets or other handouts about the return-to-work program for use in the new hire onboarding process;
  • Producing or acquiring videos and other materials on accommodation and job modification, rehabilitation, and workplace redesign to clearly communicate return-to-work policies;
  • Policies for ensuring that light-duty assignments are appropriate for an injured worker’s capabilities and do not violate any of a physician’s restrictions;
  • Procedures for involving the injured worker in identifying suitable light-duty assignments; and
  • Periodic review of your return-to-work program.

Experience modification factors

Workers’ compensation claims for medical expenses and lost wages also are considered in your “experience modification factor.”

What is an experience modification factor?

Your experience modification factor is the ratio of the costs of your company’s actual workers’ compensation claims compared with the expected costs for companies of similar size in your industry.

Your experience modification factor can matter, sometimes significantly. It not only is used in determining your workers’ compensation insurance premiums but also may impact your ability to win contract bids.

Your experience modification factor may be considered when bidding on defense and other federal government contracts, state government contracts, and even some private sector contracts. Some states won’t accept bids from contractors with an experience modification factor higher than 1.0.

An experience modification rating 0f 1.0 means your workers’ compensation losses are in line with those of most companies of your size in your industry. A rating above 1.0 means your losses are higher than expected. A rating below 1.0 means your losses are lower. A favorable rating often results in discounted workers’ compensation insurance premiums.

To determine the pool of comparable companies, a ratings bureau will look at factors like the occupational classifications of your employees (for example, clerical, manufacturing, and managerial occupations), number of employees, and size of payroll.

You can ask your insurance agent for the form or worksheet showing you what factors your state’s ratings bureau considers in calculating your experience modification factor.

Your insurer should have provided you with an Experience Modification Rating form or Experience Modification Rating worksheet when it issued your policy.

Not all employers are large enough to be experience-rated. Such companies are not covered by regular workers’ compensation insurance but are covered by an “assigned risk plan.” Premiums in an assigned risk plan can be higher.

The experience modification factor goes by many names. It is referred to as your “Experience Rating,” “Experience Modification Rate,” “Emod” or “E-Mod,” “EXP-Mod” or “E-X-P-mod,” or “ModX.”

In most states, employers’ experience modification factor ratings are provided by the National Council on Compensation (NCCI), an organization owned by a group of insurance providers. The NCCI gathers and analyzes claims data from individual insurers to develop aggregate industry data that is then used to determine individual employers’ experience modification factors.

 The NCCI publishes manuals documenting its procedures, including its Experience Rating Plan Manual for Workers Compensation and Employers Liability Insurance.

However, some states operate their own ratings bureaus to assign experience modification factors. Some state rating bureaus utilize the NCCI data when determining ratings for multistate employers, while others do not.

What can you do?

What can you do to reduce your OSHA-recordable injuries and workers’ compensation claims? Your workers’ compensation insurance carrier may have resources to offer. Common guidance from some of the top workers’ compensation insurers includes establishing and maintaining an effective safety and health management program, as well as monitoring your workforce for “red flag” behaviors that lead to recordable injuries and compensable claims.

Steps you can take to prevent accidents and injuries and reduce the chances of your having to handle a workers’ compensation claim begin before an employee is even hired. Effective safety and health management measures include:

  • Having your HR personnel screen for behavioral and personality traits like resilience, compliance or disobedience, and risk-taking;
  • Having your HR staff emphasize your company’s safety culture and the importance of compliance with safety procedures to prospective employees, as well as during the onboarding process for new employees;
  • Educating and training new employees in their job duties, the safety and health hazards of their jobs, and the importance of following safety procedures;
  • Enforcing your company’s safety procedures, recognizing or rewarding those employees who follow safety procedures, and instituting real consequences for those who do not follow safety rules or procedures;
  • Assessing job requirements and only assigning workers capable of meeting the mental and physical demands of the job;
  • Supplying all your employees with necessary personal protective equipment, such as gloves, respirators, and safety glasses;
  • Investigating and reviewing near misses, injuries, and work practices to identify safety weaknesses and updating safety procedures, if necessary; and
  • Training your employees in new or updated safety procedures when equipment, machinery, or workflows change and monitoring their compliance with new procedures.

A near miss can give a worker a false sense of safety, making an accident and a claim more likely. Identifying the root cause of a near miss offers you the opportunity to facilitate employee behavior changes and reinforce their safety awareness.

Take every opportunity at staff meetings and during employee performance reviews to talk about the importance of safety in your facility or at your worksites, as well as compliance with your safety policies and procedures. You want your employees to be fully engaged in protecting their own and others’ safety and health. A strong safety culture can help prevent the accidents that lead to workers’ compensation claims.

Research also has found a correlation between disciplinary actions and workers’ compensation claims. Employees who must be disciplined for not following workplace rules or not reporting on time for duty are more likely to be involved in serious safety incidents.

Background checks and behavioral screening during the hiring process can save you headaches later when a noncompliant employee becomes injured and saddles you with workers’ compensation claims.

A handful of proactive steps can help—steps like performing regular safety audits or facility “walkarounds” to correct problems, holding safety meetings or giving “toolbox” or “tailgate talks” on safety topics, and keeping up on housekeeping.

You may even want to consider adopting the National Institute for Occupational Safety and Health’s Total Worker Health® (TWH) approach, which integrates health promotion with workplace safety and health protection.

The ‘business case’ for safety and health

The need to reduce the legal, medical, and other expenses involved in workers’ compensation can help you make the business case for a robust safety and health management program at your company, demonstrating a quantifiable return on the investment in workplace safety and health.

Remember, the number of injuries and resulting number of claims will be factored into your experience modification rate used by your insurance carrier to set your workers’ compensation insurance premiums. The number of compensable or recordable injuries also can affect your company’s ability to win contracts.

You can make an even stronger business case for your safety and health management program by demonstrating the cost savings of specific safety interventions.

To prove the value of your injury and illness prevention or safety and health management program, your analysis also needs to capture the indirect costs of workplace injuries, such as the following:

  • Production time lost to a work stoppage following an accident;
  • Administrative costs of supervisors collecting information and preparing reports after accidents or injuries;
  • Costs to hire and train replacement workers;
  • Lost productivity resulting from the learning curve of a new or newly assigned employee; and
  • Replacement costs of damaged machinery, materials, or property.

Making the business case for safety and health could help you get the resources you need for occupational safety and health compliance and loss prevention due to compensable injuries.