Although workers compensation claims often skyrocket when companies or municipalities downsize or close facilities, managers can take steps to ferret out fraud and keep the legitimate claims' costs low.
Mary Hollis, manager of claims services at Liberty Mutual, Boston, partially attributes this increase in claims to the reduced fear that laid-off employees feel toward filing claims once they know their jobs have been eliminated. "They have nothing to lose and have no fear of reprisal for filing the claim," she says.
Layoffs inevitably generate workers comp claims, agrees Robert Weyburn, vice president and claims consulting manager for Sedgwick James, Boston. "Though some claims filed by laid-off workers are fraudulent, many are filed by workers who have developed hearing loss, carpal tunnel or multiple soft-tissue injuries. Because of fear or reluctance to file claims, these employees did not report the claim until notified of the layoff or closing," he says. "Additionally, since most COBRA and employer benefit plans are subject to deductibles and other coverage restrictions, employees may opt for filing a claim under workers compensation instead."
Downsizings spur a higher increase in filed claims than plant closings, Hollis reports. "Downsizing tends to shuffle your workforce and move people into different departments where they use unfamiliar machinery or different physical procedures," she says. "We've found that 40 percent of accidents happen during the first year of employment."
States that have not reformed their workers comp laws make it easier for employees to "use workers comp as a tool to supplement unemployment," reports Weyburn, who advises employers to research the workers comp laws in the facility's jurisdiction prior to a downsizing or closing.
For example, in California, stresses resulting from termination are considered to be a compensable injury. So, an employer whose facility is in the Golden State must ensure that it terminates its staff in the "least intrusive way," Hollis says. "When we go before a judge in such a state, the claimant may be given a higher award and continued disability because he has no job to return to."
To reduce such "termination stress," Weyburn suggests that employers have a high-ranking official deliver the news of a downsizing or closing and should show concern for the laid-off employees by offering job fairs, resume counseling and on-site therapy sessions.
To keep ensuing claim costs low, Hollis says an employer should:
* Choose a team with experience in claims, loss prevention and human resources to manage the downsizing.
* Establish a claims procedure and place a claims team on-site to learn the situation of the employee filing the claim first-hand.
* Keep accurate records in one central location.
* Investigate working conditions carefully before announcing any layoff. Consider videotaping employees at work and documenting baseline levels of noise, airborne particles and chemicals.
* Conduct exit interviews with employees to detail their injury histories. Photographing employees at this time can help you remember them better and can be used to identify a former employee if fraud surveillance is necessary.
* Train the downsizing team to watch for fraud indicators such as fraud solicitation, a history of fraud or filing similar injury claims with the same doctors and lawyers.
In addition, communication with your insurer should be an integral part of the downsizing process, Wey-burn notes.
However, even with such precautions, companies should expect workers comp claims to hurt their insurance ratings after a downsizing or plant closing. "Most Fortune 1000 corporations have some direct financial impact - through a compensation deductible plan, retention levels or charge backs - that will cause a financial burden on a division or plant to be phased out," Weyburn says.
"Smaller companies usually participate in a guaranteed cost program, non-retro or even the state fund," he continues. "In general, the smaller companies' compensation experience modifier would increase because of the bad experience that may be associated with a problematic layoff. One alternative would be to enter a state fund and seek relief."
Test Your Environmental Knowledge 1. Of the 130 million cars in the United States, what percentage are recycled when they're scrapped? a. 10 percent
b. 50 percent
c. 75 percent
d. 100 percent
2. How many gallons of used motor oil are dumped into drains and sewers annually in the United States by do-it-yourself auto mechanics? a. 100 million
b. 130 million
c. 160 million
d. 190 million
3. What's the most recycled food package? a. pizza boxes
b. steel cans
c. glass salsa jars
d. milk jugs
4. Which of the following household appliances can be recycled? a. refrigerators
b. clothes washers
d. all of the above
5. What's the best choices for disposing of grass clippings? a. bag them and send them to the landfill
b. recycle them in a compost pile with old leaves
c. incinerate them
d. leave them on the lawn