Workers’ Compensation: A Short Guide for Safety Managers

Workers’ Compensation: A Short Guide for Safety Managers

The federal Occupational Safety and Health (OSH) Act of 1970 governs all workplace safety and health regulation and enforcement. The act created the Occupational Safety and Health Administration (OSHA), a federal agency within the Department of Labor. OSHA develops workplace safety and health standards, applicable nationwide. Approximately half of U.S. states operate their own state programs for occupational safety and health. However, there is little variation in workplace safety compliance requirements from one state to the next because the federal agency approves and monitors state programs, and state regulations must be “at least as effective” as federal standards.

Although they may seem similar, there are differences between handling your company’s workers’ compensation claims and managing your company’s compliance with federal or state occupational safety and health laws and regulations. 

Workers’ compensation is administered at the state level, so laws and their implementation can vary from state to state. Workers’ compensation laws protect employers from liabilities related to workers’ injuries, illnesses, and deaths, while the required insurance coverage provides the costs of workers’ medical treatments and lost wages or provides death benefits to a surviving spouse and children if a worker is fatally injured while on the job.

The purposes of state workers’ compensation laws and the federal OSH Act differ slightly. Dealing with both can lead to competing and/or overlapping responsibilities. One company may assign those responsibilities differently than another. As a result, safety managers may be wholly responsible both for OSHA compliance and supervising the workers’ compensation program. Other companies may, for example, assign workers’ compensation responsibility to benefits staff within the Human Resources department.

If you’re tasked with the duties for both safety and workers’ compensation, your responsibilities may include:

• Ensuring compliance with the OSH Act’s General Duty Clause and requirements of several federal or state safety standards.
• Responding to workplace injuries and illnesses; ensuring that sick or injured employees receive first aid or proper medical attention; and administering workers’ compensation claims, assisting employees in filing claims, and navigating the insurance system.
• Monitoring workers off duty due to workplace injuries and illnesses, remaining in contact with workers and confirming they are receiving proper treatment, and making progress in rehabilitation and recovery.
• Overseeing an injured worker’s return to work or a light-duty program if the worker has not yet recovered enough to resume regular duties. The end goal is always the employee’s return to regular duties.
• Containing your company’s costs for workers’ compensation claims or premiums.

EMR and Premiums

A crucial aspect in determining your company’s workers’ compensation insurance premium is the experience modification rate (EMR). Your company’s EMR is found using a formula that includes your company’s claims history, and safety record in comparison with the claims and safety experience of other companies within your industry.

For example, If your company has an EMR of 1.0, then your company has an average level of risk for your industry. A below 1.0 EMR  indicates lower risk or a better-than-average safety performance for your industry. An EMR above 1.0 indicates higher-than-average risk, reflecting worse safety performance or more claims than the industry average. A higher EMR usually results in higher premiums, and your premium rates reflect both the inherent risks within your industry as well as your company’s individual claim history.

The best way to curb claims and reduce premiums is also the best defense against being inspected and cited by OSHA: preventing accidents, illnesses, and injuries. This is where the safety function and workers’ compensation responsibilities overlap. 

The number of recordable injuries is monitored by OSHA. The agency’s area offices target employers with higher-than-average injury rates per industry. Your insurance carrier will set your workers’ compensation insurance premiums based on the number of injuries and claims at your facilities or worksites. Your company’s injury rate can also affect your company’s ability to win contracts. 

According to Liberty Mutual Insurance (LMI), disabilities due to workplace injury cost businesses more than $59 billion annually. According to LMI’s latest Workplace Safety Index, the causes of the costliest workplace injuries are:

• Handling objects, costing $13.98 billion annually;
• Falls on the same level, costing $10.84 billion;
• Being hit by objects, costing $6.12 billion;
• Falls to a lower level, costing $5.71 billion;
• Awkward postures, costing $4.69 billion;
• Vehicle crashes, costing $3.56 billion;
• Slips or trips without a fall, costing $2.06 billion;
• Repetitive motion involving microtasks, costing $2.05 billion;
• Colliding with objects, costing $2 billion; and
• Running equipment or machines, costing $1.92 billion.

This list includes three of the “fatal four” safety hazards: caught in/between, electrocution, falls, and struck-by hazards; these are responsible for the most workplace fatalities.

‘Near Misses’— Watch Out!

You should never become complacent. Pay attention to, and monitor “near misses.” Just because it hasn;t happened yet, doesn’t mean you are safe. Research has shown that for every workplace accident that occurs, there are more than 600 near-misses.

Keeping an eye on close calls can bring your attention to common workplace hazards or mistakes your workers and supervisors could be making every day. It may only be a matter of time before seemingly ‘small’, repeated mistakes or uncontrolled hazards could result in an accident, injury or worse– a fatality. All accidents and near-misses should be thoroughly investigated in order to and make appropriate changes in your policies and procedures. Encourage your workers and supervisors to report all accidents and close calls. The more incident data you have, the more easily you can perform an accurate analysis of your company’s risks.

These types of precautions could reduce the number of claims your company files, reducing premiums, and lowering the chance of an OSHA violation or inspection.

If an accident or a near-miss doesn’t result in a recordable injury or illness—it doesn’t factor into your company’s injury rate that OSHA uses in its inspection planning. A recordable injury isn’t necessarily a compensable one if it doesn’t result in medical costs or lost wages.

In addition to investigating all accidents, injuries, and close calls in a timely fashion, you should also track incidents over time so you can perform an analysis of trends. This could prevent future incidents that could result in expensive workers’ compensation claims or higher insurance premiums going forward. However, the incident analysis needs to be a blame-free evaluation. You want to get to the root causes so you can adjust your workflows, procedures, and policies appropriately. Maintaining a cool head when dealing with an incident will allow you to develop an effective safety intervention protocol, preventing future claims or OSHA penalties from injuries due to similar causes.

Corrective actions aimed at improving employee health and safety can also improve the chances of employee compliance with any changes you make to your policies or work procedures.

Incentive Program Cautions

You should be careful with safety incentive programs that discourage reporting. It’s what you don’t know that can cause you problems. A safety incentive program could set you up for trouble if it interferes with getting the data you need to effectively manage safety.

Workers may also get the wrong message from a safety incentive program. Just because they’re focused on winning awards like gift cards doesn’t mean they’re performing their duties with soundly ingrained safety behavior.

Just as underreporting limits the amount of data you have to use in performing root cause analyses, it could result in a whistleblower complaint and thus, an OSHA investigation.

Safety, Health Management Program

A well-administered safety and health management plan could help reduce the legal, medical, and other costs resulting from workers’ compensation claims at your company.

You can improve your company’s OSHA compliance and bring down your premium costs and the cost of workers’ compensation claims by implementing a safety and health management program that includes the following components:

• Management leadership or “buy-in,” making a commitment to continually improve worker safety and health and communicate that commitment to workers, as well as setting program expectations and responsibilities;
• Worker participation, ensuring that your workers and their representatives are involved in all aspects of the program and that employees understand their roles and responsibilities within the program;
• Hazard identification and assessment, continually identifying workplace hazards and evaluating risks by identifying and assessing the hazards of routine, nonroutine, and emergency situations;
• Hazard prevention through a hierarchy of controls, selecting interventions according to a hierarchy that uses engineering solutions first, followed by safe work practices, administrative controls, and then personal protective equipment (PPE);
• Employee and supervisor education and training, clearly communicating hazards in the workplace and preventive practices under the program, as well as training employees in their responsibilities within the program and training managers and supervisors in safety concepts and their responsibilities for protecting employee safety and health; and
• Program evaluation and continual improvement that includes investigating incidents and developing new policies and workplace safety rules to address emerging or newly uncovered hazards.

You also need to communicate the specifics of your safety and health management program with contractors and/or staffing agencies. Staffing agencies need to be able to clearly discern where your responsibility ends and theirs starts. You may need to negotiate responsibility for training a staffing agency’s employees. If a staffing agency’s employee is injured, OSHA could cite you as well as the staffing agency for violations.

Safety Committee

Although your workers’ compensation insurance carrier or the state workers’ compensation agency may require you to have one. If not, you may want to form a safety committee to monitor hazards and help develop safety interventions. If you have a union-affiliated workforce, one or more of your contracts may require one.

Having a safety committee could involve the following:

• Committee membership that includes employees and their union representatives, managers, and supervisors;
• Maintaining records of meeting agendas, meeting minutes, and committee decisions and recommendations; 
• Holding monthly or quarterly meetings;and
• Developing and implementing workplace safety and health committee inspection schemes.

Although compliance requirements under the OSH Act and obligations for administering your company’s workers’ compensation coverage may differ, addressing hazards and implementing controls for injuries and illnesses will help you achieve both.