For those of you, who are responsible for the selection, purchase, and management of Worker’s Compensation Insurance for your company, this article is written with you in mind.
There are six key items about worker’s compensation insurance that every employer MUST know! With the ever-growing number of legal issues facing companies today, insurance coverage should not be overlooked by any small business owner.
The first item on our list is very important to understand as it will help guide all executives through purchasing decisions involving worker’s compensation insurance benefits within their firm.
The other six items focus on specific claims process changes that have been introduced into workers’ comp law which can affect your business either positively or negatively depending upon how well you understand them and include:
1) Loss-Free Period
2) Waiver of Subrogation
3) Voluntary Employer’s Account (VEA)
4) Advance Payment Mechanism
5) Independent Medical Examination (IME) Process
6) Modifications to Initial and Maximum Compensation Rate Schedules.
Now, let’s put all the legal mumbo jumbo into plain English as we explore these seven key items about worker’s compensation insurance!
When purchasing worker’s compensation insurance you may be asked how many premium dollars your company expects to pay annually. It can be helpful for an employer to know whether the annual premiums they will pay during year 1 and year 2 for a particular coverage level are dependent upon any special conditions or time limits that might impact their decision-making process regarding this quote.
Although the following details will vary from state to state, this information provides a typical example of how an insurance carrier will adhere to these guidelines. For lower coverage levels carriers often use the calendar year as the loss-free period under which they expect no active employee claims to occur.
For higher coverage levels it is not unusual for carriers to ask about your anticipated annual payroll. The applicable loss-free periods are typically one year for lower levels and two years at higher levels.
Under most circumstances, an employer’s choice between these two rates will be based on their expected number of active employees during that time period. Should you determine that your company has fewer than five hundred (500) employees and this level of worker’s compensation coverage is recommended by your agent or broker, you may find yourself limited to these time limits.
This is because carriers offering worker’s compensation insurance for companies with less than five hundred (500) employees often require their customers to pay rates based on a loss-free period of one full calendar year in length or longer and two years for higher levels of coverage if your expected payroll exceeds $100,000 per year.
It has always been the law that an employer may not attempt to circumvent statutory worker’s compensation laws by having independent contractors provide services instead of using their own employees.
However, this concept used to only apply when the company was found to be misclassifying its workers as independent contractors; this determination was made by comparing the amount of control the company held over their workers’ methods and means of work performance to the typical standards used by companies for their employees.
Now, independent contractors hold legal protection against employer retaliation which occurs when an employer makes a worker’s compensation claim more difficult, time-consuming, or costly. Items such as requiring an independent contractor to follow specific procedures before filing a claim.
Instructing them not to report injuries until after completing assigned responsibilities that day, or holding back final payment for completed work pending receipt of proof that they have reported any workplace injuries.
In short, this new law says that if you unreasonably interfere with an injured worker’s ability to file a workers’ compensation claim it may cost your company dearly!
For example, consider the ill-fated practice where some employers would offer workers’ comp benefits to their independent contractors on a ‘pay as you go basis. In those instances, employers would typically withhold final payment for services until the worker’s comp claim was resolved because they understood pay-as-you-go benefits to be a form of reimbursement where the injured worker simply pays his or her medical expenses out-of-pocket and then receives a partial refund from their employer once their claim has been settled.
It is now known that this type of behavior can be considered retaliation against an independently contracted worker’s ability to receive workers’ compensation benefits. Such non-compliance could trigger significant penalties especially if other work-related injuries occur within a twelve (12) month period after the first injury went unreported by the independent contractor so long as the two events are deemed causally connected.
It is now more important than ever before to confirm the legal status of your workers, especially those who are classified as independent contractors. Unfortunately, it is also becoming increasingly common for employers to attempt to get around worker’s compensation laws through such measures as non-compliance and improper classifications of employees which can result in significant penalties so be on guard.