Workplace Safety and the Law
The most recent data from the Bureau of Labor Statistics indicates that approximately 3 million people were injured on the job in 2011 and in 2012, 4,383 workers died.1 The number of on-the-job fatalities and injuries has been decreasing in the United States. Part of the reason for the decline in workplace injuries and deaths is hopefully due to improved safety and health conditions in workplaces. However, part of the decline in workplace injuries and fatalities could be due to fewer hours worked in industries that have had a high incidence of worker injuries and fatalities, such as construction.
All levels of government have passed numerous laws to regulate workplace safety. Many of these laws include detailed regulations dealing with work hazards in specific industries such as coal mining and railroads. However, two basic sets of workplace safety laws affect most workers: the various workers’ compensation laws at the state level and the Occupational Safety and Health Act of 1970 (OSHA) at the federal level. The objectives, policies, and operations of these two sets of laws are very different.
Each state has its own workers’ compensation law, so the provisions for funding and enforcing the law differ by state. As we discussed in Chapter 12, t he main goal of the workers’ compensation system is to provide compensation to workers who suffer job-related injuries or illnesses. Workers’ compensation laws have no safety regulations or mandates, but they do require employers to pay for workers’ compensation insurance. Because insurance costs are higher for employers with more workplace accidents and injuries, employers have a financial incentive to create and maintain a safe work environment.
In contrast, OSHA is a federal law designed to make the workplace safer by ensuring that the work environment is free from hazards. The act mandates numerous safety standards and enforces these standards through a system of inspections, citations, and fines. Unlike the workers’ compensation laws, however, OSHA does not provide for the compensation of accident victims.2
Workers’ Compensation
In the early 1800s, people injured on the job went without medical care unless they could afford to pay for it themselves and they rarely received any income until they could return to work. Employees who sued their employers for negligence had little hope of winning, because under U.S. common law the courts habitually ruled that employees assumed the usual risks of a job in return for their pay. In addition, under the doctrine of contributory negligence, employers were not liable for an employee’s injuries when that employee’s own negligence contributed to or caused the injury. And under the fellow-servant rule, employers were not responsible for an employee’s injury when the negligence of another employee contributed to or caused the injury.
In the early years of the twentieth century—after a host of workplace disasters, including a 1911 fire in a New York City shirt factory that killed more than 100 women—public opinion pressured several state legislatures to enact workers’ compensation laws. The workers’ compensation concept is based on the theory that work-related accidents and illnesses are costs of doing business that the employer should pay for and pass on to the consumer.3 Since 1948, all states have had workers’ compensation programs. These state-administered and employer-funded programs are designed to provide financial and medical assistance to employees injured on the job.
The stated goals of the workers’ compensation laws are:4
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▪ Providing prompt, sure, and reasonable medical care to victims and income to both victims and their dependents.
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▪ Providing a “no-fault” system in which injured workers can get quick relief without undertaking expensive litigation and suffering court delays.
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▪ Encouraging employers to invest in safety.
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▪ Promoting research on workplace safety.
To be eligible for an award from the workers’ compensation system, an employee’s injury must have occurred in the course of his or her employment. Sometimes serious accidents, even death, can occur in the workplace, but the accident may not be directly due to the performance of the job. Is the employer still liable for this unfortunate outcome? In many of today’s workplaces, job descriptions are more ambiguous and broader than ever before. What is really inside or outside someone’s job responsibilities is often not clear. This breadth and ambiguity can encourage flexibility and broad commitment in the workplace, but it may also have the unintended consequence of increasing an employer’s exposure to liability for accidents that may occur.
The Benefits of Workers’ Compensation
Workers’ compensation benefits compensate employees for injuries or illnesses occurring on the job. These benefits are:5
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▪ Total disability benefits Partial replacement of income lost as the result of a work-related total disability.
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▪ Impairment benefits Benefits for temporary or permanent partial disability, based on the degree and duration of the impairment. Injuries are classified as scheduled or nonscheduled. Scheduled injuries are those in which a body part (such as an eye or a finger) is lost; there is a specific schedule of payments for these injuries. Unscheduled injuries are all other injuries (such as back injuries); these are dealt with on a case-by-case basis.
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▪ Survivor benefits In cases of work-related deaths, the worker’s survivors receive a burial allowance and income benefits.
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▪ Medical expense benefits Workers’ compensation provides medical coverage, normally without dollar or time limitations.
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▪ Rehabilitation benefits All states provide medical rehabilitation for injured workers, and many states provide vocational training for employees who can no longer work at their previous occupation as the result of a job-related injury or illness.
The Costs of Workers’ Compensation
The cost to employers of workers’ compensation insurance is directly affected by accidents, with premiums that can increase dramatically and stay high for years as a result of a single injury.6 Workers’ compensation insurance is based on payroll, but premiums paid are modified by an organization’s safety record. Workers’ compensation insurance premiums average from around 2 percent to more than 4 percent per $100 of wages, but the rate can be much higher in some industries, such as construction.7
Unfortunately, the workers’ compensation system is subject to fraud by both employers and employees. On the employer side, some companies try to avoid the cost of paying workers’ compensation premiums by simply breaking the law and not insuring their employees. An audit in Florida, for example, found that 13 percent of employers did not have workers’ compensation insurance. Because premiums are based on payroll, some employers underreport their payroll.8
Employee fraud in various forms can also occur. One particularly graphic example of an apparently fraudulent workers’ compensation claim involved a worker at a Target store in New Jersey. The worker claimed head and neck injury and was found with boxes around her that had apparently fallen off from a shelf. However, security cameras in the store show that she had arranged the boxes, hit herself in the head with a package of batteries, and ate crackers and a beverage and vomited the material.9 The claimant now faces criminal charges for fraud and could be sentenced to years of jail time.
Data analytics software is being used by a number of insurance firms to detect possible fraud.10 However, managers also have a responsibility to confirm workers’ compensation claims and reduce fraud. The Manager’s Notebook, “Keep ‘Em Honest: Preventing Workers’ Comp Fraud,” further considers fraud possibilities and offers preventative management actions.
Although the occurrence of fraudulent claims should be reduced as much as possible, it is the cause for legitimate workers’ compensation claims that should be a central focus of responsible management. If the causes for injuries can be identified and reduced, the costs of the injuries and workers’ compensation claims would also be reduced. For example, overexertion is a top cause of workplace injuries.11 Common examples of overexertion include heavy lifting, pushing, or pulling. Given the prevalence of overexertion injuries, and thus of worker compensation claims, it makes business sense to address those issues, such as correct lifting techniques, that may reduce injury rates and costs. Overexertion is a common cause of injury across companies and industries, but the top causes of injury differ across companies. To effectively manage and control injuries and their costs, managers need to know the causes of injuries at their company and then address them.
Infrequent types of injuries can sometimes be more important than common ones. For example, repetitive motion injuries (such as carpal tunnel syndrome) can result in expensive and lengthy absences from work.12 Thus, it is important for a manager to consider both frequency as well as costs when determining where to focus attention and resources.