Waiting periods are a very common feature in US workers’
compensation systems but are relatively rare in the Canadian context and absent
from Australian systems. A waiting
period in workers’ compensation is a form of worker deductible. Most commonly, waiting periods start on the
first day for which wages are lost and last anywhere from one day to one week
with three and seven day waiting periods being very common.
Many systems allow for medical-only claims during the
waiting period and most have no prohibition against the employer paying some
benefits during this time. In fact,
collective agreements may contain provisions that require wage continuation
during a workers’ compensation waiting period.
In such cases, there is no administrative or indemnity saving by
introducing a waiting period. All that
changes is the pocket from which the benefit is paid.
Most systems with a waiting period have a retroactive
point. If the worker is off work beyond
this point (ranging from one to four weeks but most commonly two weeks), the
waiting period is waived and the worker receives wage-loss indemnity payments
for the waiting period as part of the workers’ compensation claim. Eliminating a waiting period impacts only the
cases with durations less than the waiting period.
When workers’ compensation systems started, the waiting
period was seen as a way to constrain insurance costs. As may be deduced from the structure of the
waiting-period deductible and the retroactive provision, the waiting period is
targeted at less severe (in terms of duration) claims. Let me be clear, waiting
periods limit cost to the insurer (and, through insurance rate-setting and
experience-rating provisions, to the employer).
The human and financial cost of the injury for the waiting period is
borne by the worker and his family unless this burden is offset by collective
agreement provisions or employer practice of wage continuation (or access to
sick leave or other paid leave provisions) provided by the employer.
When workers’ compensation got started in BC in 1917, the
waiting period was three days. In 1972,
the waiting period was eliminated. This
was part of a trend in Canada, however, there has been a recent trend to
consider and implement waiting periods.
Prince Edward Island and Nova Scotia each have a “2/5ths” of
a week waiting period [which works well for 4 day weeks and other non-five days
a week schedules] and New Brunswick has a 3 day waiting period.
From a pure insurance point of view, the best injury claim
is the one never filed. Introducing waiting
periods conceptually reduce administrative costs [assuming healthcare costs are
paid by someone else] and indemnity costs but they may well discourage many
claims of longer duration from ever being filed. If sick leave or other leave provisions are
in place, a worker may well elect to forgo a possible workers’ compensation
claim with all the burden of filing and often with an implied or perceived onus
of proving work-relatedness in favour of a simple sick leave application within
the firm. Firms may well tacitly approve
this practice as it may (or may be perceived to) positively impact workers’
compensation premium rates through experience rating.
For workplaces with no alternatives, a waiting period
externalizes a cost of production [work-related injuries and illnesses] to
workers. If this forces the worker or a
family to access other aspects of the social safety net [social welfare
services] or community food banks, then the mere existence of a waiting period
externalized costs beyond the workplace.
Put another way, those externalized costs amount to a subsidy (paid by
workers’ families, taxpayers or the community) to businesses where injuries
occur.
Yes, the firm will have to hire a replacement worker for a
few days or bear the costs of lost productivity, but that is the case
regardless of the legislative existence of a waiting period. Contrast a firm in a jurisdiction with a
waiting period to one where work-related claims are payable from the day
following the day of injury and the collective value of waiting periods is
obvious.
Some may argue that the financial subsidy or externalization
of costs at the aggregate level is not large.
If this is the case, then reverse is also true: the cost of eliminating
waiting periods where they exist will not be large either. If, however, the
value of a waiting period is argued to be significant, then its cost or subsidy
value should be part of the policy discussion.
Every jurisdiction has to make its own decision regarding
waiting periods in workers’ compensation.
That’s a matter for legislators and their electorates. There may be good and valid reasons for
waiting periods that outweigh the costs or justify the subsidy in a particular
jurisdiction. I am not saying the public
policy choice to have or introduce a waiting period is always a bad one. I am suggesting that the policy debate
include a full discussion of the externalized costs and subsidy values
involved.
