Despite having addressed waiting and retroactive periods before, I continue to receive questions about the law and policy surrounding them. The questions usually contain assumptions that waiting and retroactive periods are universal features of workers' compensation systems and their design is uniform. Neither assumption is true. Understanding the variation in waiting and retroactive periods is critical to interjurisdictional comparison,
policy analysis and financial risk planning for employers and workers. It is also essential in any comparative exercise on the costs and benefits of workers' compensation systems.
Waiting periods are not a universal feature of
workers’ compensation for temporary total disability (TTD). While common in US states, waiting periods
for TTD compensation are absent from most Canadian workers’ comp and Australian “WorkCover” jurisdictions. Where
waiting periods are part of the workers’ compensation legislation, they are far
from uniform in design.
A waiting period for TTD workers’ compensation is a
specified time frame following a work-related injury for which TTD compensation
is not payable. A few jurisdictions provide
exceptions to the waiting period rule in the case of hospitalization
(California, Idaho for example) or for certain professions (firefighters in
Maine and New Brunswick).
Closely aligned with waiting periods are retroactive
periods. If there is a waiting period,
legislation usually contains a retroactive provision allowing for TTD
compensation to be extended to the waiting period if the duration of disability
extends beyond a specified period (7 days in Delaware, 6 weeks in Louisiana,
for example) . Some jurisdictions (Rhode
Island and Hawaii, for example) have no retroactive period regardless of the
duration of TTD. Where there is no retroactive period or where the duration of
disability is less than the retroactive period, the injured worker receives no
TTD compensation to offset the lost wages.
An uncompensated waiting period is a worker-paid
“deductible”. From the perspective of
the worker, the full value of earnings lost during the waiting period
represents a financial cost to the worker in addition to the human cost
associated with work-related injury. A
waiting period that is waived or paid retroactively reduces the financial burden of lost earnings but
does not make the workers “whole” with respect to lost earnings. Earning replacement rates and maximum
insurable earnings or maximum benefit payments still apply and virtually guarantee
that a portion of lost earnings are never recovered through workers’
compensation insurance.
There is no universal standard for what constitutes an
equitable waiting period. The 1972
report of the National Commission on State Workmen’s Compensation Laws headed by John F Burton, Jr., noted the
pressures for reducing and maintaining waiting periods:
The advantage of reducing both the waiting and the qualifying period [for retroactive benefits] is that workers will have a higher proportion of their lost remuneration replaced by benefits. At the same time, the cost of the program increases, both in benefits paid and in administrative expenses. Proponents of the waiting period argue also that a waiting period is necessary to discourage malingering. (Chapter 3 page 59)
The National
Commission’s mandate required an evaluation of various aspects of permanent
and temporary compensation under state workers’ compensation laws with respect
to adequacy and equity. Its recommendation
regarding waiting and retroactive periods provides guidance to policy
makers in the US and beyond. The National Commission summarized its
recommendation this way:
We recommend that the waiting period for benefits be no more than three days and that a period of no more than 14 days be required to qualify for retroactive benefits for days lost.(Ibid.)
The National
Commission’s recommendation defines a reasonable “minimum
standard” or threshold against which policy makers and stakeholders
may examine workers’ compensation waiting and retroactive periods. Using this “no more than” standard, each workers’
compensation jurisdiction may be assigned to one of three distinct categories of
compliance with National Commission’s
recommendation: Exceeds, Meets, and Fails to meet the
minimum recommended by the National Commission.
In February 2017, I retrieved statutes and/or policy
documents regarding waiting and retroactive periods for all North American
jurisdictions. I then categorized each
according to its compliance with the National Commission recommendation. [As
an aside, most statutes contain no reference to a “waiting period”. The provisions that give rise to waiting
periods are often framed as prohibitions against payment for losses in the
initial days following injury or prescribed timeframes for the “commencement”
of temporary total disability compensation payments.] The preliminary results of my analysis are as
follows:
- Exceeds Minimum recommendation:
- No waiting period or
- Waiting period of three days
and/or retroactive period of less than 14 days or
- Waiting period less than
three days and retroactive period of 14 days or less
- Wyoming, Wisconsin, West Virginia,
Minnesota, Vermont, Connecticut, Delaware, British Columbia, Alberta,
Saskatchewan, Manitoba, Ontario, Quebec, Prince Edward Island,
Newfoundland & Labrador, Northwest Territories, Nunavut, Yukon
- Meets Minimum:
- Waiting period of 3 days and retroactive period of 14 days
- Washington,
Oregon, Utah, Colorado, Iowa, Montana, Illinois, Kentucky, District of
Columbia, Maryland, New Hampshire
- Fails to meet recommendation:
- Waiting period of more than 3 days or
- Waiting period of any length and no retroactive period or
- Waiting period of any length and retroactive period of greater than 14 days
- California,
Nevada, Idaho, Montana, Arizona, New Mexico, North Dakota, South Dakota,
Nebraska, Kansas, Oklahoma, Arkansas, Texas, Louisiana, Mississippi, Alabama,
Georgia, Florida, Tennessee, North Carolina, South Carolina, Virginia,
Indiana, Ohio, Pennsylvania, Indiana, Ohio, Michigan, New Jersey, New
York, Rhode Island, Massachusetts, Maine, New Brunswick, Nova Scotia
More than half of the North American workers’ compensation
systems examined in this analysis fail to meet the minimum waiting period and
retroactive period recommendation of the National Commission.
This wide disparity across systems creates inequalities in
the financial burden for workers. It
also complicates comparisons of employer costs for workers’ compensation. Rate
comparisons rarely take into account the financial impact of the variation due
to system features such as waiting and retroactive periods. Clearly, the value provided by workers’ compensation coverage with no waiting periods (or a short waiting
and retroactive periods) should be taken into account when comparing rates and
costs to jurisdictions with lengthy waiting periods (and particularly if
they have lengthy or absent retroactive
periods). That said, I can find no published figures or
estimates of the uncompensated wage loss due to waiting periods in any state
with a waiting period. There are
estimates of the value of “employer deductibles” but worker deductibles in
either dollar amounts or uncompensated time (days or weeks) are not reported.
The laws and policies around the commencement of TTD compensation impact every workers' compensation time-loss claim. More than any other comparative feature, the policies regarding waiting periods and retroactive periods influence the balance of who bears the cost of the most common workplace injuries. Workers bear the physical and financial costs of those injuries; the portion uncompensated by workers' compensation systems can vary widely with devastating consequences on families and the potential externalization of costs to other insurers, workers, and the community at large. These externalizations obscure the full cost of work-related injuries--and amount to a subsidy to the cost of production that removes or dilutes incentives toward prevention of injury and disability.
Where waiting periods have been eliminated, the uncompensated portion of lost earnings is reduced and may be inferred by the reported value of compensation for TTD paid. Where waiting periods exist, the uncompensated portion of lost earnings will be significantly higher than for otherwise similar injuries and system features. Quantifying the impact may influence safety and outcomes for millions of workers.
