Who is NOT covered by Workers' Compensation?

For the last few months I have been researching the public policy criteria for determining who is  covered by workers’ compensation and who is not.  From a public policy perspective, an accurate statement of "percentage of the employed labour force covered by workers' compensation" is an important foundational statistic to any public policy evaluation or reform.  Some data do exist but, so far, it appears:

• Stated workers’ compensation coverage rates are likely over-estimated

• Few jurisdictions provide actual counts (or direct, well documented estimates) of workers mandatorily covered

• No jurisdiction publishes counts of those who voluntarily “opt in” to coverage

• No jurisdiction publishes counts of persons (as opposed to the number of waivers issued) exempted by waivers, elections, or opt-out provisions

• Public policy justifications for exclusions or exemptions are almost non-existent

• Where justifications are offered, they primarily rest on the historical evolution of workers' compensation coverage

While there are some published coverage estimates based on workers’ compensation data regarding the numbers of workers covered, most do not explain their methodology.  Many rely on external data sources (unemployment insurance data, employment surveys).  

Even the wording surrounding coverage in workers’ compensation is not consistent.  In some cases, certain industries, occupations, worker categories, or employers are “exempted”, others “excluded”, and still others may “seek a waiver” from the otherwise universal or sectoral coverage rules.  Often, there are rules that allow some exempted or excluded categories to apply for coverage on an optional or “elective” basis.  Rarely, however, are detailed estimates of number or proportions of the work force within and beyond coverage provided at the state or provincial level.    

The inconsistencies in workers’ compensation coverage rules have real-life implications for those in the scope of coverage and outside it.  The lack of consistency in coverage rules may lead to erroneous assumptions that can leave workers and their families destitute and employers without the protection of the workers’ compensation exclusive remedy.  Worse yet, the lack of workers’ compensation coverage externalizes health care costs of work-related injuries to other medical plans (private and public) thus raising costs for the funders (including taxpayers as well as individual and group disability insurance plans). 

Workers’ compensation premiums are often justified as a means of confining the financial costs of work-related injury, illness and disease to the industry that gives rise to them; if workers’ compensation costs rise, there is an incentive to greater investment in safety and prevention.  For workers and employers outside the workers’ compensation scope of coverage, those incentives may be less clear and far less direct.  More importantly, those financial costs for wage replacement and medical aid (diagnostics, treatment, rehabilitation) are externalized to others.  If someone else bears the financial cost of work-related injury, why bother invest in prevention?

I’ve asked several government policy branches responsible for health and workers’ compensation to provide their public policy rationale for limiting the scope of workers’ compensation coverage.  The few formal responses I have received so far are like this one (I won’t name the jurisdiction):

“Many of the [excluded] industries listed…  were deemed ‘low risk’ while others actively lobbied to be exempt from coverage.”

“Low risk” is not defined and “active lobbying” implies that those with good lobbyists are the only ones likely to be excluded. 

In my research so far, I have examined about 70 jurisdictions in Canada, the U.S. and Australia.  The public policy approaches for determining who is and who is not in the scope of coverage fall into the following general categories of workers’ compensation coverage:

• General inclusion for all industries (or classes of industry) with broad exclusions (Alberta – Workers’ Compensation Regulation Schedule A [Alberta Regulation 325/2002])

• Mandatory universal inclusion with narrow, specific exclusions (British Columbia-Assessment Practice Directive 1-2-1(A) - Exemptions from coverage)

• Optional inclusion (Texas, for example)

There are three public policy approaches to those excluded from coverage:

• Hard exclusion:  NO option to come under coverage for any reason
• Soft exclusion (Voluntary inclusion):   Option for exempted or excluded to “opt in” or enter voluntarily into workers’ compensation coverage
• Waiver exclusion:  Ability to “opt out” of coverage if certain conditions are met

The following list provides some of the occupations and industries that may be excluded from workers’ compensation coverage (NOTE: Many of those occupations/industries in this list are in fact mandatorily covered in some or most jurisdictions).  The list is not comprehensive nor is it universal.  The jurisdictions mentioned are illustrative only; others may or may not have similar (or more or less restrictive) provisions for a given occupation or industry.  This listing is provided here to illustrate the range of exclusions and the variability in the criteria among various jurisdictions:

Agricultural / farm workers /harvest help/Gardeners – Exempt if 5 or fewer in Florida, if family farm and less than  $8k payroll in Minnesota

Babysitters and Child Care -  Child care before or after school of less than 15 hours per week is optional in British Columbia but mandatory if more than 15 hours per week.       

Cab / vehicle for hire drivers – Independent taxi drivers exempt in Massachusetts. Taxicab drivers whose compensation is by contractual arrangement are exempt in Alaska

Casual employees  - Exempt if less than 26 hours weekly in Connecticut,  if less than 20 consecutive days in Kentucky

Cleaning persons/ Private household workers-  Household or domestic employees whose typical duties include house cleaning and yard work are exempt in Montana. Exempt if less than 20 hrs/week and 6 less than 6 weeks in any 13 week period in South Dakota.

Commission-paid salespersons—This is often listed as a separate category from real estate and insurance commissioned sales but criteria vary.                 

Corporate Officers/Exec Officers / Directors /Major Shareholders – Exemption formulas vary widely.  Elective for up to 10 shareholders with 10% or more of shares in Michigan, 5% ownership in Pennsylvania, 25% share ownership in Nebraska           

Cosmetologists, Barbers- exempt in Montana

Domestic servants – Exemptions from coverage if less than 52 hours in  90 days in California, under 240 hours per quarter in DC, if less than $160 by 1 employer in any 3-month period in Ohio

Entertainers – Musicians exempt pursuant to a service contract in Louisiana, Entertainers in Nevada are exempt.       

Family Farm corporations/ Family enterprises—often listed as optional or elective but coverage may be required for farm hands if a specified number of employees or payroll value is exceeded   

Financial Institutions (Banks)- Banking is exempt from coverage in Manitoba, Ontario, Alberta            

Illegal enterprises or occupations—This is not often specified but may turn on the definition of “illegal”.  Specifically excluded in South Dakota

Independent Contractors-  Often excluded but specific rules may apply for construction; special certification may be requires for exemption as in Montana 

"Less than" exemptions  - Exempt for firms with less than a stated number of employees; 3 in Michigan, 4 in South Carolina, 5 in Missouri. [ NOTE:  Special rules may apply for construction firms]

Maritime workers- Exempt in New Jersey        

Municipal employees – Exempt for firefighters and police cities <500k illinois="" in="" span="">

Newspaper/publication vendors/ distributors—This is a controversial area particularly in Kentucky where a recent law requiring mandatory coverage was overturned             

Non-profit, religious, charitable organizations – This is a common category but there are specific criteria in most jurisdictions     

Outworkers - Exempt if less than 26 hours weekly in  Connecticut.

Owner operators – Truck driver owner operators are exempt in South Carolina.  Exempt in South Dakota if certified as Independent Operators by the Department of Labor.   

Professional sport players / athletes – Exempt in Florida, hockey teams exempt in Rhode Island, Professional sports competitors or athletes are exempt in British Columbia (note, however, managers , coaches, administrators are mandatorily covered).

Real estate agents/licensees/ brokers (commission) and Insurance Agents- licensed- commonly exempted from coverage. 

Sawmill or logging operators - Exempt if  >10 employees who operate less than 60 days over a 6 month period in North Carolina

Self-employed/ Independent Contractor - Very common exclusion but often with optional or voluntary inclusions offered.

Sole proprietorship or partnership (Sole trader in Australia)  - Exempt in most places but in Tennessee, in construction, sole proprietors and partners are required to cover themselves or be listed on the State Exemption Registry

State / provincial employees    - Voluntary for state and political subdivisions in Tennessee, exempt for elected or appointed officials in South Carolina

Teachers – Most teachers in Alberta and Saskatchewan are exempt.    

Volunteer first responders, law enforcement, patrol members or rescue workers  -specifically covered in Minnesota but certain groups like ski patrol persons exempt in North Carolina. 

There are also groups of individuals that may be excluded from some or all coverage under workers’ compensation.  Undocumented workers have been denied coverage for vocational rehabilitation, for example, because of their illegal immigration status  (Ortiz v. Cement Prod., Inc., 708 N.W.2d 610 (Neb. 2005)).  Workers in concurrent employment may have limited coverage (see http://workerscompperspectives.blogspot.ca/2015/06/will-workers-compensation-cover-income.html and "Moonlighters Wanted", Perspectives Magazine, IAIABC, November 2016 ).

Beyond the problems for workers and employers associated with the lack of coverage for certain industries and occupations, the absence of concise, comparative numeric data leaves policy makers to make important decisions on shaky assumptions.  Finding an accurate answer to the question "What percentage of the employed labour force covered by workers' compensation?"  should not depend entirely on indirect calculations.  "Employment" and "employed labour force" are frequently sampled and reported, so choosing a recognized denominator should be straightforward.  In states like New Mexico or Oregon with direct worker premiums or per capita payroll charges for workers' compensation, calculating the numerator should be trivial.  Unfortunately most jurisdictions only collect payroll not employment data so no direct numerator data is available to them.  

In the interests of good public policy and transparency, jurisdictional reporting of the percentage of the employed labour force covered and not covered by workers' compensation should be improved and standardized.  At a minimum, each jurisdiction should be report the number and percentage of employed labour force covered, the number of firms and associated workers covered by "opt in" or voluntary coverage provisions, and the number of firms and associated workers exempted or excluded by waiver or other application process.  

Why aren’t all time-loss work-injuries compensated?

The following recent headlines demonstrate how important that weekly paycheque is to workers and their families:

• 50 percent of minimum wage workers say they have to work more than one job to make ends meet
• Three quarters of all employees feel they live paycheck-to-paycheck to make ends meet at least sometimes; nearly a quarter feel they always do
  • [Harris Poll/CareerBuilder.com, “Two Thirds of Minimum Wage Workers Can’t Make Ends Meet”, August 11, 2016]
• Almost half (48%) report it would be difficult to meet their financial obligations if their pay cheque was delayed by even a single week
  • [Framework/Canadian Payroll Association, “Canadians living pay cheque to pay cheque, challenged by debt and economy, payroll survey finds”, September 7, 2016]
• 46% [of working Australians] admit that they live ‘pay-cheque to pay-cheque’.
  • [Ipsos/National Australia Bank, “Australia today: A look at lifestyle, financial security and retirement in Australia”, February 12, 2016]

The financial impact of even a brief interruption in earnings due to a work-related injury or disease can be devastating.  Despite the legislative intent of workers’ compensation laws, the simple reality is that many—perhaps the majority—of those who miss time from work due to a work-related temporary total disability never receive workers’ compensation for their lost wages.

Employers, family members, and even policy makers may assume workers’ compensation coverage is there for every case of work-related time-loss injury.  The assumption may blind them to the serious gaps exist for many workers in the employed labour force.  For some, understanding the gaps may provide the impetus to fill them.  At a minimum, knowing that gaps in coverage exist will allow those with the resources to prepare for interruptions in earning due to workplace injury or occupational disease.  Unfortunately, for many workers and their families, there are no resources to cover the gaps; using private savings or buying individual disability insurance coverage are not realistic options.

Work-related injuries can occur to anyone engaged in employment in the labour force.  Clearly, those institutionalized or in the military are not available for employment in the broader labour force;  those who are incapable of work, retired or otherwise withdrawn from the labour force are not available for work.  Those who are unemployed but looking for work are available for work but any injuries that occur to them don’t arise from work so are excluded from this discussion.  That leaves the subset of individuals engaged in work for themselves or someone else; it is from this population that work-related injuries occur;  only a subset of those are covered by workers’ compensation. 

As may be noted in the figure below, work-related injuries that result in time away from work can arise from employment within the scope of workers’ compensation or outside it (self-employed, exclude small enterprises, and excluded occupations or sectors).    Inclusion within the scope of workers’ compensation coverage, however, does not automatically lead to compensation.

1. Injuries to workers outside of workers’ compensation coverage are excluded

First, let’s look at the intentional exclusions from workers’ compensation coverage.  The actual coverage of the employed labour force ranges widely by jurisdiction.  Many states and provinces define the industries and sectors that must carry workers’ compensation coverage; a few mandate blanket inclusion then identify specific exclusions. Common exclusions include agricultural workers, domestics, professional sports players and self-employed.  In some jurisdictions, firms with fewer than four or five employers may also be excluded from mandatory workers’ compensation coverage. 

NASI estimates workers’ compensation coverage in the “total workforce” is estimated by to be approximately 90% in the US [2013 data]; AWCBC  puts the Canadian “employed labour force” coverage rate at about 84% [2013 weighted average] but the calculation method is somewhat different.  Australia reports that 92% of its employed labour force is covered by workers’ compensation (often called “WorkCover”). 

Both the US and Canada have wide variations in the coverage rate among the states and provinces.  Texas, where employer “non-subscription” to workers’ compensation is an option, approximately 67 percent of private, year-round employers have workers' compensation;  these employers account for about  80 percent of the private workforce in Texas. [Texas, Department of Insurance, Division of Workers Compensation, Biennial Report of the Texas Department of Insurance to the 84th Legislature , December 2014].  That is likely at or near the low end of coverage rates in the US but no standardized calculation is available to allow state-by-state comparisons. 

 In Canada,  there is a standardized calculation methodology that allows province-to-province comparisons (including self-insured and federal employees in the covered percentage).  The recent calculated “percentage coverage”  rates for each province/territory and the Canadian average are shown in the following figure:

While the average is approaching 85% and has been rising since 2000, there is a clear divide above and below the national average.  

As far as I can tell, there is no similar analysis on a state-by-state basis in the US.  It is reasonable to assume, however, that there are states where more than 95% of the employed labour force is covered and others where the percentage may be as low as 75%. 

“Self-insured” employers are typically included in the calculations as long as they are required to provide legislatively mandated workers’ compensation coverage.  Firms outside the scope of coverage or not required to comply with workers’ compensation law are typically excluded from calculations.  As a matter of practice, such firms may well purchase and offer disability insurance, although a few will carry the risk and manage their own liabilities. 

As an aside, there are two main types of self-insured employers: 

• those that are self-insured and self-administer their own claims (or contract a third party administrator to do so on their behalf), and
• those who are self-insured without self-administration.   

In most Canadian provinces, self-insurance does not include self-administration.  Self-insured employers are financially responsible for their own claims but the administration of the claim including initial adjudication is administered by the provincial exclusive workers’ compensation system.

Australian workers’ compensation coverage alone would be around 80% of the employed labour force; adding the “self-insured” employers, the figure rises to about 90% [based on 2013 data].  It should be noted that self-insured in Australia means self-insured with self-administration (including third party administration) in conformity with benefit levels mandated by the workers’ compensation legislation.  Self-insured firms in Australia manage their own financial liabilities arising from their own claims. 

The implication here is that intentional exclusions in Canada, the US and Australia result in 10% to 15% (on average) of employed members of the labor force outside of the scope of workers’ compensation coverage.  If the rate of injury to this excluded group is similar to the rate experienced by those within the scope of coverage, then 10% of 15% of time-loss or wage-loss resulting from workplace injuries are excluded from the possibility of compensation.  

As may be noted from the Canadian data, variation in percentage covered in some jurisdictions over time.  This is rarely due to sudden changes in the scope of coverage.  More often than not, the variation relates to changes in the distribution of the employed labour force among sectors of the economy (including sectors excluded from mandatory inclusion in the workers’ compensation system).  

The “scope of coverage” decision is a public policy choice but it has important consequence for those outside the coverage umbrella.  Clarity around who is excluded and why is important and necessary in order for workers to assess their own financial risk.  Those who can afford it may choose to purchase private disability plans. 

Intentional exclusions explain why one segment of work-related time-loss injuries that are not compensated.  Being within the scope of workers’ compensation coverage, however, does not automatically result in payment of compensation for days lost due to a work-related injury and disability.

2. Injuries Accepted and Compensated

This is the firmest statistic you can find at a state or provincial level.  It is typically reported on the basis of a claim where “indemnity” or “wage-loss” compensation was paid for “temporary disability”.  Some jurisdictions make a distinction between temporary total and temporary partial disability payments. 

For the purposes of this analysis, any workers’ compensation claim that has even a partial day of wage-loss compensation paid would be considered in the count.  Medical-aid claims (or “healthcare only” claims) are not considered as “accepted and compensated” for the purposes of this analysis.

Time-loss claims that are “accepted but not paid” are discussed later but introduced here to contrast with the compensated case.  A worker who experiences a Monday injury (in a typical Monday to Friday work week) and is away from work the next three days (Tuesday, Wednesday and Thursday),  then returns to work Friday may receive no wage-loss compensation if the jurisdiction has a three-day waiting period; doctor bills and medication may be paid but no compensation for time away from work would be payable because of the three day waiting period.  Such a claim would be counted as accepted but not paid. 

In some provinces, employers may pay the first week or two of wage loss in order to maintain income continuity for injured workers.  The employer is re-imbursed by the workers’ compensation insurer thus maintaining the tax-free status of the compensation.  In Australia, employers may be required to pay wage loss compensation for the first 5 or 10 working days before workers’ compensation payments for wage loss begin.  This sort of “employer deductible” would be counted as an accepted claim with compensation paid.

The statistic for “work-related time-loss injuries with temporary disability compensation” may be reported as or along with an “injury rate”.  This may be misleading depending on the denominator used.  As indicated in the figure and explanation above, this fraction of work-related injuries relates only to covered employment and only to claims that received payment.  Unless coverage is near 100% and wage-loss compensation is paid for all time away from work (that is, no waiting period), this is more aptly entitled “paid claim for covered injuries rate”.  

These first two categories – workers’ compensation “excluded” and “accepted and compensated” might be assumed to tell the whole story but research evidence suggests otherwise.  Some studies of fatalities and cases involving hospitalization show medium to high correlation between hospitalization records and workers’ compensation [for example, see  Koehoorn M, Tamburic L, Xu F,  Alamgir H, Demers PA, McLeod CB, “Characteristics of work-related fatal and hospitalised injuries not captured in workers’ compensation data”, Occup Environ Med doi:10.1136/oemed-2014-102543];  however, most research studies reveal large discrepancies between cases reflected in workers’ compensation data and other sources such as hospital records [see  Boden LI, Ozonoff AL . Capture-recapture estimates of nonfatal workplace injuries and illnesses. Ann Epidemiol 2008;18:500–6. doi:10.1016/j.annepidem.2007.11.003].

Next we examine four main categories of work injuries that are not compensated. 

3. Time-loss Work-injuries Accepted but Not Paid

Workers with otherwise acceptable work-related time-loss injuries may be “disentitled” from receiving compensation. 

• Waiting period non-payment

As noted above, waiting periods can result in non-compensation for wages lost due to absences caused by work-related injuries for cases within the scope of employment.  Waiting periods are “worker deductibles” and have been eliminated from all but two Canadian jurisdictions and all Australian jurisdictions.  In the US, waiting periods range from three to seven days.  Most states have a “retroactive period” that waives the waiting period for work absences that extend beyond a given duration (two to four weeks, typically).  Time-loss claims with no wage-loss compensation are considered “accepted but not paid” for this discussion.

• Concurrent employment or other earnings disentitlement

Otherwise acceptable claims may also fail to qualify for compensation.  In the case of concurrent employment, for example, an injured worker may be disabled from one job but able to work in a second, concurrent job.  Wages from a second or other multiple employment(s) may negate any earnings loss from the injury employment.  Such a claim would be counted as accepted but not paid.

• Process issues resulting in non-payment

Still other claims are accepted but no payment is made to the worker because of lack of contact with the worker. The transient or tenuous nature of the injury employment may be one reason for this phenomenon.  For example, a migrant farm worker may suffer an injury, get immediate treatment then return to his or her home country to convalesce.  Assuming farm work and migrant agricultural workers are covered and the injury properly reported, the immediate medical bills  may be paid (often directly to the physician, hospital or other provider) but any payment to the worker may be impossible due to lack of contact information.   Such a claim would be counted as accepted but not paid.  

As noted at the beginning of this article, many workers have little or no financial reserves.  The lack of financial resilience means all aspects of their lives are put in jeopardy as the result of even a short work absence due to work-related injury.  Workers move to lower-priced accommodation, live with relatives in an unknown address in or out of state (in the case of temporary foreign workers this may be out of country) to have assistance and support in recovery, leave the city to reduce costs, etc.  Such cases may still have “technical entitlement” to wage-loss compensation but the insurer may “suspend payment” the claim processing due to lack of contact with the injured worker.  Medical bills and hospital bills might be paid if they were directly submitted to the insurer. 

4. “Denied” (or “not decided”) claims

Employers may properly report injuries and workers may fill out all the appropriate claim forms for injuries they and even their physicians believe arose in the course of and out of the duties associated with their work but the claim may be “denied”.  This term may or may not have a specific meaning for a particular jurisdiction.  If an injured employee applies for benefits but his employer is not properly insured, the claim could be denied or “rejected”.  Many jurisdictions have laws that will allow coverage of injuries where the employer should have been registered or insured but this is not universally true.

A more common category of denied claims involves those where the insurer accepts that the employer is covered and that the employee is a worker but does not accept that the particular injury occurred as a result of work or that the consequences of the injury are sufficient to warrant time away from work.  Back pain may have a sudden onset at or after work but linking work to the injury may be complicated and contestable.  Stress, repetitive strain,  and cumulative damage from repeated incidents are frequently contested by the insurer.  In these cases, the worker and even the employer may well believe in the “work-relatedness” of the injury but the insurer may rule the injury did not arise from work. 

Statistics on denied claims (which may be reported as “rejected”, “disqualified”, or “disallowed”) are rarely reported.  When they are, it is difficult to assess what portion of the claims could be considered work related.  Few claims that are initially denied are subsequently appealed or reviewed for the accuracy of the denial decision.  To workers and many others, these claims are often the genesis of mistrust of the system.  That said, workers’ compensation has a limited mandate and the work-relatedness or causation decision is critical to the integrity of the system. 

Workers may “over-report” injuries (including those adequately treated with on-site first aid;   disinfect and bandage an abrasion, for example) to record an exposure, build evidence of poor or unsafe working conditions, or because of misinformation on the nature of workers’ compensation.  These cases are often turned down for any compensation.

Some quite serious injuries that occur at work may be denied because of “horseplay” or other actions that essentially take the worker out of the course of employment.

An injury may well arise from work activities and be documented by both the worker and the employer as being work related;  the insurer may also agree and accept the claim to pay doctor bills and medication but rule that wage-loss compensation is unwarranted.  Despite a valid work-injury claims, no compensation is payable because the worker is deemed able to work (not totally disabled).

Despite the potential negative connotation of the terms “rejected, disallowed, disentitled,  and denied”,  these decisions are essential components of adjudication in workers’ compensation.  Legislation and policy define the limits of the coverage; acceptance of cases beyond that scope undermines the will of the legislature and the financial integrity of the system.  The consequences of not properly adjudicating claims include  losses due to fraud and abuse that would increase costs for employers and threaten benefits for legitimate claims.  

An injury that is attributable to work may carry secondary benefits that motivate the filing of a claim that will or should be ultimately and properly denied.  In the US, the lack of universal health care may be a motivator to opt for an attribution to work of an injury of uncertain origin.  In the absence of a clear etiology, the attribution of a back injury to work activity, for example,  may afford access to medical care and even improved social status or family support. 

Few jurisdictions release any information on denial rates of initial claims.  Even where data are available, it is hard to tell how many denied claims might eventually have involved wage-loss compensation. 

There is also little data on claims that have incomplete information required to make a decision.  Similar to claims that are decided but payment suspended due to lack of contact with the injured worker, those with work-related time-loss injuries who move, return to their home country, or otherwise lose touch with the insurer may lose possible entitlement because of the lack of continuing contact or supply of additional information needed to complete the claim process.  In some states, there are legislated timelines for deciding claims.  Claims that are otherwise acceptable may be denied in order to meet time limits imposed by the regulator.  Provisions for reconsideration or “unsuspending” claims may exist but data are hard to come by. 

5. Worker under-reporting (including non-reporting)

Assuming an employee works within covered employment and suffers a time-loss injury, there are several reasons why the injury might never be reported to the workers’ compensation insurer even if the employer is otherwise supportive of workers’ compensation reporting and claiming. 

• Third-party action (considered, initiated or in process)

Injured employees are not permitted to sue their employers or other workers for work-related injuries that arise in the course of their employment.  This “statute bar” is an essential component of the workers’ compensation “exclusive remedy” that is at the core of the grand bargain or historic compromise that is workers’ compensation.  Where a third party is involved, and that third party is not an employer or worker under the workers’ compensation legislation, the worker may have an option of pursuing an action.  The choice to pursue such action may prevent a workers’ compensation claim.  In some cases, a worker may claim workers’ compensation benefits and subrogate the right of action against the third party to the workers’ compensation insurer.  This, however, removes the decision-making from the injured worker.

• Gradual-onset and Out-of-time

Work injuries and occupational disease may not become apparent immediately.  Most jurisdictions have time limits within which a work injury or occupational disease must be reported or workers’ compensation claimed.  With few exceptions, former workers—those no longer in the workforce or those who are unemployed at the time of a claim—are unlikely to have a successful workers’ compensation claim.  Exceptions may be made for cases where the diagnosis was delayed or other barrier prohibited the timely report and claim.

The connection between work and the development of disease or an injury may not be immediately obvious.  Unlike injuries that have a single, sudden traumatic origin, some mental injuries such as Post Traumatic Stress Disorder (PTSD) may develop over time with disability occurring as a result of one or several events that happened over time.  First responders, for example, may be exposed to horrific scenes of death and violence.  The psychological toll may result in non-disabling or disabling conditions (including sleeplessness, depression, anxiety, anger) but may also result in more serious issues not immediately proximal to a specific definable event.  

Bullying in the work environment (from customers, bosses, or co-workers) is a recognized workplace health and safety issue.  By definition, bullying or harassment (including sexual harassment) is a pattern of behaviour, not a single event.  Some jurisdictions have specific occupational health and safety regulations or standards that require employers to act to prevent bullying or harassment; workers’ compensation systems may cover injury as a result of bullying or harassment but the lack of consistency may contribute to under-reporting.  Workers who suffer illness or injury as a result of bullying in the workplace may be unaware of compensability.  Worse yet, workers may fear further bullying or harassment if a claim is made or the pattern of incidents is reported. 

• Non-reporting

Why wouldn’t a worker claim workers’ compensation for a work-related time-loss injury?  Leaving aside employer inducements and active claim suppression (which we will get to shortly), there are several reasons including:

• Lack of knowledge of rights
• Misconceptions about benefits
• Substitution of other income supplement
• Barriers of language, culture
• Fear of collateral consequences (undocumented worker fearing detection and deportation)
• The “hassle” factor (forms completion, retelling injury story, meetings)
• Social or work-group pressure

This last item can be quite significant.  In my career as a vocational rehabilitation consultant I never saw a roofer or faller with a minor injury.  Unless they were taken from the worksite on a stretcher, workers in these occupations seemed to view a workers’ compensation claim as a sign of weakness.  Even among nurses and caregivers, there was a sense that some injuries are “just part of the job”.  The social stigma in these occupations may be changing but is still present but no one should have to accept work injury as a consequence of work.

As noted earlier, many workers have little or no financial reserves.  For these individuals, the financial impact of a waiting period that may be as long as a week coupled with the delay between date of injury and first payment can be an overwhelming concern.  For workers that have access to paid sick leave,  the decision to opt to use paid sick leave that ensures no loss of earnings and no delay in payment over workers’ compensation is an obvious choice.  Unfortunately, this externalizes costs to others.  Sick leave is a taxable benefit often factored into the wage cost in collective agreements.  Using sick leave for work injuries removes the focused financial incentive workers’ compensation provides in promoting workplace health and safety.

The hassle factor refers to the effort cost of filing a claim relative to the expected benefit.  If I think I will get little or no benefit from making a claim, why should I bother?  A few jurisdictions have “dial a claim” services or establish a claim on the basis of any report of injury from a physician, employer or worker.  Some jurisdictions require claims to be submitted in specific manual forms through specific channels with the employer.  The hassle factor of the latter may make filing for short time-loss not worth it to the individual. 

Under-reporting by workers not only deprives the worker of entitlements or externalizes costs to others, it dampens an important safety feedback loop and distorts the risk profile of the workplace.  Those distortions may result in underestimation of hazards and risks creating an information vacuum or asymmetry to the potential detriment of workers and others in the workplace.

6. Injuries under-reported by employers

Under-reporting by employers have similar consequences to under-reporting by workers but the underlying consequences and motivations are different.  The categories here include the following:

• Benign Non-reporting or Misreporting (no active intent)

Benign “non-reporting” is not direct claim suppression but may relate to a misunderstanding of requirements or administrative barriers related to poor training or administrative systems.  Training deficits and lack of experience are often at the route of the issue.  Employers, particularly smaller ones, may rationally and properly focused on production issues and the challenges related to meeting staffing demands that arise following an injury; reporting may not be seen as a priority particularly if the procedures are not well known or systems lacking. 

• Intentional Under-reporting (active intent)

 Intentional under-reporting or misreporting (showing an injury as no time-loss when, in fact, the injury does involve time away from work or otherwise meets reporting criteria) may be as large as 9% of the reported time-loss workers’ compensation volume. [Prism Economics and Analysis, “Workplace Injury Claim Suppression: Final Report” prepared for WSIB, Ontario, April 2013].  Motivation for this behaviour may arise from perceived consequences of reporting claims as a result of the “experience rating” or rate modification systems that exist in most jurisdictions.  Critics claim:

...Experience rating causes the under-reporting to a WCB of occupational disabilities, it creates false statistics that tend to diminish OH&S… Experience rating also creates an incentive for employers not to report to a WCB disabilities sustained by a worker that employers have a statutory duty to report.” [Terence Ison, “Reflections on Workers' Compensation and Occupational Health & Safety" (2013) 26 C.J.A.L.P. 1-22] .

In some jurisdictions, it is the responsibility of the employer to report the workplace injury to the workers’ compensation insurer or authority.  This requirement is over and above requirements by the occupational health and safety authority unless, of course, the insurer and the OH&S agency are one in the same (WorkSafeBC, for example).   

To encourage reporting, legislators often set time deadlines and impose penalties for non-reporting or delayed reporting.  However, there is no centralized source of information on the prevalence of non-reporting or delayed reporting by employers. 

• Employer claim suppression (intentional indirect or passive)

Whereas benign and intentional under-reporting relate to direct action (or inaction) by employers, subtle and overt claim suppression by employers induce actions (or inactions) of workers with regard to claiming workers’ compensation for time-loss injuries.  One study summarized the issue this way:

Employer inducement can be either overt or subtle. Overt inducement consists of threats and sanctions. Subtle inducement can take four forms:

(1) appeals to loyalty,

(2) willingness to pay wages and medical benefits in lieu of a workers’ compensation claim,

(3) group-based incentive programs  that foster peer pressure to suppress reports of injuries, and

(4) perceptions that an injury will diminish prospects for promotion or increase the risk of lay-off.  [Prism Economics and Analysis, 2013]. 

By the way, “injury free” group performance incentive programs fall into this category of claim suppression.  That is why most occupational safety and health authorities discourage or prohibit incentive programs that could be an inducement to under-report work injuries.  [For example, OSHA, “Memorandum: Employer Safety Incentive and Disincentive Policies and Practices”, March 12, 2012]

These inducements are more difficult for regulators to detect.  They are most effective on employees who are most vulnerable.  These include workers with limited knowledge of their rights, few alternative employment prospects, and precarious employment situations.  That said, large firms as well as small have been found to engage in these activities.   

The likely fraction of work-related time-loss claims that receive compensation is a function of these factors.  Studies in the US and Canada along with published statistics can help fill in the values for a given jurisdiction. 

This is critical information for policy makers as well as workers and employers.  If the fraction of accepted and compensated work-related time-loss injuries is unacceptably low in a given jurisdiction, then administrative and policy actions can be taken to improve the percentage.  Actions include:

• Expanding the scope of coverage to include currently excluded occupations and sectors
• Promoting coverage to those with option of coverage
• Educating workers and employers on their rights and obligations
• Streamlining application and benefit payment systems
• Specific programs for those in precarious and contingent employment
• Identifying administrative and policy barriers that result in denied claims

Does Workers' Compensation need a new "Grand Bargain"?

In a recent blog post, Robert Wilson (WorkersCompensation.com) concluded that workers’ compensation needs a new “grand bargain”.  He supports this conclusion by arguing that the exclusive remedy that is the main underpinning of the workers’ compensation system is under attack.  He cites three trends as evidence that the current arrangement is broken.   Specifically, he notes increasing exceptions to the no-fault aspect of the system, the erosion of worker benefits, and the increasing scope of coverage for co-morbidities and social issues as three categories of threat to the current system. 

Whether you call it a “grand bargain”, “historic compromise”, or  “historic trade-off”,  the current system of workers’ compensation is a social contract and it is under attack.  One need look no further than the daily news to see Bob’s issues in the headlines.  This morning’s Pro-publica / NPR article, “The Demolition of Workers’ Comp”  certainly supports the contention that the current system isn’t working.  They underscore the erosion of benefits for workers, the declining costs for employers,  and externalization of the human and financial costs of workplace injuries to workers, the taxpayers and society at large.

Bob pointed out strains on the original grand bargain.  It was based on principles and designed to apply in an economic and social context that was changing--not static-- at the time.  The basic principles have remained the same but the context has continued to change.  Science has advanced, we use new materials and processes, we have different stressors in our environment.  We understand today that many factors in the work environment can cause or be of causative significance of injury and disease. Workplace stresses including bullying, harassment and work overload are now known to be factors in mental injuries.  We now understand that PTSD is a real and serious consequences of certain work exposures.  We know or suspect strongly that  shift work  that interferes with circadian rhythms is a probable human carcinogen.   This changed context does not mean that the principles should change. 

We also know that workers and work have changed. A century ago, the argument against including farm workers in the scope of workers’ compensation coverage could plausibly be sustained because farms were mainly family operations and most of the workers were family.  That is not the case today.  I don’t see this change as the basis for throwing out the old paradigm.  In fact, exclusion of farms from the scope of workers’ compensation coverage makes less sense in the present context.  Many temporary foreign and migrant workers would benefit greatly from bringing farms under workers’ compensation rules.  It works in some states and provinces; why not make that coverage universal?

Workers’ compensation has always operated on the principle that we take the worker as we find him or her.  That principle includes many conditions that may make recovery from any workplace injury more complex or protracted.  The fact that the condition did not prevent work prior to the injury is not a reason to decry the current scope of workers’ compensation coverage.  This is not coverage “creep”.  It is, in part, a consequence of medical science enabling more of us to work despite underlying conditions that may be managed.  

Rather than a new grand bargain, why not try living up to the original one?  The  NationalCommission on State Workmen’s  Compensation Laws (1972) defined what living up to the bargain would look like.  Looking only at the main National Commission recommendations on temporary disability compensation, I found only a handful of North American jurisdictions that came close meeting the recommended standard.  The Pro-publica/NPR article found only seven states follow at least 15 of the recommendations.

Clearly, the current system of workers’ compensation is not working in most jurisdictions.  The fact that there are some examples in the US and Canada where the systems do provide something close to the National Commission’s recommended standard demonstrates that the underlying principles of workers’ compensation can achieve the social policy objective:    to protect workers from work-related injury, disability, illness and death in a compassionate and sustainable way that still allows the economic activity and innovation necessary for societies to operate and thrive.  

The failures are not in the foundations or underlying principles of the original grand bargain but in the proliferation of legislative and policy “reforms” that depart from them.  The National Commission defined in exquisite terms the minimum standards workers’ compensation systems ought to achieve.  It is against that standard that each workers’ compensation system should be measured and held to account. 

With apologies to Chesterton, the grand bargain that is workers’ compensation has not been tried and found wanting;  it has been found difficult and not tried.  Before we abandon the grand bargain and strike some new compromise, we ought to try living up to the current one first.   

What are the OH&S / Workers' Comp implications of "Voluntary" events and activities?

Workers are often asked to “volunteer” for certain activities that have some association to employment.  The association may be strong (volunteering for overtime) or weak (attending a company picnic) but there are implications for safety and health as well as workers’ compensation. 

Most volunteering” cases involve a worker working on a special project, putting in overtime to clear a backlog, or participating in a special events like conferences, open houses, or community event (parade, “home and garden” show, cultural festival) .  The connection to work in these examples is pretty clear.  A worker may volunteer to participate in these activities and events but injuries that may arise out of and in the course of these events are as work-related and typically accepted as compensable in most jurisdictions. 

This coverage is an important protection for workers and employers. Workers continue to have access to the workers’ compensation coverage for themselves and their families; workers’ compensation coverage protects employers from suit for work-related injuries that may arise.  If the voluntary event were not deemed work-related, the employer might still be faced with liabilities in the event of injury. 

Just because a voluntary event or activity such as working to clear a backlog may be covered by workers’ compensation does not mean an employer can forget about health and safety.  Occupational health and safety standards still apply.  Before initiating a voluntary weekend shift to clear a backlog or asking someone to pull an “all-nighter” to prepare a presentation for the next morning, an employer needs to ask questions about health and safety like:

•  Are the protections normally provided available to the worker(s)?
•  Are there special risks or hazards associated with this work that need to be identified? 
• If the worker is working alone, what provisions are required and in place for his or her protection?

Suppose there is a big order due out on Monday and you ask for “volunteers” to work the weekend to fulfill the commitment.  Are the usual weekday resources for the health and safety of the workers available on the weekend?  Is there access to a qualified first aid attendant, open lunch area, alarm and production stops working, etc.? Does the week-end site security system change the risk of intrusion?  Are there scheduled maintenance activities such as floor washing and waxing or system purging that could increase risks to those not normally on site when these activities take place?

And then there are the “voluntary events” like corporate picnics, softball tournaments and project celebration parties.  Are these truly voluntary or are they “work-related”?  Depending on the jurisdiction and the circumstances, injuries arising from participation in such events may well be compensable.  Each case will be determined on its own merits but adjudicators tend to look at the expectations for attendance, where the event takes place, how involved the employer is in sponsoring the event, and the degree to which the activity or event furthers the objectives of the organization. 

Expectations for attendance and participation are tricky.  A worker may feel compelled to participate particularly if the firm organizing or sponsoring the activity promotes it as a “team-building” event or if there is an implied advantage or accepted requirement of participation as part of career development.  Failing to participate may be what we used to call a “career-limiting” decision.   Is a participant really “free” to choose non-attendance in the event?

Employer benefits such as improved worker health and morale, higher corporate profile, and better standing in the community may be enough to bring an event into the scope of “work-related” activities.  One can imagine photographs of the event or activity published on intranet sites and used in recruiting brochures as evidence of corporate social responsibility and accountability—an important corporate goal. 

If you want to enhance trust among team members, you might organize a rock-climbing event.  A day of river rafting may help an executive team bond, refresh and foster creativity.  Having teachers/faculty voluntarily attend graduation ceremonies, homecoming, and alumni events clearly advances the interests of the school, college or university.  The “work-relatedness” of any of these events may be sufficient to bring injuries that may occur into the scope of workers’ compensation coverage.

My point is not to discourage corporations from offering such events and activities.  These activities can clearly further the corporate objectives.  When arranging, sponsoring or organizing any corporate activity and event, be aware of its “work-relatedness”, have your health and safety professional look at the hazards that may be inherent in the activity, venue, or event,  and ensure compliance with occupational safety and health standards. 

How much does Canada spend on medical care for work-related injury?

A policy analyst from the US contacted me a few weeks ago and asked a disarmingly simple question.  “How much does Canada spend on medical care for work-related injury?”  The question came from an assumption that Canadian healthcare system would have this data readily available.  In fact, the question is quite complex (and is the reason for this longer than usual post).  

The first complexity is a definitional one:  what is covered by the term “medical care”.  Our discussion on this point lead to agreement that the term was meant to cover the various aspects of necessary medical care including doctor visits, hospitalization, medical diagnostics such as MRIs and x-rays, prescriptions, physical rehabilitation, and medical appliances such as wheel chairs.  Coming from a workers’ compensation background, both of us had a pretty good idea of what would be typically covered by a work-related injury under workers’ compensation in our respective jurisdictions.  We agreed that the scope and nature of WC medical coverage was pretty much the same in both countries.  For the purposes of the question, “Medical care” is meant to include the health care expenses typically covered by WC systems from hospitalization to bandages and medications to MRIs. 

The second issue we discussed was the term “cost”.  In workers’ compensation accounting, there are “actual costs”, real payments to real doctors, hospitals and therapists made in a particular year and there are “incurred” costs, which crystalize an estimate of the medical costs that are likely over the lifetime of claims occurring in a given year.  The incurred cost may include discounted future costs related to an injury-year claim.  My friend was interested in the former, the real dollars paid out in the calendar year. 

What surprised my colleague was the fact that workers’ compensation medical coverage was separate from the universal medical plans and that each province had its own medical plan.  I explained the constitutional reasons for this and the basic principles of the Canada Health Act.  Like WC insurers in the US and most other countries, WC is the first payer of work-related medical costs in Canada. 
I also clarified that payment of insured health services by an employer or a worker would offend the principles of the Canada Health Act (public administration, comprehensiveness,  universality, portability, accessibility).   WCBs pay for the cases they cover but no direct payment by the employer or worker for insured necessary health services is permitted. 

To answer the question, I went to WCB’s annual report and looked through the notes in the financial statements.   From a workers’ compensation perspective, medical care costs for work-related injury, illness and disease was nearly $1.75 billion dollars in 2011.  But that was not quite the answer to the question asked! 

Clearly, workers’ compensation covers a lot of the work-related injury medical costs—and well it should.  Work-related injuries have both a human and financial cost.  The financial cost is reflected in industry-specific premiums and firm-specific experience rating that determine the amount a firm pays for workers’ compensation coverage in a year.  Workers’ compensation costs are counted for in the firm as an employment expense and add to the labour cost of production.  It is only when the cost of work-related injury is fully reflected in the cost of production that firms may be motivated to invest in safety.  Firms with the lowest injury costs have a competitive advantage over those with higher costs.  Just as importantly, the cost of work-related injuries is borne by the industry that gave rise to that cost and not by the worker or the general community.    Why should the community –taxpayers—be on the hook for work-related injury medical costs?  That would amount to a subsidy to business.  

This all makes sense from a worker’s compensation perspective.  Industry should pay the medical cost associated with work-related injury and disease.  This logical, simple principle is also consistent with what Tommy Douglas and Emmett Hall—the founders of universal health care in Canada—envisioned.  Both saw fit to exclude payments made by workers’ compensation authorities from the definition of insured health services.  

To really answer the original question,  I had to estimate the medical costs from those enterprises and workers excluded from workers’ compensation.   The list of exclusions varies from province to province.  Some jurisdictions have virtually no exclusions or exemptions from coverage.  For these provinces, the amount spent by the WCBs for medical care for work-related injury is the cost of work-related medical care for the whole jurisdiction.  

Assuming the exclusions from WC coverage have a similar injury rate, severity and cost pattern to the WC covered population in each province, one way of estimating the medical care costs of work-related injury and disease in any given province would be to take the actual costs paid by the WCB for a year and divide that by the percentage of the employed labour force in that province.  Subtracting the actual cost of WC-covered costs from the grossed-up estimate would yield an estimate of medical costs for the non-WC covered segment of the employed labour force. 
The result of this approach yields more than $337 million.  That’s a third of a billion dollars being borne by workers and taxpayer-supported healthcare insurance programs.  More than half that amount is in Ontario.  So, based on this estimate method, the cost of work-related medical care (for both workers' compensation covered and excluded work-related injuries) in Canada is about $2 billion. 

To be more accurate the injury rate and population of each exempted category would have to be gathered and matched with similar populations from populations with WC coverage.  That data is simply not available to an independent researcher.  It may also be argued that at least some of the work-related medical care costs would not be borne by the taxpayer but may be borne by extended medical plans.  This may be true but few plans are fully employer paid or fully self-insured leaving open the likelihood of some externalization of costs from the employer.  Finally, there are costs that would be borne by certain workers covered directly by the Federal Government but I could not find a good source for that. 
There may be valid arguments for exclusions from worker’s compensation coverage but those arguments need to be sufficient to justify this substantial public subsidy to the cost of production.  Why should taxpayer-supported medical plans subsidized the cost of work-related injuries for banks in Ontario or teachers in Saskatchewan but not in BC?  So far, the only response I have received from policy analysts in those provinces relies on the universality principle of the Canada Health Act.    

Regardless of who pays, the financial cost of medical care for work-related injury in Canada is likely more than $2 billion—an unacceptable and preventable cost. 

If you have a better estimate methodology or can provide estimates methodologies that are more precise, let me know.