What should be the Maximum Temporary Disability level under Workers’ Compensation?

Workers’ compensation costs for temporary disability are a function of:

• The compensation rate (66 2/3rds% of gross, 90% of net spendable)
• Waiting periods (none, 3 days, 2/5ths of a week) and retroactive periods (none, two weeks, four weeks)
• Maximum compensation value  

The National Commission on State Workmen’s Compensation Laws (1972) set out what ought to be the standard for each of these measures.  In my previous posts, I have evaluated each US state and Canadian province against the National Commission’s recommendations regarding compensation rate and waiting periods/retroactive periods.  This time, I examine the recommendation regarding weekly maximum compensation for temporary disability.

The National Commission recommended:

We recommend progressive increases in the maximum weekly wage benefit, according to a time schedule stipulated in Chapter 3, so that by 1981 the maximum in each State would be at least 200 percent of the State's average weekly wage. [Emphasis added]

To be clear, the recommendation was just that, a recommendation.  Each jurisdiction must evaluate their response in accordance with their own priorities and circumstances. But we are thirty plus years from the aspirational deadline set by the National Commission.  It is time to evaluate what progress has been made towards its recommendation.

To evaluate progress, I took the 2012 maximums for each state and province from the IAIABC/WCRI Workers’ Compensation State Laws and AWCBC data that either stated the maximum directly or allowed it to be calculated based on maximum assessable or insurable earnings and the compensation rate.  I then used the BLS average (mean) annual earnings from their May 2013 published data, converted this to a weekly amount and multiplied by two to get a recent quantification of the National Commission goal that the maximum benefit equal  200% of state average weekly wage.  I used Statistics Canada data for average weekly wages (including overtime) for 2013.

Finally, I calculated how much the maximum compensation for temporary disability compensation has progressed toward the Nation Commission total.  I arbitrarily set a standard of 50% toward the National Commission “at least 200%” recommendation as having met the spirit of the recommendation.

How did the states and provinces measure up?  Only 17 states  and all but two Canadian provinces exceed the 50% threshold towards the National Commission recommended level of at least 200% of the state average weekly wage.  

Again, this is not about benefit adequacy.  This is about the equity in how the earnings losses due to work-related injury are shared.

There are two insurers:  the employer and the employee.  The employer transfers the risk of his share of the losses due to workplace injury to the insurer for the price of the premium and, by virtue of the exclusive remedy, is protected from suit for losses beyond those covered by the workers’ compensation insurance.  The other part of the earnings loss is self-insured by the worker.  The worker bears the physical and mental impact of the loss and the share of the earnings loss not covered by the workers’ compensation insurer.

The policy equity questions here are two-fold:

• How much of the financial loss should each insurer bear?  
• What is equitable (not adequate) compensation relative to what workers traded off in the “grand bargain” or “historic compromise” that created workers’ compensation?

A low maximum shifts a greater portion upon the worker.   What this analysis shows is two things:

• Meeting the recommendations of the National Commission is achievable as evidenced by the states and provinces that have met and exceeded the recommendations.  
• Many states and a couple of provinces have compensation levels that fall far short of the National Commission standard—a situation that may fundamentally undermine the foundations of the historic compromise that is workers’ compensation.  

What percentage of earnings should be replaced by temporary disability benefits?

Workers’ compensation levels for temporary disability are of critical importance to workers and their families.  Any discussions I’ve read recently are around “benefit adequacy” of temporary disability benefits.  This is, of course, critically important but misses some important points.

Workers’ suffer from work-related injuries.  No one can share the physical and psychological pain.  Workers’ compensation is intended to offset the financial impact in terms of lost wages.  In addition to the pain and suffering of the work-related injury, workers must also bear the earnings lost that are not compensated by workers’ compensation temporary disability payments.  As with uncompensated waiting periods and earnings above the maximum insurable, workers are self-insured for the difference between what they lose in wages and what they get in compensation.

The obvious benefit adequacy argument characterizes the loss as a worker deductible.  It also shifts the cost of work-related injury from employer to worker.  The lower the cost to the employer, the less the incentive to invest in worker safety and return-to-work initiatives.  Workers’ compensation costs are part of the prevention feedback mechanism.  The historic trade-off that made workers’ compensation the exclusive remedy envisioned that costs of workplace injury would not unduly shift costs as well as the burden of injury upon the worker.  

How much of the worker’s loss should be compensated?  The National Commission on State Workmen’s Compensation Laws (July 1972) said the following:

We recommend that cash benefits for temporary total disability be at least two-thirds of the worker's gross weekly wage. The two-thirds formulation should be used only on a transitional basis until the State adopts a provision making payments at least 80 percent of the worker's spendable weekly earnings. (See R3.6 and R3.7)  [Emphasis added]

Here we are more than four decades after Professor Burton’s authoritative and comprehensive report and the fact is only 10 US state have made progress toward meeting this recommendation.  By contrast, all Canadian jurisdictions could be assessed as having met the recommendation with the majority exceeding the “at least 80% of net” standard set out in the report’s recommendation. [see accompanying table]

Beyond the benefit-adequacy argument, the financial costs of work-related injury being borne by workers are real and measurable cost.  Workers and their families bear other costs and there can be debates about what estimates of those ought to include.  Temporary Disability losses are easily quantifiable into the portion covered by workers’ compensation insurance and the portion self-insured by the workers themselves.  

If the work at least 80% of that loss.  Clearly a handful of US states and most Canadian jurisdictions have found ways to meet this standard.  Doing so may be fundamental to preserving workers’ compensation as the essential social insurance program it has become in the world today.

Who insures short-duration work-injury caused absences?

Most people would say, “work-related injuries that result in workers losing time and earnings are covered by workers’ compensation”.  In most Canadian provinces, that statement would be true.  In three Canadian provinces (PEI, NB and NS) and all US states, short-duration time-loss claims may receive no compensation under workers’ compensation statutes currently in force.  In all but seventeen states, most injured workers with less than two weeks of missed work due to their injuries will never receive compensation for an initial waiting period of three to seven days.

For these shorter-duration work-injury or illness caused absences, the worker is essentially self-insured for the waiting period.  From a workers’ compensation insurer perspective, these claims may have minor costs for health care but are essentially costless in terms of compensation for temporary disability resulting in lost wages.  I can find no jurisdiction with a waiting period that publicly quantifies either the number of cases where a waiting period was served or the value of uncompensated lost wages being borne by injured workers who miss more than the day of injury.

Without data, it is hard to estimate the number of work-related absence cases that are going uncompensated because of waiting periods.   Without measurement, it is hard to see if this burden is shrinking or growing.  Without a financial implication, the case for prevention may be less than it might otherwise be. 

Jurisdictions such as British Columbia that compensate for time lost beyond the day of injury may provide an indirect indication of what is not being compensated in jurisdictions with waiting periods.   Using WorkSafeBC claims originating with injuries in 2010 and considering all the days paid through to October 2014, approximately 23% of work injury claims were compensated for 1 to 3 days.  Using a one-week measure, about 36.5% of claims received compensation for one week or less. Almost half the claims show a worker with temporary disability of two weeks or less; nearly 60% of these 2010 injured workers  have three weeks or less  lost due to work-related injury.   If a similar distribution of work-related injury absences applies in the US, then about half of work-related injuries involving time-loss are at least partly insured by injured workers themselves. 

These shorter duration time-loss claims provide critical data on the causes and nature of injuries (data that are not typically collected if no wage-loss compensation is paid).  These data can inform prevention activities and public policy that will reduce future incidents.  More importantly, the compensation for wages lost not only lessen the burden the injury imposes on the worker but also creates an incentive toward prevention of all injuries and not just the most costly ones.  This is critically important because the difference between a multi-million dollar claim and one involving just a day or two of wage loss is often a matter of millimeters. 

From the perspective of the insurer, the shorter duration claims are the least costly; from the perspective of the injured worker, three days or a week of lost wages is a significant cost.   Collectively, workers with short-duration, unreimbursed time-loss claims may well be self-insuring a material portion of the cost of workplace injuries.  That burden should be quantified and included in the calculation of the cost and consequences of work-related injury, illness and disease.

Why is there a waiting period for workers' compensation?

Many workers’ compensation jurisdictions have a “waiting period” for workers’ compensation.  This is a form of “deductible” whereby the worker absorbs the initial financial impact of wages lost due to a work-related injury.  Most jurisdictions with a waiting period also have a “retroactive period”; if a claim extends to or beyond the retroactive period, workers’ compensation for temporary disability during the waiting period is compensated.  There are also a number of jurisdictions that “waive” or “exempt” certain injuries or occupations from waiting periods. 

Waiting periods are not universal.  They are absent from most workers’ compensation systems in Australia and Canada.  In the US, waiting periods are common.  When John Burton wrote the National Commission on State Workers’ Compensation Laws (Washington, DC July 1972), he summarized the rationale for waiting periods and recommended the upper limits for waiting periods and retroactive provisions.  Specifically, the report’s Introduction and Summary notes on page 18:

Waiting period [Section 27(d)( 1 )(H) ] . Recommendations published by the Department of Labor propose a 3 day waiting period and a 14 day retroactive period. In contrast, the Model Act of the Council of State Governments specifies a 7 day waiting period and a 28 day retroactive period. Most States meet the standard of the Model Act, but do not meet the Department of Labor recommendation. Although the Model Act would provide benefits for 83 percent of lost time, the U.S. Department of Labor standard would compensate for 93 percent. The purpose of the waiting and retroactive provisions are to reduce payments for truly minor incidents and to assure benefits for even moderately serious injuries.

 We recommend that the waiting period be no more than 3 days and that the retroactive period be no more than 14 days. (See R3.5)

 

Using the National Commission recommendation as a basis for judgement, only 17 of 51 US jurisdictions would meet or exceed the recommendation regarding the length of the waiting period and retroactive period; all twelve Canadian jurisdictions would meet the waiting period recommendation but three would fail to meet the recommended retroactive upper limit.  The accompanying table reports the waiting period and retroactive period provisions in the US and Canada and assesses these against the National Commission’s recommendation. 

Interestingly, back in 1916 when British Columbia was considering its entry into workers’ compensation, the committee of the legislature (under Avard Pineo), the waiting period was avidly discussed.  The BC committee opted for a 3 day waiting period based on the following reasoning: 

We think that a waiting period of three days applicable in all cases will be adequate to accomplish any proper purpose sought by those who advocate the necessity of a waiting period, but will not be found to seriously inconvenience the injured workman, especially as he is during this period provided with full and adequate medical aid.http://www.worksafebc.com/publications/reports/historical_reports/pineo_report/default.asp

While the trade-off in 1916 was a three-day waiting period for the best medical aid provision in workers’ compensation at the time, many critics felt the burden of the waiting period was still considerable. The three day waiting period would be supported by three Royal Commissions in BC (Sloan 1942, Sloan 1952, and Tysoe 1966).  In the 1966 Royal Commission in British Columbia, Justice Tysoe sided with the business community and recommended continuation of the three day waiting period because of a fear of the financial impact on business if it were eliminated.  The government adopted that recommendation but in 1972, in the lead up to an election, the government of the day eliminated the waiting period.  

The most recent Royal Commission in British Columbia (1999) closely examined waiting periods.  It heard a number of reasons why a waiting period might be considered.  Reducing employer costs was one but concerns over “moral hazard” and high administrative costs were also noted.  The Royal Commission concluded:

Waiting periods do not reduce the costs of workplace injuries unless legislation and policies promote conduct by employers and workers that results in a real reduction in the number of injuries and illnesses, or a reduction in frivolous claims which would otherwise have occupied adjudicators’ time. If real costs are not being reduced, then waiting periods are simply a means for shifting costs away from the workers’ compensation system and onto individual workers, employers, or both.

The commission does not consider the latter an appropriate objective or result. The commission’s examination of the limited empirical evidence on waiting periods leads to the conclusion that any cost savings associated with waiting periods due to reductions in claims volume may well be more than offset by increases in the average costs of the remaining compensation claims, due to the extension of work absences beyond the waiting period (or beyond the retroactive period if one is introduced). 

Therefore, the commission sees no compelling reason to extend the current waiting period [the day following the day of injury], and in fact is of the view that injured workers should not be unfairly or unnecessarily denied compensation for losses caused by work-related injury.

Royal Commission on Workers’ Compensation in British Columbia Volume II Chapter 1 http://www.wcat.bc.ca/research/WorkSafeBC/WSBC_Hist_Rpt/1999-rc-report-2.pdf

There may be reasons why a state or province has a waiting period (and retroactive period) in its legislation.  The reasons, however, should be explicit and supported by research.  If the reasons are economic, then the economic magnitude of the policy should be measured.  I can find no current estimate of the “co-pay” or “deductible” portion of workers’ compensation born by workers who must serve an unrecompensed waiting period. 

If the reason for a waiting period provision is to discourage “frivolous claims”, then the central premise behind the argument is questionable.  Is any work-related injury “frivolous”?  Frivolous is a subjective judgement and hard to test from a research perspective.  All work injuries are serious and important in revealing failures in the barriers, safeguards and defenses that would protect workers from harm. 

There are other important questions that need to be examined.  Does the presence of a waiting period influence reporting of work-related injuries?  Is the duration of work-related injury disability influenced by the presence or absence of a waiting period?  What impact, if any, does the length of a waiting period and retroactive period have on recovery outcomes, worker satisfaction, or appeal activity?

Workers already must bear the human cost of work-related injury.  Quantifying the additional economic burden and other impacts of waiting periods and retroactive provisions should be on the research agenda.  

Is it becoming easier or more difficult to accommodate persons with disabilities?

I  recently spoke to the  Healthcare Professionals Conference hosted by WorkSafeBC.   My presentation outlined the dramatic demographic factors that are changing –and will continue to change-- our healthcare systems, workplace and communities.  Several presentations focused on the issue of mental injuries, stress, and the duty to accommodate.  A few years ago, conference planners would have confined these topics to a breakout session under an obscure title in an inconvenient time slot.  Not so today!  That may be a sign of progress… or desperation.

Accommodation is primary disability prevention.  Statutes that codify an employer’s duty to accommodate have been around for years.  Employers, disability management professionals and human resource policy makers know the law and what it means.  Whether the specific law, rule or regulation is under Human Rights legislation, the Americans With Disabilities Act (ADA), or a workers’ compensation statute, most medium to large organizations are aware of the duty to accommodate.  They train their managers and likely have supervisors and union leaders with a common understanding—at least for the more common physical disabilities. 

We also have many high-profile examples of persons with disabilities excelling in sports, politics, science, and medicine.  These examples are changing perceptions and awareness.  Although many workplaces have had to make few accommodations, most workers and managers would see both the legal and moral imperative behind the duty to accommodate.  More importantly, they see the value and potential of the individual person rather than the stigma of the impairment.  Having role models and seeing more co-workers accommodated will continue to make accommodation easier.  There may be no hardship involved in accommodating if the environmental barriers no longer exist.  If accommodation is not needed, then the impairment is not likely a workplace disability. 

Technology is further enabling that potential.  Driverless cars, bionic hearing implants, thought-to-input devices, exoskeletons, and many other technologies are lessening the impact of physical impairments.  Our concept of “disability” is changing and our ability to accommodate is being enhanced.  Few would argue that the cost of providing technological aids would constitute an undue hardship.  Technology is making accommodation easier and, in some cases, costless or productivity enhancing to implement.    

Accommodations are not restricted to technological interventions.  There continue to be real barriers to accommodation of persons with psychological or mental conditions and impairments.  Persons with degenerative (Parkinson’s, certain cancers) and episodic conditions (epilepsy, migraines) are also harder to accommodate.  Whether because of fear or ignorance, co-worker or customer attitudes can be significant and continuing barriers.  How effectively are we accommodating persons with severe Turret’s ticks, schizophrenia, recurrent depression, post-traumatic stress disorder? 

Even industries with low injury rates may find it increasingly more difficult to accommodate workers with certain conditions as the prevalence of those already accommodated becomes significant in a department or organization.  Several employers have commented to me that past compliance with mandatory-reinstatement provisions leads to incrementally more difficult accommodation challenges for each new case.  These employers perceive the duty to accommodate as becoming more difficult.  

It may not have reached the point of “undue hardship” but is clearly a concern. 

One employer noted that about half the staff in her operation had one or more accommodations (some temporary because of recent work-related injuries, others permanent because of permanent work and non-work related impairments).  She was happy to support each individual but her concern over the increasing costs and declining competitiveness were obvious.  As more of the certain job requirements were concentrated on fewer non-accommodated staff members, she was concerned about increased risk of injury and the potential for resentment and increased risk in this group of workers. 

Is accommodation become more or less challenging?   The answer is both!  And that situation is likely to continue for some time.  With increasing numbers of older workers, the conditions and co-morbidity associated with ageing will become more prevalent.  The demand for certain skills in short supply may drive an increased “desire to accommodate” as the price of attracting or retaining certain expertise.  Innovation will also be required, not just to adapt and apply new technologies but also to reorganize the way work itself is performed. 

The question itself, however, masks the reality of work environment.  The prevalence of persons with impairments that need accommodation is increasing and will continue to increase in our workplaces.  The biggest barriers to future accommodation are less likely to be the undue hardship of a technological aid.  Attitudes, static organizational structures and persistent prejudices are likely to continue to be the biggest barriers in the coming years.     

What is an employer "duty"?

Duty.  It’s a word we don’t use that often in the context of workers’ compensation and occupational health and safety.  When we do use it, we tend to gloss over it and may miss its real meaning and importance. 

Employers have a “General Duty”  to protect workers in the work place.  Every occupational safety and health regulation has a General Duty Clause.  The US OSH Act specifies it this way (in part): 

SEC. 5. Duties(a) Each employer --

                (1) shall furnish to each of his employees employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees…

WorkSafeBC’s governing legislation uses similar terms and stated (in part) in section 115 of the Workers Compensation Act:

(1) Every employer must  (a) ensure the health and safety of

(i) all workers working for that employer, and

(ii) any other workers present at a workplace at which that employer's work is being carried out

Employers also have a “Duty to Accommodate”.  This duty may emanate from Human Rights legislation but may also be reflected in workers’ compensation legislation  (often in the form of a Mandatory Reinstatement provision).  Ontario’s Workplace Safety and Insurance Act, 1997 states both an “obligation” and a “Duty”

Obligation to re-employ41.  (1)  The employer of a worker who has been unable to work as a result of an injury and who, on the date of the injury, had been employed continuously for at least one year by the employer shall offer to re-employ the worker in accordance with this section.

Duty to accommodate(6)  The employer shall accommodate the work or the workplace for the worker to the extent that the accommodation does not cause the employer undue hardship.

The Victorian WorkCover Authority  (and others) use the term “duty-holder” – a term that is useful in conceptualizing that a duty has substance.  It also implies that someone, some individual or group is “carrying the ball” and that its possession may be “shared with” or “passed to” someone else but not dropped or abandoned. 

In common usage, “duty” has a stronger connotation than “responsibility” or even “obligation”.  We often read or hear that someone “ignored”  or “shirked” a responsibility or “walked away” from an obligation but we speak of “dereliction”  or  “failure” when referring to a duty unfulfilled. 

This sense of a duty being a mandatory obligation or moral requirement reinforces the importance of the General Duty, the Duty to Accommodate and other duties in workers’ compensation and OH&S; the specificity of the term “duty-holder” helps underscore the persistence of that obligation and the potential consequences that may flow from abandoning  or consciously neglecting to act. 

There are other “duties” in workers’ compensation,  OH&S, and our broader community.  Some are specified in legislation but others  are part of the moral framework of our society. Healthcare workers have a “duty of care”, injured workers have a “duty to mitigate loss”,  all of us have a “duty to provide the necessities of life” to children and others.  

A duty imposes a moral obligation on the duty-holder  to act.  Recognizing this relationship may help employers, workers and others in the workplace ensure every duty and duty-holder understands what is required and acts accordingly.

How does health, safety and workers’ comp measure up in China?

The digital display registered 431 km/hour. The Shanghai landscape flashed by the window of the worlds’ only Magnetic Levitation (Mag Lev) commuter train. Safe, fast, economical—the MagLev is emblematic of the “new” China and of the inherent consideration for occupational health and safety that is essential to its design, construction and operation.

For any observer sensitive to safety, China offers ample opportunity to examine safety systems as they apply to old technology, massive urban renewal projects, and advanced technological installation such as the MagLev . There are obvious similarities and striking differences in safety protocols and standards from what we see in the West. Whether observing a construction projects in the growing hospitality sector in the rice-terraced hills of Longji (Guilin) or in the inner precincts of the walled city of Xi’an, practices that protect workers from harm are inherent in the processes and procedures.

Watching a welder on a new high rise in Shanghai, I could see virtually no differences in the protections evident from those I have seen in any western metropolis. The worker, his equipment and the safety environment around him were equivalent to what I have seen in Vancouver, Melbourne and New York. I noted many co-workers wearing hardhats (all with engaged chin straps) working behind guardrails floor after floor, in much the same way observed in Western centres.

In the mountainous rice terraces of Longji, a lone construction worker in soft shoes and no hard hat was slowly, methodically, building a brick wall between concrete pillars of a third floor of a cliff-topping guest house. Clearly, not what might be seen adhering to western safety standards; yet, when I speak with the locals (many have some English in part because of the tourism in the area), they report few injuries. Without personal protective gear like hardhats and steel toed boots, workers carry out complex tasks without excessive injuries. How can this be? When I asked one local engineer why injuries were not more common, he attributed the relative safety he observed to “the Chinese way of doing things”.

There is a tendency to confer the qualifier of “safe” on the visible protections observed in a workplace. Hard hats, fall arrest systems, safety googles are obvious examples. Such apparatus, however, are but one layer of protection. The barriers or safeguards that protect workers from the inherent active and latent hazards in the workplace are not always as visible as personal protective equipment (PPE). For example, much of what I observed in China was extremely patterned work. Many buildings were not unique. The design and methods used to create them were very standardized. Many of the workers were evidently very experienced. In essence, one observed experienced workers, building nearly identical structures with the time-proven methods. These “systems” of doing things embody worker protections in the designs, work procedures and shared culture.

Workplaces around the world rely on these less visible, less “prescribed” worker protections. Barriers, safeguards and defenses that protect workers extend well beyond the visible personal (and most immediate level) of PPE; one can see safety in the design, work processes, supervision and training (and experience). Are these enough? Probably not…in China or anywhere else; in China as in the West, all work generates hazards to workers. The challenge is the same in every workplace: managing the risks and reducing the frequency and magnitude of the defects in the barriers, safeguards and defenses that protect workers from occupational injury and disease.

Work-related injuries occur in China as they do in the West, so security in form of compensation and rehabilitation are also needed. According to the ILO, China has effective employment-injury coverage for about 22.5% of the labour force (World Social Protection Report 2014/15 ). This is low by European , Australian and North American standards but this is double what it was about a decade ago. And the mandated coverage provides innovative incentives toward safety and prevention. For certain degrees of disability, the accident employer must provide suitable employment –something like the mandatory reinstatement provisions present in some workers’ compensation legislation. The Chinese solution, however, goes further. It anticipates that reinstatement may not be possible so mandates the employer pay a pension equal to 60 per cent or more of the monthly net income of the injured worker.

Challenges still exist, of course. Demographic, political, economic and environmental challenges will continue to test China’s people and leadership. The care and protection of the most vulnerable in the labour force and society must continue to be a priority in China as they are with other nations.
That said, China is changing. Its economy continues to lead the global recovery. Its technological advances are often leapfrogging the incremental paths other nations have taken. Hopefully, the safety and health of workers as well as their care and support after injury will continue to be part of China’s agenda.