by Maureen Gallagher, WorkCompEdge Contributor

Layoffs have become an unfortunate reality of everyday life in America. While historically layoffs are often due to legitimate competitive practices (and in some cases corporate heartlessness), I don’t have to tell you that almost all layoffs in the past 18 months have been due to the severe economic downturn. For this article, let’s take a further look at work comp claim issues associated with layoff situations:

Don’t just do the paperwork: employers mustover communicate in layoff situations. These are human beings whose lives have just been turned upside down. The surviving employees will give the employer the benefit of the doubt and their commitment to the employer if the employer tells them the truth and treats the employees who are leaving with fairness and compassion.

It is a documented fact that an impending or even threatened layoff increases workers compensation claims…especially in a tight job market. Individuals faced with a reduction in their income, temporary unemployment benefits and the likelihood of unaffordable health insurance may look to workers compensation as a way to ensure their income is sustained in the face of a layoff or termination. Even the rumor of layoffs and company reorganizations is enough to scare some employees into filing a work comp claim. But note: simply because an employee files a claim after his or her employment ends does not necessarily mean that the claim is fraudulent. Some employees, previously worried that filing a claim would affect their job security, go ahead and file once they are terminated. Whether the injuries are real or imagined, the fact is, workers compensation claims increase during and after a layoff.

Employers can’t completely stop illegitimate claims from being filed, but there are steps they can take to prepare for defending against such claims – and thereby minimizing costs. The following techniques, a list I’ve tweaked from an article by the Louisiana Workers Compensation Corporation to include my own experience, can avoid or minimize claims cost following downsizing, terminations or layoffs.

1. Communicate with Your Insurance Carrier

Let your insurance carrier know about any downsizing plans your company has. The carrier should be more than willing to strategize with you on ways to thwart any fraudulent claims. Report any suspicions you have about a claim, along with all the reasons for your suspicions, to your workers compensation carrier. The earlier you voice concerns, the better the opportunity to investigate, gather medical evidence and discuss strategy on defensible positions.

2. Focus on the Things You Can Control

The workers compensation system was designed to protect the employee and the laws favor the employee. However, measures can be taken to minimize cost and limit the life of the claim. Often this is the goal – reducing cost and the life of the claim – which can be frustrating to employers. The reality of workers compensation claims is that they are not won by hitting a home run. Rarely is there one isolated piece of information that “knocks it out of the park” and provides an ironclad denial. Claims are won through a series of singles. Documentation of anecdotal evidence (the employee was fine on the last day of employment; no one saw the individual get hurt; the employee was observed using the body part he or she is alleging is not functional etc.) and objective evidence (the independent medical exam’s x-ray or MRI shows no injury) builds your defensible positions and gets you to home base (which is usually a negotiated settlement). The value of the claim will be substantially less with well documented information. The claims take patience and persistence to resolve as bringing the employee back to work (the most common resolution to workers compensation claims) is not an option in a layoff situation. The lack of this option complicates the claims handling. The efforts and costs expended to defend suspect claims is difficult but worth the aggravation as it far outweighs suffering the enormous cost of a permanent long term workers compensation claim.

3. Revisit Your Accident Reporting Policies

Require all employees to report accidents immediately, no matter how minor.

4. Recommit to Thorough Accident Investigations

Accidents in times of company turmoil can be especially upsetting, but this is not time to get lax on your procedures. Investigate accidents immediately after they’re reported. Separate witnesses from each other and the injured employee to get the whole story – and signed statements. Remove or restrict access to any equipment or other physical evidence involved until it can be examined. Address any other hazards which may have contributed to the accident as soon as possible.

5. Be Vigilant About Your Recordkeeping

Many of the workers compensation claims filed after employment ends are occupational disease in nature. Claims for hearing loss are common after layoffs. Be vigilant about your industrial hygiene recordkeeping, including baseline levels of noise, airborne particles, in-door air quality, chemicals and dust exposures. Also be sure not to neglect equipment condition or housekeeping inspection logs. Make sure records are not destroyed, since employees’ payroll, schedule and accident reports may become evidence in a claim after their employment has ended.

6. Use Wellness Exams and Videocams to Document Employees’ Health

Many employers contract with their workers compensation medical provider to conduct physical examinations to determine an employee’s overall health and fitness status preceding a layoff. Employers may also videotape work areas to document employees performing their usual duties. These tools can help establish an employee’s health and activities at the time employment ends. A cautionary note – information obtained about an employee’s health must not be used as a reason to terminate or lay off the individual. This would violate the Americans with Disabilities Act.

7. Ask Employees to Confirm They Haven’t Had Unreported Accidents

As part of an employee’s exit interview, have the employee sign a form stating whether they have been involved in any unreported accidents on the job. This is an important document that can help defend any claims arising after employment ends.

8. Invest in Employee Assistance Programs

Terminations can easily and understandably thrust employees into an antagonistic frame of mind that can lead to fraudulent claims, but this can be mitigated if the employer communicates caring in the exit interview – and provides some real programs to support those sentiments. Consider job fairs, resume counseling, placement services, on-site therapy, and other services that demonstrate your concern for your terminated employees’ welfare.

9. Consider Stepping Up Security Measures

As we all know from unfortunate events reported in the media, workplace violence is a real concern following layoffs or terminations. Any employee hurt on the job through violence of another current or prior employee will result in a workers compensation claim. Examine the level of security you can provide for remaining workers. Use exit interviews to assess an employee’s attitude and tendency towards violence, and take all threats seriously. Employees probably should not have unescorted access to work areas following a layoff or termination.

10. Watch for Potential Fraud Indicators

Familiarize yourself with the warning signs of fraud developed by the National Insurance Crime Bureau:

• the employee is disgruntled after being fired or laid off
• the employee has been told his or her employment is about to end
• the employee is having financial difficulties
• the accident is not witnessed
• the injury involves subjective complaints of pain with no ability to obtain objective medical evidence

Your claims adjuster is undoubtedly familiar with these, but, as noted in our first point, your awareness and good communications will facilitate optimal claims handling.

Conclusion

Although none of these tips may actually prevent an employee from making a workers compensation claim after leaving an employer, they can assist in defending against such claims. The more evidence to present to the judge that there was no mention of any accident until after employment ended or was announced to end, the stronger the defense will be.

Employee reductions can pose a significant challenge for employers and often a devastating turn of events for employees. It is important for employers to have a layoff strategy broken down into goals and an action plan for the company. The layoff can be so overwhelming an employer may forget the overall company’s vision and strategy. Each employer should ask the question; “How do we not just survive but thrive after a layoff? How do we inspire our remaining employees to achieve amazing things… to continue their focus and innovation and not be paralyzed by these troubled and uncertain times?” First, every employer must over communicate in these situations. The employer should reiterate the vision and strategy of the company and the action taken (layoffs), although painful for everyone, accomplishes the mission.

Next, keep in mind; these are human beings whose lives have just been turned upside down. The surviving employees will give the employer the benefit of the doubt and their commitment to the employer if the employer tells them the truth and treats the employees who are leaving with fairness and compassion.