Reducing Workers’ Compensation Costs

All business owners know that maintaining a business can be costly.  Advertising, inventory, rent, and taxes, just to name a few.  In California, almost all businesses are also required to carry workers’ compensation insurance.  Workers’ compensation insurance can be costly.  All businesses, ranging from large corporations to small businesses, are all trying to reduce costs in order to maximize profitability.  Although California law likely requires you to carry workers’ compensation insurance for your business, there are techniques you can employ to help reduce your workers’ compensation costs.

One way to help you reduce your workers’ compensation insurance costs is to make sure you understand how your workers’ compensation insurance premium is determined.  Workers’ compensation insurance premiums are based on a specific classification system.  The more dangerous the roles of your employees, the higher your workers’ compensation rates will be.  Accordingly, you need to have an open line of communication with your insurance adjuster to ensure that he or she is assigning the correct classification to your workers.

Another way to reduce your workers’ compensation insurance costs is to make sure that your workplace is as safe as possible.  Ensure that you keep your equipment up to date and in good repair.  Creating a safety committee in the workplace can also help, as your employees can take a direct role in keeping your workplace as safe as possible.  As your employees are the ones who directly deal with all workplace conditions, they often have some important suggestions as to how to make your workplace even safer.  The fewer injuries you have in your workplace, the lower your workers’ compensation premiums will be.

Third, you should build a return to work program.  An important rule of thumb to keep in mind is that the longer a workers’ compensation claim remains open, the more expensive the claim will be.  This is because the claim will require that more replacement income benefits must be paid.  Accordingly, if you can build a program that proactively helps workers get back to work, income benefits will not have to be paid for as long a time.  A return to work program often includes allowing an employee to return on a light-duty or even part-time basis.  You will need to coordinate these plans directly with the employee’s health care provider to make sure the work is appropriate for the particular injury.

We have extensive experience helping our clients understand their rights and responsibilities with regard to workers’ compensation responsibilities.  Call us today for a consultation.

Owner/Officer Inclusions and Exclusions

Workers’ compensation is an important system to make sure that employees injured while working receive payment and medical benefits while they are recovering.  California law has extensive regulations concerning workers’ compensation.  One of the most important regulations for business owners to be aware of is the requirement to carry workers’ compensation insurance.  There are very few exceptions to this rule.  Owners of a small business or officers of a corporation may sometimes qualify for inclusions or exclusions from this requirement, however, and it is important for you to understand when these may apply if you own a business.

Although the law in California used to state that officers and directors of corporations were automatically excluded in certain cases from the requirement for businesses to cover all of their employees, this is no longer the case.  The law now provides that if officers and directors are automatically included in the requirement that all employees must be covered by workers’ compensation insurance.  If, however, the corporation is completely owned by the officers and directors, they may opt-out of insurance coverage.  If they want to do this, they will have to sign a form specifically providing that they are opting out of the insurance coverage requirement.

Sole proprietors also need to understand workers’ compensation requirements.  A sole proprietor is not generally required to provide workers’ compensation for him or herself.  The exception to this is if the sole proprietor is running a roofing business.In that case, workers’ compensation insurance will need to cover the sole proprietor. Self-employed people are generally also exempt from the requirement.

Regardless of the structure of the business, the requirement that the business carries workers’ compensation extends only to employees.  If your company uses independent contractors, it is not necessary that your insurance cover those individuals.  That said, it is really important to ensure you are correctly classifying your workers.  Simply deciding that all of your workers are independent contractors is NOT dispositive of whether they actually are employees or independent contractors.  There are many relevant factors in determining whether a worker is an employee or an independent contractor, only one of which is classification.

We have experience assisting our clients understand their responsibilities in the context of the California labor code.  Contact us today for a consultation.

Workers’ Compensation Audits

If you have your own business, you likely know there are many regulations that you need to comply with, ranging from federal tax laws to local zoning ordinances.  In California, you will also need to make sure your business complies with all the requirements of the California Labor Code, including the requirement that almost every business must carry workers’ compensation insurance covering all of their employees.  In addition to complying with the law, you will need to cooperate with your workers’ compensation insurance carrier.  One way you will need to cooperate workers’ compensation insurance carrier will be during a workers’ compensation audit.

Workers’ compensation insurance carriers will need to comply with their annual workers’ compensation audit.  It is likely that when your policy is set to expire, you will receive a letter or a phone call informing you that it is necessary to complete a workers’ compensation audit if you wish to continue using that company for workers’ compensation insurance.  Keep in mind that the letter or phone call may come from a company other than your workers’ compensation insurance provider, as many large insurance companies outsource their audit process.

In general, the audit process exists to make sure that your business still has the proper type and amount of workers’ compensation insurance.  For example, if your business has grown from 50 employees to 250 employees, it is likely your payroll will increase your insurance premium.  In general, auditors will request documents including tax forms, payroll records, and certificates of insurance if you have hired any subcontractors.  If you are unable to provide licenses and certificates of insurance for subcontractors, your insurance company will likely charge you additional premium for subcontractors’ workers’ compensation insurance.  They will also ask about job descriptions for each of your employees.  One way you can facilitate the auditing process is to ask the auditor if there is a specific order in which he or she would like the papers organized.

During the audit, your auditor will aim to make sure your business is placed in the correct rate class.  The rate class code has a direct impact on your insurance premium.  If you feel that you have been misclassified, you should immediately discuss the issue with your auditor.

We have extensive experience helping business owners understand their rights and responsibilities, including concerning workers’ compensation audits  Contact us today for a consultation.

What Is Workers’ Compensation “Leakage?”

Any business owner can tell you that running a business can be a complex proposition.  Trying to make sure your business conforms with all relevant city, state, and federal laws is an essential step before you even get to the practical aspects of your business, such as ordering inventory, advertising, and deciding when to expand.  Workers’ compensation is a very important part of your business, and the law of California provides that you must pay for workers’ compensation insurance unless you qualify under one of the very few limited exceptions.  Being familiar with the insurance system can help make sure you are properly following the rules and regulations surrounding workers’ compensation.  One major issue faced by workers’ compensation insurance carriers is “leakage.”

Leakage in the workers’ compensation context refers to payment errors.  Overpaying claims represents a major problem and challenge for insurance companies.  In general, leakage is divided into two main categories: hard leakage and soft leakage.

Hard leakage refers to erroneous payments made on claims that should not be covered.  If an insurance company pays out on a claim when the insurance policy had actually lapsed, or it turns out the injury was not compensable under the policy, would be two examples of hard leakage. In other words, hard leakage occurs when a payment is made where no types of coverage existed.

Soft leakage, by contrast, refers to when overpayments have been made on claims that are otherwise valid.  Errors in medical payments or even payments made after a claim is denied or disputed are types of soft leakage.

Another type of leakage that does not fall into either of these precise categories is vendor leakage.  Vendor leakage involves payments to outside vendors.  These would be services that are used in the investigation or in handling claims.  Private investigators, private nurse case managers, or independent medical evaluation companies are some of the most common.

Although employers may not think that these types of leakage should concern them, this is not accurate.  The more leakage an insurance company has, the more likely it will  raise rates later to make up for the unnecessary payments.

If you have questions about your business’s rights and responsibilities, call us today. Contact us today for a consultation to talk about your business.

My Employee is Injured But I Don’t Have Insurance

The area of workers’ compensation law is one that is complex and nuanced.  Employers know that it is important to follow California rules and regulations about how to conduct their business, including abiding by the workers’ compensation laws.  While there are a variety of code provisions that impose affirmative duties on an employer in the workers’ compensation context, one of the most important is the almost universal requirement for employers to carry workers’ compensation insurance.  If you have failed to follow this provision and your employee has sustained a work-related injury, you may be wondering what are the important next steps.

The first step that you should take if you failed to carry workers’ compensation insurance and the employee has sustained a work-related injury is to retain a skilled attorney.  Failure to carry workers’ compensation insurance can result in severe civil penalties or even criminal prosecution.  Accordingly, you need to consult an attorney immediately to protect yourself and your business.

Next, you need to understand that just because you failed to carry insurance will not mean the business will not be responsible for medical bills.  To the contrary, an employer can still be held responsible for payment of all medical bills associated with the treatment of the work-related injury.  In addition, unlike a typical workers’ compensation case, there is no law restricting the employee from filing a civil lawsuit against the employer.  In this type of lawsuit, the employer will be presumed to have acted negligently and cannot use the defense of contributory negligence.  The result can be a very sizeable civil award to the employee.

If your business does not have the resources to pay the benefits for the injured employee, the Uninsured Employers Benefit Trust Fund can pay the workers’ compensation benefits. After the  case has been resolved and a final sum of damages awarded, the UEBTF can pay this amount to the employee.  The employer will be responsible for reimbursing the UEBTF for everything it has to pay out to the employee.  To request payment of workers’ compensation benefits from the UEBTF, the employer must apply for payment and provide certain documentation.  Ensuring your employee receives compensation from the UEBTF does not mean that you cannot be fined or even incarcerated for your failure to carry insurance.

We have externsive experience with helping clients when they have failed to carry the required insurance.  Call us today for a consultation.

What Am I Obligated to Report to My Insurance Carrier?

Workers’ compensation is an important social program for Californians.  Workers’ compensation allows employees and employers to rest easy knowing that they are both protected in case an employee suffers a work-related injury.  In California, almost all employers, with very few exceptions, are required by law to carry workers’ compensation insurance.  Failure to carry workers’ compensation insurance can result in severe civil and even criminal penalties for an employer who fails to follow the law.  Employers who do properly carry insurance need to understand what must be reported to their insurance carrier to make sure they do not violate their policy.

If you have any questions about what needs to be reported to your insurance company, the first place you should look is your policy documents.  The insurance policy documents will be an essential source of information concerning your responsibilities.  If you fail to adhere to your policy’s requirements, it could result in your insurance carrier refusing to cover an incident.  It could even mean your insurance carrier will decline to continue providing coverage for your business at all.

In addition to those issues that your insurance requires to be reported, there are California laws that will also apply to reporting requirements.  The most important of these is the initial report of the injury or occupational illness.  As an employer, you are required to provide a workers’ compensation claim form within one day after the employee reports a work-related injury or illness.  After the employee returns this form to you, you must provide the claim form along with the report of the injury or illness to your insurance claims administrator within one working day.  In other words, if the employee reports an injury, you are required by law to report this to your insurance.

Another important reporting issue is fraud.  If you have suspicions about fraud in your workers’ compensation case, you need to report this to your insurance carrier.  Workers’ compensation fraud includes not only fraud on the part of the employee, but also the medical providers or even attorneys.  Your insurance carrier will then investigate the fraud concerns.  If there are founded cause for concern, your carrier will report the issue to law enforcement.

We have extensive experience helping our clients understand their responsibilities when it comes to workers’ compensation insurance.  Call us today to talk about your case and your business.

Can I Opt Out of Workers’ Compensation Insurance?

Employers know that they need to take precautions to make sure their business is adequately protected.  Employers need to carry a variety of types of insurance, ranging from fire insurance to insurance on any vehicles.  Workers’ compensation insurance is another important component to protect your business.  Workers’ compensation provides insurance coverage in the event that your employee sustains a work related injury.  Despite its protections, some employers find the cost of workers’ compensation insurance too heavy a price to pay for that protection.  This leads many employers to wonder whether they can opt out of carrying workers’ compensation insurance.

California labor code section 3700 provides that if a business employs one or more employees, that business is required to carry workers’ compensation insurance.  It is important to note that this requirement includes some workers that you would not ordinarily believe would fall under this requirement, such as nannies or handymen.    It also should be noted that due to recent changes in the law, executive officers and directors of corporations must also be included in workers’ compensation coverage unless the corporation is completely owned by the directors and officers.  In that circumstance, they can opt to be excluded from coverage.  Except for those circumstances, all employers are required to carry workers’ compensation insurance and can face hefty penalties for failure to comply.

In some cases, an employer may decide to self-insure.  Self-insurance requires that you receive state approval.  The business must have a net worth of at least five million dollars with a net annual income of at least five hundred thousand dollars.  The employer must also post a security deposit.  Although this generally means that only larger businesses are able to meet the requirements, some small employers in the same homogeneous industry pool their workers’ compensation liabilities.  If the employer is self-insured, workers’ compensation claims may be administered directly by the employer or the employer may contact with a third party administrator to handle the administration of the case.

If you have questions about whether your business is required to carry workers’ compensation insurance, contact us today.  We can talk to you about your rights and responsibilities.

Repetitive Motion Injuries – What Is My Business Liable For?

There are a wide variety of injuries that can occur in a work place.  An employee can fall off scaffolding, get in a car accident while driving to deliver a shipment, or receive an injury from malfunctioning equipment.  Repetitive motion injuries are also a common source of work related injuries.  The most common type of repetitive stress injury is carpal tunnel syndrome.  Carpal tunnel syndrome occurs when the nerves running from the hand to the wrist are compressed through repeated motions, like typing.  There are other types of repetitive stress injuries, which could come from repeated bending or repeated use of one body part, such as repeatedly lifting your arms over your head.  Like other work related injuries, an employer can still be liable for repetitive motion injuries.

If your employee has a repetitive motion injury or shows signs of developing the injury, you need to treat the repetitive stress injury just as you would any other injury.  The employee needs to seek medical attention.  You will need to complete the same paperwork and submit it to your workers’ compensation insurance provider.  The employee will be eligible to receive replacement income, payment of medical expenses, and if necessary, reasonable accommodations when the worker is able to come back to work.

One issue that frequently arises with these types of injuries is that the worker was likely typing a lot or during similar repetitive actions in previous employment.  Employers will often wonder whether they are obligated to cover the repetitive stress injury if the condition started to develop during prior work.  Whether the injury is covered by the workers’ compensation system will be dependent on whether the injury is a pre-existing condition.  For example, if the injury was diagnosed and treated before the worker started with your business, it may very well be excluded from coverage under workers’ compensation.  However, if the pre-existing condition is one that he or she previously received workers’ compensation benefits for and the condition is aggravated by the work with your business, then the employee may very well be eligible for additional workers’ compensation benefits.  The employee will need to get a medical examination to determine whether it is part of a pre-existing condition or a new injury.

We have extensive experience helping our clients understand the workers’ compensation system.  Call us today to talk about what we can do to help you

Origin and Purpose of Workers’ Compensation

The majority of employers take many measures to help make sure their employees are as safe as possible at work.  Employers may decide to provide extra safety training, purchase and install safety technology, or form safety committees, just to name a few examples.  Unfortunately, despite the most diligent efforts, it is likely that at some point, an employee will sustain a work-related injury.  When that happens, the employee may file for workers’ compensation.

The modern workers’ compensation system can trace its origin to the Workers’ Accident Insurance system that was put into place by Otto von Bismark in 1881.  The motivation behind enacting this system was what was referenced as the “unholy trinity” of tort defenses that were available at that time, including contributory negligence, assumption of risk, and the fellow servant rule.  In other words, it was much more difficult for injured employees to be compensated if they were injured on the job.

Different states here in the United States started implementing workers’ compensation systems before the turn of the century, with the first state-wide system being instituted by Maryland in 1902.  Workers’ compensation provided a much needed outlet for injured employees to seek compensation for industrial injuries.  The workers’ compensation system is designed to protect both the employer and the injured employee.  Workers’ compensation in California is a “no fault” system.  This means that the injured employee does not have to prove the injury was a result of negligence or intentional acts on behalf of the employer.  Similarly, the employer is protected from law suits from the employee, with only a few exceptions.

It is no secret that at the turn of the century, industrial working conditions for most Americans were quite dangerous, with few regulations in place to require employers make sure their workers were safe.  Especially in factories or manual labor fields, it was common for employees to sustain truly horrific injuries.  By instituting worker’s compensation, employers were motivated to make sure their businesses were as safe as possible for their employees.  In addition, employers could feel at ease knowing that their employees could not sue for negligence if the employee sustained an injury because the employer overlooked some safety measure.

We have extensive experience helping our clients understand the workers’ compensation system.  Call us today to talk about what we can do to help you.

Handymen, Nannies, Small Businesses, and Workers’ Compensation

Millions of Americans run their own small business.  Whether that business is the primary source of income for the family or just a side job to help provide supplemental income, business owners are all well aware that there are many regulations surrounding formation and running a business.  In addition, many people choose to employ other individuals for help around the house, including nannies and handymen.  Whether you have a small business or you employ others to help you around the house, it is important that you understand your rights and responsibilities regarding workers’ compensation.

California labor code provides that employers are obligated to carry workers’ compensation insurance.  This is true even if the business has only one employee.  This is also true of businesses which are located outside the state of California but still do business in this state.  In other words, if your business is located in Oregon but you sometimes do business in California, you are stills subject to the California requirement that you carry workers’ compensation insurance.  For a sole proprietorship, the law does not usually require workers; compensation if the business has no employees.  The important exception to this is for roofing contractors.  All C-39 roofing contractors in California are required to carry workers’ compensation insurance and file a valid certification with the state.

It is also important to understand your obligation regarding workers’ compensation insurance if you use the services of a nanny or a handyman.  Under California labor code 3352(h), “any person employed by the owner or occupant of a residential dwelling whose duties are incidental to the ownership, maintenance, or use of the dwelling, including the care and supervision of children, or whose duties are personal and not in the course of the trade, business, profession, or occupation of the owner or occupant” is classified as an employee.  This means that you may be required to carry workers’ compensation insurance for your nanny or handyman.  California law goes on to state that if the person has worked less than 52 hours in the 90 days before the injury was sustained or earned less than $100 in wages during that time, the person is not an employee for worker’s compensation purposes.

We have extensive experience helping our clients understand the rights and responsibilities concerning workers’ compensation insurance.  Contact us today to talk about your options.

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