Containing the Growing Risk of Workers’ Compensation Retaliation Claims

There is little doubt that claims alleging workers’ compensation retaliation are growing and OSHA is cracking down on employers that discourage the reporting of injuries or retaliate against those who do. The story is told in the following examples:

•  Indiana Court of Appeals upholds an award of more than $400,000 in compensatory and punitive damages
• Illinois Appellate Court affirmed a jury verdict awarding $660,400 in compensatory and $3.6 million in punitive damages for retaliatory discharge
• A U.S. Court of Appeals for the 10th Circuit recently reduced a $4.2 million jury decision to $2 million
• The Labor Department brought a suit against Pittsburgh-based United States Steel Corp mid-February seeking to reverse disciplinary actions against two employees for failing to immediately report workplace injuries in accordance with company policy
• OSHA has ramped up its suits against employers for suspending or terminating employers who reported workplace safety hazards
• Anti-retaliation provisions in OSHA’s electronic recordkeeping rule go into effect August 10, 2016
• OSHA launched a Whistleblower-Severe Violator pilot program in Nebraska, Kansas, Missouri, and Iowa
• In 2014, the Missouri Supreme Court overturned decades of its own precedent to reduce significantly the standard of proof for workers’ compensation retaliation claims under Missouri law
• In 2013 about 100 federal and state court cases involving retaliation for workers compensation were decided, roughly double the number a decade before

Nicolas A. Dibble points out in the article, The Risk of Retaliation, four reasons for the high-value awards in such cases:

1. Public awareness. Ramped up advertising by attorneys coupled with headline-grabbing jury verdicts is a recipe for increased claims.
2. Public perception. Jurors tend to believe that employers retaliate.
3. Timing. An employee who seemingly has sacrificed physical health in the employer’s service and is denied a workers’ comp claim and then terminated can win over a sympathetic jury.
4. Advertising and social media encourage the reporting of insurance fraud. An unintended consequence is a “contention among workers that employers believe all claims are fraudulent.”

How to avoid workers’ comp retaliation claims

While there are times when discipline or termination of a workers’ compensation claimant is warranted, it is bad timing and the legal risks are significant. Most states have laws that prohibit employers from retaliation against employees who file a claim. In effect, this means that a detrimental change in the employment relationship cannot occur – termination, demotion, lower pay, unwarranted disciplinary actions and so on.

Unless there is a well-documented and proven egregious act or misconduct:

• Don’t fire the employee within days or weeks of the claim, as there will be an inference that the two are connected.
• Don’t punish employees who violate safety protocols only when an injury is reported. Ask the question, would your best employee be treated the same way? Treating employees consistently is key to non-discriminatory enforcement.
• Don’t assume the employee cannot perform the essential functions of the job after an injury. Employers subject to the ADA should begin the accommodation process immediately.
• Don’t use drug testing or the threat of it as a form of adverse action against employees who report injuries. A compelling reason for testing should exist.
• Don’t offer incentives based on injury and illness rates.
• Don’t allow the manager to discuss the claim or behave in a manner that suggests a retaliatory motive. If the claim goes to trial, the manager can be an asset only if he/she maintains impartiality.

Positive steps employers can take:

• Do comply with the anti-retaliation provisions in OSHA’s electronic recordkeeping rule and document your actions to inform employees of their right to report work-related injuries and illnesses free from retaliation.
• Do review your procedures for reporting injuries and illnesses to ensure they do not discourage reporting, such as short windows of time to report, drug testing, and so on.
• Do have a written policy prohibiting unlawful retaliation,
• Do have a written safety program that is behavior-based and encourages the reporting of near misses as well as injuries.
• Do provide and document workers’ comp retaliation claim training/counseling for managers.
• Do inform temporary and contract workers of their right to report work-related injuries and illnesses free from retaliation and ensure they receive proper training.

Don’t let employer-sponsored sports and events become “forced fun”

While many employers understand the risks of a compensable injury arising from a company-sponsored event involving physical or social activities, some get caught up in the morale-building and all-inclusive aspects and unnecessarily expose themselves to claims that affect their work comp costs. Consider a recent case in Minnesota, Shire v. Rosemount, Inc.

Under Minnesota law, any employee who is injured during “voluntary recreational programs” is exempt from workers’ comp coverage. The company held an annual employee-recognition event during work hours. Employees had to attend the event or use limited vacation time or take unpaid leave. The event included dinner followed by bowling, then a game of laser tag. During the game of laser tag, an employee injured his ankle and was unable to perform his normal work duties for more than one year.

This case went all the way to the Minnesota Supreme Court with the employer arguing the event was a voluntary recreational program because employees had the option of requesting paid vacation or unpaid leave time instead of attending. The employee argued the event was not voluntary because attendance was the only option under which he would get paid without using vacation time. The court agreed the injury was compensable because of the financial consequences to the employee – loss of pay or loss of vacation time.

The company further argued that even if attendance at the event wasn’t voluntary, participation in laser tag was voluntary, but the court also rejected this argument. It said the law addressed entire recreational programs or events, not individual activities within the events. By paying all of its employees or holding the event after working hours and not paying those attending, the company may have avoided responsibility for the claim.

Christopher J. Boggs, Vice President of Education for Insurance Journal’s Academy of Insurance, notes that the “course and scope of employment” doctrine that determines the compensability of an occupational injury extends to recreational activities while on the employer’s premises or at the employer’s “direction.” He notes that four tests are applied to the facts surrounding the injury to determine compensability of “Forced Fun”:

1. “Did the accident occur on the employer’s premises? An affirmative response does not guarantee compensation. Making recreational facilities available does not make the employer liable. But neither is it required that the injury occurs on the employer’s premises to be compensable.

2. Was the event or team organized by the employer? Company-organized softball teams competing in “industrial leagues” may qualify under this provision. However, several employees deciding to form a team is wholly different from a team organized by the employer, encouraging “good” ballplayers to participate.
3. Did the employer pay for the activity? It is unclear if this refers to the total cost or a subsidy on behalf of the team.
4. Did the employer benefit? Advertising in the community (team shirts), improved employee morale or better teamwork; an employer can “benefit” from these activities in more ways than tangible outputs.

Boggs advises, “Make any and all social or recreational activities expressly voluntary. Any hint of requirement or employer benefit could cause a problem.”

There is no one rule that fits all and each case will be decided on its merits. States vary on when an activity might be considered forced and even the established rules have exceptions and do change. Before planning an event, it’s best to discuss your exposure with your broker.