How to manage layoff risk.
Published in Risk & Insurance Magazine, July 2009.

Labor Finders International is the granddaddy of day labor temporary staffing companies. Florida and California are its two largest markets. Its workers earn $10 to $13 an hour. In the best of times, the firm employed close to 200,000 workers. Now its workforce is down to under 100,000. I contacted them to find out if they have experienced a rise in workers compensation claims due to its turnover in recent months.

The company hasn’t, at least due in part to controls it has had in place for some time to control for layoff-induced claims.

And here a number of us (not me, I am vain enough to say) has been worry worts over the danger that when workers are laid off they have a greater propensity to file claims.

Wayne Salen is the risk manager of the Palm Beach Gardens, FL, company. He told me, “We have a 'best practice' that involves signing in and out each day. That signature confirms whether or not they were injured or had an incident that might warrant any medical treatment.”

“We've not had any problems with post-employment filings since we can go back to the date of alleged injury and find their signatures attesting to no injury or illness following that day at work with our customer. We bring the collaboration with our customer to bear as to witnesses and with site supervisor in charge of our temp placements.”

Salen says that the temp staffing industry, having been around for years, have long since learned how to control for this risk.

In search of further insights on how employers should manage in a time of layoffs, I contacted Kevin Foy, who is a Baltimore-based lawyer and principal in CompResponse, which advises insured employers on injury prevention, managing claims and keeping their insurers’ feet to the fire. Many clients are in the highly volatile construction industry.

Foy said the employer should do everything it can to encourage its workers to immediately file unemployment claims, “in fact, perhaps drive the employees down to the unemployment office.”

When filing for unemployment benefits, the worker usually has to say he is ready, willing and able to work. Foy, putting his lawyer’s hat on says that “This gets the worker to honestly answer those questions, usually under penalty of perjury that is in the fine print, before a lawyer teaches him to create an injury. The unemployment statements can be used, on the merits and for impeachment purposes, to defend against the comp claim.”
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And this: “A exit questionnaire where the worker states he has not had any work related injury might be helpful. The employer should have its legal counsel review it for legal advice before implementation.”

None of the above, Foy avows, can provide a guarantee that any claims without merit will not be approved by a judge.

Harry Shuford, the chief economist for NCCI, says flatly that “the conventional wisdom is wrong” – claims do not surge during recessions. He found that in six of the last seven recessions, workplace injury rates fell. In five of six expansions, they rose. “There is every reason to believe that this [recession induced] downward pressure will be observed in the current economic downturn.”

Have we hammered enough nails into this coffin?