Five Ideas to Reduce Workers Compensation Exposure When Downsizing

These are dreaded words heard ‘round the locker room or break room table.’  They may start out as nothing, maybe a little one-liner about “some layoffs coming down the road” or maybe another guy said he saw Keith talking to Bob about “Immediate downsizing.”


Whether these are true or untrue, as a risk manager or someone involved in the claims process, be ready for the onslaught of the consequences of layoffs or downsizing.  Not everyone will file a claim for workers comp, but bet the disgruntled employees will, along with a few unexpected employees to now report an injury of some sort in the past. (WCxKit)



How are these issues controlled and handled proactively? We discuss a few options below, and remember these may or may not apply in your jurisdiction.


Always consult counsel before implementing any of these ideas.


  1. Go back to documentation

Keith just received his letter that his job was terminated and his last day of work will be in 10 days.  Keith is nervous, because he has limited job skills, bills to pay. He lives in a small town and there are not a lot of jobs out there.  Plus he does not have the greatest relationship with his supervisor, and he feels this is a personal assault coming directly from that supervisor who just does not like him.


What does Keith do? Well he decides to say he injured himself a month or so ago but was afraid to report it, because he heard that layoffs were coming. And he did not want to be one of the guys picked to be laid off.



This is a very common scenario. And this is where attention to documentation comes in to play.  By now, everyone on the work floor should know that if any injury happens, whether they want treatment or not, the worker is to come to the risk manager’s office to complete some paperwork.  And those who decide not to do this face the consequences associated with not reporting it.



The first question to Keith after he tells you he hurt himself a month ago should be “Why did you not tell me?  You knew the procedure, right?  Did you tell anyone?  Did anyone witness your injury? Did you see your doctor?  Why are you telling me this now?”



These are the first handful of questions to ask.  Then call in his claim to the carrier/TPA immediately.  And let them deal with it.  If you still want to lay him off while his claim is under investigation, that is fine.  If you want to wait until a decision has been made, that is fine as well.   But documentation is key, and it always will be.  You have to constantly tell the workers the responsibility to come tell you when something does not feel right, and an injury may have occurred.  And if the employees do not do this then they face the consequences that can affect the claim’s compensability.  Make it a reminder phrase every week.



  1. Perform an exit interview

If a worker resigns from a position, or is laid off, chat with them a bit.  Chances are the worker will come to you anyway to ask why it was them anyway. So now is a good time to see if the employee  pulls out any angles to try and keep getting some income coming .  Flat out ask if the worker is hurt, or had a workers comp claim, or is experiencing pain for example.


Common knowledge will reveal that this is a way to increase your own claims, since if it is not mentioned then why stir the pot?  Actually, if employees are going to come forward and try being deceptive, better to confront it now versus 6 months from now.  A claim will result regardless. Granted, most people will say “No” and move on, but there is always that handful of people that will  try to claim an injury.   Call the claim in to the adjuster, and let them handle it.  That way you have performed your duty, and your responsibilities of reporting it are over and done.


  1. Have a medical exam performed by an occupational medicine doc or a local clinic doctor to be safe

In order to be ultra-aggressive, get a doc to do an exit-exam.  This will weed out all the fakers.  It is not going to be free, but weigh the costs.  If this is something to do to prove a point, then do it.  Take  time finding a doc that is also legit, and willing to do this.  In the grand scheme of things I guess it is not fantastic to be laying off people due to expenses, and then have to spend $4,000 to have a doc say these workers are fine and show no signs of disability. This is about protecting your company from the unknown future of compensation claims, some of which can become incredibly costly no matter how insignificant they seem.  So it is an option if that is preferred. Just make sure to have a credentialed doctor performing the exams in a private, professional setting (does this go without saying?), and that it is all HIPPA compliant.


  1. Ask the employees to sign a release waiving liability (if legal in your jurisdiction)

Probably the most common is just the legal paper stating that the worker is not claiming any disability at this time.  Depending on the jurisdiction, try inserting the word “future disability’ as well.  But my advice is to thoroughly check with the employment counsel, as well as the workers comp counsel on permission.  Or better yet have counsel draft the letter. Again it may cost something up front as far as expenses go, but it is all about protection down the road.


  1. With a witness present, ask if the worker was or is  hurt, or experiencing symptoms, and has been to the doctor for this. Ask is this is related to work or not.

This is similar to the doctor, but not as expensive.  Have another HR person present for the exit interview, and ask the person about any disability relating to work.  This will prevent the worker from coming back saying there were some problems swept under the rug and ignored. Check again with counsel on what can be and cannot be done, and then go from there. (WCxKit)




With any type of employee reductions in the workforce, there are going to be some bitter feelings and resentment when reducing your number of workers.  This article is about protecting your company, and protecting the future of potential comp claims.  Any way to reduce exposure is always one worth researching, and implementing, sooner rather than later.


Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and website publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Manage Your Workers Compensation: Reduce Costs 20-50% www.WCManual.comContact:








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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.


©2011 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact


16 Things Companies Can Do To Reduce Workers Compensation During Layoffs and RIFs

In 1989 the federal law known as the Worker Adjustment and Retraining Notification Act (WARN Act) went into effect.  The intent of the WARN Act was to provide employees with time to plan for their future employment with another company when the employer had to do a mass layoff.  The WARN Act has in many ways morphed into the Workers Compensation Claims Preplanning Act (that is not a real title), which provides ample time for dishonest employees to plan and execute fraudulent workers comp claims.

The WARN Act requires employers with more than 100 workers to give a 60 day notice before laying off workers.  Employers must issue a WARN Act notice if a facility closing or other Reduction in Force (RIF) will cause more than 50 employees to be without a job.  The WARN Act also applies to companies that are staggering the layoffs if the employer is laying off more than 500 employees in any 30 day period, or more than one-third of the workforce if the company has less than 500 employees.  If the employer does not provide the notice timely, the employer is required to continue the pay and benefits of the layoff workers for 60 days from the date the employees are notified of the layoff.  Plus, in some cases the employer can be fined $500 per day per employee for not giving the layoff notice timely.  Please consult your labor law attorney for additional information on WARN Act requirements. WCxKit
Statistics show that workers comp claims spike by an average of 50 percent after a plant closing or other mass layoff is announced.  This jump in claims always results in a future jump in the employer’s workers compensation premiums, as claim frequency is the primary factor in the calculation of the employer’s workers comp premium.
Unfortunately, there are times when a RIF is necessary due to a slow-down in business, a need to cut costs, a need to change the organizational structure, or a change in the company’s business strategy.  However, the employer does not have to pay bogus work comp claims as a cost of doing business.  There are numerous actions an employer who is planning a RIF should take prior to the announcement of the RIF.  We recommend employers who must RIF employees to take the following actions.

1. Keep intentions to yourself and only communicate with those who need to know.  The less time unethical employees have to plan their fraudulent claim or to think about doing so, the lower the number of bogus work comp claims.


2. If it is becoming obvious that the company needs a RIF, do not put it off.  The longer you wait, the greater the distortion the rumor mill will create.  The long wait provides ample time for unethical employees to not only plan their workers comp claim, but also to share their plans with other employees that would not be considering work comp fraud, until they learn others are going to file bogus workers comp claims.


3. When a RIF is announced, place a strong emphasis on the unemployment compensation benefits the employee will be receiving.  Employees who are less anxious about their source of income are less likely to commit work comp fraud if they know they will have another source of income while they look for another job.


4. Learn how your state handles unemployment compensation in conjunction with workers compensation.  Some states allow both at the same time, other states allow one or the other, and some states allow an offset (reduction) in workers comp benefits for employees drawing unemployment compensation.


Prepare for all workers compensation claims that may be received

5. Consult with the third party administrator (TPA) or insurer so the TPA can plan to handle the additional workers comp claims quickly so there is no waiting. If there is a delay in beginning claim investigations, the likelihood of properly defending the claim is reduced, evidence is lost and affirmative defenses are less likely. TPAs should handle these claims aggressively and early which requires sufficient staff.

6. If not already done,  a "dedicated" or "designated" adjuster assigned to handle the claims for your company is needed. If you expect a large number of new workers comp claims, it is preferable to handle all of them in the same claims office. This way the claims adjusters are familiar with working conditions.

7. If you have been utilizing more than one defense firm, pick the best attorney and pre-arrange for one attorney (best) or one firm (acceptable) to handle all work comp litigation that occur after the announcement of the RIF.

8. If an employer is closing the facility or making a major remodeling, invite the defense attorney(s) to the facility so the defense attorney(s) can familiarize themselves with the facility.

9. Video record the areas/equipment/machinery that would most likely be included in any injury scenario, especially if the plant is to be renovated or demolished.

10. Video record job functions for the medical providers, especially those that would most likely be included in any injury scenario.

11. Make a list of all key personnel, managers and supervisors, including the home address, home phone number and cell phone number, who can testify if necessary.

12. Make sure all personnel records are up to date, especially health insurance records and sick time documentation (for example:  the employee who took sick time for the back injury that occurred at home may now claim an aggravation of the pre-existing condition to continue the medical care and to draw indemnity benefits).

13. An exit physical should be considered especially if the employees work in a high decibel area or have been exposed to chemicals or other irritants while on the job.  This action should be reviewed with your defense attorney and claims supervisor as to the benefits versus the risk.

14. An exit interview can identify potential future workers comp claims.  Provide the employees with a form to complete to list any known medical condition.

15. Do not forget the employees who were already out of work and drawing indemnity benefits before the RIF announcement.  Their incentive to return to work has been removed in situations where their department or plant is being closed.  Every possible effort should be made to get these people back to work before the RIF.

16. Work with an offsite transitional duty vendor so that employees who are on transitional duty can be employed elsewhere until they are fully recovered and at MMI. Be prepared to place ALL employees who are on transitional duty in a paid position elsewhere. Charitable positions are also an option as is home-based employment.

It is essential that all workers comp claims reported after the announcement of a RIF be completely documented and thoroughly investigated promptly.  Once the facility is closed and people and evidence is no longer available, it is much more difficult for the workers comp adjuster to handle the claim properly.
It should be noted that not all workers comp claims that occur after a RIF is announced are fraudulent.  There will be legitimate injuries that occur.  There also will be employees who have worked through other minor aches and strains who now feel they must report their work-related medical condition. (WCxKit)
When you are planning a large scale RIF, you will have a lot going on.  The control and prevention of fraudulent work comp claims is necessary to not lose some or all of the financial benefits the company obtains from a RIF.

Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and website publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Manage Your Workers Compensation: Reduce Costs 20-50% Contact:


Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.
©2011 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact

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