Controlling Costs in Iowa Work Comp: Why the Employer Must Understand and Control the Mod Factor

As an attorney that represents employers and insurance carriers in Iowa workers compensation cases, I am often asked questions about the effect of a settlement, a decision from the Commissioner, or the effect of a decision being made by an insurance carrier. During my conversations, employers often mention or talk about their experience modiciation factor, or “mod factor,” when discussing their worker’s compensation claims. In discussing this issue with employers, I get the impression that most employers have a general idea of the factors involved in the calculation of their “mod factor” buit are not entirely sure how to manage or control their mod factor.

Indeed, probably all employers should be concerned about and monitor their mod factor. The mod factor is the calculation performed to determine the employer’s loss ratio. The mod factor determines whether the employer is “penalized” or “rewarded” in their worker’s compensation premiums based on their loss experience, wage basis, etc. There are some clearly relevant factors involved in the calculation of the mod factor and some measures that employers can take to reduce their mod factor and control their worker’s compensation premiums.

However, in order to manage its mod factor, every employer should understand the factors used to calculate the mod factor and techniques that the employer can use to reduce the mod factor. I have located a few good articles that can help employers understand, monitor, and manage their mod factor. I recommend that employers visit this article by Watson Insurance Agency, Inc.   This article by Sam Martin also provides some good insight. It should be helpful to employers desiring additional information about means to reduce their mod factor.

Return to Work Issues in Iowa Work Comp Cases-Part III: Remember the ADA

When pondering return to work issues and potential termination issues, an employer dealing with a worker’s compensation claim must also be cognizant of potential rights and obligations arising from the Americans with Disabilities Act and/or the Iowa Civil Rights Act. Obviously, not all employees qualify for coverage under the ADA, though employers with as few as four employees are obligated to honor the requirements of the Iowa Civil Rights Act.

If an injured worker has a qualifying disability, he/she may be entitled to reasonable accommodations upon return to work. No blanket statement can be given as to when a reasonable accommodation must be extended by an employer. Nor can a blanket statement be offered to determine whether a particular modification of the work duties or work environment will be considered a “reasonable accommodation.” Instead, the facts and circumstances of each situation must be considered.

In some instances, an injured work comp claimant may be able to return to the pre-injury job with a modification that lowers stock to below shoulder level or provides some type of lifting assistance. In other instances, an employee may need more than the 12 weeks of FMLA leave, despite having a pending offer of employment to fully recover and return to work. A reasonable accommodation may requite transfer to a different job for which the employee is qualified. Of course, this case get complicated if there is a union contract or seniority rules in place that may affect another employee that also has certain legal rights.

The size and financial ability of an employer is important in making this decision. The expense, hassles, and effects on production of a particular accommodations must be considered. Therefore, whenever an injured worker requests some type of modification of his/her job after a work injury, the employer should be congnizant of the potential application of the ADA and/or Iowa Civil Rights Act. Pre-emptive action may be indicated and consultation with corporate counsel early in the process is wise.

Return to Work Issues in Iowa Work Comp–Part II: FMLA Issues

As I discussed in my prior article, both employees and employers have incentives to return an injured employee back to work as soon as medical and reasonably possible. However, often times, the return to work issues are clouded or disputed. One practical example is when an injured worker believes he or she is not physcally capable of returning to work despite medical clearance by the authorized medical provider. If the injured worker is able to convince his/her family physician or another medical provider that he/she needs to remain off work, the worker may have certain protections guaranteed by federal law that must be considered and honored. One of those federal protections is the Family and Medical Leave Act (FMLA).

Pursuant to the Family and Medical Leave Act, employees may be entitled to unpaid leave without adverse employment consequences under certain conditions. If an employee qualifies for FMLA leave, an employer may be obligated to provide the employee additional time off despite clearance by an authorized medical provider for the employee to return to work.

From a practical standpoint, both the employee and the employer should understand their respective rights and obligations under the FMLA. An employee is entitled to take up to 12 weeks of unpaid leave as a result of a serious personal health condition. The employer can and should require medical documentation or excuse for taking this leave. However, as noted above, if the employee is able to obtain a medical excuse to remain off work from his or her personal physician or another medical provider, the employer must determine whether the requested leave qualifies for FMLA protections.

If the leave is protected by the FMLA, the employer must provide the necessary leave up to 12 weeks. However, providing FMLA leave does not require payment of wages or worker’s compensation benefits during the leave period. Pursuant to Iowa Code 85.33(2), the employer is entitled to extend an offer of light duty work to the employee. The offer must be reasonable, consistent with the medical restrictions of the authorized medical provider, and must not be unduly inconvenient or degrading. Employees should not be expect to “sort bolts” or other meanial tasks, unless this is a legitimate work task that is required to promote the employer’s business objectives.

However, if the employer has light duty work that is reasonable and consistent with the medical restrictions offered by the authorized medical provider, the employee is obligated to accept that work or forfeit weekly benefits. See Iowa Code section 85.33(2). Therefore, it is important for both employers and employees to be educated and understand their respective rights. While an employer may have light duty avaialble, refusal of that light duty assignment is not grounds for termination or other disciplinary action if the employee is entitled to FMLA leave.

Return to Work Issues in Work Comp Cases in Iowa: Part I

Often times, employees sustain work injuries that preclude a return to their regular work assignments. However, quite often, the employee and his/her physician deem it reasonable for the employee to return to work in some capacity. This is often termed “light duty” work assignments.

Some employers favor and some disfavor the light duty work assignments. Of course, some employers simply cannot practically return an employee to work unless the employee meets certain medical and physical criteria. However, in the vast number of circumstances, the employer can and probably should accommodate the temporary medical restrictions and disability and get the employee back to work in some capacity.

Most experts and even the State of Ohio recognize that there are significant benefits to both the employer and the employee in returning an employee to work in a timely and prompt fashion. If they implement their light duty program appropriately, the employer benefits in several ways. Among the benefits that the employer can experience are:

1. A happy and loyal workforce. If the employer plays its cards right, it can make it known that it values its employees and wants to keep them working even after an injury. If prompted properly, an employer can encourage a feeling of cooperation among employees to promote those in good health to assist those that may be ailing. In the end, employees operating under this type of system may feel useful, wanted, and may return these actions through greater job satisfaction, increased production, and loyalty to the employer.

2. Some production is better than no production. If the employer can think ahead and plan for potential injuries, the employer may be able to generate sufficient types of work that could be performed by an injured worker that the employer may receive a benefit while also making the injured worker feel useful. Instead of asking the worker to sort bolts for no apparent reason, the employer could explain to an injured worker that it needs to get promotional materials or holiday mailings completed and ask an injured worker to stuff envelopes and mail important documents as part of light duty. A myriad of possibilities exist and each employer will have different needs. However, if an employer can use the injured worker to complete some little performed or perhaps delinquent duties, the light duty work may ultimately be beneficial to the employer and get some much needed work accomplished.

3. The employer can reduce its workers’ compensation premiums. Statistics show that lost time claims result in significantly higher medical, indemnity, and other related worker’s compensation costs. Reducing lost time may help reduce an employer’s work comp costs and, ultimately, its own bottom line.

4. An employer may eliminate any exposure for healing period or temporary total disability benefits. In Iowa, an employer is permitted to extend an offer of light duty to an injured employee. So long as the offered work is consistent with the medical restrictions at the time and is a “reasonable” offer of work (not demeaning, not requring travel too far from home, etc.), the employee is obligated to accept the work. If the employee declines the light duty assignment, Iowa law precludes a recovery of any temporary disability benefits by the employee. Therefore, if a reasonable light duty offer is made and refused, the employer eliminates all liability for temporary disability benefits.

5. Prompt return to work may also limit the ultimate permanent disability award on a claim in Iowa as well. Length of the healing period is one factor considered by the Commissioner in determining an industrial disability. Getting an employee promptly back to work proves potential productivity, limits the healing period, and also protrays the employer in the best possible light should the claim later become litigated and require a hearing.

6. Happy employees sue employers much less frequently. Keeping an employee working and happy is very likely to preclude litigation and is much more likely to promote a harmonious and reasonable resolution of the worker’s compensation claim once the healing process has completed.

For all of these reasons, an employer should plan ahead and develop a strategy and perhaps identify relevant job tasks that can be performed by an injured worker. Planning ahead makes the process smooth and the transition back to work easier for the employee. Planning ahead allows the employer to announce the policy, express the importance of reporting to work, the desire to maintain good employees, and also allows an employer to identify work that will potentially benefit the employer, even if in some intangible ways.

So, what does an injured worker get out of the deal? Injured workers receive several benefits from a light duty assignment. First and foremost, the employee will experience a financial benefit in reporting to work as opposed to sitting on temporary disability.

Temporary total disability benefits are paid if the employer cannot accommodate the medical restrictions. Temporary total disability benefits are intended to represent 80% of the employee’s pre-injury spendable earnings. In other words, the employee will experience a reduction in income if he/she is required to stay home because of medical restrictions. On the other hand, if the employer offers the injured worker a light duty assignment, the employeee will receive 100% of his/her normal earings and will not experience the financial distress and losses that can occur with workers required to stay off work.

Even if the employer is able to provide limited work opportunities under a light duty work assignment, the employee will receive financial benefit. If the employer offers light duty work, it will presumably pay wages consistent with those prior to the date of injury for work actually performed. In this respect, the employee will receive “normal” wages at least for a portion of the hours worked and more than the 80% level should the medical restricitons preclude a return to work.

Depending on the employer, the employee may also need to return to work to maintain seniority rights, avoid lay-off, or other action under a uniion contract. Accordingly, the employee may be highly motivated and need to return to work, even if in a light duty capacity.

In addition to the monetary benefits to the employee, there are psychological and phsyical benefits to returning to work even in a light duty assignment. From a physical standpoint, being active helps the employee avoid de-conditioning. The longer a person sits at home without working, the more atrophy may occur to necessary muscles and skills required at the workplace. Continuing to work in some capacity may help keep the employee conditioned for the time when a full-duty return is a possibility.

From a psychological standpoint, most humans are creatures of habit and requrie some interaction with other humans to maintain their mental health. Light duty work assignments allow an injured worker to maintain some semblence of a normal schedule and routine in their life and may help distract the injured worker from the detriments of the injury. Instead of sitting at home with little or no personal interaction and pondering the severity of their injury, light duty assignments allow workers to continue to get up, get ready, and go to work. This allows the worker to feel useful and to earn an “honest living.” Many workers will be happier, recover more quickly, and feel more positive toward their injury and their employer if they are maintained on a light duty work assignment until they are capable of returning to unrestricted work.

Therefore, all employers should recognize that ther are significant benefits both to the employee and to the employer in planning ahead and preparing reasonable options for light duty work assignments should an employee become injured. All employers should contemplate potential and useful work assignments that could be performed and should use their light duty work program as a means to promote the employer, show compassion, all while promoting increased productivity, loyalty, and happiness among their employees.