What is a workers’ compensation audit, and what are the benefits of performing one?
A workers’ compensation audit is the periodic review of an employer’s coverage, claims and practices in an effort to identify ways to save money, avoid future claims, and identify as well as remedy ancillary legal issues. While workers’ compensation coverage is generally mandatory in all states but Texas, general liability insurance, employer practices liability insurance (EPLI), excess insurance and umbrella and/or gap insurance may also be appropriate, depending on the employer.
Moreover, the state in which workers’ compensation insurance is to be obtained is largely dictated by where the employee is performing the work, an issue that causes potential headaches for employers with employees in multiple jurisdictions or whose work frequently takes its employees across state lines. Penalties aside, being sued directly in court by an employee without the benefit of certain defenses or becoming the insurer of an employee’s injury can be the costly consequence of failing to have the appropriate workers’ compensation coverage in place.
Depending on the employer’s specific coverage, there may also be programs or groups that the employer can participate in to further drive down workers’ compensation coverage costs. An employer should periodically contact the entity providing its workers’ compensation coverage to see if it is eligible for any cost-saving programs and/or groups.
Employers using a third-party administrator (TPA) should use their TPA as an additional resource to find workers’ compensation cost-saving options that fit the employer’s specific needs and business.
Inspecting coverage and claims for potential discounts or reimbursements, fraud and subrogation interests can provide monetary benefits, while examining how employees are getting hurt may help to avoid future injuries to other employees. This measure can also minimize administrative and civil liability in other legal areas, including Occupational Safety and Health Administration (OSHA) and intentional tort claims.
Employers should consider how their workers’ compensation practices jive with their other employment practices. Reviewing contract clauses that implicate workers’ compensation coverage, handbooks, employment policies and employment practices can often avert future problems.
Finally, employers should always be mindful that workers’ compensation can overlap Family and Medical Leave Act (FMLA) and Americans with Disabilities Act (ADA) issues. By ensuring compliance under all employment laws, employers will save time, money and stress.
Adrienne Asimou is an associate in the Labor and Employment Counseling and Litigation Group at McDonald Hopkins LLC. Reach her at (216) 348-5760 or [email protected]. James Boutrous is co-chair of the Labor and Employment Counseling and Litigation Practice and a member at McDonald Hopkins LLC. Reach him at (248) 220-1355 or [email protected].
