22 Aug Preventing Post-layoff Claims

The times, they are a’changin’… large corporations are downsizing, and laying

off thousands of workers. And, to a lesser degree, small mom-n-pops are being forced to do the same. This economy’s tentacles reach out to all of us in one way or another.  

When one of your clients is experiencing a downsizing, recognize that you are in a position to help him to navigate the transition, thus mitigating the potential unemployment, employment-related, and workers’ comp claims. Because these claims, more than likely, will come back to impact your bottom line, “helping” will be a win, win for both of you.

Although, downsizing and corporate restructuring will trim the payroll, disability claims are expensive. Studies have been made concerning large and mid-sized employers who experienced downsizing.  The results illustrate that job elimination contributed to a rise in both occupational and non-occupational claims, especially those related to stress. 

Highlights of the study show that:

  • 13 percent of supervisory personnel reported occupational disability claims;
  • 15 percent reported increases in cardiovascular/hypertension-related disabilities as

compared to companies that did not cut jobs;

  • 32 percent increases in disabilities related to mental/psychiatric/substance abuse;
  • 33 percent increase in work-related claims
  • 24 percent non–work-related claims.

It’s been well documented that an increase in filed workers’ comp claims will often occur

during and up to 12 months after a major layoff. Although some of the claims may be very legitimate, there is a reasonable chance that many are the result of the financially

worsened condition of the displaced worker.

Managing the effects of layoffs

The following techniques should minimize the negative impact:

Communicate to the entire workforce. Clearly communicate to the entire workforce, not just the workers about to be laid off, the reasons for the downsize. The more information disseminated to the employees, the higher the likelihood that they’ll understand. If everyone is given the full story there will be less likelihood of rumor mongering, and suspicious claims filings. UPSIDE: Faced with a challenge, creativity and solutions have often been the result of meaningful discussion. The employees, themselves, may suggest management techniques and moneysaving strategies that could stave off some of the layoffs. 

Mitigate the financial shock

  1. a) Severance package:  If possible, offer a liberal severance package to the displaced employees. Employees will view the severance as a humane action on the part of the employer, thus diminishing the potential of bad will.
  2. b) Provide advance notice. This gives employees time to recover from the initial shock, and to explore their options to replace their employment. It is easier to find a job if you are currently employed. As a result, employees will feel respected by their employer.
  3. c) Offer outplacement assistance. By having access to a broad range of clients, your client service reps and payroll clerks should know who is looking to hire.

The laid-off workers could be directed toward these potential new employers for

employment. This provides great public relations for your clients, not to mention the absence of unemployment and workers’ compensation insurance claims that you might have to administer. Upside: Some firms provide job placement services onsite.

Exit medical exams:  Independent exit medical exams, as a standard part of the departure process prevents employees from reporting a surprise injury or illness.

Provide a visual record of the workplace. Document the working conditions of the employees; this is especially appropriate if the business is permanently shutting down.

Work closely with remaining employees. Often, the stress level for the employees not

laid off will also rise. They usually find themselves with job duties significantly higher

than before the downsizing, due to the reduction in the workforce. Access the needs and

workload distribution, and rearrange them if need be.

Be sure that your carrier is aware of the layoffs. The claims adjustors should be advised of the downturn, so that they can incorporate some probing questions into the claims investigations to determine potential fraud.

Investigate all claims quickly and thoroughly. Obtain a detailed statement from the

claimant (preferably signed), along with statements from any witnesses. Review the reports from the physicians to make sure that the claimed injury coincides with the

job duties practiced by the claimant.

A major layoff at one of your client companies could have a major impact on your

workers’ comp and unemployment experience, which could affect you financially for

years to come. With quick and clever action, you should be able to turn the experience

into one that could be remembered very positively by all parties. And if returned to their previous economic condition, the clients will certainly utilize your services again. In addition, the displaced workers will know that you helped them in troubled times, and they will recommend your services to future employers. It’s this kind of goodwill that will carry your professional employer outsourcing company through difficult times and help it prosper.

  • Marja
    Posted at 09:36h, 20 December Reply

    Tim, I think you are spot on here, but what we’re neglecting to moneitn is the hidden gaffe here by most placement firms.Sure, they are lowering fees from 30% to 25, 20 or in some (insane!) cases, 14%. But what I’ve also seen is that many guarantees are dropping from what used to be 3-6 months, down to 30 days. 30 days!?!? I usually tell firms, it’s gotta be 90 days or thanks for your time. That’s our own internal evaluation timeline, and they should play along with that. Again, classic case of some firms playing only to the current market and not looking into the future.Great post.

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