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Could this Happen to You?
Following a work-related injury in which Tom fractured his ankle, he was released to return-to-work with some temporary physical restrictions. Because of the restrictions, Tom was unable to perform his regular job duties for six weeks. Although soon after the injury, Tom's treating physician released him to return-to-work with temporary physical restrictions, his employer did not create a modified duty position for Tom, and thus did not bring the him back to work during that period. As a result, Tom was paid for lost wages by his employer's workers' compensation insurance carrier. After 6 weeks, Tom was released to return-to-work without any physical restrictions. According to his physician, he could now perform his regular job duties. However, on the day that Tom was released to return-to-work… he quit!
Because of the wage replacement (indemnity) benefits paid to Tom during his time off work, the total incurred cost for that claim was more than triple what it would have been if his employer had brought him back to work within the first week of his injury by using the management tool known as "modified duty." Although Tom didn't thank his employer, he was in-effect given a 6-week paid vacation for quitting.
Who paid for that "vacation?" Whether you guessed the that the insurance company paid for it or the employer paid for it, you are correct. The workers' compensation carrier paid for the claim initially. However, the employer may end-up paying for that "business decision" in increased workers' compensation premiums for years to come (or at least the forfeiture of a premium decrease). Chances are Tom's employer will pay for that decision through increased workers' compensation premiums several times over.
Although Tom quit on the day he was to return-to-work on full-duty status, the impact to his employer's workers' compensation premiums would have been the same even if he had not quit. To illustrate this, take a look at a very broad overview of how workers' compensation premiums are calculated.
Workers' Comp. Premiums
Workers' Compensation premiums are based primarily on two things. First, premiums are based upon what the employees do. Of course workers' compensation coverage is going to cost more for some occupations than others. A truck driver or a construction worker's rate for workers' compensation insurance is going to be more than that for a receptionist. This is simply because the risk of injury and the potential for a large claim is greater for some occupations than it is for others. Second, workers' compensation premiums are based upon the company's loss history over several years. Both the frequency and severity of claims are taken into consideration.
"Frequency" pertains to the number of claims
"Severity" pertains to the cost of claims
Given two identical companies, the company that has had a history of more frequent and/or more severe (costly) workers' compensation claims will pay a higher workers' compensation premium.
Because the amount that the insurance company pays for indemnity (wage replacement) benefits for each claim can have a tremendous impact on the overall cost of a claim, the ability and willingness of an employer to implement modified duty work assignments can help keep the cost of claims as low as possible… which can help keep the cost of future workers' compensation premiums down.
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