Archive for July, 2012

What’s the Real Workers’ Comp “Secret Sauce?”

Tuesday, July 31st, 2012

“An educated consumer is our best customer.” – Sy Simms (a really smart retailer)

In the mid-1980s and early 1990s, our nation was in the midst of an awful workers’ compensation crisis. In my home state of Massachusetts, the cost of workers’ comp was approaching $2 billion dollars annually. Employers were looking for straws to grasp. Associated Industries of Massachusetts, the leading employer organization in the state, held quarterly seminars in large hotel ballrooms and filled them every time with CEOs, CFOs and HR VPs, all wanting to know what they could do to stem the tide.

Often, I was a keynote speaker. Why? Because my company, Lynch Ryan, had figured out that even though, as Peter Rousmaniere, my CFO at the time, put it, the crisis was “a horrendoma of the first order,” employers who were committed and driven to reduce their costs could do so if they instituted real, systemic programs with roles, responsibilities and accountability throughout the organization. These employers learned that time was their enemy and that when safety failed and injury resulted, they needed an urgent sense of immediacy to take hold of the injured person and keep him or her as close as possible to the bosom of the workplace. They didn’t just report the injury to their carriers and return to business as usual.

Relative to their peers — their competition — these employers shone like bright stars in the clear night sky.

In 1992, Massachusetts enacted far-reaching legislation to significantly improve what had become a woebegotten state system. This reform legislation produced results that still echo today as Massachusetts continues to have among the very lowest costs in the nation, but among the highest benefits. The big national bugaboo, medical costs, are about 40% of the total spend, as opposed to around 60% nationally. The $2 billion has shrunk to around $600 million.

Yet, even now, employers who treat workers compensation as they would treat any other important business function (time to repeat – with written documentation, roles, responsibilities and accountability established throughout) still outperform their competitors. I’ve worked with many of them who managed workers’ comp well and were proud of the results they’d achieved.

And that, to me, remains the secret sauce.

Yes, the Great Recession has caused terrible damage to the nation and, by extension, to the workers compensation system. Yes, the combined ratio is unsustainable (and may be understated). Yes, we’re in the middle of an epidemic of opioid abuse, enabled, for the most part, by doctors who long ago forgot their Hippocratic Oath and who now bow to Gordon Gecko. And, yes, workers’ comp, especially with respect to medical claims management, has gotten much more complicated over the years (and the Medicare Secondary Payer Statute hasn’t helped). But in the midst of all this, you will still find employers who are so serious about safety and injury management, that their workers’ compensation costs, relative to their peers, give them a significant competitive advantage. All things being equal, their boats are in a safe harbor, waiting to sail when the storm lifts.

In many cases, these employers who “got religion” long ago are large organizations, at least upper middle market. They have the resources to institute systemic programs. But what about the other 80% of American businesses? These companies need help. How do we bring them the education they sorely need to weather the market vagaries?

I think that’s the bull’s eye challenge.

Risk Roundup & Other News of Note

Wednesday, July 25th, 2012

Risk Roundup – Van Mayhall hosts Cavalcade of Risk #162 on his Insurance Regulatory Law blog – check it out!
Florida – From The Palm Beach Post comes this rather unsettling account: Worst TB outbreak in 20 years kept secret: “The CDC officer had a serious warning for Florida health officials in April: A tuberculosis outbreak in Jacksonville was one of the worst his group had investigated in 20 years. Linked to 13 deaths and 99 illnesses, including six children, it would require concerted action to stop. … “The high number of deaths in this outbreak emphasizes the need for vigilant active case finding, improved education about TB, and ongoing screening at all sites with outbreak cases,” Luo’s report states./ Today, three months after it was sent to Tallahassee, the CDC report still has not been widely circulated.”

Mining – And yet another story about an illness that should be obsolete but is making a resurgence: In Black Lung Makes a Comeback, Underwriters Cough Nervously, Susannah Levine writes, “After years of decline, black lung disease (Coal Worker’s Pneumoconiosis) — once the occupational hazard of career-long coal miners — is showing up in younger and younger miners, say experts.
The Journal of Toxicology reports rapidly progressive CWP — the most swiftly fatal form of the disease — in younger miners, who are often exposed to coal dust and more toxic silica dust over relatively short careers. The CDC has also published several studies finding severe cases of CWP in younger miners.”

After the 1969 Federal Coal Mine Health and Safety Act of 1969, Black Lung was almost eradicated. The Black Lung Benefits Act of 2010 increases the employer’s liability significantly so this increase represents a huge exposure.
Wellness Incentives – The American College of Occupational and Environmental Medicine, aka ACOEM, has announced the release of Guidance for a Reasonably Designed Employer-Sponsored Wellness Program Using Outcomes-based Incentives, which was published in the July issue of the Journal of Occupational and Environmental Medicine. The work was a collaborative effort with the Health Enhancement Research Organization, American Cancer Society, American Cancer Society Cancer Action Network (ACS CAN), American Diabetes Association, and the American Heart Association. The published guidance provides direction on two key questions: 1. What are the elements of a reasonably designed wellness program that incorporates outcomes-based incentives? 2. How can employers who use outcomes-based incentives be sure that their programs comply with the Health Insurance Portability Accountability Act (HIPAA) guidelines for a “reasonable alternative standard” to those who cannot meet the health standard?
More on Physician Dispensing – You might think that with some of the attention given to the topic of late, states would be clamping down on loopholes that allow egregious profits for physician dispensing. Not the case. Joe Paduda reports on WCRI’s recent study of Phsyician Dispensing in Workers’ Compensation says that growth is exploding. One example he cites: “In Illinois, physicians’ share of all prescription costs increased from 22 to 63 percent of all prescription payments over 07/08 to 10/11. You read that right; growth tripled over three years. Even more revealing, the volume of scripts dispensed by docs grew from 26% to 43%.” Apparently, the report hit a nerve because a few days later, Joe posted that WCRI – under assault by physician dispensing company – one AHCS, headquartered in Florida. Hmmm, that name seems familiar. See the NYT: Insurers Pay Big Markups as Doctors Dispense Drugs
Other Items of Note

Seasonal Safety

Extraterrestrial Exposures: Astronaut Medical Oddities

Tuesday, July 24th, 2012

Every profession has its unique occupational risks and hazards, and some also have widely recognized work-related health risks associated with the profession. For example, the mining profession is associated with black lung disease; poultry and other food processing workers are at high risk for repetitive stress injuries, and so on. Or see Alice’s Mad Hatter and Work-Related Illness for an interesting historical perspective. Even seemingly safe professions such as musicians have work-related health risks.
Some workers we had never really considered from this perspective are astronauts. It’s not that we didn’t think they took risks – how could you possibly watch a metal cylinder being hurled into the farthest reaches of space and not think of the risks? But beyond curiosity about what they ate and how they handled bodily functions (oh come on, everyone wonders about that), we hadn’t given much thought to the more mundane day-to-day health hazards that astronauts face, and we feel safe in saying that most of you probably haven’t either.
We think that is about to change. The intriguingly titled Blindness, Bone Loss, and Space Farts: Astronaut Medical Oddities offers a fascinating glimpse into the “curious, bizarre, and potentially dangerous ways that space affects the human body and mind.”
Adam Mann of Wired Science says that, “Though astronauts have been flying above the Earth for more than half a century, researchers are still working to understand the medical toll that space takes on travelers’ bodies and minds. Astronauts must deal with a highly stressful environment, as well as weakening bones and muscles and the ever-present dangers of radiation. If people are ever to venture far from our home planet, such obstacles will need to be overcome.”
We aren’t going to go into much more detail about the article, beyond piquing your interest with these few teasers: “flying space barf” “foot molting” and “bugs in space.”
Pay attention people, because these are the looming exposures for commuting workers – and the future may not be as far away as you think.

New York: Workers Comp Smoke and Mirrors

Monday, July 23rd, 2012

Anyone involved with policy making knows that insurance rate filings can have, how best to put this, political dimensions.
Case in point: Last week, New York Governor Andrew Cuomo and his Insurance Department of Financial Services stuck their collective fingers into the holes in the dike holding back a workers’ compensation cost Tsunami.
Here’s what happened and what we think it means for the future. The New York Compensation Insurance Rating Board (NYCIRB), which in New York functions much like the National Council on Compensation Insurance (NCCI) functions in most other states, had filed a loss cost rate increase request of 11.5% to be effective 1 October 2012 (we’ll come back to that in a bit). After due consideration, the Department of Financial Services rejected the Rating Board’s filing, ruling that there would be no increase in loss costs. Result: status quo.
In his remarks about the decision, Governor Cuomo said, essentially, that the last thing New York’s employers needed, given the economy in which they are forced to exist, was an increase in the cost of workers compensation. Amen to that. The Governor also said that the insurance industry had not taken fully into consideration the decrease in costs associated with reforms enacted in 2007 under the Spitzer administration.
It’s a great picture – reforms enacted, costs go down, everybody’s happy. If only that were true. There are a number of fact-based reasons why it’s not.
We talked with Consulting Actuary Scott Lefkowitz, FCAS, MAAA, FCA (Lefkowitz has more initials than I have fingers), a partner at Oliver Wyman, a leading global management consulting firm with offices in more than 50 cities across 25 countries and a member of the Marsh & McLennan companies. Mr. Lefkowitz specializes in workers’ compensation and operates from Oliver Wyman’s Melville, NY, offices. In addition to consulting to many of New York’s employers and reviewing loss cost filings for numerous regulators, he offers expert testimony in many jurisdictions. His testimony with respect to the Rating Board’s filing and his comments following the Department of Financial Services’s rate request rejection offer a stark contrast to the optimistic (perhaps a better word might be “hopeful”) remarks of the policy makers and politicians. His public comments and testimony are here: NYCIRB Hearing 2012 Comments with Cover Letter (PDF).
In the first place, there is the indisputable fact that the 2007 reform has just about doubled the maximum indemnity benefits paid to injured workers, from a pre-reform maximum of $400 per week (which had been the maximum since the early 1990s) to $792, effective 1 July 2012. That maximum is still lower than most all of the industrialized states. Even so, consider this – according to the recently released 2012 Edition of NCCI’s Annual Statistical Bulletin, the average cost of a lost time claim across all NCCI administered states for 2008 adjusted to a final cost basis is $47,800. However, when the NYCIRB publishes data claim costs, it projects only to what is called a 9th report, a subtle, but important, distinction. For 2008, the NYCIRB-published average cost of a lost time claim in New York is $61,700, which is nearly 30% higher than NCCI’s all-state average. But this is not even at a final cost basis. When Oliver Wyman’s Lefkowitz analyzed New York’s data and projected to ultimate, the 2008 figure was $73,000, making it one of the highest in the nation. And he projects 2012’s ultimate cost to be about $100,000. Wow! (Oliver Wyman’s and Lefkowitz’s analysis of New York’s costs and trends) (PDF).
Employer Assessments
Then there are the employer assessments, and there are five of them. We’ll just mention the big three, and look at them relative to indemnity dollars paid. These include:

  • The slowly winding down Special Disability Fund (the SDF is New York’s version of the 2nd Injury Fund), currently assessed at 21.8%
  • The Reopened Case Fund, which since reform has grown from 3.5% to 13%
  • The funding of the Workers’ Compensation Board at 6.5% (not to be confused with the New York Compensation Insurance Rating Board).

Taken together, in 2012, New York’s assessments equate to 51% of every indemnity dollar paid in the state, or about 21% of premium. New York’s self-insured employers are assessed based on indemnity dollars paid. Employers purchasing insurance are assessed based on premium. Either way, no employer can escape from these extraordinarily large additional charges. The hope of the 2007 reform was that, by closing down the SDF, costs would decline significantly, but that hasn’t happened yet, and it won’t for a few more years. Meanwhile, New York’s employers are stuck with the highest claim costs and the highest assessments in the nation.
Next, one of the major pieces of the 2007 reform was the elimination of lifetime benefits for permanent partial disabilities. These were to be capped at 10 years, which, on its face, could save significant money for the system. However, there is what is called a “hardship” provision as part of the 2007 reform, open to claimants with at least an 80% impairment rating. They can appeal the 10 year cap based on hardship, and it’s not a wild stretch to suggest that the Board will approve a majority of these appeals, leading to lifetime benefits for the most seriously impaired and much less cost saving than the reform predicted.
So, back to the NYCIRB’s 11.5% loss cost increase request. Built into the filing was a somewhat unusual qualitative adjustment downward because the Rating Board believed, without stipulating evidence, that New York’s insurance carriers were over-reserving lost time claims. Without that highly questionable downward adjustment Mr. Lefkowitz wrote that the increase would have been not 11.5%, but 28%.
With the now 0.0% rate increase, Lefkowitz and Oliver Wyman contend that costs in New York today are just slightly less than costs prior to reform, before consideration of assessments. With consideration of assessments, which have grown from about 30% of every indemnity dollar paid in 2007 to over 50% of every indemnity dollar paid in 2012, workers compensation costs in New York today are even greater than they were prior to the 2007 law change. He compares this with post reform costs in other highly expensive states, such as Florida and California. Florida’s reforms have decreased costs by about 60%, California’s by 66% (in fact, California’s costs are at a level not seen since 1999). However, Florida, California and other reform states will have to go some to beat the decline in Massachusetts, where, due to reforms enacted in 1992, rates are now equal to what they were in the mid-1980s.
We will continue to watch events unfold in New York.

A sizzling edition of Health Wonk Review

Thursday, July 19th, 2012

We’re happy to be hosting this summertime edition of Health Wonk Review – and hopefully, twelfth time is the charm because this marks our time #12 at bat hosting. We’re wilting from the heat, but haven’t found it as bad here in the Northeast as other parts of the country. The summer has been so darn hot, we’re blowing through records left and right. NOAAA likens the recent extreme weather records to a baseball player on steroids. But it’s hard to know what’s been hotter – the weather or the political rhetoric. The sweltering weather hasn’t slowed down our health policy wonks, who have a lot to say about the Supreme Court’s recent health care ruling, among other topics. We’re taking a slightly different approach to this edition and posting the entries in the order in which they were received. Without further ado, let’s dig in.
Joe Paduda says that if Medicaid isn’t your business, you may be tempted to ignore the implications of the current kerfuffle over whether or not states should accept free money to expand Medicaid, but that would be a mistake. See his post The Medicaid expansion and political choice at Managed Care Matters.
InsureBlog‘s Bob Vineyard explores the brave new world of the Medical Loss Ratio (MLR), and why he thinks it’s destined to be both insomnia-curing and migraine-inducing in his post How Now Brown MLR?
Gary Schwitzer’s Health News Watchdog blog provides a valuable service for policy wonks and consumers alike by holding journalists’ feet to the fire in terms of accuracy of health care reporting on medical studies, among other things. Recently, he took a skeptical look at the exuberance with which respected media outlets leapt on research reports about the salutary effects of alcohol intake on arthritis and alcohol intake on osteoporosis.
At Wing of Zock Dr. Joanne Conroy, an anesthesiologist and Chief Health Care Officer at the Association of American Medical Colleges, shares her enthusiasm for the Supreme Court’s decision to uphold the Accountable Care Act, including the individual mandate. She draws upon the experiences of friends and family to conclude, “What makes me proud is that we didn’t abandon the most vulnerable of our citizens, who lack political voice and economic clout. These underinsured Americans, many on the brink of personal financial insolvency, are our neighbors, co-workers, and friends.”
Keeping families healthy is good business sense for any organization. At Corporate Wellness Insights Fiona Gathright posts about the health benefits and ROI that organizations can realize by including dependents in Employee Wellness Programs.
With the increased need for primary care physicians, midlevel providers are increasingly the go to solution to fill the void. Brad Flansbaum of The Hospitalist breaks down all you need to know regarding advanced care nurses — salaries, training, and the various niches they occupy.
In his usual pull-no-punches style, Dr. Roy Poses of Heath Care Renewal offers a detailed report of why he finds some industry insiders unreliable when it comes to health reform in his scathing post Fool Us Once, Shame on You, Fool Us Twice, Shame on Us – The Untrustworthy Pronouncements of Aetna’s Former CEOs. In pointing out the flip-flopping on the issue of the individual mandate, he questions the wisdom of treating self-interested corporate health care CEOs as visionaries.
David Williams of Health Business Blog says that malpractice reform is a key tenet in the GOP’s proposals to “repeal and replace,” but in his post another reason that malpractice reform is overrated, he shows how it’s unlikely to have any real impact: Malpractice payments have declined 8 years in a row, and new reimbursement models will reduce the appeal of “defensive medicine.”
At Health Access, Anthony Wright tells us Why California Matters when it comes to the Affordable Care Act: It’s not just the biggest state, or the state that has taken the lead in implementation. It also has the distinction as the exception — the sole “blue” state in the top dozen states with the largest percentage of uninsured. As such, it can be a leader in showing how ACA can directly address the needs of states with high uninsured rates. Bonus: we point you to his Health Reform Quiz 201.
In her reporting on healthcare reform, Maggie Mahar has been focusing on the word “one” and the way that media narratives are not only shaping the public’s perception but are also actually shaping events. At HealthBeat, she posts about Self-Fulfilling Media Narratives: How One Man Decided the Fate of Health Care Reform, and at blog, she looks at whether one missing word could kill the ACA.
At at Colorado Health Insurance Insider, Louie Norris notes that in the healthcare reform debates, the lion’s share of attention has focused on the health insurance industry. In her post Does GSK Case Show A Need For Profit And Admin Caps In the Rest Of the Healthcare Industry?, she suggests we may want to cast the net wider, to include the pharmaceutical industry, for one.
At his eponymously named Health Policy Blog, John Goodman examines the economic ramification of the Affordable Care Act and raises the question of whether ObamaCare is causing the jobless recovery?
Harold Pollack says that we can expect that the NAACP boos for Romney may only be the beginning. He explains why he thinks the latest GOP rhetoric over the Affordable Care Act will alienate minority communities at the blog.
At New Health Dialogue blog, Justin Jones takes a cue from the new Health Dialogue-ers article on 12 Ways Health Care Could Be Improved If the House Wanted to Hold More Than Symbolic Votes to offer his own tongue-in-cheek look at 31 Things the House Could Have Done… that he thinks might have been more productive than voting to repeal the Affordable Care Act for the 31st time.
And here at Workers’ Comp Insider, if you haven’t already read it, we point you to a post about one of the reasons why prescription drugs are so much more costly under workers comp than under general health care: Physician drug repackaging, front and center.
Upcoming edition: We’re on a slightly relaxed summer schedule so the next Health Wonk Review is scheduled for August 16. Dr. Jaan Sidorov will host at Disease Management Care Blog.

Doggone fraudster of the month

Tuesday, July 17th, 2012

Fraud of any flavor is to be decried, but somehow it bothers us just that much more when the perpetrator is a physician. Call us sentimentalists, but we like to think of the Hippocratic oath as more than just a quaint mythic tradition. You know, the “do no harm” thing. But with the proliferation of prescription pain pill abuse, addiction, and deaths, it’s inevitable that some physicians are involved. We happened to spy a recent news story about the bust of a California pill mill.
Police had complaints that Dr. Rolando Lodevico Atiga of Glendora was essentially selling prescriptions for strong painkillers, such as oxycodone and Vicodin. Atiga was already on probation from prior charges related to fraudulent activity. Undercover agents went to obtain proof by trying to obtain fraudulent prescriptions. At one point, Atiga asked the officer for proof that she suffered from pain. How conscientious!

“This undercover officer obtained X-rays of her dog, brought these X-rays into the office, showed the doctor,” Staab said. “He looked at these X-rays, immediately said that pain medicine for her would be warranted and for $400 immediately issued a prescription for hydrocodone. Either Sparky the dog really, really badly needs Percocet or this doctor is a petty drug dealer masquerading as a physician,” Staab said.”

Now the dog x-ray angle of this story is pretty humorous, but there is nothing whatsoever that is funny about the underlying issue. Propelled by an increase in prescription narcotic overdoses, drug deaths now outnumber traffic fatalities in U.S.. When you think about druglords and pushers, doctors are probably not the image that comes to mind … but as the prescription drug problem worsens, that may change.

Physician drug repackaging, front and center

Thursday, July 12th, 2012

The drum that our colleague Joe Paduda has been beating for several years – the outrageous cost of repackaged drugs in Florida – appears to be resonating. This esoteric little nook and cranny of workers comp that is costing employers millions across many states would normally not attract much attention in mainstream media – heck, even a lot of grizzled workers comp vets weren’t conversant with the practice or the potential adverse affect on costs. But yesterday, the issue made the business section of the New York Times in an article by Barry Meier and Katie Thomas, Insurers Pay Big Markups as Doctors Dispense Drugs. They sum up the crux of the matter: “At a time of soaring health care bills, experts say that doctors, middlemen and drug distributors are adding hundreds of millions of dollars annually to the costs borne by taxpayers, insurance companies and employers through the practice of physician dispensing.” The article goes on to note that, “The practice has become so profitable that private equity firms are buying stakes in the businesses, and political lobbying over the issue is fierce.”
Florida and the case of Automated HealthCare Solutions are used as examples in the article. We’ve leave you to follow the excellent job the reporters do in outlining the issue, tracking down connections, and showing how a recent legislative attempt to close this costly loophole was squelched. Alan Hays, the Republican state senator in Florida who introduced the defeated bill said that, “The strategy of the people that were opposed to this bill was to put the right amount of dollars in the right hands and get the bill blocked,” he said. “And they were successful in doing that.” That defeat is costing employers and taxpayers some $62 million, according to the state’s insurance commissioner.
Don’t miss the accompanying infographic, Paying Much More in the Doctor’s Office. Also note the 424 comments to the article, which we are still perusing at this time – it’s not often that a detailed workers’ comp issue garners that much attention in the so-called mainstream press.
We give a big tip of the hat to Paduda, who has posted on the Florida repackaging issue repeatedly. going back several years, despite some personal jeopardy in the form of a threatened lawsuit, later dismissed by a federal judge.
How Connecticut is dealing with Physician Drug Repackaging
In February, Paduda posted that physician dispensing was coming to Connecticut and urged his readers to contact regulators. At Evidence Based blog, Michael Gavin posts an update: Connecticut Gets Drug Repackaging Right: Removing the Financial Incentive. Interestingly, this was done via a rule change rather than a statutory change. Plus, it does not ban the practice of physician dispensing, and it even allows a reasonable administrative fee. Gavin suggests that these central tenants of an effective regulatory approach to repackaged drugs might serve as a model for other states. Florida, take note!

Biweekly risk roundup

Thursday, July 12th, 2012

It’s Cavalcade of Risk week – David Williams hosts the week’s compendium of risk-related posts, including rugby, robots and rebates, at Health Business Blog.

Annals of Compensability: Sedentary Worker in the Garden

Wednesday, July 11th, 2012

Barton Rodr was a computer programmer for Yzer Inc, DBA Funnel Design Group in Oklahoma. When the yard crew taking care of Yzer’s property quit, the company asked for volunteers and Rodr stepped forward. He and his son mowed the lawn and manicured the yard on successive Saturdays, in preparation for the festivities at Automobile Alley, the historic district of downtown Oklahoma City. Barton, a salaried employee, was not paid for the work; his son received $40.
On July 18, 2009, Rodr was putting away the lawn mower when he suffered a heart attack. He was 36 at the time. A workers comp judge awarded him benefits, determining that the injury occurred in the course and scope of employment. A three-judge panel affirmed, but the OK Court of Civil Appeals reversed, opining that Rodr’s lawn work bore no relation to his primary job as a programmer.
The OK Supreme Court has ruled in favor of Rodr. Despite his performing volunteer work out of class and on the weekend, he was still an employee of Yzer, as the yard work met the primary test of employment: it furthered the interests of his employer.
In its defense, the company pointed out that the heart attack was caused by a pre-existing conditon: Rodr was overweight, a smoker, with a family history of heart problems. From the perspective of (very distant) consultants, we are tempted to ask: why did the company allow this employee to volunteer? Despite his relatively young age, he worked at a sedentary job and displayed risk factors that precluded his doing physical work. Speaking as a weekend mower, I can certify that the task is strenuous and noisy (less so for my neighbor who sits calmly on his riding mower, listening to music through noise-canceling headphones).
Volunteer vs. Employee
The court has ruled that an employee who volunteers is not a “volunteer.” OK law defines a volunteer as “any other person providing or performing voluntary service who receives no wages for the services other than meals, …therapy…or reimbursement for incidental expenses.” An employee is not “any other person.”
This is no small matter, for Rodr or for Yzer’s workers comp insurer. The unfortunate Rodr is permanently and totally disabled. He is unlikely to work again. He is currently surviving on a mechanical heart and will need a transplant soon. Given Rodr’s age and medical expenses of significant magnitude, this claim is likely to reach seven figures.
The lesson for employers is clear: saving a few bucks on physically demanding jobs is not worth the risk. An overweight smoker with a family history of heart problems does not belong within ten feet of a lawnmower. When your lawn crew quits, just go find another one.
Thanks to WorkCompCentral (subscription required) for the heads up on this case.

Young workers + injuries + labor law violations = huge penalties

Monday, July 9th, 2012

Every summer, we beat the drum about the moral mandate of keeping young workers safe. But as with many things, the morale mandate all too often speaks to employers in a soft voice while money shouts in a big voice. So if “doing the right thing” isn’t enough of a reason to keep kids safe, there’s also a big economic incentive in the form of penalty avoidance for employers to toe the line when it comes to safety and strict adherence to youth labor laws: if a young worker is injured, the employer may be subject to steep additional penalties if labor law violations are present. These penalties are “uninsurable” – that is, they will be out-of-pocket for the employer since the insurer is not on the hook for penalties related to an employer’s labor law violations.
In Denmark v. Industrial Manufacturing Specialists, Inc., the Alabama Court of Civil Appeals recently upheld double compensation for an injured 16 year old worker due to the employer’s child labor laws violations. The youth was a part-time worker who was working with a coworker to load a 1,300-pound metal bar stock onto a table so that it could be cut by a band saw when the load fell on the youth, crushing him and causing internal injuries and a fractured ankle. Even though the youth was not actually engaged in the prohibited activity (use of the band saw), “The court found a nexus between the task the worker was performing at the time of the accident and the manufacturer’s violation of the child labor laws. Therefore, the worker was entitled to double compensation for his injury.”
Before employing minors, it is essential to know and obey child labor laws, particularly in regards to prohibited work. Employers who fail in this charge may wind up paying double compensation and/or fines if an injury occurs. There are federal laws governing the employment of minors in both non-farm work and in agricultural work, but employers need to know the governing state law because the Department of Labor states that, “Where state law differs from federal law on child labor, the law with the more rigorous standard applies.”
Laws cover such matters as minimum age, prohibited work by age cohort, whether work permits are needed, and restrictions on the hours of work allowed. Here are some compliance resources for employers. As with most laws, ignorance of the law is not a defense.

Federal Laws – Hiring Youth & Compliance Assistance
The U.S. Department of Labor’s Wage and Hour Division (WHD) administers and enforces the federal child labor laws. Generally speaking, the Fair Labor Standards Act (FLSA) sets the minimum age for employment (14 years for non-agricultural jobs), restricts the hours youth under the age of 16 may work, and prohibits youth under the age of 18 from being employed in hazardous occupations. In addition, the FLSA establishes subminimum wage standards for certain employees who are less than 20 years of age, full-time students, student learners, apprentices, and workers with disabilities. Employers generally must have authorization from WHD in order to pay sub-minimum wage rates.

Among the FLSA penalties, DOL says that:

Employers are subject to a civil money penalty of up to $11,000 per worker for each violation of the child labor provisions. In addition, employers are subject to a civil money penalty of $50,000 for each violation occurring after May 21, 2008 that causes the death or serious injury of any minor employee – such penalty may be doubled, up to $100,000, when the violations are determined to be willful or repeated.

See more at the Deparment of Labor’s Youth & Labor topic page
State Laws
Many states offer double compensation or other penalties related to an injured youth when there are labor violations. In some instances, penalties can be imposed even when the labor violations aren’t directly related to the injury.
Selected State Child Labor Standards Affecting Minors Under 18 in Non-farm Employment as of January 1, 2012
State Child Labor Laws Applicable to Agricultural Employment
Links to state labor offices
Compliance with labor laws is only one part of the employer’s responsibility: the other is ensuring a safe environment. Young workers are green workers who don’t have the experience, judgement, and work hardening that older workers have. That heightens their risk of injury. It’s important to provide task-specific training with an emphasis on safety. We also encourage the idea of pairing a young worker up with a more experienced mentor. The article Preventing Young Worker Fatalities offers a good list of tips. Also, see our prior posts about young workers for more tips.