Area Development
It's natural to want to trim costs wherever possible. But doing any serious cost cutting in the area of workers compensation insurance presents special challenges. For one thing, you can't cut benefits levels as you can with health insurance. That's because states mandate full treatment for on-the-job injuries. Another issue is that your cost-cutting steps must be done in conformance with the law. And when it comes to workers comp, the state is all-powerful. "With the exceptions of federal employees and employees working in maritime industries, state laws control workers compensation," says Christopher M. Fox, an associate in the Philadelphia office of Littler Mendelson, the nation's largest law firm devoted to representing management in employment matters.

Unfortunately, juggling the various state laws can get complicated. "Each state has specific rules regarding how you notify employees of their rights, how they can file claims and what doctors they may or may not see," says Fox. "Your state laws will also detail what steps you must take to report workplace injuries." You can obtain information about your own state's laws from U.S. Department of Labor at

No-Fault Coverage
Nobody wants to deny workers comp benefits for legitimate accidents. But what about those instances when accidents are partly the fault of the employee? Suppose the worker failed to use a safety device, engaged in horseplay, or did something foolish, or worked while intoxicated? Or what if an injury was deliberately self-inflicted?

Many employers would like to weed out such questionable claims as a way of controlling insurance costs. It is certainly possible to mount defenses in cases such as the above. Unfortunately, unless some clear-cut fraud is involved, prevailing in court can be difficult. "Most workers compensation systems have become very liberal as to the definition of an accident," says James J. Moore, president of J&L Risk Management Consultants, a Raleigh, North Carolina-based firm that helps employers manage workers comp costs. "The fact is that courts deny benefits only rarely."

One reason for this is a matter of judgment. Legitimate claims often arise because employees were not paying attention to what they were doing or performed tasks out of the normal work routine. Trying to draw a bright line between legitimate and improper situations can be problematic. Another reason is a matter of perception. "In any workers comp case, it becomes the `big bad insurance company' against the one little employee," says Moore. "Workers compensation judges tend to lean towards the testimony of the employee."

Lawsuits Avoided
While it seems the workers comp laws are stacked in favor of employees, those laws also protect employers from costly lawsuits by injured workers. "The tradeoff for a no-fault system is that workers compensation is generally the exclusive remedy for employees injured in the workplace," says Fox. "Only in very limited instances may an employee circumvent the system and sue the employer in tort."

And what are those instances? Once again, state law rules, according to Fox. "Using Pennsylvania as an example, an injured worker could sue [the] employer outside of the workers compensation system if the employer failed to maintain workers compensation insurance, or the injury was intentionally caused by the employer," he says. "That being said, Pennsylvania courts have held that even a willful violation of OSHA safety regulations will not expose an employer to civil liability."

Safety First
There is one highly effective way to control workers comp costs - launch a workplace safety program and constantly work on improving it. If you experience fewer accidents, you will incur lower medical costs - which translates into lower workers comp premiums. "A lot of employers come to me and ask, `How can we reduce the cost of this claim?'" says Moore. "Unfortunately, once a claim is made, you are not going to reduce the cost. The best approach is to take steps to reduce workplace accidents that lead to claims. The least expensive accident is the one that never happens."

While safety programs can become quite detailed, it's wise to start out small and build. The first step is to identify the accidents most likely to happen. "Slips, trips, and falls are by far the most common accidents for almost all employers," says Moore. "I see a ton of knee and ankle injuries resulting from what seem like minor accidents." Such injuries can be damaging to the worker and to the business: "If you cannot put your weight on your hip or your knees or your ankle, you are going to be out of work a long time," says Moore. "That is very costly."

Train your employees to be especially vigilant in quickly correcting conditions that might seem innocuous, but can lead to slips, trips and falls. For example:

• Tangled rugs. Straighten any rugs that have gotten folded over. Watch for corners that curve upward. Make sure the rugs themselves do not slip easily on your floor.

• Wet floors. When it rains, do the floor areas just inside your doorways get wet? Dry them immediately and install high-friction rugs. And install barriers to guide customers around any wet areas.

• Obstructions. Avoid leaving cartons in the middle of walkways. Scoop up any flyers or other pieces of paper that may cause people to slip.

"Studies show that stepping to different levels causes many trips and falls," says Moore. "So you need to pay special attention to stairways, any changes in floor levels, or sections of floor that are on a gradient." On stairs, install roughened safety strips across the steps that help shoes get a firm hold. Place mats at the bottoms and tops of stairs to catch any water tracked in when it's raining. Also make sure your banisters are firm and are mounted at the right height. Changes in floor levels need to be clearly marked. Install bright colored strips along the division and a railing where possible. As for floors that are on a gradient, post warning signs and a walkway railing.

Other Risks
Data entry workers, cashiers who scan orders, and others engaged in repetitive tasks are subject to carpal tunnel syndrome, which can spark workers comp claims. "In any situation involving repetitive work, I recommend job rotation," says Pam Hart, director of safety and wellness programs at Doherty Employer Services, a Minneapolis, Minnesota-based human resources outsourcing firm. "You can also encourage frequent stretching and short breaks. Or switch hands regularly." She says negative effects of keyboarding can also be avoided by making sure workstations are structured properly so that worker's hands and wrists are kept straight. Consultants schooled in ergonomics can assist.

Additional risks come from many of the required day-to-day tasks in which workers regularly engage to do their jobs. "Be especially careful about any positions that require employees to lift, pull, or hold heavy items," says Claire Wilkinson, vice-president for global issues at the Insurance Information Institute. "Overexertion of this kind accounts for a large proportion of injuries."

Employees can be excellent sources of information on workplace hazards that should be addressed. "I highly recommend that retailers gather employee feedback throughout the safety program and incorporate employees into establishing a safe place to work," says Amy Trueblood, account manager at Awards Network, a LaPorte, Indiana-based organization that sells safety awards programs. She recommends discussion of topics such as how to avoid a known safety hazard, how an accident was recently prevented, or how a recent accident could be prevented in the future. "

Vital as safety programs are, they can be counterproductive if poorly managed. Here are four "don'ts" that Trueblood suggests:

• Don't set up safety goals that will encourage employees to not report accidents.

• Don't develop a safety program and then fail to establish benchmarks or track its success over time.

• Don't cap award earnings so that people slack off during periods during which they cannot earn safety gifts.

• Don't award safety gifts without considering the different tastes and preferences of employees.

Controlling Fraud
The no-fault nature of workers comp laws usually means that employers find it difficult to defend against claims. But that doesn't mean that steps should not be taken to ferret out cases of clear fraud. Fraudulent activities result in increased workers comp exposure and higher premiums, and that can affect profits whether the employer is a small mom and pop operation or a national corporation.

"Workers compensation fraud comes in many forms," says Fox. "An injury can be staged. Or there can be simple malingering by an employee who is content collecting indemnity payments but who is really able to work. Or the employee may be collecting indemnity payments while working elsewhere." Insurance companies often contract with third parties to engage in surveillance that can be helpful in debunking workers comp fraud. For example, video footage may show the employee doing yard work or engaged in other physical labor that undermines an allegation of inability to work. Other detective work might uncover evidence that the worker has obtained employment elsewhere.

Stay Involved
Employers should stay involved with the injury cases until the employees return to work. "Vigilance is absolutely key in managing workers compensation claims," says Fox. "It starts at the time of injury with an investigation to determine if a claim is compensable under workers compensation laws. Beyond that, you need to be involved after claims are filed." He suggests that if your claims are being managed by a third-party administrator or an insurance company, make sure that organization is keeping an eye on the claim, assuring the claimant is not working elsewhere and checking periodically with medical providers to assess the status of the claimant's medical condition.

Workers comp benefits are typically divided into medical - the reimbursement of doctor and hospital bills - and indemnity - payments for lost wages. "Controlling medical costs is very important because they now represent a much larger portion of total workers compensation costs than they did 20 years ago," says Fox. "And there is no indication that this trend will be reversed." He says you can contest medical procedures that seem too frequent or costly to the extent your state law allows. State law can also affect how you monitor the ability of the employee to work. In Pennsylvania, for example, you can require that the employee see a doctor of your choosing twice a year for that purpose.

One more thing: Don't treat accident victims like strangers. "Keep in mind that injured employees are staying at home, looking at ads from workers compensation attorneys on the TV and computer," says Moore. "So reach out to them. Call them. Send them get-well cards. Asking how they are doing is off-the-scale important. Except for your safety program, it's the best thing you can do to save money."

Progress Ahead
Safety programs have proven themselves effective tools for reducing workers comp costs, and employers have climbed aboard the bandwagon. "Safety has improved considerably over the years," says Wilkinson. "Employers are increasingly focused on making the workplace safer and reducing worker exposure to hazardous activities."

Keep in mind that safety doesn't happen by itself; it must be managed. "A safe work environment starts with the attitude of top management," says Moore. "Water runs downhill: If managers don't care about safety then employees won't." And the attitude of concern must be understood by all: "If your top managers don't communicate their concerns about safety then nothing else you do to reduce accidents will make any difference."