With few exceptions, New York employers must have their employees insured under the Workers’ Compensation Law (WCL).1 Insurance coverage and related costs can be a major expense for any employer, even in good economic times. This article provides an overview of employer obligations under the WCL, and offers examples of how employers can help control expenses related to workers’ compensation.
The purpose of workers’ compensation is to provide reasonable – not full – compensation to employees for a work-related injury, illness or death, regardless of fault.2 On balance, workers’ compensation is the exclusive remedy of the injured employee against the employer so that, with few exceptions, the employee may not bring a negligence action against the employer for such injury.3 Workers’ compensation does not provide compensation for an accident or injury solely because it occurred at work.4 Rather, an employee must establish that his injury was caused by employment in order to obtain workers’ compensation benefits.5 For example, in Frederick v. Lindenhurst U.F.S.D., the court upheld the decision of the Workers’ Compensation Board that the death of a school custodian was not causally related to his employment. Although the custodian was found not breathing and unresponsive in the school’s boiler room, the death certificate and autopsy results attributed death to arteriosclerotic heart disease, and the court found no medical evidence to suggest that the custodian’s work caused his death.
A workers’ compensation insurance policy is the contract that provides the statutory benefits to which an injured employee may be entitled. It provides a fund accumulated from covered employers to meet the risk of loss, distributes the burden of such risk among participating employers, and ensures compensation in accordance with the WCL. Generally, insurance provides injured employees with weekly cash payments and medical benefits or, in the case of death, survivor benefits to their dependents. Benefits include medical care and treatment; wage replacement within certain limits; death and funeral benefits; and a facial disfigurement award.
Employers should research and periodically review the most cost-effective insurance options, such as whether to self-insure or purchase an insurance policy. Generally, employers may obtain workers’ compensation insurance coverage through self-insurance, the New York State Insurance Fund (NYSIF) or a private sector insurance carrier.6 To qualify to maintain a self-insured workers’ compensation program, employers must meet certain financial standards and other requirements. Self-insurance may be less expensive, but administration of the workers’ compensation program can be costly, and the Workers’ Compensation Board may require proof of sufficient financial security and a substantial security deposit commitment from some employers.7
Otherwise, coverage may be obtained from NYSIF or a private insurance company. Annual premiums may vary from one insurance company to another for the same coverage. Premiums depend upon such factors as the employer’s type of industry, payroll, history of prior claims and potential liability for future claims. To help reduce premium costs, employers should ensure that employees have accurate “classification codes,”8 and should consider whether to participate in an industry “safety management” group plan.
Individual Claims Each claim for workers’ compensation benefits should be reviewed carefully so that invalid claims are challenged in a timely manner. Employers have the right to request that the insurance carrier contest the compensability of a claim. Common reasons to challenge a claim include: 1. There is insufficient medical evidence of an injury or illness; 2. The illness or injury did not arise “out of or in the course of employment” (i.e., there is no causal relation between the injury and accident);9 3. Proper notice to the employer was not given;10 4. The claim was not properly filed in time (i.e., within two years after the accident or injury in most cases);11 and 5. The alleged injury or illness does not warrant the length of the employee’s absence. When a claim is controverted by either the employer or insurance carrier, the Workers’ Compensation Board may conduct an investigation to decide whether the claim is valid. Employers may attend any hearings related to their employees’ claims.
Even after a claim has been approved, it should be monitored carefully. There is no presumption of a continuing disability; rather, it must be established by progress reports from the treating physician in order for the employee to continue receiving benefits.12 The Workers’ Compensation Board may have the claimant examined by a qualified physician, and a claimant who refuses to submit to a physical examination may lose compensation benefits during the period of refusal.13 In addition, the employer or carrier may request an independent medical examination (IME) of the claimant.14 The IME results could lead to the claimant’s benefits being denied, terminated or reduced. A case may even be reopened in the event that medical reports demonstrate a change in the claimant’s condition.15
What if an employer suspects fraud or misconduct? Allegations may be reported anonymously to the Office of the Fraud Inspector General, which investigates WCL violations, by calling the 24 Hour Complaint Hotline at (888) 363 6001.16 Examples of fraud include an employee filing a claim based on an injury that did not occur or was not work-related, or misrepresenting the employee’s ability to return to work.
Absences Due to Workers’ Compensation
Employers should bear in mind that the WCL does not prevent the dismissal of an employee who cannot function effectively.17 Employees may be disciplined – and dismissed – for excessive absences that result from a work-related injury or illness. It is true that an employer may not discriminate against an employee solely because an employee has submitted a claim under the WCL. However, absent evidence of retaliation, an employer may discharge an employee for such reasons as insubordination, misconduct, economic reasons, inability to perform the work or excessive absences even when those absences were due to a work-related disability.18 This is because the hardship that an employee’s excessive absence creates for others, including coworkers, is a legitimate business reason for dismissal.19
For example, in Duncan v. New York State Developmental Center, the New York State Court of Appeals upheld the dismissal of an employee after she had been absent from work for more than one year due to a work-related injury; the court found no evidence that the employee was discharged in retaliation for her compensation claim.20 Similarly, in Appeal of Bd. of Educ. of Beacon City School Dist., the New York State Commissioner of Education upheld the dismissal of a tenured teacher for incompetence and neglect of duty due to her excessive absences.21 The Commissioner explained that “A[a]n employee whose physical condition results in absences which are so numerous as to seriously impair his or her effectiveness as a teacher is subject to a charge of incompetence.” In that case, the Commissioner found that the termination was for a legitimate business reason, i.e., the hardship that her absenteeism created for her students. Of course, employers must still adhere to any law or contract provision that governs the termination of employment.
Sources of Reimbursement
Employers should seek timely reimbursement from the Board for compensation payments or continued wages that are paid to an employee in advance of a workers’ compensation award. The WCL permits reimbursement out of a claimant’s award for either the employer’s advance payment of compensation or continued payment of wages.22 Employers may be reimbursed for compensation paid to a claimant even when compensation was paid in accordance with a contract or collective bargaining agreement (CBA).23 However, this right to reimbursement may be lost if the employer fails to file a claim for reimbursement before compensation is awarded.
Employers may also be entitled to reimbursement under the “Second Injury Law,” which provides an incentive for employers to hire employees who have a permanent physical impairment from a prior accident or disease.24 This law permits an employer to obtain reimbursement from the “Special Disability Fund” for workers’ compensation benefits and medical expenses awarded for an employee’s work-related permanent disability or death. In addition, employers may seek reimbursement from the proceeds of a third-party action.25 For instance, when an employee is entitled to workers’ compensation but his injury was caused by the negligence of a third party, there may be a right to commence a negligence action against that third party. In such case, an employer may be entitled to reimbursement from the recovery obtained from that third party.26
Employers can also control costs by enforcing the limits of their obligations to employees who claim workers’ compensation benefits. The premise is simple, but some employers are not aware of the practical effects of this basic rule. Assuming there is no policy, contract or established practice to the contrary, employers need not provide “fringe” benefits, such as the accrual of vacation time or payments for unused vacation time, to employees who are absent from work and claiming workers’ compensation benefits. When employers do not provide such a benefit for other absent employees who are absent, such a benefit for employees who are claiming workers’ compensation benefits would result in an unfair “windfall” for them. This is true for several reasons.
First, the law is clear that employers are not required to provide employees with vacation time or leaves of absence, either paid or unpaid.27 Paid time off is a “fringe” benefit which employers have discretion to provide. The only exception is when an employer has a written policy, contract or an established past practice that requires the employer to provide vacation time, or when an employee is eligible for leave pursuant to a law such as the federal Family and Medical Leave Act (FMLA).
Second, the WCL was not intended to permit employees to profit through the receipt of double benefits. Reimbursement from a workers’ compensation award must not disproportionately favor either employer or employee.28 For example, in Houda v. Niagara Frontier Hockey, employers were entitled to reimbursement for salaries paid to employees receiving workers’ compensation benefits during summer months, since the employers did not receive the benefit of players’ primary service to be performed under the employment contracts.29 In another example, Pawlewski v. Buffalo Bd. of Educ., a teacher who fell at work had received her full annual wages and benefits paid over period of 10 months, but those wages were continued after the summer recess.30 The court held that the employer school district was entitled to reimbursement for compensation paid over summer months, because denying reimbursement would have “the disfavored result” of providing the teacher with both full wages and compensation.
Third, employers – especially public employers – should avoid the unfavorable precedent of providing unnecessary benefits without negotiation.31 Pursuant to the “Taylor Law” (Civil Service Law, Article 14), when a public employer acquiesces to a practice that is not set forth in a contract, this may establish a “past practice” which cannot be altered in the future without negotiation. Fourth, consider that recent amendments to FMLA Regulations confirm that an employee is not entitled to accrue any additional benefits or seniority during unpaid FMLA leave.32 The same policy should apply to employees who are absent from the workplace and claiming workers’ compensation benefits.
Conclusion Finally, yet importantly, the most basic cost-saving idea is accident prevention. Making workplace safety and employee training a priority will help reduce the occurrence of accidents and resulting claims.33 For those work-related incidents that are unavoidable, careful oversight and the assistance of competent legal counsel will help to ensure the efficient administration of the workers’ compensation program, in accordance with both the letter and spirit of the WCL.
Christie R. Medina is an associate with Frazer & Feldman, LLP, based in Garden City, N.Y. Christie concentrates on Education Law, Labor Law and Municipal Law. She graduated from the Hofstra University Honors Program (B.A., magna cum laude, Phi Beta Kappa, 2003) and Hofstra University School of Law (J.D., 2006). She is a recipient of the “Commissioner Monica Gollub” Memorial Endowed Distinguished Full Academic Scholarship in Law. Christie is a member of the New York State Bar Association, the Education Law Committee of the Nassau County Bar Association, and volunteers as a mentor in the Nassau County Bar Association Student Mentor Program. Questions can be directed to cmedina@ ffedlaw.com.
1. See WCL §§ 10, 32-a and 50. The WCL is enforced by the Office of the New York State Attorney General and the Workers’ Compensation Board (Board), which administers the workers’ compensation program statewide. WCL § 141. The Board is authorized to hear and determine all claims for compensation or benefits under the WCL. See 12 NYCRR §§ 300.1 et seq. (procedures before the Board).
2. Lundberg v. State, 25 N.Y.2d 467, 472 (1969).
3. Maas v. Cornell University, 253 A.D.2d 1 (3d Dept., 1999).
4. See Detenbeck v. General Motors Corporation, 309 N.Y. 558 (1956).
5. Lundberg v. State, 25 N.Y.2d 467 (1969); Frederick v. Lindenhurst Union Free School Dist., 886 N.Y.S.2d 518 (3d Dept., 2009).
6. See WCL § 25 and 50(4)(b)(self-insurance); Article 5 (county self-insurance plan); Article 6 (State Insurance Fund). An insurance policy merely guarantees the employer’s performance of its WCL obligations, but when a claim is disputed, the carrier is not required to pay unless a Workers’ Compensation Law Judge has found the employer liable for compensation. See WCL § 50; Penn v. Standard Acc. Ins. Co., 4 A.D.2d 796 (3d Dept., 1957). The WCL does not require an employer to make payment when the right to such payment is in dispute.
7. School districts and municipal employers that elect to self-insure are exempt from posting security deposits (WCL § 50[a]), and may establish a Workers’ Compensation Reserve Fund for this purpose (General Municipal Law § 6-j).
8. To determine the insurance premium, classification codes are used to group similar types of businesses, so those with lower risks pay a lesser rate than those with higher risks. See http://ww3.nysif.com/Workers_Compensation/Policyholders/About_WC_Premium_and_ Billing/Components_of_WC_Premium.aspx#ClassCode.
9. WCL § 10.
10. Generally, the employer must receive written notice of an accident within 30 days after the accident or death, and a claim will be barred by the unexcused failure to give such notice. Employers must raise this objection at the first Workers’ Compensation Board hearing or it could be waived. WCL § 18.
11. WCL § 28. 12. WCL § 13-a(4)(a);
12 NYCRR § 325-1.3(b)(3). Mercio v. Globe Protection, Inc., 74 A.D.2d 682 (3d Dept., 1980).
13. See WCL § 13-a(4)(a). A claimant who refuses to submit to a physical examination may lose compensation benefits during the period of refusal. WCL § 19.
14. WCL§ 13-a(4)(b) and 137 (IMEs).
15. WCL §123; Eggleston v. Shinola Company, 229 N.Y. 622 (1920); Brennan v. Mack International Motor Truck Corp., 238 A.D. 877 (3d Dept., 1933).
16. See WCL § 136(3). See also http://www.wcb.state.ny.us/content/main/fraud/FraudInsGeneral.jsp.
17. See, e.g., Duncan v. NYS Developmental Center, 63 N.Y.2d 128 (1984)(employer does not violate WCL by taking disciplinary action against employee who is absent due to legitimate illness or injury).
18. See WCL § 120; Conklin v. City of Newburgh, 205 A.D.2d 841 (3 Dept., 1994).
19. See Gagnon v. Foster Medical Supply Inc., 232 A.D.2d 681 (3d Dept., 1996); Kaye v. Brewster Cent. School Dist. Bd. of Educ., 103 A.D.2d 870 (3d Dept., 1984), aff’d 64 N.Y.2d 1097 (1985) (discharge of probationary employee, for reasons unrelated to absence due to compensable injury, did not violate WCL even though employee was absent due to compensable injury at time of discharge).
20. 63 N.Y.2d 128 (1984).
21. 34 Ed. Dept. Rep. 190, Decision No. 13,278 (1994), available at http://www.counsel.nysed.gov/Decisions/volume34/d13278.htm, last visited November 2, 2009.
22. WCL § 25(4)(a); Adolf v. City of Buffalo Board of Educ., 50 N.Y.2d 871 (1980); Drew v. Board of Education of U.F.S.D. No. 1, Town of Carrollton, 35 A.D.2d 871 (3d Dept., 1970).
23. See e.g., Adolf v. City of Buffalo Board of Educ., 50 N.Y.2d 871 (1980); Lynch v. Board of Educ. of City of N.Y., 1 A.D.2d 362 (3d Dept., 1956), aff=d, 3 N.Y.2d 871 (1957). 24. See WCL § 15(8).
25. WCL § 29; See, e.g., Atlantic Mut. Ins. Co. v. State of New York, 50 A.D.2d 356 (3d Dept., 1976).
26. WCL § 29.
27. In the case of school districts and municipal employers, for example, General Municipal Law § 92(1) specifies that boards of education and municipal employers have discretion to grant vacations, sick leaves and leaves of absence to their officers or employees, with or without pay, and may adopt rules and regulations in relation thereto.
28. Knoll v. Chemung County, 44 A.D.3d 1190 (3d Dept., 2007).
29. 16 A.D.3d 926 (3d Dept., 2005).
30. 53 A.D.3d 834 (3d Dept., 2008).
31. See Civil Service Law, Article 14; Canastota C.S.D.,
32 PERB &3003 (1999); New York State Dept. of Correctional Services, 21 PERB &4517, 4541 (1988)(establishment of past practice).
32. See 29 CFR § 825.215(d)(2).
33. See New York State Workers’ Compensation Board, “Employers’ Handbook A Guide to the Workers’ Compensation and the Disability Benefits Systems for the New York State Business Owner” (July 2009), available at http://www.wcb.state.ny.us/content/main/Employers/EmployerHandbook.pdf, last visited November 2, 2009. See also, Office of the New York State Comptroller, “Local Government and School Accountability: Managing Workers’ Compensation Costs” available at http://www.osc.state.ny.us/localgov/costsavings/workers_comp.htm, last visited November 2, 2009.
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