Most employers can expect to see a reduction in the number of workers’ comp claims lodged during a recession (as we previously reported - see article), but this is no guarantee that there will be a corresponding reduction in claims costs. In fact, the severity and duration of workers’ comp claims tend to rise during recessionary periods.

There are several reasons why long term claims become more common when the economy contracts, including:

• Businesses find it more difficult to provide light / modified duties;
• Older, more experienced workers may be less prone to injury than younger, inexperienced workers, but when they are injured at work their injuries tend to be more severe;
• Workers who are on modified duties and retrenched are more likely to remain certified for modified duties;
• There is a rise in claim duration for employees in short term or seasonal work, such as the construction industry;
• The time it takes for a worker to find a new job may increase, especially when seeking a similar rate of pay; and
• Workers with minor injuries and illnesses may be reluctant to claim for fear of compromising job security, thus increasing the proportion of serious claims.

The case studies below illustrate how some of these factors might play out in the workplace.

CASE STUDY ONE

A woman works for an automotive parts manufacturer. At work, she develops a shoulder problem which prevents her from safely completing her usual duties in the factory. After two weeks off work on wage replacements, she returns to full time work on modified duties but experiences ongoing shoulder soreness.

Meanwhile, there is a decrease in demand for car parts due to the economic crisis. The manufacturer downsizes the plant and ten staff are made redundant, including the injured woman.

Her inability to undertake regular duties thanks to her work related shoulder problem means that it is very difficult for her to find a new manufacturing job. She is back on workers’ comp payments for the duration of the manufacturing downturn or until her employer’s obligation is exhausted and her payments are terminated.

CASE STUDY TWO

An apprentice carpenter is employed, along with three other staff, by a building industry subcontractor. The apprentice injures his back at work and takes six weeks off to recover. After this time off work, his physio informs him that it is safe for him to return to work on modified duties. However, during his absence there has been a substantial downturn in his employer’s business and there are no modified duties available.

Because he cannot return to work, the apprentice’s motivation to stick to his rehabilitation plan diminishes. Instead of remaining active, he spends most of his time at home watching television. He becomes depressed and feels that he will never complete his apprenticeship. His physical discomfort increases and he becomes wary of exercise because he perceives that exertion causes pain and he fears worsening his injury. He remains on workers’ comp payments, and his back problems do not improve.

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While costs per claim might rise during a recession, in line with the increase in claim severity and duration, employers won’t necessarily see higher total claims costs. The issue of overall cost will be determined by whether:

• The increased proportion of longer claims is primarily due to a drop in the number of minor claims, or an increase in the number of long or serious claims; and
• The drop in claims frequency is adequate to cancel out the rising costs per claim.

The information above was drawn from a briefing paper from Canada's Institute for Work and Health, with case studies provided by Super Doc!