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The Correlation Between Layoffs & Workers’ Compensation Claims

Recent research indicates that more layoffs and hiring freezes are increasingly likely to occur in 2023. Can this trend lead to increasing workers' compensation claims? The answer may surprise you.

April 21, 2023

While it may seem counterintuitive, when layoffs increase, hard-to-prove workers’ compensation claims can often follow suit. Effectively managing post-layoff workers’ compensation claims is not only an important part of the claims process in general, but a necessity for identifying potentially fraudulent claims.

“Layoffs do not often result in receiving fewer claims,” said Stephen Peacock, Director of Client Engagement at Safety National. “In fact, claims that are reported after a layoff typically are not necessarily caused by one specific incident, but are due to aches and pains that have lingered and may not have been proactively reported. Because of the nature of these claims, they are more challenging for adjusters to investigate when they have not previously been reported.”

For instance, these claims may involve factory-type work that causes pain in wrists, shoulders, knees, and back, also known as repetitive trauma. Office workers are also at risk from these types of injuries, which include carpal tunnel syndrome, bursitis, and tendonitis of the wrists and elbows.

Post-Layoff Claims Are Often More Challenging

Post-layoff filings can be more difficult to prove if ex-workers do not report incidents at the time they occur. Repetitive trauma claims can be particularly difficult to prove after the injured worker leaves the job because the determination of the cause of the injuries may hinge on ergonomic studies, medical documentation, and physician opinions.

For example, the difficulty occurs when complaints of pain or injury are made unofficially in passing and not documented. Often, workers believe the pain will go away on its own in a few days, and sometimes it does. Or, the pain may be mild enough that workers believe they can live with it until it goes away, so it may not be worth reporting and then taking the time from work to see a doctor. However, that pain can remain for weeks or months – and without reporting or seeing a doctor, there is no documentation for it. Post-layoff, the pain may become more noticeable, which leads to a claim being reported. Investigating these claims is time-consuming and may hinge on witness statements, medical records and ergonomic studies. Medical tests and doctor evaluations will need to be arranged, which can take weeks or months to have done and records/opinions received.

How Can Employers Help Protect Themselves

Verifying the validity of post-layoff claims can be difficult, but employers who follow these three guidelines before layoffs occur may have an easier path.

  1. Work with the risk management team and department supervisors to gather documentation about work incidents and complaints of pain as they occur or are reported, no matter how small. Managers need to ensure that all injuries – large and small – are documented and reported to the appropriate team.
  2. Investigate these issues. Include the worker and anybody else who knows or might know something about an incident or the mechanics of a task. Statements need to be obtained from the worker and anyone else who witnessed the incident or heard the worker’s complaints of pain.
  3. Document and retain everything, including videos of the mechanics and ergonomics of the more repetitive jobs, if available.