Penalty flags

Last updated on May 13th, 2019 at 02:33 pm

Most employers pass the risks and costs of work injury claims on to a worker’s compensation insurance carrier. This means that the carrier has everything covered, right? Not quite.
There is still one area where Wisconsin employers can’t pass the costs on to their insurer: penalty claims. With these claims, it’s the employer – and not the insurer – who is on the hook, which is an expense that few employers can afford for a penalty that can and should be avoided.
Safety violation
A safety violation can bring a penalty of up to $15,000 if an employee is injured as a result. Liability exists when an OSHA violation or failure to comply with the "Safe Place" statute contributes to causing the injury. Employees are generally entitled to benefits even if their negligence contributed to the injury, so the employer must show that the employee’s unsafe act was so extraordinary that it could not have been anticipated in order to avoid liability. In all but the most extreme cases, showing this is an uphill battle.
How do employers avoid these claims? The obvious key is to avoid the unsafe condition or act in the first place by consistently enforcing safety rules and by keeping equipment and facilities in safe condition. If an injury involving a safety violation occurs anyway, employers should remedy the violation and work promptly to resolve the employee’s claim for benefits. It is an employee who feels insulted, on top of being injured, who is likely to seek revenge.
Bad faith
Acting in bad faith when dealing with a work injury claim can also lead to a $15,000 penalty. This commonly occurs when the employer decides on its own not to treat an injury as work-related without any support for that decision. The question then becomes whether the employer had "credible evidence" to make the claim "fairly debatable," which usually means having a medical opinion that says the injury isn’t work-related. Employers who deny claims without such evidence run the risk of paying a bad faith penalty.
This penalty is easily avoided. Claims of injuries should be promptly addressed and reported to your carrier. If there is doubt about the validity of a claim, employers should err on the side of caution and report the injury. Doing so is not an admission of liability and, in fact, demonstrates good faith. If it is later determined that the claim is not valid, benefits can be terminated and your carrier can pursue reimbursement.
Unreasonable refusal
to rehire
The greatest risk for employers is the unreasonable refusal to rehire claim, which entails a penalty of one year of the employee’s wages. This amount is not offset by wages from subsequent employment or by other benefits received, so a violation here can hit an employer hard. Because of the high potential payout, and the relative ease of making the refusal to rehire case, this claim is not only attractive to a terminated employee, but also dangerous for an unwary employer.
This claim, which covers both the refusal to return a work-injured employee to work and the termination of a work-injured employee for reasons that appear to have some connection with the injury, forces employers to prove that their actions were reasonable.
What is considered reasonable? Although the answer depends on the facts of each case, it is generally deemed unreasonable for an employer to terminate a work-injured employee if there is any work available that the employee can perform; where the termination is for misconduct or poor performance and similarly situated employees without work injuries have not been terminated; where the termination is due to a concern about future injuries or increases in insurance rates; or where absences related to the work injury are counted against the employee.
How to avoid this penalty? While the considerations for dealing with the return to work or continued employment of a work-injured employee are too numerous to address here, the best advice is to bear in mind that there is an obligation to return a work-injured employee to work if it is at all possible to do so, to be consistent, and to deal with the employee in good faith.
Bottom line
Worker’s compensation costs are an inescapable reality and most are uncontrollable. While employers strive to control costs, any savings can quickly evaporate for the employer who gets hit with a penalty. Keeping these penalties in mind when dealing with a work-injured employee will reduce the risk and help keep unnecessary worker’s compensation costs in check.

Steven A. Burk is an associate with the Quarles & Brady LLP law firm in Milwaukee.

May 13, 2005, Small Business Times, Milwaukee, WI

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