1. What constitutes an “occupational” injury or

illness 2. Gray areas in determining if an injury/illness

is “occupational” 3. What constitutes an “occupational” disease

To be compensable under Workers’ Compensation, an injury must be “Occupational” “Occupational” requires more than just occurring at work An injury is considered “Occupational” when it meets three tests…

To be considered “occupational,” the injury must:

1. Arise out of…

2. Be in the Course of…

3. And within the Scope of employment. Specific thresholds are created by each requirement that must be met before an injury is considered “Occupational.”

Indicates and requires a causal connection between the furtherance of the employer's business and the injury.

A function of the injury’s or illness’ timing and location: The injury must occur:

1. During operations for the employer ("during employment"); and

2. At the employer's location or a location mandated or reasonably expected by the employer.

More specifically defines the first two tests by:

1. Analyzing the motivations of the employee;

2. Analyzing the employer's direction and control over the actions of the employee; and

3. Analyzing the employer's ability to foresee the activities of the employee

Injuries can “arise out of” and “be in the course of” employment without being “within the scope of” employment Unless all three tests are satisfied, coverage can be denied

Determining compensability as an “Occupational” injury is more difficult when employees work outside the “corporate walls” and without direct supervision.

Examples include: Employees who travel as a major part of their job (sales people,

construction or maintenance crews, etc.); and Employees who work from home. Two concepts important to traveling and home-based employees: “Proximate Cause” “Abandonment of Employment”

When an employee is away from the employer’s premises for business purposes, injuries are generally considered to arise out of and be in the course and scope of employment. The proximate cause of the employee's injury is the furtherance of the employer's interest.

When an employee deviates from the permitted or expected course and scope of the off-premises work, he is considered to have abandoned his employment and any injury suffered during this time is NOT (or may not be) considered “Occupational.”

The key question: “When does the employer become the ‘proximate cause’ of the worker’s activity?” Gray areas in “proximate cause” include:

The Coming and Going Rule; “Forced Fun;” and Horseplay and Practical Jokes.

Traveling to and home from work is generally not considered within the “course and scope” of employment. Neither is going to or returning from lunch. But there are exceptions….

Travel is an integral part of the employment;

Employer-furnished group transportation;

Employee performing a beneficial errand for the employer;

Injury to an “on call” employee;

Trip costs reimbursed by employer; and

Injury suffered once employee enters the parking lot or before he leaves.

Employees injured while participating in recreational activities while on the employer's premises or at the employer's "direction" may qualify for workers’ compensation coverage.

Four tests to decide compensability of “Forced Fun:”

1. Did the injury occur on the employer’s premises? 2. Was the event or team organized by the employer?

Did the employer pay for the activity?3. Did the employer benefit from the activity?4.

Each incident is judged on its own merits.

Compensability based on four tests: 1. The extent and seriousness of the deviation; 2. The completeness of the deviation;

The extent to which the practice of horseplay is an 3.accepted part of the employment; and

The extent to which the nature of employment is 4.expected to include some horseplay.

To be considered "occupational" and therefore compensable, the disease must arise out of or be caused by conditions peculiar to the work.

Facts of the sickness/disease that are investigated include: The timing of the symptoms related to work; Co-workers showing similar symptoms; Is such illness common to the industry; Does the employee have a predisposition to such

illness; and Personal habits and medical history.

Example: Is a heart attack compensable? Decided on a cases-by-case basis; but courts have applied two tests:

Was the stress-related illness caused by acute, sudden stress?

Was the stress abnormal for the particular job?

Occupational diseases have a long gestation period that can encompass several policies. So, which policy responds?

The policy in effect at the employee's last exposure responds to the illness!

Who works for the insured For whom is the insured responsible Legal structure and its effect on workers’

compensation Contractual risk transfer and workers’

compensation

Employees: A person hired to perform certain services or tasks for particular wages or salary under the control of another Independent Contractors: An entity with whom a principal/owner directly contracts to perform a certain task or tasks Subcontractors: Such a relationship is created when three parties are involved

The 3 parties to a subcontractor relationship are: The Principal/Owner: The owner of the business or the

property An Independent/General Contractor: The entity with

whom the principal/owner directly contracts to perform certain tasks or duties

A Subsequent/Lower Tier Contractor: The entity hired to

do some or all the work contracted to the independent/ general contractor

Three “types” of Employees

Direct Employees

De Facto Employees

De Jure Employees

Is the “independent contractor” really an “employee?”

Does the employer/contracting party control the individual's ways and means;

Are the tools and materials supplied by the employer/contracting party;

Does the "independent contractor" work for anyone else; or

Does the "independent contractor" carry his/her own insurance?

It’s all about CONTROL!

Control creates a “De Facto” employment

Statute creates a “De Jure” employment

Legal Structure dictates WHO is considered a

direct employee

The “Employer” is generally not required to be protected by workers’ compensation – but the “Employee” is! Deciphering who counts as an “employee” is a function of the entity’s legal structure, and who/what is considered the “employer!” Two types of “Employers”/”Persons”: Natural Person Employers Legal Person Employers

Sole Proprietors

Partnerships

LLC’s (in a majority of states)

Corporations

LLC’s (in approx. 17 states)

Any “person” not considered an “Employer” must be protected by workers’ compensation:

Corporate officers are employees

Members of LLC’s in some states are employees

Originators of Professional Associations are likely treated like corporate officers

Examples of Employee Count:

Purpose: Protect the upper tier contractor from the financial impact of an injury to a worker who is not a direct employee; and to place the burden on the party most closely related to and able to control the situation and risk of injury

Reason: Direct, statutory and vicarious liability are placed on the upper tier contractor

Direct Liability: Buy their own workers’ compensation coverage

Statutory Liability: Confirm that ALL contractors, subcontractors, etc. (essentially anyone contributing to the work) have workers’ compensation in place

Vicarious Liability: Use indemnification and hold harmless agreements (part of contractual risk transfer) coupled with waivers of subrogation requirements

Transferor – The party transferring risk to another (the “upper tier”)

Transferee – The party accepting the risk (the “lower tier”)

Financer - The party responsible for providing the financing

“For and in exchange for fair and equitable consideration, ‘transferee’ (name of the lower tier contractor) agrees to indemnify, hold harmless and waive any right of subrogation against ‘transferor’ (name of the upper tier contractor) from any and all loss or cost arising from bodily injury to (transferee's) employees, subcontractors or subcontractor's employees hired by (transferee).”

The “Why” of Premium Audits

WC Audit Basics

Special Payroll Considerations

Governing Classification and the Single Enterprise Rule

Exceptions to Governing Classification Rules

ABCs of Premium Audits

Actual exposures cannot be definitively known at the beginning of the policy year, only estimated

Insurer wants to be positive they are receiving adequate premium for the insured exposure

To confirm premium is adequate, a premium audit is performed after the policy period ends

Payroll Other-than-payroll Per Capita

Upset Payroll

Taxicabs

Aircraft

Total Cost

Wages/Salaries;

Commissions

Bonuses

Overtime

Pay for holidays, vacations, or periods of sickness

Pay for time not worked

Pay for travel time to or from work or specific job site

Employer payments of amounts otherwise required by law

Contributions to a savings plan or vacation fund required by a union contract

IRS Qualified Salary Reduction Plan

Employee Savings Plans

Contributions to an IRA made by the employee

Payment on any basis other than time worked

Payment or allowance for tools

Value of housing/lodging

Value of meals

Substitutes for money

Tips and other gratuities

Payments by employer to Group Insurance or Pension Plans

Special rewards for individual invention or discovery

Severance pay

Pay for those on active military duty

Employee discounts

Expense reimbursements

Money for meals for overtime work

Work uniform allowance

Sick pay paid by a third party

Employer-provided perks

Sole Proprietors and Partners: Executive Officers: Members and Managers of LLCs: Founders/Organizers of Professional Associations:

Getting paid more does not increase the likelihood that an injury will occur

Medical costs, theoretically, don't fluctuate based on the individual's income

Indemnity payments are limited to a minimum

and maximum in each state

The “governing classification” is intended to represent the exposure created by the overall operational business, not the exposure of each individual employee. Some activities are considered an integral part of a business' operations. These are called “General Inclusions."

Employees that work in a restaurant, cafeteria or commissary run by the business for use by the employees (this does not apply to such establishments at construction sites)

Employees manufacturing containers such as boxes, bags, can or cartons for the employer's use in shipping its own products

Staff working in hospitals or medical facilities operated by the employer for use by the employees

Maintenance or repair shop employees

Printing or lithography employees engaged in printing for the employer's own products

The "Standard Exception" classifications

The "Interchange of Labor" rules

The "General Exclusion" classes

Employers eligible for classification under the

"Multiple Enterprise" rule

Some duties/activities are so common to most business they are considered exceptions to the governing classification rules. These include:

Clerical Employees- Class Code 8810

Clerical Telecommuter - Class Code 8871

Drafting Employees - Class Code 8810

Salespersons - Class Code 8742

Drivers - Class Code 7380.

Watch out for “&” or “including” in the Governing Class description; may negate the “Standard Exception.”

Interchange of labor rules allow a single employee's payroll to be split between or among several class codes provided: All classifications used for an employee are appropriate to the job

performed

Payroll records allocate the employee's actual wages between/among the different classes

The division of payroll is not available with any of the standard exception classifications (with the possible exception of the driver code)

The operations/activities are not conducted on the same job site The applicability of this rule varies by state

Some operational activities do not fit into the analogous assignment of the governing General exclusion classes are the opposite of "standard exceptions" Operations and activities falling within the general exclusions are:

Employees working in aircraft operations;

Employees performing new construction or alterations;

Stevedoring employees;

Sawmill operation employees; and

Employees working in an employer-owned daycare.

A particular entity may conduct additional operations not usual or customary to such an enterprise

Secondary operations producing a basic premium equal to or higher than the governing class code (the code generating the highest payroll) automatically qualifies

If the basic premium generated by the secondary operation is less than the governing class code basic premium, four tests must be satisfied:

1. The operation cannot be commonly found within the operation of the subject insured's business;

2. The operation could each exist as a separate entity; 3. Separate financial records are kept for each operation; and 4. The operations are physically separated.

A. Always be there.

B. Be prepared.

C. Copy of auditor’s work papers.

D. Don’t volunteer more information than asked.

E. Exceptions to the single entity rule.