Workers Compensation Overview
Workers compensation represents over 50% of the average local government’s insurance budget. Unfortunately, temporary and permanent disability benefits as well as medical costs have increased at a rate much faster than inflation.
This site is designed as a toolbox for local officials and managers faced with the challenge of controlling workers compensation costs. The toolbox includes a summary of the laws governing workers compensation, an overview of employer and employee responsibilities, and best practices.
Chapter 1: It’s the Law: NJSA 34:15.1
In 1911, New Jersey became one of the first states to enact a workers compensation law and is generally considered to have one of the most balanced laws of any major state. While the New Jersey Workers Compensation Court is employee-oriented, the law also gives employers important controls to reduce fraud and abuse.
Workers compensation is a no fault program that provides benefits to employees for occupational injuries and illnesses. With rare exceptions, the question of who caused the accident is not even considered when determining workers compensation benefits. The only relevant issues are: (1) Was the employee’s injury due to a job related accident or exposure; and (2) how seriously was the employee injured. The employee’s “sole” recourse against the employer is workers compensation unless the employer intentionally caused the accident. Recent court decisions have held that deliberately violating safety standards can now be considered as an “intentional wrong” opening the door to additional litigation.
Under the law, employees injured on the job are entitled to necessary medical care, temporary disability benefits, and compensation for permanent disability. The law allows the employer (or the employer’s insurer) to contract with a managed care organization (MCO) to provide medical treatment. This is a critical control to prevent abuse.
While disabled from work, the employee also receives temporary benefits in the amount of 70% of the employee’s earnings up to the state-average weekly wage. As a practical matter, public sector employers almost always continue the employee’s full wage during the temporary disability period. Temporary benefits stop when the doctor certifies that the employee has reached “maximum medical improvement” (MMI) even if the employee still cannot return to work. At this point, the employee receives a disability award based of the extent of permanent disability. In recent years, workers compensation costs have dramatically increased because these awards have become very substantial.
The New Jersey Department of Labor, Division of Workers Compensation enforces the law. In addition to workers compensation, the Department of Labor administers the Public Employee Occupational Safety and Health Act (PEOSHA) that establishes safety standards for local governmental employees. The Department requires all local governmental employees to receive extensive safety training. PEOSHA has over twenty-five safety professionals that inspect for compliance with its safety and training regulations. Under the act, PEOSHA can fine local governments up to $7,000 per day for willful and repeat violations of its standards.
Chapter 2: N.J. Local Government Accident Facts
Employee Accident Rates –
Accidents by industry per 100 employees
Finance & Insurance
Wholesale, Retail Trade
All Local GovernmentAll NJ Employers
Lost Time Cases
Municipal Employee Accident Rates- Accidents by Department
Employee Accident Rates – Public Works Accidents by Function
Buildings and Grounds
Water and sewer
Employee Accident Rates – Public Works Accidents by Type
Slips and Falls
Employee Accident Rates – Utility Authority Accidents by Type
Slips and Falls
Employee Accident Rates – Police Department Accidents by Type
Slips and Falls
Employee Accident Rates – Fire Department Fatalities
Employee Accident Rates – Housing Authority Accidents by Type
Slips and Falls
Chapter 3: Employee Safety Programs Must Start at the Top
The single most important thing any local official can do is to place the safety program on the discussion agenda each month and request that the CEO report on the program’s status. Local officials are responsible to establish priorities. The management team and workforce will adjust their priorities based on what local officials decide to monitor.
Ninety-five percent of all employee accidents are preventable. In safety engineering, there is a simple axiom – any dangerous act will cause an accident if repeated often enough and any dangerous condition will cause an accident if it remains uncorrected long enough. Safety records can be improved by changing behavior – reducing unsafe acts and quickly correcting unsafe conditions.
Long-term effort produces results. The particular safety standards are not especially complicated. Local governmental officials and managers are not expected to be a safety engineer. All MEL affiliated JIFs offer extensive safety services to assist member local governments. However, to be successful, you must consistently take a visible roll in the program.
- Permanent Organization: Every local government is required to have a safety committee. The CEO should personally chair the committee – this is not a responsibility that should be delegated. In most forms of local government, the CEO is the manager or administrator – not the Mayor. In authorities, the CEO is the Executive Director. The safety committee should also include employee representatives, the head of each major department and, if possible, the unit’s insurance risk manager or agent. The committee should complete a monthly written report of its activities and a copy of this report should be circulated and discussed with the governing body.
- Training: All managerial and supervisory personnel should receive annual risk management training in addition to training required by various safety laws pertaining to their functions. Some of the training for non-managerial employees is mandated by the regulations established by the Public Employees Occupational Safety and Health Administration (PEOSHA). However, this should be supplemented with non-mandated training that addresses safety issues not specifically covered by the regulations.
- Safety Awareness: Managers and supervisors have the daily responsibility to make sure each employee is reminded of the critical safety procedures required for that day’s operations. They also have the responsibility to observe operations to identify and correct potentially unsafe situations.
- Engineering Inspections: All workplaces should be periodically inspected by a safety professional. Your JIF provides this service. Managers and supervisors should supplement these inspections with daily self-inspections.
- Accident Investigations: All accidents should be investigated to identify ways to prevent a reoccurrence.
- Monitoring and Follow Up: At a minimum of once each quarter, the safety committee should compare its record to similar communities and authorities. Comparison data is often available from your JIF. The report should also track the performance of each department to identify trends.
Model Safety Policy
The (local government name) will provide a safe and healthy work environment and shall comply with the Public Employees Occupational Safety and Health Act (PEOSHA). The (local government) is equally concerned about the safety of the public. Consistent with this policy, employees will receive periodic safety training and will be provided with appropriate safety equipment. Employees are responsible for observing safety rules and using available safety devices including personal protective equipment. Failure to do so constitutes grounds for disciplinary action. Any occupational or public unsafe condition, practice, procedure or act must be immediately reported to the supervisor or Department Head. Any on-the-job accident or accident involving (local unit name) facilities, equipment or motor vehicles must also be immediately reported to the supervisor or Department Head. The (local government name) has appointed a Safety Committee that meets on a regular basis to discuss and recommend solutions to safety problems. Employees are encouraged to discuss safety concerns with their Safety Committee representative.
Chapter 4: Managing Workers Compensation Claims
The cost of a workers compensation claim is directly proportional to the time it takes for injured employees to reach what is known as “maximum medical improvement” (MMI) and return to work. MMI means that injured workers have improved medically as far are they are going to improve.
Workers compensation claims can be controlled by: (1) using the most skilled doctor to treat a particular injury; (2) eliminating transactional delays such as waiting for treatment, authorizations or special care; and (3) reducing the number of lost workdays to the minimum required to reach Maximum Medical Improvement.
Reporting Procedures | Every department head and supervisor must know how to report an accident. The procedure should require immediate reporting by telephone so that the claims organization can establish early contact with the treating physician. The department head or supervisor, not the injured employee, should prepare the written accident report.
Doctors | The treating physician is the single most important factor in reducing workers compensation cost and preventing fraud. New Jersey is one of the few states that allow the employer (or the employer’s insurer) to contract with a managed care organization (MCO). The CEO should personally interview the treating physician along with the Managed Care coordinator and the claims adjuster to discuss the claims procedures. In particular, review the job descriptions and requirements of critical positions and the physician’s willingness to coordinate with the local unit to release employees back to work as soon as reasonable
Maintain Contact with the Injured Employee | It is management’s responsibility to periodically contact the injured worker and express support. The major reason injured employees retain lawyers is because they are uncertain of their benefits or concerned that they are not receiving adequate medical treatment.
Develop a Transitional Plan for Each Injured Employee | Studies have also shown that many injured employees are capable of assuming their full responsibilities at an earlier date if they start a transitional plan before reaching Maximum Medical Improvement (MMI). Depending upon the circumstances, a transitional plan includes both specialized rehabilitation and transitional duty on the job. Other injured employees are not capable of immediately assuming full duties even after they reach MMI and may need time to build up to their full responsibilities. Work with the treating physician and the MCO to identify what the employee is capable of doing on the job while recovering. Also identify additional rehabilitation required to get the employee back into shape after the inactivity during the employee’s disability period.
Model Transitional Duty Policy
The (local government name) will endeavor to bring employees with temporary disabilities back on the job as soon as possible and may assign transitional duty to employees who temporarily cannot perform the essential functions of their positions because of injury or illness. Transitional duty is not guaranteed and will not exceed _____ workdays (typically forty-five). If a department already has one employee on transitional duty, it is unlikely that another employee from that department will be assigned transitional duty.
An employee requesting transitional duty or the Workers Compensation Physician shall notify the (CEO title) as soon as the temporarily disabled employee is able to return to work with restrictions. Transitional duty will only be assigned if the employee will probably be able to perform the essential functions of the position after the transitional duty period. The (CEO title) will consult with the Department Head to determine if there is any meaningful work that can be performed consistent with the restrictions. Transitional duty assignments may be in any department and not just the employee’s normal department. The (CEO title) will decide if it is in the best interest of the (local unit type) to approve a transitional duty request and will notify the employee of the decision. The (local government name) reserves the right to terminate the transitional duty assignment at any time without cause.
Employees may not refuse transitional duty assignments that are recommended by the Workers Compensation Physician. In such cases, failure to report to work as directed shall constitute immediate grounds for dismissal. If the employee believes that the transitional duty assignment is beyond the employee’s abilities, the employee may request a meeting with the (CEO title) who will render a written response within 24 hours.
Employees on transitional duty will receive their regular salaries and are prohibited from engaging in any outside employment of any kind unless they receive prior written approval from the (CEO title). If transitional duty is approved, the employee or Workers Compensation Physician must keep the (CEO title) informed of the medical progress. (Optional – Employees assigned to transitional duty will be allotted time off to attend medical or physical therapy appointments but must request leave time for any other reason.) If at the end of transitional duty period the employee is not able to return to work without restrictions, the (local unit name) reserves the right at its sole discretion to extend the transitional duty or place the employee back on Workers Compensation or disability. This policy does not affect an employee’s rights under the Americans with Disabilities Act, the Family and Medical Leave Act, the Fair Labor Standards Act, the Contagious or Life Threatening Illnesses Policy or other Federal or State law.
Chapter 5: The Workers Compensation Judicial System
Workers Compensation Judges review and rule on all matters affecting a claim settlement of a claim. While their rulings can be appealed to the Appellate Division of the Superior Court, appeals are rare. Specifically: Judges have the authority to (1) make awards (2) Require medical examinations and services for injured employees (3) approve and fix attorney’s fees, and (4) assess penalties.
As an alternative to formal litigation, an informal hearing process before a Judge is available, and often results in a quicker resolution of the case. The statute of limitations for filing a formal claim is two years from the date of injury, or the last payment and/or authorized medical treatment.
- Only approximately 15% of all cases are resolved in judicial hearings.
- Each Judge has authority to establish rules for hearing cases in their chambers.
- Understanding each Judge’s evaluation methodology is essential.
- Because of the establishment of JIFs, Judges have become more familiar with local government work practices and environment—which can be an advantage to both the employer and the employee—in finding an amicable resolution to their disagreement.
- Most Judges take into consideration the occupation of the employee as well as the percentage of disability when determining the amount of an award.
- A realistic medical assessment of injury that relates diagnosis to its functional impact on the employee is crucial. Qualifying the extent of an injury is of equal importance. To assist in the evaluation of an injury’s impact on the employee and job performance, Judges often welcome a “job activities check list” identifying the essential components of a particular job classification.
- Although medical history is given consideration, standard judicial procedure is to evaluate each claim on its own merits.
Chapter 6: Benefit Options Beyond Workers’ Compensation
Employees who receive a workers’ compensation disability award remain eligible for a broad range of other benefits. Selecting the benefit option that best meets employee needs is complex, and they should be advised to seek independent legal and accounting advice before making a decision. Following is an overview of the major benefit options.
I. Disability Retirement
An employee who can demonstrate physical or mental incapacity to perform normal duties and has the required length of service credit in the NJ pension system can apply for a disability retirement benefit. Two types are available:
A. Accidental Disability Retirement Benefit
To be eligible, the worker must demonstrate that the disability is work related, and was injured as a result of an “identifiable, undesigned and unexpected mishap caused by external circumstances.” Eligibility is contingent on the injured worker satisfying the remaining requirements including that the injury occurred during the performance of regular or assigned duties, and was not the result of negligence or preexisting conditions alone or in combination with the work, and that the disability is permanent and total. The benefit is currently 72.7% of base salary at the time of the traumatic event for participants in the Public Employees’ Retirement System (PERS) and the Teachers’ Pension and Annuity Fund (TPAF). If the employee is a participant in the Police and Firemen’s Retirement System (PFRS), the benefit is 70% of compensation on which pension contributions were made at the time of retirement or the date of the traumatic event whichever provides the higher benefit. The accidental disability retirement benefit net of that portion generated by the employee contribution to the retirement plan is reduced dollar for dollar for all periodic workers’ compensation benefits the worker receives. The accidental disability retirement benefit is exempt from federal tax and NJ State income tax until age 65. The benefit is not reduced if the employee receives private insurance benefits. New Jersey service credit in the pension system is not required to be eligible for the accidental disability retirement benefit.
B. Ordinary Disability Retirement Benefit
If the worker does not meet the standards required for the accidental disability retirement benefit, but is otherwise qualified as totally and permanently disabled, an ordinary disability benefit may be approved.For PERS and TPAF participants, the benefit is currently equal to 43.6% of the final average salary of the worker based on the worker’s salary history. For PFRS participants the benefit is equal to 40% of the worker’s final compensation or 1.5 % of final compensation for each year of service credit, whichever is higher. This benefit is subject to federal tax but is not subject to NJ income tax until age 65. The benefit is not reduced by Social Security, regular workers’’ compensation or private insurance benefits, but any workers’’ compensation award the worker receives may be reduced. If the pension is based solely on the work-related condition, the entire pension can be used to offset the workers’ compensation award. If the ordinary pension is for both work and non-work related conditions, there is an apportionment to determine what part of the pension overlaps with the workers’ compensation claim. If there is no relationship between the ordinary pension condition and those of the workers’ compensation award, there is no offset.For PERS and TPAF participants, a minimum of ten years of New Jersey service credit in the pension system is required to be eligible for ordinary disability retirement. In addition the pension account must be active, and the employee must be considered totally and permanently disabled, that is, incapable of performing normal or assigned job duties with no possibility of significant improvement. For PFRS participants, the same stipulations apply, except that only four years of service credit in the New Jersey pension system is required. Both accidental and ordinary disability benefits are considered retirement benefits. The person receiving either benefit is free to accept active employment from another employer, but the benefit will be reduced to the extent that salary and benefit combined exceed the worker’s salary at the time the benefit was approved.
II. Regular Retirement
An employee who has satisfied the requirements for a regular pension can apply for this benefit, which varies based on age and years of service. Retired status does not prohibit an individual from accepting a job from another employer. And retirement benefits are not offset or reduced in any way because the employee has received a workers compensation disability award.An employee who chooses to retire makes it possible for the employer to seek another applicant for the position, thus reducing the cost and lost work time associated with work place injury.
III. Social Security Disability
An employee who can demonstrate permanent total disability due to a work related injury is also eligible to apply for a benefit provided by the Social Security Administration (SSA). The approval process requires three to five months to complete according to SSA. The process includes review by the New Jersey Disability Determination Services, a division of the Department of Labor and Workforce Development.Requirements are strict: the employee must have a medical condition that is expected to last at least one year or result in death and must demonstrate an inability to be successfully employed in any job for which the individual might be qualified based on age, medical condition, education and work experience.Workers’ compensation and other public disability benefits may reduce the Social Security benefit, particularly if the combination of these benefits exceeds 80% of the employee’s average current earnings, which are calculated by Social Security on the basis of a formula.
IV. Additional Options Available to the Employee and the Employer The Americans with Disabilities Act
An employee who has experienced a work related injury and achieved MMI can seek to be qualified as disabled under the provisions of this act. The qualifications for disability are different than those related to workers’’ compensation, in that the employee must demonstrate impairment that substantially limits one or more major life activities, a record of such impairment, or being regarded as having such impairment. In effect, an employee may have received workers’’ compensation benefits, but can be deemed eligible under ADA. If an employee is deemed eligible, the employer is required to make reasonable accommodations within certain prescribed limits. At the same time, employees seeing ADA eligibility must demonstrate ability to perform the essential functions of the job being sought without creating a danger to themselves or others. In addition, the employer has the right to require that an employee submit to a fitness for duty examination.The provisions of the Act and its requirements are complex; skilled professional support is required to understand and apply them to any particular situation.
V. The Family Medical Leave Act (FMLA)
Under the provisions of this act, employers with more than 50 employees are required to provide 12 weeks of job protected leave in a twelve month period to any employee that can demonstrate a serious health condition, and has been employed for more than 1,250 hours in the past twelve months.The benefits include continuation of the employee’s medical benefits and a guarantee—with some stipulations—that the employee will be returned to the same or an equivalent position at the same rate of pay and benefits. Employers have the right to treat the time an employee is out of work while receiving temporary disability benefits under workers compensation as FMLA time if they have included a provision in their policy manual to that effect.
Because of the complexity of these programs, counsel and technical advice from financial professional and attorneys who specialize in workers compensation and employee benefits should be secured by both employers and employees.
Thanks to Robert McGuire, Compensation Manager, Bergen Risk Managers, John J. Feczko, Esq., John R. Tort, Jr., Esq., and Rosemary Freeman, Pension Supervisor, County of Bergen for their assistance in preparing the information included in this pamphlet. Please note that this information is not a substitute for expert advice regarding risk management and legal opinion. Individuals considering application for any of the benefits mentioned in this document are urged to seek professional assistance.
Chapter 7: Best Practices
Develop ADA approved job descriptions and keep them up to date. Share them with your medical provider.
Post Offer Testing
You are permitted to have prospective employees examined to determine if they are able to perform the essential physical requirements of the job. Employers may require a physical agility test representative of the work.
Educate your Employees and show them you are willing to help if they are injured. Consider a payroll stuffer outlining workers compensation benefits.
Make certain new workers, including seasonal and temporary staff, are thoroughly oriented to workplace conditions and shown how to perform their jobs safely.
Health Care Needs
Look for injury patterns and relay them to your medical provider. Visit your provider regularly to share your needs and concerns.
Make certain supervisory staff members are trained regarding the need for prompt and accurate injury reporting. Post instructions at all work sites. Make certain that emergency services personnel are trained and ready to respond at all times. Also don’t delay reporting because you don’t have all the information.
Remain in close contact with your injured employees. If they are able, ask them to pick up their paychecks from work rather than mail them. Insure them that their jobs are being held open for them and they are needed.
You should expect to receive regular updates regarding injured employees from your managed care provider. Review these reports carefully, and consider returning the employee to work on modified duty as soon as deemed appropriate by your medical provider.
Reduce Lost Work Time As Much As Possible
The length of time an employee is out of work has a direct impact on the cost of the claim and any judgments that may be made by a workers compensation court. Strive to find ways to return your employees to work.
- Check all departments to determine if a temporary accommodation can be made to fit an employee’s work restrictions
- Consider using employees in evening programs
- Return employees to perform administrative modified duties that are needed but not physically demanding
- Make certain your medical provider is aware of your return to work program and is familiar with your workplace requirements
- Consider having out of work employees complete required safety training available through the MEL Safety Institute
- Contact your managed care provider, and claims administrator for ideas on how to reduce lost work time
Accident: An unforeseen or unintentional injury including those resulting from occupational disease.
Authorized Treatment Provider: Medical practitioner authorized by the managed care provider to deliver medical care related to an injury covered by worker’s compensation regulations.
Compensable Injury: An injury arising from and in the course of employment while performing duties that benefit the employer.
Fitness for Duty: Determination by a medical provider that an injured employee is capable of returning to the workplace to assume duties assigned by the employer.
Frequent Flyer: Term used to describe an employee who makes frequent claims of workplace injury that are often difficult to substantiate.
Functional Capacity Evaluation (FCE): A series of medically prescribed tests used to assess an employee’s ability to perform the physical requirements of a job.
Maximum Medical Improvement (MMI): A specific point in time when a medically determinable impairment has become stable and further treatment is not expected to improve the condition.
Modified Duty (Modified Duty): Temporary job duties assigned to an injured employee that allow return to the work environment in a productive capacity performing duties within the physical limitations caused by the injury.
Occupational Disease: A disease resulting from employment conditions under which work was performed or as a natural outcome of that work.
Permanent Partial Disability (PPD): Compensation paid to an employee for an injury that is permanent in nature.
Permanent Total Disability (PTD): Compensation paid to an employee for an injury that is permanent in nature and the employee is unable to earn wages in the same or other employment.
Temporary Total Disability (TTD): Compensation paid to an employee during a temporary period of time when the employee is unable to perform any work.