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November 7, 2004    DOL Home > ODEP > Publications > Fact Sheets

Workers' Compensation: Developing Company Policies

The Workers' Compensation Crisis

The workers' compensation crisis can no longer be ignored. For most companies, workers' compensation is growing faster than any other cost. Workers' compensation premiums nationwide were estimated to be $70 billion in 1992, a 45% increase over 1989 premiums. These costs are expected to be more than double by the year 2000, or $150 billion by the end of the decade. The value of the average claim is estimated at $34,000, twice that of the cost of a claim in 1980.

Disability Management Program

An effective disability management program can curb the escalating costs for workers' compensation disability claims. The key to a successful disability management program is communication--early, frequently, and on a continuous basis among the employee who is injured, management, and labor. An effective program should include the following components: having a written plan with top down support; implementing safety and prevention programs, including keeping employees fit, safety training, and careful design of the workplace; using a managed health care network of providers; avoiding litigation; using a team approach, which includes representatives from all relevant departments; and implementing early return to work programs, which include modified duty jobs.

Federal disability nondiscrimination laws and an effective workers' compensation program share the goal of retaining employees with disabilities in the workforce. Each state has its own workers' compensation law and second injury fund. The employers' return-to-work policies and procedures must be consistent not only with state workers' compensation laws, but also with federal disability nondiscrimination laws.

Workers' Compensation and Federal Disability Nondiscrimination Laws

Workers' compensation laws are designed to provide needed assistance to employees who are injured on the job, whereas the purpose of federal disability nondiscrimination laws is to protect people from discrimination on the basis of disability. These laws prohibit an employer from discriminating against a person with a disability who is qualified for a job. The EEOC regulations prohibit employers from making medical inquiries of employees that are not job-related and consistent with business necessity. However, the federal disability nondiscrimination laws are consistent with an employer taking reasonable steps to avoid increased workers' compensation liability claims while protecting persons with disabilities against exclusion from jobs they can safely perform.

The following questions and answers will assist employers in developing its workers' compensation policies and procedures, as part of its disability management program.

Are all injured workers protected by federal disability nondiscrimination laws?

Whether federal disability nondiscrimination laws protect an injured employee will depend on whether the person meets the definitions of an "individual with a disability" and "qualified individual with a disability." The person must have an impairment that "substantially limits a major life activity," or have a "record of" or be "regarded as" having such an impairment. The worker also must be able to perform the essential functions of a job currently held or desired, with or without a reasonable accommodation.

The fact that an employee is awarded workers' compensation benefits, or is assigned a high workers' compensation disability rating, does not automatically imply that federal disability nondiscrimination laws protect her or him. Not every employee injured on the job will meet the definition of disability. An employer must consider work-related injuries on a case-by-case basis to determine if the nondiscrimination laws protect a worker.

When are medical examinations allowed?

With regard to employees, employers are prohibited from making disability-related inquiries and requiring medical examinations that are not job-related and consistent with business necessity. However, there are exceptions to this general prohibition:

  • Post-offer medical examinations following a conditional offer of employment and before work begins, provided these are required of all individuals in that job classification,
  • Fitness-for-duty examinations if such examinations are job-related and consistent with business necessity (e.g. to determine if the employee can perform the essential functions of the job), as well as to determine what reasonable accommodations may be required, and
  • Voluntary medical examinations that are part of on-site employee health programs (e.g., "wellness programs").

An employer may not subject applicants, before a conditional offer of employment, to disability-related inquiries or medical examinations.

If post-offer inquiries or examinations are given before entry on duty, they must be required of all entering employees in a particular category regardless of disability. The results may not be used against individuals with disabilities unless they show that the individual is not qualified for the job. For example, a moving company may test all of its furniture moving laborers, but not its other employees, as long as it tests all furniture moving laborers.

Once an employee is on the job, actual performance is the only permissible measure of the employee's ability. When the need arises to question a person's continued ability to do the job, the employer may make disability-related inquiries, including medical examinations only if they are job-related and consistent with business necessity. Such circumstances generally occur when an employer has a reasonable belief, based on objective evidence, that (1) an employee's ability to perform essential job functions will be impaired by a medical condition; or (2) an employee will pose a direct threat due to a medical condition.

Who can employers inform of an individual's medical data?

In all situations in which medical information is obtained, strict confidentiality is required. Medical information must be maintained in separate files from personnel and other information. While maintaining strict confidentiality, the employer may inform the people listed of an individual's personal medical data to the following extent:

  • Supervisors and managers, regarding necessary restrictions in the employees' duties and reasonable accommodations,
  • First aid and safety personnel if the disability may require emergency treatment, and
  • Government officials investigating compliance with federal disability nondiscrimination laws, upon request.

How can information from these inquiries and examinations be used?

The employer may use information from post-offer medical inquiries and examinations for various purposes, such as:

  • To verify employment history,
  • To screen out individuals with a history of fraudulent workers' compensation claims,
  • To provide information to state officials as required by state laws regulating workers' compensation and "second injury" funds,
  • To screen out individuals who would pose a "direct threat" to the health and safety of themselves or others, which could not be eliminated or reduced to an acceptable level by a reasonable accommodation.

What is the role of "light duty" under federal disability nondiscrimination laws?

Many employers provide what is generally called "light duty" or modified duty for employees who are recovering from an injury or other disability. This may involve a temporary reassignment of the employee to an entirely new job with lighter physical demands, or it may consist of allowing the worker to perform the regular job at less than full productivity. Light duty may also include a temporary exclusion of certain difficult tasks from the employee's regular job duties. Federal disability nondiscrimination laws do not require an employer to allow a person with a disability to work permanently on a reduced productivity basis.

Can employers refuse to allow an individual with a disability to return to work?

The employer cannot refuse to let an individual with a disability return to work on the basis that the employee is not fully recovered from injury, unless she or he:

  • Cannot perform the essential functions of the job she or he holds or desires with or without a reasonable accommodation, or
  • Would pose a significant risk of substantial harm that could not be reduced to an acceptable level with reasonable accommodation (i.e. "direct threat").

Since reasonable accommodation may include reassignment to a vacant position, an employer may be required to consider an employee's qualifications to perform other vacant jobs for which she or he is qualified.

The information in this fact sheet came from various DOL agencies, as well as the following sources: Center on Education and Work, University of Wisconsin-Madison ADAlliances to Educate and Employ People with Disabilities: Ideas to Solve your ADA Problems, September 1994; and the Workers' Compensation Research Institute, Cambridge, MA.

October 1995
Updated April 2002

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