Recession and Workers’ Compensation Return to Work

Topics: Coronavirus (COVID-19)

The coronavirus (COVID-19) pandemic has impacted all aspects of our society. The effect on our economy is just beginning to being seen in the number of unemployment applications and responses to government relief programs. The majority of governors across the country signed stay at home/shelter in place orders to help prevent the spread of the virus and overwhelm our medical facilities. Nonessential businesses have closed to abide by the orders, thereby furloughing or laying off a majority, if not all, of their workers. The repercussions of the pandemic are not just affecting the economy and medical system, it is altering workers’ compensation processes and injured workers return to work.

Impact of Coronavirus on Workers’ Compensation Process

The National Council on Compensation Insurance (NCCI) looked at the economic impact of coronavirus (COVID-19) on workers’ compensation. The report found that as states shut down to help prevent the spread of the virus, the number of layoffs were happening quite rapidly, but not uniformly across economic sectors and types of businesses. These shutdowns have different impacts, and small businesses are at particular risk of closing permanently. The report found that during the pandemic, workers’ compensation premiums are likely to fall more in comparison to employment. However, workers anticipating layoffs may defer accelerating injury reporting, impacting claim frequency.

In some instances, stay at home orders have limited access to medical care during the pandemic, which may increase the duration of existing workers’ compensation claims. The ultimate goal for injured workers is to return to work after an injury. Due to the pandemic, returning to the workplace could take longer because of delayed medical treatments or physical therapy and some jobs are furloughed while a business is closed.

As the coronavirus (COVID-19) continues to spread throughout the United States, many medical providers are asking patients to use telemedicine and other remote options instead of face-to-face appointments. AmTrust is working with our partners to make sure injured employees have access to their providers, medications and treatments while following safe social distancing guidelines.

Return to Work Programs Are Disrupted Due to COVID-19 Recession

Return to work programs are an important part of a workers’ compensation program. These programs are a proactive way to help injured employees return to their full potential on the job as quickly and safely as possible. In return to work programs, employees who receive approval from a physician to return to the workplace are given light-duty or transitional work by their current employer until they are fully released by the physician to get back to their normal job duties. These programs are an efficient way for employers, employees, healthcare providers and claim administrators to manage the workplace injury rehabilitation process.

A 2010 Workers’ Compensation Research Institute (WCRI) study, Recession, Fear of Job Loss and Return to Work explains how a coronavirus-related recession could affect return to work programs. The report looked at the direct and indirect effects of a recession on return to work. Direct factors include scarce job opportunities that may delay return to work and indirect factors include that workers who are worried about losing their jobs may return to work too quickly and could face re-injury. The study concluded that higher unemployment rates are associated with an increase in long-term (over 2.5 years) unemployment amongst injured workers. This is because the high unemployment rates make it more difficult for injured workers who are not returning to work with their pre-injury employer to find work.

With COVID-19, if the virus results in a prolonged recession and the unemployment rate goes up, injured workers who are not returning to work with their pre-injury employer will likely have a more difficult time finding work. Due to the rapid closures of businesses under stay at home orders, the number of injured workers who face longer-term unemployment may increase. Similar to the 2010 findings, injured workers might also return to work sooner than they should if they fear their jobs are at risk, which could result in re-injury in the future.

Will there Be a Recession Due to COVID-19?

Due to states’ stay at home/shelter in place orders to help slow the spread of the coronavirus, businesses across the country have been forced to close suddenly, resulting in millions of employees being laid off. Once the stay at home orders lift, businesses will be allowed to reopen again, but with social distancing and safety requirements. Some businesses will open sooner than others and some businesses might not open at all. Hopefully, the shutdown measures will be of limited duration and the economy will rebound quickly after the restrictions are lifted.

Experts describe the COVID-19 recession as very different then a “typical” recession, which affects a wide range of industries and the impact of a downturn lasts a longer time. The immediate closures of nonessential businesses, restaurants, bars and the canceling of large events, such as concerts and sporting events, are more extreme than a usual recession. Coronavirus pandemic layoffs are severe, widespread and devastating, but they are not uniform across all sectors of the economy. A large number of businesses have been able to convert their workforce to working from home.

A major worry is that small businesses that were forced to close might not reopen. Some restaurants have been able to convert to delivery and take out orders but at a fraction of their normal business. Also, retail shops have been relying on online orders to keep their businesses going during the downtime.


Federal and State Assistance for Small Businesses

Federal and state governments have set up programs to help small businesses during the COVID-19 crisis and to help reduce the economic disruption they face. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) enacted in mid-March contains provisions for financial support to small businesses of 500 or fewer employees. Congress made small business disaster loans available via the Small Business Administration (SBA) as well as provided funding for the federally guaranteed Paycheck Protection Program (PPP). In addition to the federal relief laws, individual states and cities have provided small business loans and grant programs on top of the federal SBA Disaster Loans.

Return to Work Programs Enhance Workplace Safety Procedures

The economic outcomes of the coronavirus pandemic will be felt for a long time. It is unclear how the closures from the COVID-19 virus will change the workers’ compensation process going forward. We all will be adjusting to the “new normal.”

One thing that is clear, explains Jeff Corder, VP of Loss Control at AmTrust Financial, is that infectious disease mitigation efforts are going to remain front and center in business for the foreseeable future, and perhaps permanently. Even though certain physical distancing protocols, and other controls such as masks may eventually relax, maintaining high levels of workplace sanitation and personal hygiene is tantamount to the broader world of workplace safety. It is hard to separate the two and paying attention to both will enhance a company’s overall mindset of safety. This can exert a powerful influence on both the prevention of injury and illness as well as return to work outcomes.

AmTrust Financial’s Loss Control Department can help insureds by providing effective safety resources and commercial property safeguards to ensure their ongoing success, including information on return to work programs. Contact us for more information about creating a customizable loss control program for your organization.

This material is for informational purposes only and is not legal or business advice. Neither AmTrust Financial Services, Inc. nor any of its subsidiaries or affiliates represents or warrants that the information contained herein is appropriate or suitable for any specific business or legal purpose. Readers seeking resolution of specific questions should consult their business and/or legal advisors. Coverages may vary by location. Contact your local RSM for more information.

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