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Legally Correct: How Your Hiring Practices Affect Your Work Comp Premiums

Wednesday, July 16, 2008
Written By
Kory Wells

by Frank Pennachio, WorkCompEdge Blog Contributor

In the popular 2001 film “Legally Blonde,” Elle Woods (played by Reese Witherspoon) is a stylish sorority girl who, in a quest to get back the guy who dumps her, discovers her true potential way beyond the stereotypes of her blonde mane. fingers crossed behind back

If you’re just crossing your fingers that you’ve hiring a candidate who’s medically fit for the job, don’t be surprised if you find yourself with costs related to a new or pre-existing injury.

When we employers are interviewing job applicants, we likely have a movie running in our heads that I call “Legally Correct.” Delving below the surface to discover a job applicant’s true potential can feel like tricky business. This age of political correctness can make the most eloquent orators among us stumble. More importantly, there are EEOC guidelines to worry about: What questions we can ask. What questions we cannot ask. While we are trying to determine if an applicant has the abilities and personality to fit in our company, there’s another aspect we often overlook: whether they are medically fit for the work we need them to do.

I can hear you now: “Frank, I can’t ask someone their medical history.”

You’re right. In most cases, you can’t – not until you make them a conditional offer of employment. But after you do that, your applicant should undergo a medical screening to make sure he or she is fit for the specific functions of the job you want to hire them to do. This is a legally correct and – I would argue – moral thing to do. This process will weed out an applicant who truly is not fit – or who has intentions of filing a claim on a pre-existing injury after they’ve been with you a few months.

Most large employers have been doing medical screenings for a long time. But I find that a lot of my small business clients learn about this the hard way.

Here’s a real life success story: I recently met with a client to renew his company’s workers compensation insurance policy. In 2003, this client was paying over $480,000 in workers compensation premiums. The company was scrambling to find an insurance company that would offer them a renewal policy: their experience mod factor was 1.63. If they didn’t get an offer from the voluntary insurance market, then they’d be driven into the assigned risk market, where their cost would exceed $800,000.

Fast forward to 2008 and the story is dramatically different. The company’s projected premium cost for the upcoming year is under $200,000. Their experience mod factor is 0.85.

I asked the Chief Financial Officer what he felt were the major factors influencing this turnaround. Without hesitation, he said, “Beefing up our hiring practices and returning injured employees to work.” (In my next blog, we’ll talk more about back-to-work programs. As Jim mentioned in his comments to my last blog entry, it’s all about expectations.)

You notice the CFO didn’t make any reference to safety? Not safety committees, safety programs, or safety inspections. This company’s problems didn’t arise from an unsafe workplace, and they already had a positive corporate culture.

Now obviously, creating a safe workplace is a foundational and necessary step to any business. But, employers often don’t understand that the safest workplace in the world will not overcome hiring an employee who isn’t a good fit for the job.

Let me hear from you. Do you or your clients use “Legally Correct” pre-employment medical screenings? What’s your experience with them? Have you seen their implementation improve your claims history and premium costs? Is there a down side to medical screenings that I haven’t mentioned?


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