Temporary Disability (TD) is a crucial benefit designed to replace lost wages for injured workers during their recovery period when they cannot return to work due to an industrial injury. Because many workers live paycheck to paycheck, it is paramount that the TD be paid on a timely and accurate basis. Paying TD accurately and timely is more complicated than most people realize. Complicating factors include multiple employers, overtime scenarios, cash tips, scheduled wage increases, and seasonal employment. Some employers continue the salary for the injured workers while they are off work. Coordinating benefits can be complicated if the salary continuation is limited to a fixed amount or fixed number of days or weeks. To accurately pay TD, getting precise information on earnings from both the employer and the injured worker is essential. That is why ensuring the injured worker is engaged by providing accurate earnings statements will produce accurate benefits.
Fundamental Principles of TD
- Calculation Standard: TD is generally calculated as two-thirds of the injured worker’s gross weekly earnings, subject to state-mandated minimum and maximum rates.
- Waiting Periods: Each state has specific periods before TD benefits begin, typically 3 to 7 days. Some states count the waiting period from the date of injury, while others start the day after the date of injury.
- Economic Hardship During Waiting Period: For injured workers paid at minimum rates and living paycheck to paycheck, the unpaid waiting period can result in catastrophic monthly financial losses, exacerbating their economic hardship.
- Economic Risks of Non-Indexed Rates: States that have not indexed their TD rates to reflect changes in the cost of living or inflation are putting injured workers at severe economic risk, particularly during periods of high inflation.
- Eligibility Period: TD benefits are generally capped at a maximum duration, often measured in weeks or years, depending on state laws. For instance, California allows 104 weeks within five years from the date of injury, with extensions possible under specific circumstances.
- Reduced wages: Some injuries may result in reduced work hours which will require TD for the reduced wages.
- Public Safety Officers: Some states have salary continuation for some public safety officers or have the TD paid at full salary (with no taxes taken out)
- Tax Implications: The U.S. does not tax workers’ compensation benefits.
Challenges in TD Administration
- Accuracy of Wage Information: Obtaining accurate and complete wage information can be challenging due to scheduled wage increases, irregular work hours, cash tips, and seasonal employment multiple employers, and inconsistent overtime scenarios. Many times, the injured worker will not have accurate information concerning their earnings over the prior year.
- Concurrent Employment: Workers with multiple jobs require aggregation of earnings across all employments, which may involve different pay rates schedules and reduced earnings.
- Inclusion of Benefits: Some states, like Washington, include employer-provided benefits (e.g., health insurance, pension contributions) in calculating TD rates, adding complexity to the process.
- Impact of Delayed Return to Work: Employees off work for more than one month face a much higher risk of permanent job loss and longer disability durations, highlighting the importance of early return-to-work programs.
- Coordination with non-industrial Short Term Disability Benefits: Coordination between Temporary Disability and the State or companies’ short term disability benefits can be problematic. This scenario usually is due to a delay in determining if the injury is compensable of if the injured worker has applied for the STD as well as filing a work-related claim. Disparities between TD and STD rates can create incentives for cost-shifting.
- Paycheck to paycheck: Many workers live paycheck to paycheck. The workers’ compensation system pays every other week. This can be problematic for workers who are paid on a weekly basis
Best Practices and key issues in TD Administration
- Timeliness: TD payments must be made promptly to avoid financial hardship for injured workers.
- Engagement with Injured Workers: Claims examiners should actively engage injured workers to ensure timely and accurate provision of wage data.
- Clear Communication: Explaining workers’ compensation benefits in the injured worker’s native language significantly improves understanding and engagement.
- System Updates: Claims systems must be regularly updated to reflect changes in indemnity rates, mileage rates, and other statutory adjustments. Accurate TD calculations are a particularly rich target for the use of AI.
- Documentation: Comprehensive wage calculations and supporting data documentation ensure transparency and compliance. The use of standardized wage statement forms is particularly useful.
- Light and Modified Duties: Light or modified duties are a cornerstone of successful return-to-work programs. They facilitate gradual reintegration into the workplace and reduce the duration of disability. They are one of the best system cost reduction programs for workers’ compensation.
- Education on Return-to-Work Benefits: Injured workers should be educated on the financial and emotional risks of extended time off, including the potential for job loss and long-term economic consequences.
- Supportive Employer Culture: Employers with supportive cultures and proactive return-to-work policies significantly improve outcomes for injured workers.
- Coordinated Benefits Delivery: If the claim is delayed and non-industrial short-term benefits are provided, if the claim is subsequently accepted the STD system should be reimbursed promptly and accurately. The claims examiner should coordinate seamlessly the benefit provision efficiently and monitor to prevent fraud.
- Retroactive Adjustments: Delays determining compensability or issuing first payments or delays in obtaining accurate wage statements can necessitate retroactive adjustments in the payments.
- Overpayments and Underpayments: Errors in calculating TD due to incorrect wage data or system failures can lead to legal disputes and financial complications.
- Special Categories: Public safety officers and similar roles may receive enhanced benefits (e.g., full salary continuation), requiring different calculations.
- Life Pension Adjustments: Workers with permanent disability benefits linked to TD rates may require ongoing adjustments based on SAWW changes.
- Technology Integration: AI-powered chatbots, mobile apps, and other technologies can be utilized to enhance communication, streamline claims processes, and improve the overall TD experience.
- Audits: Regular audits of TD payments and calculation methods help ensure compliance and identify areas for improvement.
- Subrosa Utilization: Surveillance investigations (subrosa) are underutilized, but when properly managed, they can reduce fraud and improve claims outcomes.
- Medical-Legal Reporting Delays: Delays in obtaining the medical-legal reports impair the accuracy of TD payments and the delivery of benefits.
- Functional Job Analysis: Employers should maintain detailed functional job analyses to assist physicians in determining suitable modified duties for injured workers.
Conclusion
Temporary Disability benefits are a cornerstone of the workers’ compensation system, providing essential financial support to injured workers. Accurate calculation and timely payment require a comprehensive understanding of statutory frameworks, proactive stakeholder engagement, and robust administrative practices. Early return-to-work programs, effective communication, and addressing barriers like fear of re-injury are critical to optimizing outcomes. By adhering to these principles and addressing common challenges, the system can better serve injured workers and maintain compliance with evolving regulations. Improved coordination with the California Employment Development Department (EDD) benefits and proactive measures to prevent fraud will strengthen the system’s integrity and efficacy.
