Human Resources Directors are often charged with hiring employees, ensuring that the employee is properly trained, and delivering the bad news when the employee is not working out.

HR Directors are usually the last ones to know that a problem employee has now become the company’s worst workers’ compensation claim ever. Many managers assume that Human Resources and Risk Management are synonymous; they are not.

The impact of HR decisions are often felt on the desk of the workers’ compensation adjuster, who can become embroiled in unnecessary litigation because someone did not weigh both the HR decision and the risk management exposure. Unfortunately, adjusters are often forced to manage the claim and manage the HR issues simultaneously.

I often find companies are at one extreme or another – they are either, good historians with no HR guidelines, or they are strict enforcers of HR rules. Both extremes are detrimental when managing an injured employee.

Is there a balance between HR and Risk Management? I believe so. A true understanding of the roles that the each area plays is the first step to creating a cohesive balance, between the need to adhere to the HR guideline, and the need to protect the employer from unnecessary workers’ compensation litigation.

The role of the HR Director should be to manage the daily employment issues for the company as they arise; the Risk Manager should have a good grasp of the HR rules, as well as an understanding of the work site dynamics and the financial exposure workers’ compensation, will have on the company’s ability to compete within its particular industry.

Several years ago, while managing claims for a large self-insured employer; I was given permission by the Risk Management Department to settle a claim for what appeared to be a reasonable amount. I secured authorization from the Risk Manager and scheduled a mediation. I arrived at the mediation, quite confident that I would use all my negotiation skills as an adjuster to satisfy my client (the Risk Manager). Two hours later, after much give and take, I left with an excellent settlement – and even had money left over. I immediately contacted my client to give him the good news. The Risk Manager was pleased. He phoned the HR Director, informing her that the file was settled and the settlement included a severance package of $2,000.

The dismayed reaction of the HR director caught him by surprise. She advised him that the employee was not entitled to severance. In fact, the employee was indebted to the company for several advances he was given at the onset of the workers’ compensation claim! Another problem arose, when he advised her that part of the settlement was an agreement to continue the health insurance benefits for the employee until the end of the month and to provide him with COBRA information. The HR Director advised him, that the employee declined health insurance benefits during the open enrollment; he was not entitled to COBRA benefits.

The result – we had to rescind our original offer and the employee refused to accept the revised settlement. Our diligence in this situation was for naught; we missed an opportunity to settle a file because the Risk Manager did not communicate with HR before authorizing the workers’ compensation settlement.

A key point that one should take away from this discussion is the need for all areas within an organization to work together. The Risk Management Department and the HR department must create a system of cross-reporting even minor issues. Every claim impacts both HR and Risk Management – the Departments have no choice but to work together.

It is not the adjuster’s job to determine if an employee it entitled to an offered benefit during settlement negotiations. The company must relay the parameters of the settlement to their insurance carrier. Most – if not all – problems such as those detailed above, could be eliminated if the Risk Manager and the HR Director meet regularly to discuss items, which overlap between their Departments. If both Departments disconnect from each other, the only winner is the employee, who is looking for a litigation angle.

A balance between HR and Risk Management is an achievable goal – it up to both managers to establish guidelines, keep the lines of communication open, and understand that you are both working towards the same goal – minimizing the companies’ exposure to costly litigation.

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