When you start a business, you must decide

Employer's Legal Handbook:

Health & Safety

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As an employer, there are many good reasons—in addition to your humane instincts—for creating a safe and healthy workplace. Obviously, healthy workers will be happier and more productive. There will be fewer disruptions of work schedules due to absenteeism. And health insurance costs may be reduced. An incidental benefit may be an improvement in worker efficiency; workers generally are more efficient in a safer workplace. Then there are the more obvious obligations. Federal and state laws and an increasing number of local ordinances require you to take steps to make the workplace safe and healthy.

Workers today are well informed about the link between workplace conditions and health problems. Most know, for example, that secondhand smoke can cause or aggravate respiratory and heart problems, and that repetitive motions can lead to Carpal Tunnel Syndrome. And an increasing number of workers will not hesitate to press legal claims against employers who fail to rectify unsafe or unhealthy conditions.

In addition to health and safety statutes, state law requires your business to provide workers’ compensation coverage to pay for medical bills and partial wage loss when an employee is injured in the workplace. By reducing on-the-job injuries and eliminating the workplace causes of disease, you can lower the cost of workers’ compensation coverage.

Get Employees Involved:

In meeting your legal responsibilities for keeping the workplace safe and healthy, don’t overlook an obvious resource: the workers. Involve them in identifying safety and health problems and suggesting ways to solve such problems. Organizing a safety committee made up of equal numbers of employees and managers is a good starting point. If workers can voice their safety concerns to you and to other workers who are able to initiate changes, there’s less chance that they’ll jump the gun and go straight to government authorities to report a complaint. Having such a safety committee can also earn you a break on workers’ compensation insurance premiums. To further involve workers, consider holding company safety seminars at which you encourage employee suggestions.

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A. The Occupational Safety and Health Act

In 1970, Congress passed the Occupational Safety and Health Act or OSHA (29 U.S.C. §§651 to 678)—a comprehensive law designed to reduce workplace hazards and to improve health and safety programs for workers. It broadly requires employers to provide a workplace free of physical dangers and to meet specific health and safety standards. Employers must also provide safety training to employees, inform them about hazardous chemicals, notify government administrators about serious workplace accidents and keep detailed safety records.

Although there can be heavy penalties for not complying with OSHA, such penalties are usually reserved for extreme cases in which workplace conditions are highly dangerous and the employer has ignored warnings about them. If your workplace is inspected—an unlikely event for a typical small business—OSHA will work with you to eliminate hazards.

1. Who Is Covered

Generally, you must comply with the Act if your business affects interstate commerce. The legal definition of interstate commerce is so broad that almost all businesses are covered. But Congress did make some very limited exceptions. OSHA won’t apply to your workplace if:

• you’re self-employed and have no employees

• your business is a farm that employs only your immediate family members, or

• you’re in a business such as mining, which is already regulated by other federal safety laws.

2. Safety Standards

OSHA sets a general standard for all covered businesses. As an employer, you must provide a place of employment that’s “free from recognized hazards that are causing or are likely to cause death or serious physical harm to employees.” Recognized hazards are not clearly defined, which can make it difficult for you to know how to comply with the law. The broad language covers an almost impossibly large range of potential harm—from sharp objects that might cause cuts to radiation exposure.

But there’s more. In the Act, Congress created the Occupational Safety and Health Administration—also called OSHA—as a unit of the U.S. Department of Labor. And Congress authorized this agency to set additional workplace standards, which it has done in great profusion. The specific standards cover a wide range of workplace concerns, including:

• exposure to hazardous chemicals

• first aid and medical treatment

• noise levels

• protective gear—goggles, respirators, gloves, work shoes, ear protectors

• fire protection

• worker training, and

• workplace temperatures and ventilation.

3. Posting, Reporting and Recordkeeping

You must post a notice called “Job Safety and Health Protection,” which is available from the nearest OSHA office. If your business is located in a state that has its own approved OSHA program, there may be a state form for you to post instead of the national version. Check with your state OSHA office to find out.

You must notify OSHA within eight hours after learning that an employee has died from a job-related accident or that three or more employees have been hospitalized because of a workplace accident. Call or visit an OSHA office to report the location and time of the incident, the number of fatalities or hospitalized employees, the name and phone number of a contact person and a brief description of the incident. Expect a follow-up investigation.

Unless your business is exempt from OSHA recordkeeping requirements, you must maintain several types of records.

Injury and Illness Log. You must keep a log (OSHA Form 200) of all workplace injuries and illnesses, except minor injuries requiring only first aid. Throughout February, you must post the log for the previous year.

Medical Records. You must keep up-to-date medical records and records of employee exposure to hazardous substances or harmful physical agents.

Training Records. You must keep records of your safety training records and make them available for review by employees.

Retention. You must maintain required records for specified periods of time—sometimes as long as 30 years.

Exemption from Recordkeeping:

The OSHA requirements for recordkeeping apply only to businesses with 10 or more employees—although state OSHA regulations may apply the recordkeeping requirements to smaller businesses. In addition, the following businesses are exempt from recordkeeping:

• retail trade—except for businesses selling general merchandise, building materials and garden supplies

• real estate, insurance and financial businesses, and

• service businesses—except for hotels and other lodging places, repair facilities, amusement and recreation facilities and health services.

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B. State OSHA Laws

If a state has a health and safety law that meets or exceeds federal OSHA standards, the state can take over enforcement of the standards from federal administrators. This means that all inspections and enforcement actions will be handled by your state OSHA rather than its federal counterpart.

So far, 23 states have been approved for such enforcement regarding private employers. They include: Alaska, Arizona, California, Hawaii, Indiana, Iowa, Kentucky, Maryland, Michigan, Minnesota, Nevada, New Mexico, North Carolina, Oregon, South Carolina, Tennessee, Utah, Vermont, Virginia, Washington and Wyoming. (See the contact details below.)

New York and Connecticut also have OSHA-type laws, but they only apply to government employees. Other states are considering passing OSHA laws—and some of the above states are considering amending coverage and content of existing laws.

If your business is located in a state that has an OSHA law, contact your state agency for a copy of the safety and health standards that are relevant to your business. State standards may be more strict than federal standards, and the requirements for posting notices may be different.

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C. Hazardous Chemicals

The OSHA rules include a section called the Hazard Communication Standard. Many people call this the right to know law. Basically, the standard requires you to give information to your employees about the hazardous chemicals they handle.

The requirements of informing employees vary somewhat from state to state. If your business handles any chemicals, be sure to get a copy of your state’s rules. Because most of the state laws are similar to the federal right to know rules, this discussion will focus on the federal law. If your state has standards that are more stringent than the federal ones, there are still some unresolved questions about whether you need only comply with the federal standards. Until this legal issue is clearly resolved, it’s wisest to follow the stricter standards.

To understand the right to know laws—state or federal—you must first become familiar with the Material Safety Data Sheets (MSDS) supplied by manufacturers of all hazardous chemicals. They contain a wealth of information, including:

• the physical hazards of the chemical such as flammability and explosiveness

• health hazards—the symptoms of exposure and the medical conditions that can be made worse by exposure

• how the chemical enters the body and the limits of safe exposure

• whether the chemical is known to cause cancer

• how to safely handle the chemical

• recommended protection methods including protective clothing and equipment, and

• first aid and emergency procedures should a chemical be mishandled.

Obviously, if an employee is working with hazardous chemicals, this is essential information. That’s why the law requires you to keep the MSDS for each hazardous chemical and make it accessible to employees. You must also keep a list of all the hazardous chemicals used in your business and label all containers. And you’re required to train employees in the safe use of hazardous chemicals.

Example: Ace Water Treatment Corporation sells water treatment systems to rural homeowners whose water comes from underground wells. Ace issues demonstration kits to its sales staff so they can demonstrate to potential customers the extent of impurities in the homeowner’s water supply. In one test, the salesperson adds a few drops of potassium hydroxide to a sample of the customer’s water so that certain impurities will collect at the bottom of the test tube. Potassium hydroxide is a hazardous chemical sometimes known as lye.

The chemical comes from the manufacturer with an MSDS explaining its dangers and how it should be handled—for example, goggles should be used to protect the user’s eyes. To comply with the right to know law, Ace keeps the MSDS and makes it available to employees. Ace makes sure that all containers are properly labeled, and that all employees are thoroughly trained in how to use and handle the chemical. To further protect its employees, Ace issues protective goggles to those who perform water tests using the chemical.

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D. Workers’ Compensation

The workers’ compensation system provides replacement income and medical expenses to employees who suffer work-related injuries or illnesses. Benefits may also extend to the survivors of workers who are killed on the job.

Workers’ compensation is a no-fault system. The employee is entitled to receive stated benefits whether or not the employer provided a safe workplace and whether or not the worker’s own carelessness contributed to the injury or illness. But the employer, too, receives some protection because the employee is limited to fixed types of compensation—basically, partial wage replacement and payment of medical bills. The employee can’t get paid for pain and suffering or mental anguish.

To cover the cost of workers’ compensation benefits for employees, you’ll usually need to pay for insurance—either through a state fund or a private insurance company. While self-insurance is a possibility in some states, the technical requirements usually make this an impractical alternative for a small business.

1. Coverage Requirements

Each state has its own workers’ compensation statute. While the details differ from state to state, one thing is clear: If you have employees, you generally need to obtain workers’ compensation coverage. Your state workers’ compensation bureau can tell you about any legal requirements for informing employees of their rights—generally by displaying a poster.

State laws vary as to whether sole proprietors, partners and executive officers can or must be covered by workers’ compensation. In some states, these owners and managers have the option of being covered or not. If you’re in one of these states and you want this coverage—which will give you the same benefits as other workers who are injured—mention this when you apply for coverage through a state fund or a private insurance carrier.

Similarly, in some states, sole proprietors, partners and executive officers are automatically covered but you have the option of excluding them. Ask a representative of the state fund or private insurance carrier how to do this when you apply for coverage.

A few states require workers’ compensation coverage only if you have three or more employees.

You’re Still Liable for Intentional Torts:

While workers’ compensation is the employee’s exclusive remedy for most work-related injuries or illnesses, there’s a major exception: injuries or illnesses caused by the intentional actions of the employer. An employee who can prove that your intentional actions caused an injury or illness can take you to court, seeking a full range of damages—including, for example, damages for pain and suffering as well as economic losses.

Obviously, if you or a supervisor were to physically assault an employee, that would qualify as an intentional action. But courts sometimes treat other workplace events as intentional, too. Suppose, for example, that to speed up production, you remove the safety devices from a dangerous machine. An employee is injured using the machine, but you continue to require workers to use the machine in its unsafe condition. You’ve probably set yourself up for an intentional injury claim because you know with “substantial certainty” that additional workers will be injured by that machine.

In that situation, injured employees would not be limited to their remedies under your state’s workers’ compensation law. They would be able to sue you and your business under traditional tort theories.

Rejecting Coverage Can Be a Mistake

In two states—New Jersey and Texas—workers’ compensation coverage isn’t mandatory for an employer. You can choose whether or not you want to secure workers’ compensation insurance for your workplace. But if you opt not to and you’re sued by an employee who claims to have been injured on the job by your negligence, you won’t be able to use the employee’s own carelessness as a defense. Therefore, most wise employers obtain workers’ compensation, no matter where their businesses are located.

2. Arranging for Coverage

Some states allow an employer to self-insure—a process that typically requires the business to maintain a hefty cash reserve earmarked for workers’ compensation claims. Usually, this isn’t practical for small businesses. Most small businesses buy insurance through a state fund or from a private insurance carrier. If private insurance is an option in your state, discuss it with the insurance agent or broker who handles the basic insurance policy for your business. Often you save money on premiums by coordinating workers’ compensation coverage with property damage and public liability insurance. A good agent or broker may also be able to explain the mechanics of a state fund where that’s an available option or is required.

In most states that have a state-run workers’ compensation fund, you have a choice of buying coverage from the state or from a private insurer. In the following states, however, you must purchase from the state fund: North Dakota, Ohio, Washington and West Virginia. In Wyoming, you must purchase coverage from the state fund if you are engaged in an “extra-hazardous” industry.

Insurance rates are based on the industry and occupation involved, as well as the size of the payroll. Your safety record can also influence the rate; if you have more accidents than is usually anticipated, your rate is likely to be increased.

3. Controlling Costs

Premiums are based on two factors: industry classification and payroll. If your premium is above a certain amount—$5,000 in many states—your actual experience with workers’ compensation claims will affect your premiums. Your rate can go up or down, depending on how your claims compare with other businesses in your industry. The number of claims filed by your employees affects your premium more than the dollar value of the claims. That’s because if you have a lot of accidents, it’s assumed that you have an unsafe workplace and the insurance company eventually will have to pay out some large claims.

Here are some steps you can take to try to keep your workers’ compensation costs down.

a. Preventing accidents

Emphasize safety in the workplace. Provide proper equipment, safety devices and protective clothing. Train and retrain your employees in safe procedures and in how to deal with emergencies. Set up a safety committee comprised of both managers and workers. Promote employee health by offering wellness and fitness programs.

b. Buying coverage wisely

Seek out a participating plan in which the insurance company pays dividends to its insured employers. It helps to find a solid company with a long history of paying dividends—but dividends are never guaranteed.

Consider being put on a retrospective rating plan which, unfortunately, isn’t usually available to many small businesses. In such plans, the insurance company agrees to adjust your premium at the end of the year based on your actual claims experience. If you have a strong safety program, this program can be better for you than a dividend-type program—which generally looks at the insurance company’s claims experience and not just the history of your business.

Make sure your business and your employees are properly classified. Don’t let the insurance company mistakenly place your business in a class that pays a higher premium because of job hazards. And, since workers are also classified based on the nature of their work, check to see that the insurance company has classified them correctly.

Remove overtime pay from the payroll figures on which the insurance company calculates your premium.

c. Following Up

Use light duty or modified work assignments to help workers who have been injured on the job but are allowed back to work on a trial basis.

Monitor claims. If you learn that an employee seems to have recovered but is still accepting workers’ compensation benefits, ask him or her for an explanation. If something still seems amiss, notify the insurance company or state fund.

4. Injuries and Illnesses Covered

As an employer, you needn’t dig very deeply into the fine points of workers’ compensation law. The state fund or private insurance company that covers your workplace will have its own lawyers resolve legal questions about whether a worker is entitled to compensation for a particular disability and, if so, how much the worker is entitled to receive. When a worker seeks to receive benefits that are questionable, these lawyers will challenge the employee in your behalf.

Still, as a well-informed employer, you may want to learn a bit more about how the system works. While workers’ compensation law varies somewhat from state to state, there’s enough similarity among the states to justify some general statements.

To be covered by workers’ compensation, an employee’s injury needn’t be caused by a sudden accident such as a fall. Basically, any injury that occurs in connection with work is covered. Many workers, for example, receive compensation for repetitive motion injuries such as Carpal Tunnel Syndrome, which primarily afflicts the wrists, hands and forearms.

In theory, if a worker’s injury was intentionally self-inflicted or was caused by substance abuse or by some other nonwork cause such as a hobby, the injury won’t be covered. But in a disputed case, the worker is still likely to get the benefits by showing that his or her behavior wasn’t the only thing that caused the injury.

Workers may also be compensated for some illnesses and diseases. An illness is likely to be covered by workers’ compensation when the nature of the job increases the workers’ chances of suffering from that disease. Illnesses that are the gradual result of work conditions—for example, emotional illness, heart conditions, lung disease and stress-related digestive problems—increasingly are being covered by workers’ compensation.

Finally, there are death benefits. Dependents of workers killed on the job can usually collect workers’ compensation benefits.

Don’t Penalize Workers Who File Claims

In most states, it’s a violation of the workers’ compensation statute or public policy to discriminate against an employee for filing a workers’ compensation claim.

5. Benefits Paid

Workers’ compensation covers the employee’s medical and rehabilitation expenses. It also provides income to the employee to offset a big part of lost wages. Typically, a worker receives two-thirds of his or her average wages up to a fixed ceiling. But since these payments are tax free, a worker who receives average wages fares reasonably well.

In most states, workers become eligible for wage loss replacement benefits as soon as they’ve lost a few days of work because of an injury covered by workers’ compensation. The number of days required to qualify varies by state. Some states allow the payments to be paid retroactively to the first day of wage loss if the injury keeps the employee out of work for an extended period.

Workers may receive lump sum benefits if they have a total disability or a permanent partial disability. In some states, there are specific amounts provided for permanent partial disability such as the loss of an eye or a foot.

6. Independent Contractors

Workers’ compensation insurance is required only for employees—not for independent contractors who work for you. Small businesses sometimes buy services from independent contractors to save money on workers’ compensation insurance, as well as taxes and other expenses normally associated with employees. That’s fine as long as you correctly label people as independent contractors rather than employees. But if you make a mistake, and a person improperly labeled as an independent contractor is injured while doing work for your business, you may have to pay large sums to cover medical bills and lost wages which should have been covered by workers’ compensation insurance.

In addition, you can sometimes have a problem with a properly classified independent contractor who hires employees to perform some work for you. The trouble can come if the independent contractor doesn’t carry workers’ compensation insurance.

Require Proof of Insurance

When hiring an independent contractor, ask to see an insurance certificate establishing that the independent contractor’s employees are covered by workers’ compensation insurance. For good measure, make sure too that the independent contractor has general liability insurance.

Excerpted from the “The Employer’s Legal Handbook”, by Fred S. Steingold