What to expect in 2023 – Part 1

This two-part article highlights the 19 issues we predict will have a high impact on workers compensation and risk management in the year ahead…

In a year dominated by economic uncertainty, persistent inflation, geopolitical disruption, and changing workforces, workers compensation was “healthy and resilient with a dash of uncertainty”* in 2022 as rates were generally stable or declining and claim frequency continued to decline. Yet, workers comp is not simply insurance, it aligns employers’ and employees’ best interests by focusing on health, safety, and outcomes. Employers that take a strategic approach recognize that safety, productivity, and profitability are goals achieved together. *National Council on Compensation Insurance (NCCI)

Addressing the issues affecting workers compensation serves the broader purpose of strengthening the entire business. While some of the issues are familiar and ongoing and others are emerging, all have the potential to be disruptive if ignored. Here are ways employers can address the 19 issues we predict will have a high impact on workers compensation and risk management in the year ahead:

1. Labor shortage: Think about the workforce differently — Even as the economy cools, workers remain in short supply and some economists predict the shortage could be one of the biggest economic challenges for several decades. Shifting demographics, reduced immigration, low fertility rates, baby boomer retirements, and COVID have created the perfect storm for declining labor participation rates.”Quick fixes” such as relaxing hiring practices, hasty and inadequate training, turning a blind eye to safety infractions, and pushing workers to the point of burnout or exhaustion are not solutions. Over time this will lead to increased costs, more accidents, lower productivity, declining morale, and higher turnover.The solution lies in maintaining a safe and healthy workplace while empowering employees to be your greatest asset. This involves more than good pay and benefits, it involves looking at employee skills, recruitment, and retention, job satisfaction, and even organizational design differently. How to do this will vary by company, but there are two concurrent paths to begin: (1) engage in dialogues to understand employees’ perspectives of the company, health and safety, and job satisfaction and (2) identify the skills needed to drive workflows and maintain a competitive advantage. Companies that commit to act on employee feedback, focus on their internal talent, and reskill employees so they acquire cross-functional knowledge and training will cultivate a sense of purpose and mission that fosters retention and a safe working environment.
2. Aging workforce: Accommodate older workers — An aging workforce has been a constant issue in workers’ comp for many years but takes on new importance considering the worker shortage. According to the National Council on Compensation Insurance (NCCI), the biggest drop in labor force participation is in workers under 25 and over 65. The Bureau of Labor Statistics (BLS) projects that over 63 percent of labor force growth from 2021 to 2031 will come from workers over 65. Moreover, more than one in four workers will be 55 or older in 2030.Legacy approaches to aging and the workforce are no longer viable; smart organizations view age and longevity as an asset, focusing on retaining older workers, inviting them back from retirement, creating “alumni networks,” and recruiting older people. Flexible work schedules, proactive ergonomic strategies, good health benefits, and two-way mentoring opportunities are ways to encourage older workers to return or remain in the workforce. Adapting the workplace and the nature of work itself to maintain and enhance the safety, health, well-being, and productivity of workers as they age is key.
3. OSHA: Expect more aggressive enforcement activity, employee-friendly rules, and higher penalties — According to Bloomberg Law, OSHA inspections have rebounded to almost pre-pandemic inspection levels. The number of OSHA inspectors grew 19 percent in FY2022, and the number of OSHA whistleblower investigators was up by 37 percent. Major actions in 2022 included:
   • Submitted the permanent standard on COVID-19 for the healthcare industry to the Office of Management and Budget (OMB) for final review Dec. 7, 2022. It’s uncertain what the standard contains, although many speculate it will mirror the ETS, and the timeline for review is unknown.
   • Significantly expanded the Severe Violator Enforcement Program (SVEP), considered one of the agency’s most onerous enforcement efforts.
   • Launched a National Emphasis Program (NEP) on indoor and outdoor heat hazards, the first nationwide enforcement mechanism to proactively inspect workplaces for heat-related hazards in general industry, maritime, construction, or agricultural operations.
   • Launched a five-year Regional Emphasis Program (REP) in Pennsylvania, Delaware, Maryland, Virginia, West Virginia, and the District of Columbia focused on the warehouse, storage, and distribution industries.
   • Launched a Local Emphasis Program for food production workers in Illinois and Ohio.
   • Extended the Revised NEP for COVID-19 until further notice.
   • Proposed sweeping changes to the recordkeeping rule, which would expand coverage to thousands more establishments and increase the scope of data required for submission.
   • Issued an Advance Notice of Proposed Rulemaking (ANPRM) to revise the standards for occupational exposure to lead.

   For 2023, the agency seems focused on increased enforcement, workplace violence prevention in the health care industry, heat illness, and process safety management which were listed in the pre-rule stage in the Spring agenda. Key OSHA standards listed in the proposed rule stage involve infectious diseases with a NPRM scheduled for May 2023 and lockout/tagout with a NPRM scheduled for March 2023.

   OSHA penalties will continue to rise. No later than January 15, 2023, federal OSHA must again increase the civil penalties, based on a cost-of-living adjustment for inflation. Watch for a final rule about the adjustment, which becomes effective when published in the Federal Register. In 2022, it was not unusual to see six-figure penalties and some exceeded $1,000,000.

4. Marijuana: Don’t be indecisive about drug testing policies — One of the biggest dilemmas facing employers today is how to maintain a safe workplace while marijuana is legalized medically and recreationally in states but remains illegal federally and popular opinion continues to push for acceptance. In 2022 more jurisdictions (eg, California, Connecticut, District of Columbia, Rhode Island) passed laws on cannabis use, with several placing limits on employer drug testing and policies. In November 2022, Maryland and Missouri joined 19 other states in legalizing recreational use of marijuana and more referendums and bills are expected in 2023.Add to this the ever-evolving patchwork of state laws and regulations, conflicting case law on reimbursement for medical marijuana in workers comp, and the inadequacy of traditional testing methods for marijuana impairment and it’s easy to understand why employers don’t know what to do. In many jurisdictions, employers face the daunting task of proving impairment was the sole cause of an injury to deny a claim.Yet conflicting messages and inconsistent practices related to drug policies are a source of stress and dissatisfaction among employees. They deserve to have a clear understanding of who will be tested and why, when testing will be done, what will be tested for, the consequences of a positive test, and the technologies that will be used. Inevitably there are competing interests in an organization and compliance issues that need to be weighed but this is a business decision that should be based on what best serves the unique operational, safety, productivity, and cultural needs of your business.Another emerging issue related to drugs that deserves watching is the Centers for Disease Control and Prevention (CDC) proposed new guidelines that would ease restrictions on prescription opioids, particularly for people suffering from chronic pain. It will be up to states to decide if they will lift limits on painkillers that have fueled the nation’s deadly overdose epidemic.
5. Musculoskeletal disorders: Prioritize prevention — Musculoskeletal disorders (MSD) such as back strains and sprains, carpal tunnel syndrome, rotator cuff tears, and tendonitis are another constant issue in workers compensation. Often known as ergonomic injuries, they develop over time and result from awkward or static postures, forceful exertions like heavy lifting, or repetitive movements and are the largest category of workplace injuries. The National Safety Council (NSC) reports that MSDs cause 30 percent of unwanted days away from work and cost employers approximately $20 billion annually. To increase awareness and reduce MSD risk, the organization is calling upon employers to take the MSD Pledge.While MSDs are a significant challenge to manage, know no boundaries, and pose a risk to workers in every industry, solutions can be inexpensive. Videos recording a worker in motion can help identify body parts that are at risk for injury. The solution can be as simple as providing a shelf to make materials easier to access. And a new generation of wearables, which give real-time alerts to drive sustained behavior change, is more readily available and affordable.
6. Middle managers: Recognize the role has changed — Middle managers today are constantly confronting new realities. Hybrid work, changing employee expectations, supply chain challenges, emerging technologies, turnover, mental health, marijuana, and shifting corporate objectives have added new layers of complexity to their roles. While the managerial approaches that were successful in 2019 may be ill-suited for the workforce of 2023, what remains the same is that middle managers are the linchpin that connects the front lines to higher levels of management and the company culture. Managers who do not engender trust and excel at motivating are a liability.In workers comp, one of the most important predictors of effective recovery-at-work outcomes and how expensive a claim is going to be is the worker’s relationship with the manager. Organizations that take actions to relieve pressure on managers by clarifying priorities, and training in coaching and mentoring, as well as time management will enhance workforce stability and productivity.
7. Temporary workers: Understand new best practices — OSHA and other organizations have long argued that temporary workers are at increased risk of injury. The National Institute for Occupational Safety and Health (NIOSH), together with several partners, released a new set of best practices for protecting temporary workers. This manual builds on resources developed by OSHA’s Temporary Worker Initiative, launched in 2013. Changes looming in the standard for joint employers (see #8) make this a hot issue for 2023.
8. Joint employers: Keep an eye on NLRB’s proposed standard revision — In September 2022, the US National Labor Relations Board (NLRB) published a proposal to again revise its standard for determining joint-employer status. The proposal rescinds and replaces the employer-friendly rule adopted in February 2020 with a substantially broadened definition of joint employer, even more so than the joint employment standard that existed in the wake of the 2015 Browning-Ferris decision.While the laws vary by state, critical issues can arise with workers’ compensation as to which employer is responsible for the payment of workers’ compensation benefits and whether either or both employers have the benefits of the “exclusivity doctrine” available to defend against a third-party action. The bottom line for employers is that under the proposed joint employer rule, employers that use another employer’s employees would more likely be considered joint employers. The final rule is expected in the first half of 2023.
9. Independent contractors: Control contract management and classification risks — In 2022, recession fears caused demand for contract workers to surge by more than 25 percent. This trend is expected to continue in 2023 as companies play it safe and bring in talent only as needed. Ineffective contract management and classification compliance are risks for employers. A recent report by ISN, the global leader in contractor and supplier information management services, found that one in four companies does not track or know the amount of work outsourced to contractors. Failure to have a comprehensive contract management program has inherent safety risks. Worker safety can be compromised when contractors are rushed onto jobsites but have not received proper onboarding and training. Using tools such as artificial intelligence analytics (AI) can unlock insights into the impact that contractors have on workforce safety and provide a roadmap for improvements.In late 2022, the U.S. Department of Labor (DOL) released a proposal to rescind a 2021 rule that made it easier for employers to classify workers as independent contractors, rather than employees under the Fair Labor Standards Act (FLSA). While the proposal shifts toward a pro-employee definition of employment, it is not as rigorous as the ABC test used in states like California and Illinois and is expected to have the largest impact on industries that rely on gig workers. However, employers should expect more regulatory actions, more investigations, and more litigation, as the DOL has hired close to a hundred new wage-and-hour investigators.Although the rule will only be applicable when determining worker status under federal wage and hour law, it’s a major legislative trend and employers must continue to be diligent in maintaining compliance with all tests for determining worker status. In 2022, California’s ABC test withstood several legal challenges, and three states, Alabama, South Dakota, and Washington passed laws addressing gig workers.