Workers' Compensation (members ed.)
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Under Texas law, restaurants have two options for insuring employees:
1. The workers' compensation system -- described below.
2. The tort system -- operates with unlimited damages and without common law defenses in handling employee injuries. Employees may not sue covered employers for damages for personal injuries sustained while working, except in cases of gross negligence.
Flat cost, dividend and retrospective programs
Money-saving insurance options
Workers' Compensation Insurance programs
Within workers' compensation insurance are three plans - flat cost, dividend and retrospective. Each plan offers different advantages depending on your business, accounting methods and coverage preference.
In any plan, the premium is based on the type of work your employees do, the number of employees you have and your past losses. Limiting dangerous conditions and implementing an effective program to prevent injuries will, over time, lower your premium payment.
Flat-cost programs - have a set premium for the term of the coverage regardless of losses or claims.
Dividend programs - have a standard up-front premium. Money is refunded if losses are lower than the rate expected. (See "Purchasing Groups" for TRA's Dividend program.)
Retrospective plans - have an up-front premium but if losses are higher or lower than expected you may be refunded or charged more at the end of the term.
Consult an insurance agent to help select the plan that's right for you.
Money-saving insurance options
Deductible Plans
Deductible plans are available to restaurants with more than $5000 in premiums. This lets you "self-insure" smaller claims thus decreasing your premium.
Per-accident deductibles - available at levels of $1,000, $2,500, $5,000, $10,000, and $25,000. The deductible amount may not exceed 50% of the policyholder's premium, however policyholders may negotiate with their insurance company for higher deductibles.
Aggregate deductibles - available in amounts ranging from $2000 to 100% of the policyholder's annual premium OR $100,000, whichever is less.
Negotiated deductible - available for higher amounts than per-accident or aggregate plans.
A Combination of per-accident and aggregate plans may also be obtained.
Purchasing Groups
Special insurance is available for groups of two or more restaurants. This allows small employers to save money by taking advantage of the volume discounts offered to larger restaurants. The group establishes its own guidelines for participation in the group and decides what to do with any savings from volume discounts.
The Texas Restaurant Association offers group volume discounts of up to 11-percent off non-group premiums. Call 1-800-395-2872 for more information.
Self-Insurance
Self-insurance is an option, but only for restaurants whose premiums exceed $500,000. Self-insurance can take many forms, and you can combine it with a high-deductible policy to cover small losses out of a self-insurance fund with major losses covered by your traditional premium-based insurance. Talk to your insurance agent about self-insurance options for your business.
Insurance Audit
Before purchasing insurance, it’s important to complete an insurance audit available from the Texas Department of Insurance. An audit will help you determine your premium and ensure that your record is accurate and current. Things to look for on your insurance audit:
Make sure you have been credited with any claims you've won.
Make sure that payroll data and classifications are correct. Do not under report. An employer is liable for misrepresenting payroll amounts to the insurer. The penalty is 10 times the difference in premiums due.
Note that it is unlawful for an employer to collect workers' compensation premiums from employees. You can be sued for shifting premium payments to employees.
Policy Cancellation
If your policy is being cancelled or won't be renewed, you are entitled to 30 days advance notice by certified mail unless you, as employer, have requested the cancellation.
Ten days notice is required if your insurance company cancels because of fraud, non-payment of premiums, or increased hazard (including the employer's failure to comply with the insurance company's recommendations for loss control).
The employer must post notice to employees when compensation is discontinued and file form TWCC-5 with the Texas Workers’ Compensation Commission.
Failure to do so leaves the employer responsible for workers' compensation benefits as well as a lawsuit under the tort system with the possibility of unlimited damages.
Coverage
The Workers' Compensation Act only covers individuals when they are working. The Act includes certain occupational diseases as physical injuries, but does not cover natural illnesses that do not result from, or become aggravated by, employment.
The Act provides that the following types of injuries are not covered.
An injury caused by an act of God unless the employee is at the time engaged in the performance of duties that subject him to a greater hazard from the act of God than ordinarily applies to the general public.
An injury caused by an act of a third person, intended to injure the employee because of reasons personal to him and not directed against him as an employee, or because of his employment.
An injury received while in a state of intoxication, including drug use.
An injury caused by the employee's intention and attempt at self injury or to unlawfully injure another person.
Reporting
When reporting an incident, an employer is required by law to furnish written notice of lost-time injuries to the Workers' Compensation Commission and the insurance company. In addition, an employer must maintain a log of all injuries, which records:
The injured employee's name, address, date of birth, sex, wage, date of employment, social security number, and occupation.
The date and time when the injury occurred, the reported cause and nature of the injury, the part of the body affected, the location where the injury occurred.
The name of the employee's supervisor, and the names of any witnesses.
The name of any treating health care provider.
The amount of any benefits advanced to the employee.
An employee must report an on-the-job injury to their employer within 30 days and file a claim for compensation within one year.
Claims
An on-the-job injury can be a frightening experience for many employees. Few have any knowledge of workers' compensation. Any misunderstanding about where they stand can slow recovery and lead to numerous complications.
Anxiety can be reduced by letting the injured employee know, early on, that medical and hospital bills will be paid, wage replacement payments will be made automatically and that a job is waiting when the employee can return to work. While the law does not require an employer to hold an injured worker's job open, assisting the worker to return to pre-injury employment or a modified position is a definite cost-saving factor and a benefit to the employee.
Finally, work with your insurance claims adjuster. They need your help in obtaining the pertinent information necessary for processing the claim. Promptly investigate accidents and provide the adjuster with this information. Ask to be kept informed of the status of the claim. If the employee returns to work notify the adjuster at once.
Medical Coverage
The Workers' Compensation Act provides for reasonable medical aid, hospital services, nursing, chiropractic services and medicine at the time of the injury and after to cure and relieve effects naturally resulting from injury. The Act also covers certain physical rehabilitation treatments. These benefits are available even as the employee continues to work.
Average Weekly Wage
All income benefits are based on the employee's average weekly wage (AWW). The AWW is computed by totaling the employee's last 13 weeks of earnings and dividing by 13. Wages include tips and any other benefit of employment, such as the value of free meals. All income benefits are subject to maximum amounts based on the state average weekly wage, which is determined by the average wage earned by an employee in the manufacturing sector.
Temporary Income
Temporary income benefits are designed to replace an employee's paycheck while the employee is off work recovering from an injury.
The temporary benefits are paid to the employee weekly until the employee returns to work, reaches maximum medical improvement, or for 104 weeks, whichever comes first.
The benefits are paid at 70% of the employee's AWW for employees earning more than $8.50 per hour, and 75% for those earning less, for a maximum of 100% of the state AWW.
Impairment Income
Impairment income benefits compensate an employee for any permanent impairment.
The benefit is paid weekly at 70% of the employee's AWW, for a maximum of 70% of the state AWW. The number of weeks the benefits are paid is based on the amount of impairment the employee suffers as determined under the American Medical Association's Guides to the Evaluation of Impairment. For each percentage of impairment, the employee receives 3 weeks of benefits.
For example, an employee earning $500 a week suffers a back sprain resulting in 3% impairment according to the guides. The employee would be entitled to 9 weeks of benefits at $350 (70% of $500).
Supplemental Income
Employees with serious injuries resulting in an impairment of 15% or more are entitled to supplemental income benefits if they are unable to make at least 80% of their pre-injury wage. These benefits are paid monthly at a rate of 80% of the difference between the employee's post injury earnings and 80% of the employee's AWW, subject to a maximum of 70% of the state AWW.
For example, an employee with an AWW of $350, who has over 15% impairment and is now earning only $200 a week, would be entitled to $64 a week in supplemental benefits (80% of his $350 AWW = $280 minus the $200 in current earnings = $80 of which 80% = $64). If the employee makes more than 80% of their AWW for more than a year they are no longer entitled to supplemental income benefits.
Lifetime Income Benefits
Employees are entitled to weekly compensation payments for life at 75% of the employee's AWW, for a maximum of 100% of the state AWW for the following catastrophic injuries:
Total and permanent loss of the sight of both eyes.
Loss of both feet at or above the ankle.
Loss of both hands at or above the wrist.
Similar loss of one hand and one foot.
Injury to the spine resulting in permanent and complete paralysis of both arms or both legs, or of one arm and one leg.
Injury to the skull resulting in incurable insanity or imbecility.
Fatality
If death results from an injury, the legal beneficiaries of the deceased are eligible to receive 75% of the deceased's AWW, subject to a maximum of 100% of the state AWW. These benefits are payable to a spouse for life, except that the payments cease upon remarriage and a lump sum payment, equal to two years of benefits, is made. Dependent children receive benefits until age 18 unless they are in school and then benefits can continue to age 25. If there is no spouse or children, other beneficiaries listed in the Act may receive compensation up to 360 weeks. The insurance carrier also pays an amount not to exceed $2,500 for funeral expenses.
