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Worker moral hazard has been shown in some empirical studies to influence workers’ compensation insurance claims patterns. According to moral hazard theory, temporary help services workers would be expected to file a greater number of spurious claims than traditional, directly-hired employees as a result of greater safety information asymmetry between staffing agencies and the temporary help services workers they place in third party workplaces than between employers and their directly-hired employees. Analysis of a survey of 30,000 working age adults finds that, of workers surveyed who experienced a work-related injury or illness, temporary help services workers are statistically significantly more likely to file a workers’ compensation claim than traditional employees by an estimated 15%. Temporary help services workers and traditional workers who file a workers’ compensation claim are equally likely to receive benefits, however, indicating that the additional claims made by temporary help services workers are considered legitimate by staffing agencies and their insurers rather than a result of moral hazard. Qualitative responses suggest that traditional employees may file fewer claims than temporary help services workers, conditional on work-related injury or illness, because traditional employees refrain from filing workers’ compensation claims out of loyalty in occasional cases and due to claim discouragement or suppression in more frequent cases. Employer behavior is found to substantially affect the odds of a worker filing a claim with a high degree of statistical significance. Survey data reveal, controlling for industry and employer size, the existence of employer high road and low road approaches to workers’ compensation, with one-third of employers very helpful to workers surveyed who experienced a work-related injury or illness. Nearly one out of five traditional employees surveyed who experienced a work-related injury or illness, however, reported a perceived threat of dismissal for filing a workers’ compensation claim.

Key Takeaways

• The current survey data show a strong effect of employer behavior toward workers who experience work-related injury or illness on the workers’ claim behavior.
• The survey data also reveal, controlling for industry and employer size, the existence of employer high road and low road approaches to workers’ compensation, with one-third of employers very helpful to workers surveyed who experienced a work-related injury or illness.
• Nearly one out of five traditional employees surveyed who experienced a work-related injury or illness, however, reported a perceived threat of dismissal for filing a workers’ compensation claim.
• A review of state workers’ compensation bureau programs intended to support the ability of injured or ill workers to file legitimate workers’ compensation claims and to address the behavior of employers following low road workers’ compensation practices seems warranted.

Citation

Edisis, A. T. (2017). Workers’ Compensation Claims by Temporary Help Services Workers and Traditional Employees. Chief Evaluation Office, U.S. Department of Labor.

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This study was part of the Department of Labor Scholars Program, and was produced outside of CEO’s standard research development process.