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Mergers, Acquisitions, and Downsizing: The Risk Manager’s Role in Due Diligence
(Part 2 of 2)

During and After the Action

During and after the action, a risk manager should address issues such as advance notice, outplacement assistance, medical histories, injured workers, return to work (RTW), stress claims, fraud, special file handling, and exit interviews.

Advance Notice in Downsizing

People aren’t stupid and will begin to guess about what’s going on almost immediately. Why have them feeling bitter about being mistrusted and having had little time to prepare for the change? Whatever resentment there will be can only be compounded by surprise.

It takes zero time to concoct a fraudulent claim. You tell Pete today that he is gone when the whistle blows, and Pete will tell you about the box he lifted last Friday when no one was looking. If there’s going to be fraud, it will happen. Giving honest workers the lead-time that you yourself would want can help avoid a lot of bad feelings.

Outplacement Assistance

Your own organization is the best place to start outplacing terminated workers. While they may not have the exact skill sets you want, remember that they likely will have to learn new skills anyway. Let them know that if they're willing to learn what you need, you're willing to work with them. If a press operator is going to have to learn to drive a forklift to get a job somewhere else, look to see if you can use a forklift operator.

Get your local state unemployment office involved. Check with your local suppliers and competitors to see if they are hiring. Offer assistance in resume preparation. Look for skills that are transferable to other operations you might be keeping. Again, this is a real sign of good faith that will weigh in on your side should a claim arise.

In today’s labor market, finding good people is hard enough. This step may get tougher (but no less important!) in hard times, but today’s market makes it relatively easy to help people get new jobs. Here’s a last thought in this area. If you are downsizing, any employees who are or may be material witnesses to a claim against you must be kept track of and treated kindly.

Medical Histories

As soon as you are reasonably certain that downsizing is going to occur, it might be good practice to amend your workers compensation claims procedures for all operations. You may want to consider having your treatment provider take medical histories with all new claims.

In a typical claim, a medical history is not taken. A history is not a physical exam, it is a series of questions like “Have you ever had this?” or “Did you ever that?” asked by the treating physician or nurse. This helps establish a baseline at the time of the treatment.

Should a laid off worker later come back with an “I forgot to tell you about the box I was lifting” claim, this history can be reviewed. It may help impeach the credibility of a fabricated claim.

For several reasons, this should be done across the board. First, it avoids problems with charges of discrimination. Second, the effects of your downsizing will be felt by more than just the downsized employees. Claims can come from remaining employees that wouldn’t have occurred otherwise. It’s referred to in some areas as “the survivor syndrome.” People start thinking about “I could be next,” and for some, the conclusion is “I better get my claim in now.”

Injured Workers

Don’t ever do anything that could be possibly interpreted or misinterpreted as terminating an employee for making a workers compensation claim. This is illegal in every state. It also sets up a good basis for a wrongful termination lawsuit.

If, among the terminated employees, there are injured workers who are off work or receiving medical treatment, they must understand that their benefits will continue just as before. In other words, they get medical treatment and indemnity payments just as if they were still employed.

You must understand that those indemnity payments can go on forever, now that they have no job to return to. Use the resources described above in outplacement services, and make certain that you get these people back to some work as soon as possible.

Return to Work

What do you do with a downsized worker who is out on workers compensation or disability? You could establish an “employment partner” arrangement where your partner agrees to hire skilled but injured workers who can’t return to your operation. This could be a local business with similar operations, the purchaser of your discontinued operations, or some other source. Be creative.

You may need to contribute toward the new employer’s cost of hiring and training the employee. These may be reimbursable from the workers compensation insurer, especially if it has been planned beforehand with the insurer. Compare these contributions against a lifetime of benefit costs, and it may well be worth it.

Stress Claims

Certainly, downsized workers can make claims of psychological stress. Understand that these claims can also come from workers who didn’t get downsized (the “survivor syndrome”). In addition, remaining staff can feel overloaded and begin to get burned out. Treatment of these claims by workers compensation or other benefit programs will vary from state to state. EAPs can really help here; it’s one of their specialties.

Fraud

Valid, compensable injuries do happen to workers who have just learned that they are going to be laid off. If your operations are continuing, so will your injuries.

This doesn’t mean you accept every new claim on its face. Look for claimants who go back to “their” doctors or lawyers for a new claim or for recurrences of an old condition just before the closing date. Also look for claimants who aren’t home during the day, or who are home but cannot come to the phone. There are many checklists for “suspicious” and “nonroutine” claims. Use these checklists, work with your insurer or third-party administrator, and pass on any information that seems irregular. Be especially attentive to multiple claimants represented by the same attorney as certain attorneys feed off plant closings.

Special File Handling

When an operation or employees are gone, it’s easy to forget them. However, if there are injured workers out on workers compensation when they are downsized, their files should be separated out from your normal claim files. One individual should have responsibility for monitoring these files until all are closed. Should a late reported claim come in, or an old injury get aggravated after the announcement, it should be part of this special group.

Exit Interviews

Show some concern here for the future of each employee. You want to be able to contact former employees again for several reasons. Six weeks after they are gone, someone will remember that “Joe knew where those files were….” Two years from now, you may need one of them as a witness to help you in a bad claim. Also, you may want to rehire one of them someday.

Part of the exit interview should address medical issues. Consult your benefits people about what to discuss, what forms to have them sign, what elections the employees must make under COBRA and other laws and regulations. Ask about their current health. Make a written record of what they say. If an employee has an unreported injury, it’s best to learn about it now, while the site is still intact and witnesses are still available.

The Risk Manager’s Role

Risk management’s role is “mission critical” in any merger, acquisition or downsizing. Senior management already knows the role of the accountant and attorney. It’s up to you to let senior managers in on how failure in any one of your areas can make the deal of their dreams become a nightmare. Unless they know why you have to be involved early, you won’t be - and you won’t be able to do your job.

Read Mergers, Acquisitions, and Downsizing: The Risk Manager's Role in Due Diligence (Part 1)

ABOUT THE AUTHOR

The Journal of Workers Compensation is a quarterly review of risk management and cost containment strategies published by Standard Publishing in Boston, Massachusetts. For more information, please visit our web site, www.standardpublishingcorp.com, or contact the editor at 800-682-5759, extension 222, or subscription services at extension 228.

riskVue | The webzine for risk management profesionals
August 2001