Can I Fire an Employee With an Open Workers' Compensation Claim?

Imagine a scenario where an employee consistently disregards company rules and protocols or has other serious performance problems. You’ve already gone through all your disciplinary steps and want to terminate, but the employee has an open workers’ compensation claim. Should you proceed, or does the workers’ compensation claim protect the employee’s job?

Unfortunately, there is no easy answer to this question because it can vary depending on which state the company is located in, why the employee is being disciplined or fired, and the nature of the workers’ compensation claim. In general, filing a worker’s compensation claim does not automatically protect employees from being disciplined or fired. However, taking such an action is inherently risky. Let’s look at the main issues you need to consider before doing so.

What is an open workers’ compensation claim?

If an employee’s claim is listed as open, that means:

1. The employee filed a workers’ compensation claim for a work-related injury or illness
2. Benefits are still being provided, rehabilitation is ongoing or the employee has not yet reached maximum medical improvement
3. The claim is still active within the workers’ compensation system

Claims can remain open for years, depending upon the severity of the injury or illness and the required treatment.

When can an employer fire an employee with a worker’s compensation claim?

While it’s illegal in most states to discipline or terminate an employee as retaliation for filing a workers’ compensation claim, there is usually no outright prohibition against doing so for legitimate reasons. That makes sense considering how long it can take for these claims to be resolved.

For example, employers may still discipline or terminate an employee when:

• After obtaining permanent restrictions, the employee can no longer complete the job tasks that were initially assigned to them
• Company-wide layoffs are necessary
• Leading up to their injury or illness, the employee had poor work performance that was properly documented

While these actions are typically allowed, employers need to proceed carefully to minimize the appearance of retaliation.

What is retaliation?

Employer actions that could be interpreted as unlawful retaliation against an employee with an open workers’ compensation claim include:

• Changing the employee’s job tasks, even though the employee is still able to perform them
• Changing the employee’s work schedule
• Demoting the employee
• Reducing the employee’s hours
• Termination of employment

Employers that are found to have wrongfully retaliated against an employee can incur significant liabilities. We recommend contacting an experienced employment attorney before disciplining or terminating employees who have an open workers’ compensation claim. But even before getting to that point, the employer needs to lay the proper groundwork to show it has a legitimate reason for its actions.

Documentation is key

Thorough documentation of behavioral or performance problems can minimize the risks associated with terminating an employee who has an open workers’ compensation claim. At a minimum, employers need:

• Clearly communicated employment policies, standards and expectations;
• Written disciplinary policies and procedures;
• Documentation of all employee performance and behavioral concerns, as well as any disciplinary or other actions taken to address them with the employee; and
• Promptness and consistency in enforcing and applying all of the above.

In addition, addressing all performance problems immediately is key. Waiting until after the employee files a workers’ compensation claim (or other legal claim or complaint) can look like retaliation, even though the problematic behavior started before the claim was made. If an employee’s performance issues begin while a workers’ compensation is pending, don’t feel like you need to ignore them in order to avoid a retaliation claim. The best practice is to follow the same steps as if the employee didn’t have an open claim and document those as well.

Just keep in mind that having sufficient documentation may help reduce your ultimate liability, but it cannot truly eliminate the risks or prevent the employee from suing.

Final thoughts

Employers must walk a fine line between meeting their legal obligations and determining when it is best to terminate an employee or take disciplinary action. Taking the time to do the legwork is well worth it in the long run.