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Workers' compensation 'legacy claims' in acquisitions

If your company is considering or in the process of acquiring another company, you may not have given much thought to that company's workers' compensation program -- or to the company's safety culture in general. This may be more relevant in industries where workplace injuries are common than in those where they aren't. However, employees can suffer injuries in any line of work.

You should find out about any unresolved claims that you may be inheriting before you finalize the deal. These "legacy claims" can end up costing you a good deal of money that you didn't anticipate.

One attorney notes that part of due diligence in an acquisition should be looking at the company's safety culture. He says, "The biggest problem is when a safety-focused company acquires a company where safety is not a priority." He notes that looking at the company's Occupational Safety and Health Administration (OSHA) records and workers' comp claims is part of that due diligence.

When looking at current claims, it's important to determine how close the claims are to being closed, when or if the employees will be returning to work and the causes of the injuries behind the claims. Experts say it's important to know why any claims that have been open for some time haven't been resolved.

The attorney also stresses the importance of determining how many employees with workers' comp claims are currently on leave. He says, "Some companies don't keep close track of employees on leave and many, many employers don't understand that in most states just about every compensable workers' compensation injury or illness qualifies as (a Family and Medical Leave Act) health condition."

He recommends getting a list of employees currently on leave and comparing that list with that of workers' comp claims from the past few years. He says, "I am amazed how often we get into a deal and the seller has employees who have no leave status."

If you are having difficulty getting the information you need regarding workers' comp claims, let your attorneys know so that they can help you get the data you need to make an informed decision on an acquisition. This can help prevent the need for litigation in the future.

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