It seems an unfortunate fact that a number of good, safety-conscious construction companies are being precluded, or seriously handicapped, from bidding/winning projects due to the increasingly common practice by agencies, project owners and general contractors of using the Workers' Compensation Experience Modification Rate (EMR) as a measure of safety performance. EMR is not necessarily a correct indicator of safety performance. EMR is an insurance underwriting tool originally set up to measure an employer's workers' compensation claims experience and to adjust pricing accordingly.

Under this system, an employer with a calculated EMR of 1.00 is determined to have "average" loss experience for the governing class of their workers' compensation policy. If the factor is greater than 1.00, the employer's claim performance, in terms of frequency and/or severity, is considered worse than average. Conversely, if the calculated EMR is less than 1.00, the employer's claims performance is considered to be better than the average governing class. EMR's are also trailing indicators. They measure the previous three policy years of claim costs, excluding the most recently expired policy year. Companies may have enacted many positive changes since those dates to help improve safety and claims management systems.

Good (safe) contractors can see their EMR increase for numerous reasons unrelated to safety. These include:

  • a new rate formula in California

  • fewer dollars in the workers' compensation system

  • payrolls down due to economy and

  • workers compensation claims that are included in EMR that were unavoidable and may not reflect a "lack of safety"

Most disturbing--and this article's main theme--workers' compensation claims are being included in the EMR calculation even though the injury was brought about by factors beyond the control of the employer. As agencies, owners, general contractors and construction managers strive to evaluate contractor safety performance, using the right measurement is more important than ever.

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