General Practice, Solo & Small Firm DivisionMagazine


Volume 15, Number 3
July/August 1999

Workers’ Compensation A Law Practice Management Perspective

BY MICHAEL P. STACY

There is a school of thought that workers’ compensation is a specialty where the fees do not justify the learning curve. To a certain extent this is true, but the use of technology and appropriate focus of your time can make it a lucrative practice.

Moreover, for the general practitioner, especially one looking to build a client base, it is an excellent additional service you can provide your clients that few other lawyers can offer.

The Learning Curve

My first job out of law school was with a firm concentrating exclusively in workers’ compensation and safe place to work litigation. My goal was to be capable of handling both personal injury and workers’ compensation cases. Fresh out of law school, I looked for some sort of printed resource, a treatise or something that would help me learn the law. But there was nothing to help figure out the basics of handling a typical, bread-and-butter case.

I tried reading the statute. I did this for about 30 seconds until realizing that the sentence ran on for three consecutive pages. The law was not written to be user friendly. In speaking with more experienced workers’ compensation lawyers, I was surprised to learn that few of them ever used the statute and some had never actually read it at all. Uniformly, every practitioner told me that the only way to learn workers’ compensation is to sit and observe the hearings. Now, several years later, I am convinced they were right.

My mentor was a licensed compensation representative, a nonlawyer who was certified by the State of New York to appear at hearings and represent clients in the full capacity of a lawyer. I have since started my own solo, general practice, incorporating workers’ compensation, while he went on to establish his own "boutique" firm, concentrating exclusively in workers’ compensation, with support staff and other licensed representatives. We both find workers’ compensation practice to be profitable.

One of the things that makes workers’ compensation a good fit for solos, especially for those just starting out, is that there is a lot of work available. It is not necessarily well-paid work, but it is work. For those who specialize in it exclusively, it is strictly a volume business. You are paid a percentage of the benefits you get "moving." For example, if back benefits are owed, you normally get paid based on a percentage of the back award. Since you are often only talking about a few hundred dollars, you either need to do a large volume of these cases or need to have low overhead expenses.

Building a Clientele

One popular way of building a workers’ compensation clientele is to contact unions and trade groups in the hazardous occupations. Obviously, the building and construction trades are the most popular focus since those workers are always getting hurt on the job. Some law firms, including my prior firm, locate their offices in the same building as union halls, and "walk ins" are a common source of business. It works out well, if you do not mind guys coming in wearing coveralls saturated in mud, cement, dust, and other building materials. You may not want to decorate your office with fine imported rugs and furniture. No kidding, if you are going to have these types of clients, be prepared to clean up after those who walk in off of a job site.

Another method is to look for referral work. In New York, the workers’ compensation board maintains its own list of lawyers actively seeking compensation cases. The bar association is another source. So are other lawyers. Since few lawyers actually possess the expertise to do these cases or avoid them because of the lack of profit, many lawyers are happy to refer the work to outside counsel. Some law firms advertise in local legal newspapers that they accept workers’ compensation referrals.

In my own general practice, I have found that workers’ compensation is a great way to "cross-market" other practice areas. While the fees you generate might not normally justify taking the work, the spinoff work it creates might otherwise make it worthwhile. Although it is unfortunate, the circumstances that bring a client to you for a work injury will also create other legal problems for a client rather quickly. For example, it does not take long for the bills to pile up, forcing many clients into bankruptcy. Likewise, the financial pressures that lead to bankruptcy often lead to marital problems and divorce lawyers. If this is a long-term disability, the client may concurrently qualify for Social Security. If the injury was caused by the negligence of a third party, there are possible personal injury claims. A personal injury award can often lead to a real estate purchase and the need for a real estate closing. Because you are dealing with a disabled worker, some lawyers find spinoff work in employment discrimination or ADA claims. Even if you do not practice in these areas, you’ll have a source of referrals to other lawyers who may in turn refer work back to you.

This approach differs drastically from the "boutique" firms that handle nothing else. For those types of firms, the impact of nonlawyers and competition from licensed representatives is perhaps a concern, since the name of the game is volume.

Competition from and Use of Nonlawyers

From my own observation, I have seen no difference between the quality of representation by a lawyer and a licensed representative. The only difference is that a lawyer, perhaps because of prior legal training, is in a better position to learn the law more quickly, although as I mentioned, most of the learning comes from simply watching the hearings and through osmosis.

I still maintain a good professional relationship with the licensed representative who trained me, and I rely on his advice in this area more than I do on the advice of members of the bar. Moreover, since his license does not permit legal services in other areas, he is a source of referrals. In fact, one argument for the solo to hire a licensed representative or incorporate paralegals into the practice is that it encourages the cross-marketing of services while avoiding the time spent actually working the cases. The pitfall of this approach is the extra time spent fulfilling the ethical obligation of the lawyer to supervise the representative, not to mention the additional malpractice exposure. If the licensed representative is working independently, you do not have those problems.

In either instance, screening is essential to maintaining a healthy workers’ compensation practice. The system was designed so that injured workers would not need a lawyer; it is a no-fault system that is supposed to be driven by doctors’ reports, not litigation. While it has become more litigious over the years, the vast majority of compensation cases do not require a lawyer at all. If there is no back award and no possibility of future awards, there is nothing for you to do, even if the client just wants a consultation. In New York, it is a misdemeanor for a lawyer to be paid for any workers’ compensation work other than out of the benefits that are moving in the case.

Using Technology

The key to profits is using technology to streamline your practice. If you are used to billable hours, forget about it. Since the fees are low, every minute you unnecessarily spend, or worse yet every minute you hire someone else to work on a file, dilutes your rate of return.

There are no pleadings in workers’ compensation. It is all forms. In my jurisdiction, the forms are free and you can get them from the compensation board. If you have a scanner and a form-typer program, you can save time on filling in standard information such as your name, and address. Some programs like Hot Docs have forms programs that permit you to scan the form into your computer. After you format the program, it asks you the information in the form of a question at all of the blanks. At the end, the program will tell you if you didn’t fill in any of the blanks.

A laptop is also becoming less of a luxury in this area and more of a necessity. Again, if you are doing volume work, you will hopefully have multiple hearings on the same date. The time you spend between hearings is just dead time. You are not billing it, you are just sitting, waiting for your next case. A laptop lets you do something productive while you wait.

In New York, we are lucky that our workers’ compensation board has recently electronically scanned all case files and provides computer access to all files in which you are retained. It is an "Intranet" system. Each practitioner is assigned a "representative number" and chooses a password to access the file so that the privacy of the claimant is protected. The system is not accessible by outside computers, but someday we may be able to access and download the entire file to our own computers or even file papers through a modem.

That would be significant. Often, a client comes to you a week before a hearing when the case may be several years old. You scramble to find out what has happened since the date of the accident, trying to see if there is any basis for a back award argument. Getting a copy of the entire file all at once to review at your leisure would be a huge advantage in leveling the playing field against the insurance carrier’s lawyers, who usually have every scrap of paper related to the case from day one in their files.

One of the most time-consuming parts of handling the case is the filing that goes with handling a volume business. It is the biggest justification for hiring support staff. Doctor’s reports and hearing notices will be strewn about your office unless you have someone to put them into the client’s file for you. The most important documents to keep track of are recent reports from the claimant’s treating doctor.

If you can’t produce a doctor’s report giving a current opinion on disability, you have no proof of entitlement to ongoing benefits. Even if the client has seen the doctor recently, you cannot rely on the doctor to send the report in to the compensation board in time for the hearing. If the reports are not there, you are probably looking at an adjournment, with the proviso that all awards are held in abeyance, meaning all payments are suspended pending proof of current disability. Even if the case is adjourned without prejudice until there is current medical information, all adjournments hurt. Though these are not big dollars for your client, they are important dollars if she has no other sources of income.

One way to combat this problem is to use a scanner to store the documents electronically. This is not that common at the moment, but since our workers’ compensation board has started filing documents electronically, it is clearly the wave of the future. My prior associate uses a flat bed scanner, which resembles a copier. Most of these models do not have an auto-feed, so each document must be placed by hand in the scanner. I prefer the auto-feed models; they are portable, no bigger than the size of an egg carton, the sheets get fed into the scanner, and the quality of the scans is the same. For a small workspace, you cannot beat it. The only big difference is that a flatbed can handle bound materials while an auto-feed cannot, but in workers’ compensation, you rarely run into the need to scan bound materials.

Initially, I bought a scanner with the idea of being mobile. By hooking it up to my laptop and taking it to the board, I was going to be able to scan the important board file documents into my computer, thus avoiding photocopying charges and extra piles of paper. But the compensation board beat me to it when they scanned everything electronically into their own computers. If your jurisdiction is not yet electronic, a scanner is worth your consideration.; our compensation board charges $.25 per page for copying, and the expense can add up for a volume business.

In order to store your documents electronically, you must have a lot of memory on your computer. If all of your documents are centrally stored, you can network other computers to the main computer, thereby giving your support staff central access to the same files. An inexpensive alternative is to purchase a "zip" drive—an external drive that is like a floppy disc on steroids. With this setup, you can easily store all of your files electronically. Of course, you will still have the logistical need for a hard copy of the documents when you are at a hearing. Electronic storage of documents will have an impact on workers’ compensation practice in the future, because it will cut the overhead related to the filing and organizing required of any volume business.

This is the one area in which workers’ compensation boutique firms are made or broken. After all, the entire practice is based on the ability to keep the cases "moving." Cases are kept "moving" by constant updating of files and follow-up phone calls to your clients to see if they are still being actively treated by their doctors or whether they have returned to work. This is time-consuming stuff but it must be done.

To keep track of it all, nothing beats a good case management software program. A workers’ compensation practice requires a good "tickler" system to remind you to follow up on the movement of the files. It also requires storage of large amounts of personal data, especially phone numbers. If you do a lot of this work, you will engage in endless hours of phone tag with insurance people, their lawyers, your clients, and their doctors. You will be surprised at how hard it is to reach a client at home who is supposed to be "totally disabled." Without this software, you’ll either have stacks of files sitting on your desk waiting for return phone calls, or else spend all of your time on your feet walking back and forth from the filing cabinet. A good case management program centrally locates all of that information on your computer. Throw in an electronic scanning/filing system and you have a very potent weapon against the old notions of small margins in workers’ compensation cases.

Support Staff

I currently do not use support staff and hope to stay that way. Instead, I rely heavily on technology. I share office space with my prior employer, paying rent for my old office, and it works out quite well. They were successful enough to refocus their practice on serious personal injury cases while I spun off my own general practice. My rent includes the use of the reception area, and their support staff gives my practice a nice professional appearance.

My prior associate, the licensed representative with his boutique practice, has anywhere from two to three secretaries. He has to because of the volume of work he handles. He tells me that a good source for support staff is the insurance industry. There is a lot of job dissatisfaction in that industry, so it is fairly easy to find good people with a background in workers’ compensation. It may be difficult to match the benefits that the insurance industry provides, but there are good people out there. The one problem he has is actually keeping support staff. If you are doing a volume business, support staff will have to keep hustling every day. That can lead to burnout, and the additional burden of training a new person on your system every couple of months. That can be time-consuming, particularly if you have a streamlined system of opening and maintaining files. Once they are fully trained, they leave. (Coincidentally, this is precisely why I prefer to avoid support staff completely.)

Finally, there is the question of what to do about phones. Cell phones are almost mandatory for the boutique firms. They help you fill the dead time between hearings. However, it is easy to let the phone run your life. If you make a conscientious effort to return phone calls at the end of the day, you should be able to get by with just a standard voicemail setup.

Pitfalls of the Practice

You would think that being administrative law, there is relatively low malpractice exposure in workers’ compensation. But like most malpractice problems, danger lurks where you least expect it. If a client comes to you with a workers’ compensation case, and the accident arose out of the negligence of a third party or a defective product, malpractice claims may arise for failure to inform the client of the applicable statute of limitations.

Here is where the general practitioner is in much better shape than the boutique practice. If you are a general practitioner, you are looking for that spinoff work, so you are less likely to miss a statute. With its tunnel vision, the boutique firm is much more likely to miss these issues. This is particularly true for the licensed representatives who are barred by law from practicing in other areas. They may be less inclined to know where to look for potential malpractice issues; or worse yet, are under the mistaken belief that their "limited" license insulates them from malpractice claims. While they are not licensed lawyers, they are arguably held to the same standard as a lawyer for malpractice purposes.

Aside from malpractice, you’ll face the simple problem of keeping your clients happy. Your clients are often experiencing a deadly combination of being broke and in physical or psychological pain. You can expect a lot of calls because the insurance company’s check was a day late. Your client is home all day, maybe for the first time ever, and has nothing to do except watch the mailbox to see if the check comes today. Most of the time, they have very legitimate complaints.

Unfortunately, you will be the messenger whom the client often wants to shoot. A disgruntled workers’ compensation client’s anger level is often similar to what you might find in an angry family law client. Workers’ compensation clients take disputes about their benefits very personally, often blaming the employer and not the compensation carrier. This is particularly true where the client has been a longtime and devoted employee or where the employer was grossly negligent. The problem is that disputes about benefits are almost exclusively under the control of the compensation carrier, not the employer.

You will undoubtedly have to do some handholding. Just how much will depend on how effective you are in educating your client about the system so she understands why things are happening to her even if they seem unfair. Some practitioners fall miserably short in this area. Failure to return phone calls or tell the client about the purpose of a particular hearing is the number one complaint I get from clients about their former lawyers. However, you must always be suspicious of clients who are on their second or third lawyer—a clear sign that no degree of handholding will ever satisfy that client. This part of the practice should not be taken lightly, even though it is easy to overlook when coping with the demands of a volume business.

Pluses of the Practice

You can practice workers’ compensation virtually on a shoestring, which makes it particularly attractive to a solo just starting out, when operating capital and cash flow are scarce. Few, if any, disbursements must be advanced. Medical records can be obtained from the board file. If there is expert testimony, it is paid for by the compensation carrier. And there are no filing fees for initiating a claim or filing an appeal. Your only real expenditures are postage and phone calls.

A workers’ compensation practice gives you the chance to do litigation without the maddening rules of evidence. You will never see a hearsay objection. If you like litigation, you will routinely find yourself cross-examining insurance company doctors who are alleging that your client is not hurt or is malingering. Often, these doctors are much less than credible and make easy targets on cross-examination. Since the traditional rules of evidence do not apply, you may have a lot of latitude in how you question a witness.

The best thing about practicing in workers’ compensation is that to the injured worker, who often has no income at all, you are a lifesaver. Your clients will remember you and will tell their friends about you. And the fact that they were injured on the job tells you something about these clients. They are mostly hard workers who know other hard workers with decent incomes. They are the type of people who will make good clients in the future; the type of people you want calling you again and again. And that makes it all worthwhile, whether you stick to a boutique practice of exclusive workers’ compensation or offer a "full service" practice incorporating workers’ compensation as just another option available to your existing clientele.

Michael P. Stacy is a solo practitioner in Rochester, New York. His general practice concentrates on litigation, workers’ compensation, and Social Security. He is of counsel to the Law Firm of Moran & Kufta, P.C. He is currently a Judge Advocate General (JAG) in the New York State Army National Guard.

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