Lower Workers Compensation Premiums With a Drug-Free Workplace

Lowering Business Insurance Costs With a Drug-Free Workplace

Pile of pills and capsules in assorted colors

Many employers can save money on workers compensation premiums by maintaining a drug-free workplace. Some employers may be eligible for a premium reduction through a state program. Others can save money by preventing accidents caused by impaired workers.

For employers, substance abuse in the workplace is a significant problem. It can increase absenteeism, lower productivity, and reduce employee morale. It can also contribute to workplace accidents. Workers impaired by substance abuse may injure themselves, other workers, and members of the public.

Varies by Industry

The Substance Abuse and Mental Health Services Administration (SAMSHA) is a federal agency that works to reduce the impact of substance abuse in the United States. It is part of the Department of Health and Human Services. SAMSHA issued a report on workplace substance abuse in 2015. The report showed that 9.5% of full-time workers were either dependent upon or had abused alcohol or illicit drugs within the previous year. The report was based on data the agency had collected between 2008 and 2012.

The SAMSHA report also showed that substance abuse varies by industry. Mining and construction workers had the highest rates of alcohol abuse. Illicit drug use, on the other hand, was most prevalent among workers in the food services and accommodations industries.

Federal and State Laws

The Drug-free Workplace Act of 1988 requires all recipients of federal grants to maintain a drug-free workplace. The law also applies to some federal contractors. Information about the Act and its requirements is available from the Department of Labor's website.

Some states and municipalities have passed laws similar to the federal Drug-free Workplace Act. These laws apply to employers that have been awarded grants or contracts from the state or city. If an employer fails to maintain a drug-free workplace as required by federal, state or municipal law, the employer's contract or grant may be terminated.

 State Discounts

As of 2016, 13 states had laws that provide a discount on laws that provide a discount on workers compensation insurance to employers that implement a drug-free workplace.

  • Alabama- §25-5-330 (1995) Provides a 5 percent discount to employers that establish a drug-free workplace in compliance with the act.
  • Arkansas- §11-14-101 (1999) Employers with drug-free workplace programs may qualify for a 5% discount on workers' compensation premiums.
  • Florida- §440.102 (1996) Provides a 5 percent reduction in premiums to employers that implement and maintain a certified drug-free workplace program in accordance with the standards set forth in the Act.
  • Georgia- §33-9-40.2 & §34-9-410 Provides a 7.5 percent discount on workers' compensation premiums to employers that have implemented a drug-free workplace program that is certified by the state Board of Workers' Compensation.
  • Hawaii- §431:14-103 (1997) Provides a discount of at least 5 percent on premiums to employers that maintain an effective safety and health program.
  • Idaho- SB 1119 (2003) Provides that public employers who conduct drug and alcohol testing of all current and prospective employees shall qualify for and may be granted an employer Workers' Compensation premium reduction.
  • Kentucky 803 KAR 25.280 (2008) Employers that implement a drug-free workplace program may be eligible for a 5% reduction of their insurance premium.
  • Mississippi- §71-3-201 (1997) Provides for a 5 percent reduction in workers' compensation premiums to employers that establish a drug-free workplace program.
  • Ohio- O.A.C. 4123-17-58 Ohio Bureau of Workers' Compensation has issued a rule that provides a five-year phased in workers' compensation premium reduction that can rise as high as twenty percent.
  • New York Part 60 of Sect. 134 of WC (2007) Workplace Safety and Loss Prevention Incentive Program. Separate credits are provided for safety, return or work, and drug and alcohol prevention. Maximum credits of 10% the first year and 6% thereafter.
  • South Carolina- §38-73-500 (1997) Provides 5 percent discount on workers' compensation premiums to employers that voluntarily establish a drug-free workplace program.
  • Tennessee- §50-9-101 (1997) Provides 5 percent discount on premiums to employers who establish a drug-free workplace program.
  • Virginia- §65.2-813.2 (1997) Provides a 5 percent premium discount for employers who institute a drug-free workplace program.

Drugs and Benefits

Suppose an employee is injured on the job while intoxicated by drugs or alcohol. Can the employee collect workers compensation benefits? The answer depends on the state. Some states bar workers from collecting workers compensation benefits for injuries sustained while intoxicated. Other states provide a reduced amount of benefits.

Note that benefits restrictions have no effect on your vicarious liability to third parties injured by your intoxicated workers. Lawsuits against your firm that arise out of such injuries should be covered by your general liability insurance.

Numerous sources of information are available to employers who wish to create a drug-free workplace policy. Examples are SAMSHA, the Department of Labor, and your state workers compensation authority. You can also seek assistance from your workers' compensation insurer. Many insurers offer risk control services that include drugs and alcohol management.

Article edited by Marianne Bonner