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Rising workers' compensation costs could hamper LA businesses

While a number of our posts have focused on workers’ compensation fraud, there is a growing problem  among the manufacturing industry with regard to workers’ compensation costs. Essentially, the steady increase in costs has caused a number of smaller companies to relocate to other regions of the country.

With each company that moves away from Los Angeles, it means fewer jobs for the regional economy; which in turn, means fewer tax revenue and possibly fewer services that the city can provide. A recent Bloomberg News report highlighted a company that previously resided in El Segundo was on pace to save more than $600,000 by relocating to central Indiana. The savings of health care costs, workers’ compensation insurance and property costs all played into the company’s decision to move. 

The story is important for a number of reasons. One, the escalating costs may tempt employers to go without workers’ comp insurance as a way to minimize costs. Not only could this lead to sanctions under California law, it could expose the business to costly lawsuits based on an employee’s injury claims.

Indeed, rising energy and health care costs may make having a manufacturing company in Los Angeles difficult, but it appears that the mayor’s office has made a commitment to keep businesses in the city by phasing out its tax on companies’ gross receipts. The Los Angeles 2020 Commission reportedly understands the financial challenges that businesses are enduring, and pledges to make changes in that regard.

In the meantime, businesses with questions about workers’ compensation are advised to speak with a qualified attorney.

Source: “Los Angeles faces decline as employers flee city’s costs,” James Nash, April 16, 2014

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