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By CYRIL TUOHY, managing editor of Risk & InsuranceŽ

Ernie Machado, the risk manager of Foster Farms, went through an epiphany of sorts many years ago. That's when he decided he wanted to be known less for his aggressive pursuit of fraudulent workers' compensation claims and more for promoting safety for the workers at the Livingston, Calif.-based poultry processor.

But Machado didn't want to look back on his career for being known as "Mr. Tough Guy."

So, when that newspaper article was published, it was the beginning of Machado's transformation, which led years later to the creation of a process known as Post-Offer of Employment Testing (POET). Machado briefed other workers' comp professionals on the POET program during a session Thursday in Las Vegas at the 19th Annual National Workers' Compensation and Disability ConferenceŽ & Expo.

The program, which evaluates a worker's ability to perform the physical demands required of the job, has cut claims costs, reduced musculoskeletal injuries and shone the spotlight on the importance of ergonomics at the company, Machado said.

Foster Farms employs 13,500 workers and hires about 3,350 workers every year to process 1.3 million birds every day. Workers speak a variety of languages--Spanish, Portuguese, Vietnamese and Hmong, among them.

In addition to the cultural issues involved with the workforce, management has to deal with labor unions and extensive oversight from state and federal regulators.

In the past 27 months, Machado said, the company's claims severity has dropped by more than half in POET-tested musculoskeletal claims, despite a 5 percent rise in California's claims incidence in 2009.

In addition, none of the company's POET-tested indemnity claims have required Foster to incur any legal defense costs, even as 43.8 percent of indemnity claims in California require some kind of legal representation on behalf of the employer, Machado said.

"Post-Offer Employment Testing has had a very positive impact from a dollar standpoint and from an employee standpoint," said Connie Miller, vice president of BTE Technologies Inc., the disability equipment and solutions provider that helped implement the program for Foster Farms.

Before the POET program, Foster Farms was paying $2,928 per closed claim. The company now pays $1,426 per closed claim, a reduction of 51 percent. In addition, Foster Farms was paying $137,655 in musculoskeletal disability claims before implementation of the program. Foster Farms now pays $35, 665 in musculoskeletal disability claims, a drop of 74 percent.

According to Machado, the company has saved a total of $424,300 because of less turnover, fewer injuries, a higher number of closed workers' comp claims and fewer legal fees.

At the start, no one was sure the program would work, and it was important to build support for the POET program among senior managers, human resources, information technology and labor union leaders, Machado and Miller said.

"It's a big program if you're hiring 3,000 people a year," Machado said. "You have got to get buy-in."

The POET process at Foster Farms is actually "owned by human resources," not risk management, Machado also said, and it was important to solicited union support early on in the implementation of the program.

November 12, 2010

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