By: Wael Khalil, CPS, SSM, Vice-President/Safety Director Lovell Safety Management Co., LLC
For nearly three decades, New York State Industrial Code Rule 59 has served an important role in improving workplace safety and reducing workers’ compensation losses. Created in the mid-1990s as part of broader workers’ compensation reforms, the rule requires employers with poor loss experience to implement formal safety and loss prevention programs under the guidance of a certified safety consultant.
The concept behind the rule remains sound. Employers experiencing significant workers’ compensation losses should receive professional assistance to identify hazards, improve management practices, and reduce future injuries. In many cases, Code Rule 59 has helped employers strengthen their safety programs and improve their claims performance.
The challenge today is not the purpose of Rule 59. The challenge is that the rule’s triggering criteria have not kept pace with economic realities.
Under the current framework, employers become subject to Code Rule 59 when their payroll exceeds $800,000 and their workers’ compensation Experience Modification Rate (EMR) exceeds 1.20. When these thresholds were established in 1996, an $800,000 payroll represented a substantially larger employer than it does today. After decades of inflation, wage growth, and rising labor costs, many small businesses now exceed that payroll threshold despite operating with only a handful of employees.
As a result, employers that would have been considered small businesses when Code Rule 59 was enacted are increasingly being drawn into a regulatory process originally designed for larger employers with greater administrative resources.
At the same time, the EMR itself is a backward-looking measurement. Experience modifications are based largely on historical claims data and often do not reflect an employer’s current safety performance. An employer may have corrected deficiencies, replaced management, implemented new safety procedures, or significantly reduced claims, yet still trigger Code Rule 59 based on losses that occurred years earlier.
Recent changes in experience rating methodology have further amplified this issue. Smaller employers have fewer payroll dollars and claim exposures over which losses can be spread. Consequently, a single lost-time claim or moderate injury can have a significant impact on an employer’s modification factor. Larger employers generally experience less volatility because individual claims are diluted across a much larger payroll base.
In practice, this means that many small employers can find themselves subject to Code Rule 59 despite maintaining reasonable safety programs and having no ongoing pattern of poor performance.
Many of these cases stem from isolated incidents rather than systemic safety failures. A single claim involving an employee injured in a motor vehicle accident, a travel-related incident, or a public premises accident may significantly impact an employer’s experience modification rating. While such claims are compensable under workers’ compensation law, they do not necessarily indicate deficiencies in employee training, hazard control, supervision, or management commitment to safety.
Nevertheless, once Code Rule 59 is triggered, employers face substantial obligations. They must retain certified NYS consultants, participate in facilities/jobsite surveys and meetings, implement corrective action plans, complete documentation requirements, and certify compliance. Failure to comply can result in premium surcharges and the loss of policy discounts, creating additional financial strain for smaller employers.
None of this suggests that Code Rule 59 should be eliminated. Employers with persistently poor safety performance should continue to be identified and required to take corrective action. However, there is a strong case for modernizing the rule so that regulatory resources are focused on employers with current and demonstrable safety deficiencies rather than employers whose loss experience may be attributable to historical events or isolated claims.
Several practical reforms could accomplish this goal. The payroll threshold could be indexed to inflation or adjusted to reflect current wage levels. A tiered threshold could recognize the differences between small, medium, and large employers. Greater consideration could be given to recent safety performance, documented corrective actions, participation in safety groups, and ongoing loss-control efforts. The Department of Labor could also be provided with greater flexibility to distinguish between employers experiencing systemic safety problems and those impacted by isolated or non-preventable events.
Such changes would preserve the original intent of NYS Code Rule 59 while improving its fairness and effectiveness. Workplace safety would remain the primary objective, but the burden of compliance would be more appropriately aligned with an employer’s current risk profile and operational realities.
After nearly 30 years, Rule 59 remains a valuable tool. Updating it for today’s economy would ensure that it continues to improve workplace safety while avoiding unnecessary burdens on the small businesses that form the backbone of New York State’s economy.
For more information on Code Rule 59 please reach out to a Lovell representative at 1-800-556-8355.