Cal/OSHA Working on Rules to Protect Outdoor Workers from Wildfire Smoke

wildfire

Cal/OSHA is developing regulations that would require employers of outdoor workers to provide respiratory equipment when air quality is significantly affected by wildfires.

Smoke from wildfires can travel hundreds of miles and while an area may not be in danger of the wildfire, the smoke can be thick and dangerous, reaching unhealthy levels. The danger is worst for people with underlying health conditions like heart disease, asthma or other respiratory issues.

Many employers want to hand out respirators to outside workers, but while there are no regulations or laws in place for how to protect your workers during smoky conditions, there are regulations governing the use of ventilators – and they are very specific.

The California Code or Regulations, Title 8, Section 5144 states requires that employers that distribute respirators to their employees must take certain steps, such as implementing a written respiratory protection program, requiring seal-testing before every use and conducting medical evaluations of all workers who will wear a respirator.

Cal/OSHA decided to start work on the new regulations after worker groups filed a petition asking the agency to step in and protect people working outside from unsafe air quality caused by wildfires.

What to expect

The regs are still in draft form and are unlikely to be completed this summer for the upcoming fire season. But here is what you can expect:

The draft of the regulations would require that employers take action when the Air Quality Index (AQI) for particulate matter 2.5 is more than 150, which is considered in the “unhealthy” range.

The protections would also be triggered when a government agency issues a wildfire smoke advisory or there when there is a “realistic possibility” that workers would be exposed to wildfire smoke.

All California employers with “a worker who is outdoors for more than an hour cumulative over the course of their shift” would be required to comply with these regulations:

  • Checking AQI forecasts when employees may reasonably be expected to be exposed to an AQI or more than 150.
  • Establishing a system of communication with employees to inform them about the AQI, changes in conditions that can lead to bad air quality, and protective measures.
  • Training their workers in the steps they would have to take if the AQI breaches 150.
  • First-line protections that employers could implement include:
    • Engineering controls, such as providing enclosed structures or vehicles with effective filtration where employees can continue working.
    • Administrative controls like:
      • Relocating workers,
      • Changing work schedules,
      • Reducing work intensity, or
      • Giving them additional rest periods.
  • If none of the above are feasible, the rule provides for a voluntary respirator (without fit-testing and medical examinations) use when the AQI is between 150 and 300.
  • If the AQI is above 300, fit-testing and a medical examination prior to use would be mandatory.

The new regulations by Cal/OSHA are pending with the Cal/OSHA Standards Board, which is expected to vote on them in July, but it’s unclear how quickly they would be implemented.

For now, if you do have outside employees who are confronted with working in smoky conditions, you should start stockpiling a two-week supply of N95 masks for all of your workers.

Conduct Diversity Training to Head Off Potential Lawsuits

Happy diverse people together

After R&B star SZA said she had security called on her while shopping at a Zefora store in California, the chain closed all of its U.S. stores for an hour to conduct “inclusion workshops” for its 16,000 employees.

Zefora understood the swift backlash that can hit a company that has acted inappropriately towards a customer, particularly if they are a minority. Unfortunately, Zefora is not the only company that has made the spotlight in recent years thanks to rogue employees that cross the line and harass or discriminate against a customer, co-worker, vendor or partner.

And in the age of people video-recording these encounters, a rogue employee could sink your company if the target decides to take legal action.

The second threat is the potential backlash of customers shunning your company once the word spreads on social media. This was the case with two Oregonians who ended up closing their bakery after the public backlash that followed their decision to not bake a wedding cake for a homosexual couple.

The best way for an organization to set a tone of tolerance is through diversity or inclusion training to guide them in their day-to-day interactions with co-workers, customers, partners, vendors and others. While this type of training is not mandated by any state or federal agency, it is recommended whether or not you have a diverse workforce or client base.

Implementing a diversity training program is also an important step in helping to reduce the risk of workplace discrimination and harassment claims. In settling discrimination cases, the Equal Employment Opportunity Commission often requires companies to educate employees on the importance of diversity in hiring and promotion, and how to avoid stereotypes.

A proactive employer that wants to avoid problems from the get-go would take that step without being required to.

More important than ever

Our country is becoming more diverse with each passing year. It’s not only different races and religions, but also sexual orientation and alternative lifestyles.

The norms that dictated behavior a half-century ago are transforming. To minimize the risk that employees, supervisors or managers step out of line in this new era, employers must develop an awareness of diversity within their business through appropriate training.

Diversity in the workplace is apparent in everything from our names to the types of food we eat, and long-taboo subjects are now discussed freely. People with disabilities often work alongside openly gay co-workers, and a variety of languages are spoken by employees and customers alike.

Elements of a strong training program

For diversity training to succeed, managers must find ways to integrate the training into daily tasks. It must go beyond a once-a-year training session. Here are some ideas:

Draw the line – Make it clear that intolerance is not acceptable, and that those demonstrating prejudice have no place in your organization.

Get management buy-in – Ingrain in your managers and supervisors the importance of diversity to both boost worker satisfaction and as a risk management tool to avoid lawsuits. Managers understand the personnel dynamics among the staff they manage, as well as interactions with customers.

Treat everyone with respect – Employees should be told that if they prejudge a customer or co-worker and treat them as a lesser individual, they can face be reprimanded and, if the offense is serious enough, fired.

System for handling complaints – Create procedures that all managers must follow if they receive a complaint about harassment or discriminatory behavior, or if an employee witnesses another employee treating a co-worker, customer, vendor or another person in a demeaning way.

Hold a seminar for all employees – Review what is acceptable and not acceptable, and cover all of the above. Try to focus on positives and give employees the opportunity to ask questions.

If Your Firm Is Sued for Discrimination, Act Fast to Check EEOC Complaint

discrimination-EEOC

Employers that are hit with a discrimination complaint must act fast to compare the allegations in the lawsuit to the earlier complaint the worker filed to the Equal Employment Opportunity Commission.

If the employer can find that the allegations in the complaint filed with the EEOC do not match those in the subsequent lawsuit filed by the worker, it can quickly move to have the case dismissed, but if it waits too long, it loses the chance. That’s according to a U.S. Supreme Court ruling in June 2019.

Under procedural rules, employees filing suit under Title VII Title VII of the Civil Rights Act of 1964 must first file a complaint with the EEOC.

The decision that paved the way for this new procedural rule was a unanimous U.S. Supreme Court ruling in the case of Fort Bend County vs. Lois M. Davis.

The ruling means that employers that are sued for discrimination under Title VII have a limited amount of time to challenge the lawsuit if the allegations differ in any way from the original EEOC complaint. If they act fast, then they stand a good chance of convincing the court to throw out the complaint.

However, if an employer dawdles and waits too long to challenge the case if they find a discrepancy, they may lose the opportunity.

If the employer in this case had acted quickly, it would never have gone to the Supreme Court, legal experts say.

The case details

An IT worker in Texas had reported that her director was sexually harassing her, and after an investigation he was fired. But after that, her supervisors began retaliating by cutting back on her work responsibilities. She filed a charge with the EEOC and, while the charge was pending, she was told to report to work on a Sunday. She refused and went to church instead.

She tried to supplement her allegations and wrote the word “religion” by hand on her EEOC intake questionnaire, but she didn’t change her formal charge document by adding that word.

The case went to trial and was appealed, and then it was sent back to the local U.S. District Court to decide the remaining charge of religious discrimination. The case had been in the courts for three years at that point.

That’s when her former employer asserted that the District Court didn’t have jurisdiction of the case because she had failed to state the claim in her EEOC charge papers. That issue was taken all the way to the Supreme court, which wrote in its decision that an objection to a charge because of a discrepancy may be forfeited “if the party asserting the rule waited too long to raise the point.”

The takeaway

If your organization is the target of a discrimination lawsuit, make sure to check the original EEOC charge for any discrepancies. If there are any, you can consult with your lawyers about filing a motion to have the complaint dismissed.

Why Your Business May Need Pollution Insurance

pollution

Many businesses that produce some type of pollutant throughout the course of daily business operations don’t know they are doing so.

Others know they are producing pollutants and have processes and safeguards in place to reduce their release into the environment. A business can be held liable for some very costly damages when these byproducts pollute another property or harm another individual.

Pollution liability clauses were once part of general liability policies, but the extensive asbestos problems in the 1970s spurred most insurers to remove pollution protection from their general liability policies.

Today, pollution liability coverage is obtained through a separate pollution insurance policy. Pollution insurance policies are written for businesses of all sizes, shapes, and forms – from pig farms and printers to apartment complexes, salons, and dry-cleaning businesses.

Why pollution insurance?

Many businesses run the risk of creating pollution during normal daily operations.

There’s also a risk from any existing pollution already on a business’s site of operation. In either case, a business could be held liable if its pollution ends up on a third party’s property, causes damage to the property or harms an individual.

Without insurance, the business would be on the hook for paying for those damages out of pocket.

What do policies cover?

The basic premise of a pollution policy is that an insured party gets a claim related to damages caused by pollution it caused.

This insurance will protect your financial interests in the event a clean-up becomes necessary. Buying pollution liability insurance will cover your interests against lawsuits where a third party could be injured by a toxic substance produced as a result of your work.

Like most types of insurance, the specifics of a pollution policy can vary somewhat from insurer to insurer.

Depending on the insurer, a pollution policy will typically cover

  • Damage to properties and individuals
  • The cost of cleaning up pollution on a third party’s property
  • Pollution incidents that occurred after the policy was
  • Investigative, legal, and court costs should the claim enter the legal system.

Who needs coverage?

Businesses that have risks related to the handling of pollutants and hazardous materials, design professionals who work with projects where there are environmental issues, as well as those who own and occupy premises that have environmental issues, need pollution liability insurance.

This includes:

  • Property owners and tenants whose buildings and land have a history of having pollutants on the property or premises. This would include a building on land that had an underground storage tank that leaked fuel oil before it was removed, contaminating the soil.
  • Contractors such as roofers who handle pollutants like tar as a part of their operations need contractors pollution liability insurance to cover damage resulting from a pollution incident.
  • Architects and engineers who are involved in projects that have issues related to pollutants need to add pollution liability to their errors and omissions insurance policy to manage the risk of making a mistake regarding the presence or absence of pollution issues as they plan and execute a project.

The takeaway

Don’t overlook pollution insurance as an important element of risk management. Should any questions or concerns about pollution insurance and insurance requirements arise, call us.

How to Prepare for Possible PG&E Power Shutdowns

Business Interruption power outage

PG&E has warned California residents and businesses that it may shut down the power grid for as long as five days for large portions of the state when there are high-wind conditions during the dry fire season.

That’s because PG&E’s infrastructure was found to be the cause of several recent California wildfires.

PG&E has sent letters to residents and business in the Central Valley, Bay Area, Sacramento area, Foothills, Northern counties and beyond informing them that “if extreme fire danger conditions threaten a portion of the electric system serving your community, it will be necessary for us to turn off electricity in the interest of public safety.”

With the specter of multiple-day power outages, all businesses need to be prepared for keeping their operations going and preventing losses that may not be covered by insurance. For almost any business today, a loss of power for an extended period of time could destroy its ability to conduct operations.

Just think how difficult it would be if you lost access to your computers, which are the nervous system of any business today. If you have no power, your operations could be shuttered for all intents and purposes.

There a number of steps you can take to make sure your businesses is resilient and can keep functioning during power outages, especially if they last a few days:

Identify business processes that will be significantly affected

Since you have the luxury of knowing in advance that there could be a long-lasting power outage, you can take steps now to identify business processes that will be greatly inconvenienced by the power outage. These processes will differ from business to business, but once you put them all down on paper, it will be easier for you to make a plan to keep those functions going. 

Create a continuity plan

Once you’ve identified those processes, you should brainstorm on how you can keep them going without your typically reliable power supply.

In order to get back to normal operations swiftly, employees should know how to respond to the power outage.

Create a step-by-step list of things, with proper designation to employees in the event of an outage. Set up emergency numbers in sight for employees to call, including your electricity supplier to get an estimate on when power may be restored.

Set up a back-up power system

To make sure you can continue operating, you should consider investing in a back-up generator. With a generator, you can continue to run critical aspects of a small business during a power outage, but they must be operated safely.

Generators need to be used with adequate ventilation to avoid risk of carbon monoxide poisoning. Never plug generators directly into power outlets, as this can injure utility workers. Never use a generator under wet conditions, and always let them cool off before refueling.

Cloud storage and MiFi

If you have not done so, you should secure a means of paperless document and file storage on the cloud. If there is a power outage and an accompanying surge, you could quickly lose your data. Plan ahead with a cloud server.

You should also prepare a system of personal wireless hotspots, or MiFi devices, so that even when the internet goes down, you can finish important tasks requiring web access, such as setting up an e-mail auto-response.

Make a survival kit

Creating an inventory of supplies for times when the power is out can help protect your employees and operations. Consider having on hand:

  • Cash
  • Medical supplies
  • Extra gas
  • Portable phone batteries for devices
  • Water
  • Canned food
  • Flashlights
  • Rope and other basic items.

The kit should be kept in an easy-to-reach place, and employees should be trained on where it is and how to use it.

And invest in business insurance

The best way to minimize the financial blow is to have the proper insurance in place. A multiple-day power outage could really crimp your income stream and, if you lose money due to your inability to operate, the typical business owner’s policy won’t cover lost revenue.

But, a business interruption policy would. These policies will reimburse you for lost revenues due to a number of events, including “service interruption” due to power outages and other utility services interruptions.

The important caveat is that the interruption was not caused by any of your own faulty equipment or wiring. But if the power company is shutting down power, any losses you incur should be a valid claim.

Business Growth Can Lead to Increased Risk

Business Growth

As the economy continues expanding, companies need to be careful about properly managing their risk, according to a report by Advisen Inc., an insurance research and data firm.

Increased activity typically means proportionally additional losses. For example, more trucks driving more miles will inevitably result in more accidents. However, there are other kinds of risk that can actually increase more than the jump in business activity. We look at three such areas here.

Workplace safety

Workplace injuries can increase as firms hire workers that have less experience. Typically, when employers expand their workforce to meet the growing demand for their products and services, the number of workers’ compensation claims tended to rise disproportionately.

New employees with less experience typically are more likely to sustain a workplace injury. At the same time, experienced staff may look for new job opportunities as compensation begins to take priority over job security.

What you can do: One option is to hire a temporary-staffing firm to fill positions. In these relationships, the client company is not responsible for covering temporary workers.

But you should be aware that OSHA requires what is known as the “dual employer doctrine”, under which temps are considered employees of both the agency and the company using them. And you are also not off the hook for providing them with a safe work environment and safety training specific to their job.

And remember: Check to make sure the temp agency has workers’ comp insurance.

Litigation increases

The risk of being sued rises as employees make mistakes due to pressure on existing staff to increase production, and again when less experienced workers are added to the payroll.

Your workers may be putting in extra hours. But fatigued workers make mistakes. For example, some of the worst industrial disasters have been in part the result of tired workers. Bhopal, Chernobyl and the Exxon Valdez oil spill all involved decisions made late at night or extremely early in the morning by people working long hours.

In addition, inexperienced employees are more like contribute to incidents where outsiders are hurt.

What you can do: Conduct thorough interviews, check references and carry out background investigations when appropriate to avoid hiring people with known problems. You are responsible for the actions of your employees.

Also, make sure that you are not overworking your staff. Provide proper breaks so they can rest, especially in jobs that require attention and strength.

Labor law violations

Trends in litigation and regulation make it more likely that companies will be charged with labor law violations. Employees are braver now about filing complaints, thinking they have a good chance of landing a new job if they are fired.

In addition, the federal and many state governments have cracked down on wage and hour law violations.

As well, some companies may try to add to their worker pool by using more independent contractors, in order to avoid hiring new workers. But the federal government has mounted a serious crackdown on companies that inappropriately classify employees as independent contractors.

What you can do: Pay close attention to your payment systems and audit your systems to make sure you comply with wage and hour laws as well as meal and rest break laws.

The takeaway

The lesson is to increase your vigilance in managing your risk and review your existing risk management strategies for gaps due to business growth.

You can take the following steps to reduce your chances of increased claims:

  • Maintain high standards when hiring new employees, such as conducting thorough interviews, checking references and, where appropriate, investigating backgrounds;
  • Properly train and supervise new employees during a growth phase;
  • Consider your current policies on temporary workers, and weigh the benefits of a flexible workforce against liability issues that temporary workers pose;
  • Revisit your policies about independent contractors, especially in light of the U.S. Department of Labor’s efforts to ferret out misclassification;
  • Pay attention to overtime rules to ensure compliance with the law; and
  • Keep shareholders informed as much as possible about any mergers or acquisitions, including terms of the transaction.

Property Coverage for Businesses with Changing Needs

Some businesses have very stable property insurance needs as the value of their non-building assets, equipment and inventory doesn’t vary much during the year.

Other types of business experience wide variations in the value of their property. Florists tend to carry more stock around Valentine’s Day and Mothers’ Day than they do on most days of the year. Many retailers earn most of their profits during the holiday shopping season, so they keep larger amounts of stock on hand during that period.

Warehouses and manufacturers may have variable amounts of product on their premises with vastly different values. Depending on the flow of orders, the value of their stock may change greatly from month to month, or even more frequently.

A traditional property insurance policy will not meet the needs of businesses like these. To secure enough coverage, they would have to buy an amount large enough to cover those times when values are at their peak. But, for much of the year that would leave them paying for more insurance than they need.

Businesses in this situation may want to consider two coverage options:

Peak season coverage – This coverage is appropriate for firms that can predict those periods when their values will increase. Examples are florists, toy, electronics and clothing retailers during the holiday season, school supply stores in late summer, and costume shops in October.

The coverage form states the location and type of the property, the amount of additional insurance, and the period during which the higher amount applies. For example, it might show that insurance on goods for sale will increase by $100,000 from Oct. 1 to Jan. 1. This gives the business plenty of coverage for the busy time, but saves it from having to pay for all that coverage the rest of the year.

Value-reporting coverage – This coverage is for those firms with asset and inventory values that fluctuate all year long. It requires the business to buy an amount of insurance large enough to take care of the peak periods.

But, the insurance company will charge a lower initial premium than that amount would ordinarily require. The firm then must make periodic reports of its values to the insurer. Depending on the option chosen, this will mean sending reports monthly, quarterly or once per year.

Again, depending on the chosen option, the reports can show values as of the end of each business day, week, month, quarter or year. After the firm has submitted all of its reports for the policy period, the insurance company determines the business’s average values and calculates the final premium.

Firms that choose value-reporting coverage must take care to submit the required reports on time and accurately. The form gives the insurance company the right to reduce claim payments for losses to the property when reports are late.

The insurer can also reduce a loss payment if it finds that the policyholder underreported its values. The limit of insurance does not automatically increase if the reports show values higher than the limit; the firm must request an increase in coverage.

The takeaway

Any company with variable property values would be wise to consider purchasing one of these types of coverage. With some careful planning, a business can limit its insurance costs while still getting the coverage it needs. Call us if you have questions about this type of coverage or to discuss whether it’s appropriate for your operations.

The Risks of Staff Using Personal Devices for Work

Bring your own device

As more employees use their personal mobile devices for work companies are being forced to confront the resulting security implications as well as how the devices are changing behaviors in the workplace.

That’s according to a report by Littler Mendelson, an international law firm specializing in employment and labor law. The report highlights the dangers and benefits of allowing employees to use their personal devices at work.

As more people buy smart phones and tablet computers and bring them to work to use to perform company tasks, businesses have responded by implementing policies that allow employees to use their personal mobile devices to create, store, and transmit work-related data.

This trend is generally referred to as “Bring Your Own Device” or BYOD. Some companies even allow employees to replace their work laptop computer with their own personal PC, which is sometimes referred to as BYOC.

The report highlights two broad categories of risks personal devices in the workplace pose: data risks and behavioral risks.

Data Risks

The report looked at five information security threats posed by BYODs:

Lost or stolen devices – According to study by the Ponemon Institute, 39% of respondents reported that their organizations had sustained a data security breach in 2011 as a result of lost or stolen equipment. Put simply, if your employees use their personal mobile devices for work, your company data is at risk if they lose their gadget.

Malware – In February 2012, Juniper Networks reported a 155% increase from 2010 to 2011 in the volume of malicious software created for mobile devices, and malware targeting the Android platform rose 3,325%.

Friends and family – A report by the U.S. Treasury Department’s Financial Crimes Enforcement Network found that in 27.5% of suspicious activity reports filed by depository institutions between 2003 and 2009, the identity theft victim knew the suspected thief, who was usually a family member, friend, acquaintance, or an employee working in the victim’s home.

Links to the cloud – A number of apps for mobile devices allow users to store their documents and data using cloud-based storage, the report states. Employers must evaluate whether the sites provide sufficient security if the employee plans to store company information using the apps.

Security breach – If you have a breach in security, it could expose your company to government enforcement actions, civil penalties and litigation. There are both federal and state-level statutes and regulations on the books that govern storage of personal information in addition to contractual obligations, which increasingly are including responsibilities to safeguard against data breaches and the consequences for failing to do so.

Behavior issues

There is another downside that has not been much discussed. In the 2011 National Business Ethics Survey, the Ethics Resource Center reported that active social networkers (employees who spend 30% or more of their work day participating on various social network sites) are more likely to believe that certain questionable behaviors are acceptable, such as:

  • “Friending” a client or customer.
  • Blogging or tweeting negatively about your company or colleagues.
  • Keeping a copy of confidential work documents in case they need them in their next jobs.
  • Taking a copy of work software home for use on their personal computers.

In addition:

  • Wage and hour implications can arise from using a mobile device to conduct work while off the clock.
  • Both state and federal laws require employers to reimburse employees for expenses that arise in the course of doing their jobs. Once employees are using their own devices it raises questions of whether the employer is required to reimburse for the cost of the device, the data plan and monthly phone bill.

Littler Mendelson includes in its report a slew of recommendations for employers. When drawing up policies on BYODs, the employer should:

  • Decide which employees should be permitted to participate in a BYOD program. You may want to exclude senior executives whose data is more likely to be relevant in litigation, research and development employees and sales staff, who may store client information on their devices.
  • Create policies that address off-the-clock work.
  • Staff should know that if they BYODs the company must be authorized to access their devices for record retention or litigation holds or investigations.
  • Before allowing employees to use dual-use devices to perform work, companies should obtain their written consent to monitor the device, remotely wipe the device, install security software and copy data if necessary.
  • Follow good security practices.
  • Create policy barring friends or family from using the device.
  • Create a policy limiting the use of cloud-based storage.
  • Address safety issues, including a prohibition using the device while driving.
  • Your policy should include consequences for non-compliance.

Don’t Overlook Equipment Breakdown Insurance

Imagine it’s a typical July day. You own a 30,000-square-foot office building that is 85% occupied. And the air conditioning and ventilation systems stop working. The outside temperature is in the 90’s and the humidity is high. It doesn’t take long before the tenants start to complain.

The contractor you summon determines that an electrical arc fried the circuit board that controls the systems.

The board must be replaced, but it will take up to five business days for it to arrive. In the meantime, the building is unfit for people to work in, and the leases oblige you to credit tenants’ rents for periods when the building in uninhabitable for more than a day. In short, you face thousands of dollars in repairs and much more in lost rents.

While your property insurance policy will cover the resulting property damage from fires or explosions, it will not cover the equipment or lost income from the downtime during repairs.

But equipment breakdown insurance will.

Equipment breakdown insurance

This form of insurance is not a substitute for other property coverage. It will not pay for damage caused by fire, lightning, explosions from sources other than pressure vessels, floods, earthquakes, vandalism, and other causes of loss covered elsewhere.

Equipment breakdown policies are designed to fill in the gaps left by other policies, not to replace them. Also, they do not cover mechanical breakdowns that result from normal wear and tear as a device ages.

A number of events can trigger a claim for equipment, such as:

  • Mechanical breakdown in equipment that generates, transmits or uses energy, including telephone and computer systems.
  • Electrical surges that damage appliances, devices or wiring.
  • Boiler explosions, ruptures or bursts.
  • Events inside steam boilers and pipes or hot water heaters and similar equipment that damages them.

Business owners often overlook equipment breakdown coverage. Bur, virtually all of them have some need for this insurance.

What equipment breakdown insurance covers:

  • The cost of repairing or replacing the equipment.
  • Lost business income from a covered event.
  • Extra expenses you incur due to a covered event.
  • Limited coverage for losses like food spoilage in freezers that break down.

Most businesses rely heavily on machines in their daily operations, from computers to refrigeration equipment and elevators to manufacturing equipment.

For some, the cost of repairs to this equipment and resulting downtime can have a serious impact. Such businesses should seriously consider buying equipment breakdown insurance.
Call us if you would like to discuss this crucial form of coverage.

Workers’ Comp Audit Mistakes: What to Look For

calculate

No company owner wants to undergo a workers’ compensation audit, but they are a fact of life if you run a business and have employees.

Unfortunately, many audits don’t go smoothly and sometimes your insurer may make mistakes. Missouri-based Workers’ Compensation Consultants, which helps employers through the workers’ comp audit process, recently listed the 10 most common audit mistakes that insurance companies make.

The list highlights a common problem and how you can detect the mistakes to avoid being stuck with a massive audit bill. Insurance companies allow you to review the audit with your broker. If you notice that you have received an audit bill that is obviously overstated, you should contact us.

Here are the things to look for when reviewing an audit by your insurance company:

Wrong class code – Misapplication of job classifications occurs in many workers’ comp audits. With hundreds of job classes to choose from, mistakes can happen. Talk to us and review your old policies to see if any of your class codes have changed.

X-Mod is changed – After your insurer finishes the audit, it will use the information to calculate your premium. When that happens, it has to include your X-Mod to get the right rate. But sometimes the insurer may use an incorrect X-Mod. Check carefully.

Subcontractors are counted – Sometimes insurers will include subcontractors as employees, which results in a new audit bill to account for the additional “employees.” But if they are genuine subcontractors, they should not be counted. Often, uninsured contractors will be included as employees. Make sure to use insured contractors only.

Disappearing credits – Most policies will have some sort of premium credits or other modifiers. Sometimes during audits, the insurer will remove them when recalculating the premium they think you owe. Watch out for missing credits and other modifiers if you get an audit bill, like:

  • Premium discount
  • Schedule credits
  • Deductible credits
  • State-specific credits

 

Audit worksheets missing – If the auditor fails to provide you with audit worksheets, which are used do compile your payroll and other audit information, you should ask to check their work. They will provide you with the information you need to carry out such a check.

Your rates changed – The rates you are charged at the beginning of your policy period must remain the same for the entire policy period. If your base rates have changed, the insurer may have made a mistake. 

Separation of payroll – Depending on your industry, you may or may not be able to split your employees’ payroll between job classifications (like cabinet installers and sheetrock hangers). This is a pinch point when errors can occur. If the auditor says you are not allowed to split job classifications even though you have in the past, your audit may be in error.

Unexpected large premium due – If you get a significant bill for your insurance company after your audit, the auditor may have made mistakes, particularly if you know that your employment has remained relatively stable and you’ve had no significant claims, if any. If it seems out of whack, call us.

Payroll data doesn’t match – If there is a discrepancy between your payroll data and what you see on the audit, a mistake may have been made. Try to match the payroll on the audit with that generated from your accountant. If the insurer made a mistake, you could end up paying for phantom payroll numbers.

No physical audit – There are three types of audits:

  • Mail audit
  • Phone audit, and
  • Physical audit

 

The mail and phone audits are prone to errors, since neither you nor your staff likely have any experience in premium auditing. If you have a big bill after a mail or phone audit, mistakes could have been made.