Mandatory Employer Sign-ups for CalSavers Have Begun

CalSavers

If your company does not offer its staff a 401(k) plan, you need to be aware of deadlines for registering your employees in the CalSavers Retirement Savings Program.

The program is designed to help California workers who do not have access to an employer-sponsored retirement plan start socking away money for their retirement. Employers with five or more workers are required to give their employees access to the CalSavers program, which was launched in 2019.

Deadlines for when employers have to adopt the program depend on their size:

  • Businesses with more than 100 employees: Sept. 30, 2020
  • Businesses with more than 50 employees: June 30, 2021
  • Businesses with five or more employees: June 30, 2022

Employers that miss adoption deadlines or fail to allow employees to participate in the program, can face penalties of $250 per employee if they don’t comply within 90 days of receiving notice from the state. The penalty increases to $500 per employee if the employer fails to comply within 180 days of receiving notice.

If your business has more than 100 employees and missed the Sept. 30 deadline, you still have time to avoid penalties by signing up now.

How it works

The program enables eligible employees to automatically contribute a portion of their paycheck to a Roth individual retirement account (IRA).

Under the law, any California employer with five or more workers must give them access to CalSavers, unless they offer a 401(k) or similar employer-sponsored retirement plan. While it’s mandatory for employers to offer CalSavers to their employees, workers are not obligated to sign up.

Under the program, employers are not required to make contributions on behalf of their employees and will incur no fees. They will be required to submit employee contributions through automatic payroll deductions.

Here’s what your employees need to know about CalSavers:

  • Accounts are portable and can be moved to another job.
  • The funds are owned by the saver, regardless of whether they leave their job.
  • Their IRA offers investment options, so the saver can choose where to park their money.
  • Employees can choose how much they want to set aside of each paycheck, up to 8%.
  • Employees can set aside a maximum of $6,000 a year into the account, or $7,000 if they are age 50 and over.
  • Fees are less than $1 per $100 deposited (they range from 0.825% to 0.95%).
  • Employees can opt out at any time.

Setting up your business’s account

Employers that want to sign up their staff can apply here (www.employer.calsavers.com).

When setting up the account you’ll need to:

  • Create a payroll list to enroll employees.
  • Assign a person in your human resources to manage the account and transfers.
  • If you use a payroll service, you will need to give them access to your account to handle the transfers.

Once you’ve created your company account, you can set up auto-enrollment for all of your new employees. Once you add a new employee to your account, they will receive an e-mail containing plan details and default elections.

Thirty days later, the deductions will be automatically withdrawn from their next paycheck and deposited in their Roth IRA.

Commercial Property Insurance Rates Rise as Risks Grow

commercial insurance rates

Commercial property insurance rates are on the rise across the country as insurers continue wrestling with the toll of increasing natural disasters, rising social unrest around the world (including the U.S.) and the COVID-19 pandemic.

Additionally, insurance companies have become more stringent in their underwriting by restricting some coverages and excluding risks that may have been covered in the past.

The rate increases and stricter underwriting are not a function of the COVID-19 pandemic, as rates have been on the rise over the last two years as other risks and claims payouts have grown, but the outbreak has added more pressure to rates.

According to a report in the trade publication Business Insurance, brokers are reporting average property insurance rate increases of 20% for policies that renewed on July 1, 2020. But rate increases are even higher for commercial enterprises that have certain types of occupancies, large and complex sets of risks, a history of losses or natural catastrophe exposure (hurricanes, tornadoes and wildfires, for example), the report states.

As mentioned, insurers have also taken various steps to restrict coverage, including:

  • More strike, riot and civil commotion exclusions (this coverage was common in most commercial property policies).
  • More stringent communicable disease exclusions for business interruption coverage (while most business interruption coverage on property policies excluded pandemic risks, a small portion of policies did not).
  • Reduced coverage for business interruption claims that don’t include physical damage to the business.
  • Reduced limits.
  • Higher deductibles.

Civil disturbance coverage

The recent riots and protests that erupted across the country also caused widespread insured damage as many stores and businesses were looted, set on fire or vandalized.

Coverage of riots and civil disturbances is a standard part of most property policies, and insurance experts estimate the insured damages could surpass $10 billion as the rioting was not just limited to one city.

There had never previously been a civil disturbance event of this magnitude in the U.S. and insurers had not priced the likelihood of it happening across the nation at one time.

Globally, insurers have started introducing exclusions and raising rates after large-scale protests and civil unrest mushroomed in Hong Kong and Chile last year, causing widespread economic damage and disruption

The scale of damage in the U.S. from our own civil unrest has pushed a handful insurers to start restricting or removing coverage for strikes, riots and civil commotion. The change is not industrywide.

Policy and rate changes for this coverage are also based on geography, as the risks of civil disturbances are greater in cities than in suburbs and smaller municipalities and towns.

Businesses can also take steps to mitigate risks, such as installing video cameras for security, as well as burglar alarms and other measures to reduce their premiums.

COVID-19

Terms and conditions are also being tightened due to the COVID-19 outbreak, after a number of insurers were sued for not paying business interruption claims on the grounds that there must be physical damage to the property.

As a result, many insurers introduced more explicit wording to make their infectious disease exclusion “bulletproof,” as one broker told Business Insurance.

Catastrophe exposure

In addition, insurance companies are looking at how much exposure they have to natural catastrophes, and are hence scaling back coverage or pulling out of some markets. They are looking at markets that have exposure to:

  • Hurricanes,
  • Earthquakes,
  • Wildfires,
  • Floods,
  • Storms

For example, in California a number of commercial and personal property insurers are restricting the number of policies they will write in areas that are at risk from wildfire. Some are also requiring that property owners create buffer areas around their buildings to reduce the chances of them catching fire during an event.

The takeaway

As a business property insured, you will want to do all you can to make your organization as insurable as possible in order to enjoy the best rates. That means taking measures to mitigate risks and following insurers’ recommendations.

That could include installing security cameras and alarms, as well as sprinklers and other fire prevention systems. If your business is exposed to a regular natural catastrophe, you should also take steps to reduce the chances of your property being damage or destroyed.

Attacks on Cloud Services Grow Amid Telecommuting Boom

cloud

As more of America’s workers were asked to work from home due to the COVID-19 pandemic, cyber criminals jumped at the opportunity to take advantage, it seems.

Remote work means work being handled on the cloud as employees share files and need a convenient way to access them.

But cyber criminals are banking on workers letting down their guards when they work from home, so it’s no surprise that while cloud service usage among enterprises jumped 50% between January and April, external attacks on cloud accounts boomed 630% in the same period.

Also, hackers and other cyber scammers orchestrated systematic attacks on collaboration tools like Cisco WebEx, Zoom, Microsoft Teams and Slack, according to the “Cloud Adoption & Risk Report ― Work from Home Edition” report by McAfee.

The risk to enterprises cannot be overstated as criminals try to take advantage of the sudden shift to telecommuting by thousands and thousands of organizations as they try to cope with the COVID-19 pandemic and continue operating during stay-at-home orders.

Employees are your organization’s first line of defense. You can protect your company by encouraging personnel to be skeptical of e-mail from unfamiliar sources.

Training your staff

Before the COVID-19 crisis, PricewaterhouseCoopers simulated a phishing attack on mid- to large-size financial institutions, finding that:

  • 70% of phishing e-mails were delivered to their targets, and
  • 7% of recipients clicked on the malicious link.

The danger with phishing and ransomware attacks is that it only takes on click, one missing endpoint agent, one failed alert, one unsuspecting employee, and the criminals can take control of your network and your cloud files.

Many of these attacks come in the form of what’s now called “social engineering attacks.” PwC recommends coaching all of your employees to take the following precautions, particularly on their mobile devices:

  • Be skeptical of e-mails from unknown senders, or from familiar people (like your company’s CEO or your doctor) who do not usually communicate directly with you.
  • Don’t click on links or open attachments from those senders.
  • Don’t forward suspicious e-mails to co-workers.
  • Examine the sender’s e-mail address to ensure it’s from a true account. Hover over the link to expose the associated web addresses in the “to” and “from” fields; look for slight character changes that make e-mail addresses appear visually accurate — a .com domain where it should be .gov, for example.
  • Grammatical errors in the text of the e-mail are usually a sure sign of fraud.
  • Report suspicious e-mails to the IT or security department.
  • Install the corporate-approved anti-phishing filter on browsers and e-mails.
  • Use the corporate-approved anti-virus software to scan attachments.
  • Never donate to charities via links included in an e-mail; instead, go directly to the charity website to donate.

Cyber insurance

Cyber insurance is designed to protect your company by insuring you for network security issues, privacy, interruption to your business, media liability, and errors and omissions.

For phishing, ransomware and other cyber attacks, the network security and business interruption portion of the policy would mainly come into play.

Network security coverage — This includes first party costs. That is, expenses that you incur directly as a result of a cyber incident, including:

  • Legal expenses
  • IT forensics
  • Negotiation and payment of a ransomware demand
  • Data restoration
  • Breach notification to consumers
  • Setting up a call center
  • Public relations expertise
  • Credit and identity monitoring

Business interruption — When your network, or the network of a provider that you rely on to operate, goes down due to an incident, you can recover lost profits, fixed expenses and extra costs incurred during the time your business was impacted. This includes loss arising from:

  • Security failures, like a third party hack.
  • System failure, such as a failed software patch or human error.

Beware of Parking Lot Hazards at the Holidays

parking hazard

During the busy holiday season, there are many distractions that make parking lots a fairly dangerous place to be.

The combination of early sunset, increased traffic and pedestrians, scam artists, vandals and thieves, and people in a rush, can sometimes be a deadly combination. Just a momentary distraction or lapse in judgment can lead to tragedy.

Parking lot accidents can also turn into a liability for your company or result in an employee being injured and filing a workers’ comp claim.

Fourteen percent of all collisions in the U.S. each year happen in parking lots, and can result in costly insurance claims for vehicle damage. Even worse, it one of your employees strike and injure a visitor, the costs are even higher in terms of both dollars and emotional distress.

Disseminate these basic tips to your employees to help keep everyone safe during the especially busy holiday season:

  • Check your surroundings before you get in your car
  • Backing up is dangerous. Be certain that nothing and no one is behind you before backing out of your parking space
  • Keep your foot off of the gas as you back up, and be ready to break in an instant
  • Look in every direction before pulling into a spot, or backing out of one
  • Don’t text and drive
  • Slow down and pay close attention to speed limits
  • Be careful of pedestrians who may dart in and out between parked cars
  • Park only in areas that are well-lit
  • Keep your car windows closed and your doors locked
  • Watch for cars that may cut diagonally through the parking lot

If you own a building with a parking lot you can also have some liability.

Generally, the owner of the parking lot (whether it is a person, a business, or a property management company) has a reasonable duty to take care that people don’t get hurt on their property. This means that they have to take certain precautions to make that parking lot as safe as possible.

If there are cracks or uneven areas in the pavement, the owner needs to warn people of the danger or repair any hazards that could cause a person to slip and fall. If the parking lot becomes icy, the owner has a responsibility to make it as safe as possible, perhaps by clearing the snow and putting down salt or ice melt.

The takeaway

By training your employees on parking lot and winter driving safety as well as your keeping your parking lot free of hazards you can greatly reduce the chances of an accident and injury happening.

And it goes without saying that you should have commercial general liability (CGL) insurance, which protects you and your business from claims of injury, property damage and negligence related to your business activities.

One of the most essential parts of a CGL policy is premises liability coverage. This portion of your commercial general liability policy offers bodily injury and property damage coverage related to the ownership or maintenance of business premises.

One-third of Workers Are Sleepy, Leading to Safety Issues and More

sleepy worker

More than 35% of workers in the U.S. are not getting enough sleep, a new study has found. That can lead to serious workplace safety issues, especially for occupations that use heavy machinery, people who work in factories or warehouses, construction or as drivers.

Among workers in other occupations it can lead to costly mistakes, friction among staff and poor communications, all of which can have a detrimental effect on your operations.

The study by researchers at Ball State University looked at self-reports of sleep duration among 150,000 adults working in different occupations between 2010 and 2018. Researchers found the prevalence of inadequate sleep, defined as seven hours or less, had increased from 30.9% in 2010 to 35.6% in 2018.

Lead researcher Jagdish Khubchandani, a professor of health science at Ball State University, identified these factors as being behind the increase:

  • Rising stress loads for a variety of reasons, due to pressure at work and at home, and
  • Thanks to the rise of smartphones, people are not unplugging from work and continue checking their phones for work-related messages. Because of this, many people are dealing with work issues up until they go to bed, which can make it more difficult to fall asleep.

Sleep deprivation can have a number of detrimental effects in the workplace, including:

Decreased communication — A worker who is sleepy may not communicate as well as they normally do. This can include mumbling, poor enunciation, slurring, running words together and not speaking in complete thoughts.

Decline in productivity — Workers who don’t get enough sleep are slower at performing their jobs and often make mistakes, which requires them to go back and do things over again.

Increased distraction — Sleep-deprived individuals often have trouble maintaining focus on their tasks, keeping track of events, maintaining interest in outcomes and doing work they consider non-essential.

Impaired driving — Getting behind the wheel after not having enough sleep can be akin to driving under the influence of alcohol. But it’s not only company drivers you have to be concerned about. If you have forklifts, lawnmowers or operators of any type of machinery, there is a greater chance they’ll make a mistake when operating those vehicles or machines if they are sleep-deprived.

More mistakes — A lack of sleep results in a decline in cognitive abilities, which can result in workers making mistakes. These include errors performing tasks or failing to perform tasks. Mistakes especially are likely in subject-paced tasks in which cognitive slowing occurs, and with tasks that are time-sensitive, which cause increases in cognitive errors.

Memory can suffer — Short-term and working memory can decline due to sleep deprivation.

Poor mood — Not enough sleep can make people moody and can result in inappropriate outbursts, impatience, lack of regard for social conventions, inappropriate behavior and irritability — all of which can affect a positive work culture.

Increased risk-taking — Judgment can be affected by not sleeping enough, which can result in risky decision-making, which in turn can result in workplace accidents and injuries.

What you can do

If you suspect you have staff who are not getting enough sleep and that it may be affecting their work performance, you can:

  • Ensure they have a reasonable work schedule. That includes not working them too much and asking them not to take work home with them.
  • Offer more flexibility. You can offer staff the ability to work from home a few times a week or per month.
  • Cut down on e-mails and meetings. Set a company policy for communication and encourage brief, face-to-face meetings and phone calls instead of drawn-out e-mail discussions.
  • Provide employees time to recharge. Offering time to recharge, along with flexibility and a healthier workload, can improve employee restfulness and ease workplace pressures.
  • Don’t require staff to answer work e-mails at home.

As Cyber Threat Mounts, More Companies Take Measures

cyber attack protection

As attacks on businesses’ networks continue increasing at unprecedent levels, cyber risks have become the top concern among organizations of all sizes for the first time, according to a new survey.

The “Travelers Risk Index” found that 55% of executives surveyed said they worry “some” or “a great deal” about cyber risks. That’s more than they worry about medical cost inflation (54%), employee benefit costs (53%), the ability to attract and retain talent (46%) and legal liability (44%).

And the most common types of attacks, and which pose the biggest security threat to businesses, are phishing and fake e-mails. They are the hardest to combat because of the human factor involved, according to another survey, the “2019 Cyber Security Breaches Survey” published by the U.K. government.

In phishing e-mails, the cyber criminals will pose as colleagues or vendors to dupe an unsuspecting employee to hand over a password or click on a malicious link that will give them access to the company’s network.

In addition, ransomware has brought many businesses and government agencies to a standstill as the same technique is used to freeze an entire network and render it unusable until the company pays a ransom for a key to unlock the network.

As concerns about cyber threats have grown, more businesses say they are taking proactive measures to safeguard against cyber risks – even though a large percentage have not implemented preventive best practices.

The steps that companies are taking, according to the Travelers survey, are:

  • Purchasing a cyber insurance policy (51% of survey participants, up from 39% in the 2018 survey the insurer conducted).
  • Creating a business continuity plan in the event of a cyber attack (47%, up from 38%).
  • Taking a cyber-risk assessment for themselves (49%, up from 45%).
  • Taking a cyber-risk assessment for their vendors (41%, up from 37%).
  • Updating computer passwords (74%, up from 71%).

The fact is that a single cyber attack can put a company out of business. Taking the threat seriously and implementing a risk management program that addresses possible exposures can help a business not only avoid an attack, but also recover from one as quickly as possible.

How to lower the chances of an attack

The insurance company Chubb recommends the following steps to reduce the chances of a cyber attack on your organization:

Identify your sensitive data – Credit card and personally identifiable information is often the target of cyber attacks.

Educate your staff – Instruct your employees about cyber attacks and how to protect the network. The most important thing for them to remember is to not to open attachments from people they don’t know or in e-mails they don’t expect.
You should also post procedures for encrypting personal or sensitive information, and require them to change their passwords regularly.

Have security in place – You should have a web application firewall in place to protect your website, in addition to a firewall for your company’s network. If you accept credit card payments, you should have an e-commerce platform that is compliant with payment card industry data security standards Level 1.

Secure your hardware – Data breaches can be caused by physical property being stolen, too. If your servers, laptops, cell phones or other electronics are not secure and easy to steal, you are taking a big risk. Physically locking down computers and servers is a good idea.

Cyber insurance

As the cyber threat becomes more sophisticated and changes, cyber-insurance policies have evolved to meet businesses’ needs. There are many types of policies in the marketplace that are tailored for specific types of businesses. The key is getting a policy that best fits your organization and covers any eventualities that you may encounter.

Some coverages you may want to consider for inclusion in your cyber insurance are:

  • Business interruption – Covers the loss of business income due a cyber attack.
  • Computer fraud – Covers theft of money, securities and other forms of tangible property through computer fraud and social engineering schemes.
  • Data breach – Covers claims of failure to protect personally identifiable information and protected health information of clients.
  • Property damage – Covers replacement cost of computers damaged by a cyber attack.
  • Identity theft expenses – These are related to the business owner or their employees after identity theft.
  • Advertising and personal injury – Covers damage caused by defamation on website or social media.
  • Transmission of virus or malicious content – Covers failure to stop the transmission of a computer virus or malicious content.
  • Errors and omissions – Covers loss caused by failure to provide proper network security.

Some policies are stand-alone products, while others are endorsements to existing polices like a business owner’s policy.

The Importance of Employment Practices Liability Coverage

law lawyer file

Every employer, no matter how small, faces the specter of being sued by a past, present or prospective employee at some time.

In fact, such employment practices claims are widespread – so much so that most businesses are much more likely to have an employment practices liability claim than a general liability or property loss claim.

Nearly three-quarters of all litigation against corporations today involves employment disputes, which can be extremely costly. The cost associated with an employment practices claim can be significant.

In 2018, the Equal Employment Opportunity Commission resolved 90,558 charges of discrimination and recovered about $505 million in remedies for discrimination plaintiffs.

In addition, the EEOC recovered nearly $70 million for victims of sexual harassment through litigation and administrative enforcement that year, up roughly 50% from $47.5 million in 2017.

The massive jump in sexual harassment claims and recoveries is a direct result of a surge in lawsuits since the start of the #MeToo movement, which has emboldened many victims to come forward and file complaints.

Keep in mind, the above are just penalties and do not include defense costs, which can exceed $100,000 per claim for employers.

For these reasons and more, employment practices liability insurance is crucial for any employer. The risks of being sued by an employee for discrimination or harassment have increased substantially, particularly now in the #MeToo era.

Employers need EPLI coverage because comprehensive general liability policies and workers’ comp policies exclude employment-related claims.

EPLI coverage

Policies cover:

  • Defense costs (court fees, attorney fees and related costs).
  • Payment of settlements and/or judgments up to the policy’s limits.
  • Any fines or penalties levied by government agencies.

EPLI policies cover business owners as well as directors, officers and managers. Some policies also cover employees. Additionally, you can buy third-party policies to cover claims brought by non-employees, such as clients.

Types of action covered include:

  • Discrimination based on gender, race, national origin, religion, disability or sexual orientation
  • Sexual harassment or other unlawful harassment in the workplace
  • Wrongful termination
  • Failure to employ or promote
  • Retaliation
  • Employment-related misrepresentation
  • Failure to adopt adequate workplace or employment policies and procedures
  • Employment-related defamation or invasion of privacy
  • Negligent evaluation of an employee
  • Wrongful discipline of an employee
  • Employment-related infliction of emotional distress

NOTE: Wage and hour claims, or disputes regarding overtime pay for non-exempt employees, have become more expensive in recent years, so most EPLI policies exclude this coverage. Business owners may be able to find endorsements to add wage and hour coverage.

Costs

EPLI claims can be extremely expensive. The average cost of a discrimination claim is $125,000, and 25% of judgments exceed $500,000.

Most businesses are wise to have at least $1 million in coverage. However, higher coverage limits increase your premium cost, so you want to balance your coverage needs and your budgetary concerns.

Call us if you want further information or need help in gauging your EPLI coverage needs.

Newsom Set to Sign in Sweeping Independent Contractor Bill

independent contractor

California Gov. Gavin Newsom has signed legislation into law that will codify a court ruling from last year that set new ground rules for what constitutes an independent contractor, and which expands on that ruling.

There’s been a lot written in the media about the legislation, AB 5, and unfortunately much of it misses the point. Some news reports have said it will spell the end of independent contractors in the state and that anyone a company hires to do a temporary job on contract must be treated as an employee, along with all of the obligations that go with that relationship.

Now that AB 5 is the law, state and federal labor laws will apply to independent contractors who have to be reclassified as employees. That means they would be afforded all of the associated worker protections, from overtime pay and minimum wages to the right to unionize. Employers would have to cover them under their workers’ comp policies, and extend benefits to them as they do to other employees.

The bill also gives the state and cities the right to file suit against companies over misclassification.

In its essence, AB 5 codifies and expands on a 2018 California Supreme Court decision that adopted a strict, three-part standard for determining whether workers should be treated as employees.

Known as the “ABC test,” the standard requires companies to prove that people working for them as independent contractors are:

  1. A) Free from the company’s control when they’re on the job;
  2. B) Doing work that falls outside the company’s normal business; and
  3. C) Operating an independent business or trade beyond the job for which they were hired.

The court explained that the first prong aligns with the common-law test for employment, evaluating the degree of control exercised by the company over the worker. The second prong examines whether the worker can reasonably be viewed as working in the hiring company’s business.

The third prong inquires whether the worker independently made the decision to go into business. The fact that the hiring company does not prohibit the worker’s engagement in such an independent business is not sufficient.

The bill will likely cause many industries to reclassify workers by allowing the state to enforce a stricter standard for independent contractors and freelancers.

Occupations affected

Below is a list of those occupations and the types of companies that would be affected:

  • Rideshare & delivery services – Like Uber, Lyft, DoorDash and Postmates
  • Truck drivers – Heavy duty trucks, Amazon delivery trucks, some tow truck companies
  • Janitors and housekeepers – Commercial cleaning services
  • Health aides – Nursing homes, assisted living facilities
  • Newspaper carriers – The bill’s author agreed to delay implementation by one year in a concession to newspaper publishers.
  • Unlicensed manicurists – Licensed manicurists will get a two-year exemption.
  • Land surveyors, landscape architects, geologists
  • Campaign workers
  • Language interpreters
  • Strippers
  • Rabbis

Occupations that would be specifically exempted by the bill include:

  • Doctors
  • Some licensed professionals (lawyers, architects, engineers)
  • Financial services
  • Insurance brokers, accountants, securities broker-dealers, investment advisors
  • Real estate agents
  • Direct sales (the salesperson’s compensation must be based on actual sales rather than wholesale purchases or referrals)
  • Commercial fishermen (exempt until 2023)
  • Builders and contractors (who work for construction firms that build major infrastructure projects and large buildings)
  • Professional services (marketing, human resources administrators, travel agents, graphic designers, grant writers, fine artists)
  • Freelance writers, photographers (provided the worker contributes no more than 35 submissions to an outlet in a year)
  • Hair stylists, barbers (provided that the person sets their own rates and schedule)
  • Estheticians, electrologists, manicurists (must be licensed)
  • Tutors (must teach their own curriculum, and does not apply to public school tutors)
  • AAA-affiliated tow truck drivers.

What employers should do

Legal experts recommend that employers:

  • Perform a worker classification audit, and especially review all contracts with personnel.
  • Determine which benefits and protections should be provided to any workers who are reclassified from independent contractor to employee (think health insurance and other benefits).
  • Notify any state agencies about corrections and changes to a worker’s status.

Discuss with legal counsel whether they should now also include them as employees for the purposes of payroll taxes, workers’ compensation insurance, federal income tax withholding, FICA payment and withholding.

New Experience Rating and Physical Audit Levels Set

workers' compensation, X mod, physical audit,

Starting in 2020, the threshold for California employers to be eligible for experience rating (X-Mod) has been reduced by order of the state insurance commissioner.

Commissioner Ricardo Lara in September approved the recommendations by the Workers’ Compensation Insurance Rating Bureau to lower thresholds for determining eligibility for experience rating and when a carrier needs to perform a physical audit of an employer’s payroll records.

The threshold for physical audits that takes effect for policies incepting on or after Jan. 1, 2020 will be $10,500 in annual premium, a drop from $13,000. This means that any employer with an annual workers’ comp premium of $10,500 or more will be subject to a physical audit at least once a year.

“Physical audit” is defined as an “audit of payroll, whether conducted at the policyholder’s location or at a remote site, that is based upon an auditor’s examination of the policyholder’s books of accounts and original payroll records (in either electronic or hard copy form), as necessary to determine and verify the exposure amounts by classification.”

Additionally, the threshold for experience rating or to have an X-Mod, has been reduced to $9,700 in annual premium from $10,000.

The eligibility rating threshold is the amount of payroll developed during the experience period in each classification multiplied by the expected loss rates for each class. If the total for all assigned classes is at or above the threshold, then the employer is eligible for an X-Mod.

Changes to dual-wage class codes

The insurance commissioner in September also approved the Rating Bureau’s recommendations for changes to a number of construction dual-wage class codes.

While most workers’ comp classes have one rate, in some classes the difference in claims costs between high- and lower-wage workers is so great that a dual-wage classification is needed. In those cases, the workers above the threshold rate are assigned one rate, while those below that threshold are assigned a higher rate.

This is usually because the higher-wage workers are generally more experienced and tend to suffer fewer workplace injuries compared to those below the threshold.

The new thresholds are for 14 construction classifications, and any workers above the threshold will have a lower rate applied.

CLASSIFICATIONS AFFECTED         

Masonry – 2020 threshold: $28 per hour (+$1 from 2019)
Heating/Plumbing/Refrigeration – 2020 threshold: $28 (+$2)
Automatic sprinkler installation – 2020 threshold: $29 (+$2)
Concrete/Cement work – 2020 threshold: $28 (+$3)
Carpentry – 2020 threshold: $35 (+$3)
Wallboard application – 2020 threshold: $36 (+$2)
Glaziers – 2020 threshold: $33 (+$1)
Painting/Waterproofing – 2020 threshold: $28 (+$2)
Plastering/Stucco work – 2020 threshold: $32 (+$3)
Roofing – 2020 threshold: $27 (+$2)
Steel framing – 2020 threshold: $35 (+$3)
Excavation/Grading/Land leveling – 2020 threshold: $34 (+$3)
Sewer construction – 2020 threshold: $34 (+$3)
Water/Gas main construction – 2020 threshold: $34 (+$3)

Discipline Should Be Part of Your Safety Program

discipline red card

Does your injury and illness prevention program spell out the disciplinary action your company will pursue if its safety rules are not adhered to?

Addressing disciplinary issues can be a very sensitive and stressful process for most managers, supervisors and employees. However, if disciplinary issues are avoided or handled poorly, it can lead to serious consequences such as property damage, injury or even fatality.

Looking at discipline not as a form of punishment but as a rule or system of rules governing conduct or activity in order to eliminate unsafe circumstances, might ease the stress for the owner, manager and employee.

Education is the key to establishing proper disciplinary procedures and holding employees accountable to the company’s health and safety policy and program, as well as to applicable regulatory requirements.

The main objective of a disciplinary program is to ensure that rules and safe work practices are taken seriously by all employees and that they are followed. When disciplinary action is deemed appropriate, it should be conducted in a timely manner. Trying to conduct unsafe behavior by waiting only allows a habit to become more ingrained.

Discipline should be positive, not punitive or negative. The goal is to correct the problem, action or behavior. The type of discipline should fit the severity of the misconduct and be conducted in private.

Five-step Disciplinary Program Process

  • Reviewing policy and procedures (managers and supervisors)
  • Investigation of accusations and infractions (supervisors and safety & health reps)
  • Determining and reviewing disciplinary action (supervisors and safety & health reps)
  • Documenting disciplinary actions and program enforcement (supervisors and safety & health reps)
  • Conducting disciplinary meetings and promoting safe work practices and compliance to regulatory requirements (supervisors and safety & health reps)

If your company hires subcontractors, they should also be required to comply with your health and safety policy.

Sample disciplinary action

You should make it clear that the company reserves the right to discipline employees who knowingly violate company safety rules or policies. Disciplinary measures will include, but not be limited to:

  • Verbal warning (documented) for minor offenses.
  • Written warning for more severe or repeated violations.
  • Suspension, if verbal and written warnings do not prove to be sufficient.

If none of the above measures achieve satisfactory, corrective results, and no other acceptable solution can be found, the company will have no choice but to terminate employment for those who continue to jeopardize their own safety and the safety of others.

Non-punitive discipline

The first step of formal non-punitive discipline is to issue an “oral reminder,” with the manager’s primary goal being to gain the employee’s agreement to solve the problem.

Should the problem continue, the manager moves to the second step – the “written reminder.” Together, the manager and the employee create an action plan to eliminate the gap between actual and desired performance.

If disciplinary discussions have failed to produce the desired changes, management then places the individual on a paid, one-day “decision-making leave.” Tenure with the organization is conditional on the individual’s decision to solve the immediate problem and make a “total performance commitment” to good performance on the job.

The employee is instructed to return on the day following the leave with a decision either to change and stay or quit and find more satisfying work elsewhere. Thus, the purpose of the disciplinary transaction has changed from a punishment method to a process that requires individuals to accept responsibility for their own behavior, performance and continued participation in the enterprise.