Fears of unsafe conditions raise worker rights concerns

 

As the numbers of COVID-19 infections continue to climb, employment attorneys say fearful workers have limited rights in refusing to work, while employers have legal obligations to provide a safe place to work.

It’s an intersection legal experts say calls for enhanced communication between companies and their workers and a constant adherence to evolving state and federal laws guiding work during the pandemic.

“Companies need to assure employees they are on top of this; it goes a long way,” said Matt Hinton, New York-based partner for risk consulting firm Control Risks Ltd. He says the issue is one to watch as more states lift restrictions.

The Occupational Safety and Health Administration and the Centers for Disease Control and Prevention have both issued guidelines on workplace safely. As of Wednesday, at least one state — Oregon — is gearing up to create permanent workplace safety guidelines for infectious diseases.

A majority of employers say they have plans in place. And safety professionals are telling employers to encourage employee engagement in safety protocols. Yet concerns are growing over whether employers are doing enough. On Monday, unions representing some 60,000 Nevada hospitality workers sued three casino properties over alleged unsafe working conditions related to the coronavirus.

Worker fear is a genuine concern, but it’s not enough to refuse work, said Courtney Malveaux, Richmond, Virginia-based principal and attorney with Jackson Lewis P.C.

The rule is a worker must have a “specific” concern, he said. An example would be if the workplace is not clean, or the worksite is not following local regulations such as requiring individuals to wear masks.

“A generalized fear of COVID does not provide a basis for refusing to work; it has to be a specific fear of a circumstance at that employee’s workplace,” Mr. Malveaux said. “It also has to be a fear that is made in good faith and is reasonable to others.”

An employee with a compromised immune system or other health issue that puts him or her at risk for COVID-19 complications could be protected by the Americans with Disabilities Act, which would require the employer to work to find the employee an accommodation, such as an alternative work environment, he said. Any concern with work “must be specific to the workplace or the employee” with a health condition, he said.

Maurice Emsellem, Berkeley, California-based program director of the National Employment Law Project, said worker rights advocates are calling on the federal government to outline more specific guidelines for those who refuse work under certain conditions. He said that what is in place among OSHA, CDC and ADA may not be enough.

There is also concern that state unemployment agencies are not keeping up with the changing landscape. “(Workers) are vulnerable because they lose their unemployment benefits if the state agencies don’t do the right thing,” he said. “In general, workers have to know they can refuse unsafe work.” In most states, a worker who quits a job cannot collect unemployment benefits.

Expect litigation, said Maxfield Marquardt, Los Angeles-based counsel and associate director for regulatory affairs at Trusaic Inc., a compliance technology company. Many state laws create parameters for employees to work “at will,” he said.

“An employee has the right to not show up for work,” he said. “But will they keep their jobs? … An employer can say, ‘You want to work? Come in.’”

Disagreements over whether conditions are safe, or whether an employer is following safe guidelines, are “part of the reason you are going to see a lot of litigation,” Mr. Marquardt said. “Litigation and regulatory guidance are evolving at a fast pace. OSHA could change its guidelines Friday; the CDC may change its guidelines again.” How can companies avoid the potential legal mess? Pay attention and consider the federal, state and local workplace mandates as “the bare minimum” in ensuring safe working conditions, Mr. Hinton said. “The employee sentiment is the important piece,” he said. “Have a path for your employees to raise their hand and say, ‘This isn’t working.’”

Listening to employees will be key, said Kim Brunell, Washington-based associate director at Control Risks. “You have to have a collaborative approach to safety,” she said. “Employers that do that best consider the context of a particular work environment.”

 

Originally posted on July 1st, 2020 by Louise Esola for Business Insurance

Workers’ Compensation and COVID-19: What Employers Need to Know

The Covid-19 global pandemic changed how Americans work, seemingly overnight. As many offices transitioned their teams to remote work, others in industries deemed essential scrambled to procure PPE and prepare their workplaces for new socially distant norms. Now that non-essential workers are beginning to return to their workplaces, a common question for employers becomes, “What happens if an employee is exposed to Covid-19 on the job? Is this a workers’ compensation issue?”

That depends, says Paul Hughes, president of Orlando-based Libertate Insurance Services, which provides workers’ compensation coverage to professional employer organizations, including XMI.

Normally, a communicable disease that could be contracted during the ordinary course of life (like the cold or flu) is excluded from workers’ compensation coverage. But several states have already amended their workers’ compensation laws to include Covid-19 “presumption” clauses.

To date, 26 states have added presumptions to their workers’ compensation laws (Tennessee is not one of them).

To read the full article, please click here. This was originally published on XMI’s website.

California COVID Call to Cost Billions for Workers’ Compensation System

As expected, the largest workers’ compensation market in the country has rendered the opinion that it is presumed that anyone that is employed outside of their house has contracted the virus at work.  Prior to this order or COVID for that matter the total cost of loss in the California system was predicted to be $18.1 B.  The median risk load as a result if you include “First Responders” is $11.2 B, or 61%.  If you exclude “First Responders”, the additional cost expected is $5.2 B, or a risk load or 28%.

It will be interesting how insurance carriers and those on large deductibles react to this.

FOR IMMEDIATE RELEASE: Contact: Governor’s Press Office
Wednesday, May 6, 2020 (916) 445-4571

Governor Newsom Announces Workers’ Compensation Benefits for Workers who Contract COVID-19 During Stay at Home Order

Benefit will be available for diagnosed workers working outside their homes

 

Presumption will be workers contracted the virus at work; employers will have chance to rebut

 

Governor also signed executive order waiving penalties on property taxes for residents and small businesses experiencing economic hardship based on COVID-19; order also extends deadline for filing property tax statements

 

SACRAMENTO – As California prepares to enter Stage 2 of the gradual reopening of the state this Friday, Governor Gavin Newsom today announced that workers who contract COVID-19 while on the job may be eligible to receive workers’ compensation. The Governor signed an executive order that creates a time-limited rebuttable presumption for accessing workers’ compensation benefits applicable to Californians who must work outside of their homes during the stay at home order.

 

“We are removing a burden for workers on the front lines, who risk their own health and safety to deliver critical services to our fellow Californians, so that they can access benefits, and be able to focus on their recovery,” said Governor Newsom. “Workers’ compensation is a critical piece to reopening the state and it will help workers get the care they need to get healthy, and in turn, protect public health.”

 

Those eligible will have the rebuttable presumption if they tested positive for COVID-19 or were diagnosed with COVID-19 and confirmed by a positive test within 14 days of performing a labor or service at a place of work after the stay at home order was issued on March 19, 2020. The presumption will stay in place for 60 days after issuance of the executive order.

 

The Governor also signed an executive order that waives penalties for property taxes paid after April 10 for taxpayers who demonstrate they have experienced financial hardship due to the COVID-19 pandemic through May 6, 2021. This will apply to residential properties and small businesses. Additionally, the executive order will extend the deadline for certain businesses to file Business Personal Property Statements from tomorrow to May 31, 2020, to avoid penalties.

 

“The COVID-19 pandemic has impacted the lives and livelihoods of many, and as we look toward opening our local communities and economies, we want to make sure that those that have been most impacted have the ability to get back on their feet,” said Governor Newsom.

 

Since declaring a state of emergency due to COVID-19 on March 4, 2020, Governor Newsom has taken several actions to benefit workers on the front lines, includingpaid sick leave benefits for food sector workers that are subject to a quarantine or isolation order; critical child support services for essential workers and vulnerable populations; additional weekly unemployment benefits; and needed assistance in the form of loans for small businesses and job opportunities in critical industries for workers that have been displaced by the pandemic.

 

Protecting Workers From Coronavirus

What Is Coronavirus?
According to the World Health Organization(WHO), coronavirus is a family of viruses that cause illnesses ranging from the common cold to more severe diseases. Common signs of infection include headache, fever, cough, sore throat, runny nose and breathing
difficulties. In more severe cases, infection can cause pneumonia, severe acute respiratory syndrome, kidney failure and even death. Individuals who are elderly or
pregnant, and anyone with preexisting medical conditions are at the greatest risk of becoming seriously ill from coronaviruses.

How Does Coronavirus Spread?
Although the ongoing outbreak likely resulted from people who were exposed to infected animals, COVID-19 can spread between people through their respiratory
secretions, especially when they cough or sneeze. According the Centers for Disease Control and Prevention (CDC), the spread of COVID-19 from personto-person most likely occurs among close contacts who are within about 6 feet of each other. It’s unclear at this time if a person can get COVID-19 by touching a surface
or object that has the virus on it and then touching their own mouth, nose or eyes.

CDC Interim Guidance
In order to help employers plan and respond to COVID19, the CDC has issued interim guidance. The CDC recommendations include:

  • Actively encourage sick employees to stay home. Employees who have symptoms of acute respiratory illness are recommended to stay home and not
    come to work until they are free of signs of a fever and any other symptoms of COVID-19 for at least 24 hours, without the use of fever-reducing or other symptom-altering medicines. What’s more, employees should be instructed to notify their supervisor and stay home if they are sick.
  • Separate sick employees. Employees who appear to have acute respiratory illness symptoms (e.g., cough or shortness of breath) upon arrival to work or
    become sick during the day should be separated from other employees and be sent home immediately. Sick employees should cover their nose and mouth with a tissue when coughing or sneezing.
  • Emphasize hand hygiene. Instruct employees to clean their hands often with an alcohol-based hand sanitizer that contains at least 60%-95% alcohol, or
    wash their hands with soap and water for at least 20 seconds. Soap and water should be used preferentially if hands are visibly dirty.
  • Perform routine environmental cleaning. Employers should routinely clean all frequently touched surfaces in the workplace, such as workstations, countertops and doorknobs.

Coronavirus, Pandemics and Workers’ Compensation

An informative article from the Insurance Journal on Coronavirus, Pandemics and Workers’ Compensation.

So the below begs the question of what is peculiar to one’s occupation/scope of work.  Why do I see the lawyers and the courts having a time and expense field day on what is peculiar.

To check myself, I went to Websters to look up said word.

peculiar

adjective

pe·​cu·​liar | \ pi-ˈkyül-yər  \

Definition of peculiar

 (Entry 1 of 2)

1characteristic of only one person, group, or thing DISTINCTIVE… a drowsy fervour of manner and tone which was quite peculiar to her.— Thomas Hardy
2different from the usual or normal:
aSPECIALPARTICULARa matter of peculiar interest
bODDCURIOUSIt seems peculiar that she would leave town without telling anybody.
cECCENTRICUNUSUALThe play had a zany plot and very peculiar characters.Note
– thus
….”means will be a much bigger deal than this post represents.  those that are most exposed are they those in contact with the general public (service/hospitality) -”  This will definitively add workers’ compensation exposure.

A pandemic is defined as, “an outbreak of a disease that occurs over a wide geographic area and affects an exceptionally high proportion of the population.” Although the media lives by the motto, “If it bleeds, it leads,” declaring a pandemic anytime more than a few people contract a virus, this time even the World Health Organization (WHO) is warning of a possible Coronavirus (COVID-19) pandemic with one Coronavirus expert, Professor Gabriel Leung, Chair of Public Health at Hong Kong University, saying that unchecked, the virus could infect 60 percent of the global population.

My intent is not to accuse the media of sensationalism, nor to intimate that WHO is overreacting (I don’t think they are); my purpose is to answer the question, what makes an illness an “occupational illness” and thus compensable under workers’ compensation? More specifically, how does or might workers’ compensation respond to the Coronavirus?

Two tests must be satisfied before any illness or disease, including the Coronavirus, qualifies as occupational and thus compensable under workers’ compensation:

  1. The illness or disease must be “occupational,” meaning that it arose out of and was in the course and scope of the employment; and
  2. The illness or disease must arise out of or be caused by conditions “peculiar” to the work.

Whether an illness arises out of and in the course and scope of employment is a function of the employee’s activities. The simplest test toward determining whether an injury “arises out of and in the course and scope of employment” is to ask: Was the employee benefiting the employer when exposed to the illness or disease? Be warned, this “test” is subject to the interpretations and intricacies of various state laws.

Qualifying as “occupational” is the low hurdle. The higher hurdle is whether the illness or disease is “peculiar” to the work. If the illness or disease is not peculiar to the work, it is not occupational and thus not compensable under workers’ compensation. An illness or disease is “peculiar” to the work when such a disease is found almost exclusively to workers in a certain field or there is an increased exposure to the illness or disease because of the employee’s working conditions.

For example, black lung disease in the coal mining industry is a disease that is peculiar to the work of a miner. Coal miners are subject to prolonged exposure to higher-than-normal concentrations of coal dust leading to black lung disease. This makes the disease peculiar to the coal mining industry.

Another example of an exposure “peculiar” to the work is a healthcare worker contracting an infectious disease such as HIV or hepatitis as a result of contact with infected blood. The worker’s unusual or “peculiar” exposure to such diseases results in an illness that is occupational and compensable.

Qualifying an illness or disease as occupational and, more importantly, peculiar to the work (and thus compensable) may ultimately require industrial commission or court intervention to sort medical opinion from legal facts. No one “test” is available to declare an illness or disease compensable or non-compensable; each case is judged on its own merits and surrounding circumstances.

Concluding that an illness is occupational, peculiar to the work and ultimately compensable is not necessarily based on the disease in question but on the facts surrounding the worker’s illness. Factors investigated and considered by medical professionals and the court include:

  • The timing of the symptoms in relation to work: Do symptoms worsen at work and improve following prolonged absence from work (in the evening and on weekends);
  • Whether co-workers show or have experienced similar symptoms;
  • The commonality of such illness to workers in that particular industry;
  • An employee’s predisposition to the illness (an allergy or other medical issue); and
  • The worker’s personal habits and medical history. Patients in poor medical condition (overweight, smokers, unrelated heart disease, etc.) and/or with poor family medical histories may be more likely to contract a disease or illness than others in similar circumstances. Bad habits and poor medical history (and heredity) cloud the relationship between the occupation and the illness. For example, smokers may be ill-equipped to fight off the effects of illnesses to which others may have no problem being exposed.

What About Coronavirus?

Judged against the qualifying factors presented, does any disease or virus declared a pandemic create a true workers’ compensation exposures? Does the Coronavirus crate a workers’ compensation exposure? The short answer is, “not likely.” Other than the fact that the Coronavirus is currently garnering intense attention, in most cases it is no more occupational than the flu.

Unless!

Only if it is proven that the employee has an increased risk of contracting the virus due to the peculiarity of his or her job might the Coronavirus be considered occupational and thus compensable. Remember, compensability as an occupational illness requires something about the job that increases the risk of exposure and illness.

As intimated earlier, healthcare workers may be able to prove the necessary peculiarity – being face-to-face with sick people ALL day – to assert a compensable injury.

Which Policy Responds to Qualifying Occupation Illnesses and Diseases?

While the Coronavirus has a relatively short gestation period, other occupational illnesses and diseases often have long “gestation” periods. Employees may be exposed to the harmful condition for many years before the illness manifests. It is also possible that the employee doesn’t contract the disease until years after the exposure ends.

The workers’ compensation policy specifically states that the policy in effect at the employee’s last exposure responds to the illness — even if the employee is working for another employer or even retired at the time the disease manifests itself.

The Coronavirus Isn’t Special

Coronavirus may be a humankind exposure rather than one peculiar to most employments. Contracting the virus at work is not enough to trigger the assertion that it is a compensable occupational illness. To be occupational and compensable requires something peculiar about the work that increases the likelihood of getting sick. It is unlikely that both the “occupational” and “peculiar” thresholds can be satisfied to make most illnesses “compensable” for the vast majority of individuals; the same is true of the new Coronavirus.

 

https://www.insurancejournal.com/blogs/academy-journal/2020/02/19/558705.htm

Potential Wage and Hour Claims Due to New Overtime Rule

Woman working at desk

This article was originally published on InsuranceJournal.com.

Time is running out for employers to familiarize themselves with new federal rules on overtime pay.

Starting January 1, the threshold for who is entitled to overtime pay — and who is not — changes. It’s the first change since 2004.

The new rule raises the income threshold that employees must reach to $684 per week, or $35,568 per year, to qualify as exempt from overtime. Employers are allowed to count up to 10% (or $3,556.80 per year) in bonuses or commissions towards the threshold.

Workers making less than the threshold are entitled to earn one and one-half times their regular rate of pay for all hours over 40 during a work week.

Failure to properly implement the new regulations could expose employers to wage-and-hour type claims under the Fair Labor Standards Act (FLSA).

For some employers, that could mean employment practices liability insurance claims.

That’s one reason Chris Williams is trying to raise awareness. Williams is employment practices liability product manager for Travelers. He is responsible for employment practices underwriting strategy, including policy language, target markets, overall profitability of the book, marketing, and serving as a general resource for underwriters on employment practices.

In a recent talk with Insurance Journal, Williams discussed the overtime rule change and what it means for employers, employees and insurance.

There’s so much else going on in the area of employment practices, the overtime pay issue hasn’t gotten much attention.

“That is a concern because the law’s already fairly complicated for employers to comply with,” Williams said. “Then, anytime you have a change in a complex law, you’re likely to see one, compliance challenges, and two, potential litigation coming out of that.”

Williams said the starting point is understanding the basics of the current rule compared to the new rule that starts in January.

Under the FSLA, employees that satisfy three requirements — they are paid on a salary basis, they are paid more than $23,660 per year, and they perform certain functions considered executive, administrative, or professional duties — are currently not entitled to overtime wages.

“For example, if you’re an executive, you’re a manager in an organization, you’re managing folks, you have the ability to hire, to fire people, and you make more than $23,660 per year, you are not entitled to overtime,” he explained.

Exempt executive, administrative and professional employees include teachers and academic administrators in elementary and secondary schools, outside sales employees and employees in certain technology occupations, according to the Department of Labor. Certain casual, seasonal and farm workers are also exempt from the overtime requirement.

For the new year, while the definitions and exemptions for those doing executive, administrative, professional and other work remain, the key change for employers to be aware of is that the salary threshold is going up from $23,660 to $35,568 per year.

“As a result of that, you’re going to have folks that are now within that pay band that are going to be entitled to overtime that previously weren’t entitled to overtime,” Williams said.

“Employers are going to have to one, figure out who those individuals are. And two, they’re going to have to make sure they’re tracking their time, and if those folks are working more than 40 hours per week, they’re going to have to make sure that they’re compensated on a time-and-a-half basis for that time in excess of 40 hours per week.”

While $35,568 is the threshold and where the primary impact is felt, there is also an upper limit as well. The high threshold under what is called the highly-compensated employee rule is going from $100,000 to $107,432.

“In other words, if you make more than $107,000, you have some administrative or executive functions within the organization, and you’re doing non-manual work, you’re not going to be entitled to overtime,” he explained.

The upper limit rarely is an issue. “We don’t see very much claim activity arising out of those individuals. It’s much more on the lower spectrum,” Williams noted.

In addition to the federal rule, depending on the state they are in, employers may have state laws on overtime pay they must follow as well. California is one such state.

“Employers in those situations are obligated to comply with both the state and the federal law. For example, in California, most of our overtime wage claims that we see pertain to state law as opposed to claims under the Fair Labor Standards Act,” he said.

Williams sees a few potential trouble spots for employers.

“One of the things we see today is employers, and I don’t think a lot if it is malicious, I just think it’s a misunderstanding of what their obligations are, but they may not pay their employees overtime.

“They may not correctly classify individuals as exempt or not exempt, meaning they’re entitled to overtime. They may not track their time correctly.”

Another area is claims for not compensating workers for time they spend putting on their gear to prepare for work. “If you work in a meat processing plant or something like that, you have to put on protective gear, and then you weren’t compensated for that time,” he said.

There are things employers should do to prepare for the new overtime situation, according to Williams.

“Employers will want to go back and make sure that they’ve correctly identified who is now entitled to overtime and are they, in fact, tracking their time and making sure those individuals are compensated correctly.

“It’s probably a good idea, given this change in the law, to review all your employees and make sure that you classify them correctly and you’re tracking their time properly and that you’re compensating them appropriately.”

Williams also noted that some employers may decide to raise the salary of their workers above the threshold of $35,568 to avoid an overtime issue. However, in order to avoid paying overtime for those workers, the employer would need to make sure the worker also qualified for an exemption under professional, administrative or executive.

“In other words, if the employer raised the salary of a worker above $35,568 per year, and the worker did not qualify for one of the exemptions, the worker would still be entitled to overtime,” he said.

Williams recalled that happened in some cases after the Obama Administration in 2016 initiated an even high threshold of $47,000. Some employers increased the pay of some of the workers beyond that threshold. But then the Obama change was struck down in court in September 2017 when a judge ruled that the ceiling was set too high and might apply to some management workers who are supposed to be exempt from overtime pay protections. Business groups and 21 Republican-led states had sued to challenge the 2016 rule.

The Department of Labor estimates that 1.2 million additional workers will be entitled to overtime pay as a result of the increase to the standard salary level, while an additional 101,800 workers will be entitled to overtime pay as a result of the increase under the highly-compensated employee rule.

Williams urges agents to advise their clients to take advantage of resources available to them to be sure they are in compliance— whether that be a human resources department, payroll processor or general counsel. He also recommends the DOL’s website that has information about the final rule.

Williams added that a number of insurance carriers including Travelers also have resources available. “It’s sort of a matter, one, of employers educating themselves, and then, two, taking action on that information,” he said.

Wage-and-Hour Claims

Those caught not in compliance could face wage-and-hour claims. Defense costs only for such claims may be covered under employment practices liability insurance (EPLI) but only for those purchasing a separate endorsement under their EPLI. It’s not part of the traditional EPLI. (Coverage of unpaid wages may be available to large firms with sizable self-retentions but this coverage is not typically available to small and medium firms.)

“A lot of carriers, including Travelers, will provide a sublimit that applies to defense expenses only for wage-and-hour claims. That generally includes issues like failure to pay overtime, misclassifying workers as exempt, potentially misclassifying workers as independent contractors when they’re in fact employees,” Williams explained.

There are certain state statutes, like in California, where employers are obligated to provide rest and meal periods. The separate coverage would include defense expenses for those types of claims as well.

Travelers offers a sublimit up to $250,000. “I think the market’s generally between $100,000 and $250,000, and there may be some outliers beyond that,” he said.

Since it’s been 15 years since the overtime rule was changed, this is in a way a new exposure, one agents may want to explore with clients.

“I think that’s a good idea. We sell this coverage to privately held companies and nonprofits, and we try to be proactive in selling it because it’s an exposure for employers that’s out there,” Williams said.

He noted that these claims are attractive to the plaintiffs’ bar because there is a fee shifting provision in the statute so that if the plaintiff prevails on the claim, they’re entitled to their attorneys’ fees. “You can have cases where the actual recovery amount may not be that significant in terms of the unpaid wages, but the attorney fee is potentially significantly more than that unpaid wage portion,” he said.

Other EPLI Issues

Overtime is hardly the only pressure on employment practices liability insurance (EPLI) these days when workplace issues are in the news on a regular basis.

EPLI provides protection against many kinds of employee lawsuits including claims alleging sexual harassment; discrimination based on age, race, gender or disability; wrongful termination, hiring or promotions; retaliation and wrongful infliction of emotional distress.

According to Williams, there are two areas in particular where EPLI is currently seeing increasing claims activity: sexual harassment and privacy.

“I’ll start off with the sexual harassment, and there’s been an uptick, particularly in severity, on those claims. There’s been an uptick in the frequency of those claims as well. It’s a challenging environment to litigate one of those cases in,” he said.

The second issue is biometric claims, driven by the Illinois biometric information privacy act.

“One of the requirements under that is that if you’re going to use biometric information of your customers or employees, you have to get a signed release from the employee or customer,” he said.

A number of employers have been using fingerprint technology to scan employees in and out and to clock when they’re coming and leaving work. In many cases, they did not get a signed release from the employee. “That’s resulted in class action claims brought against those employers alleging violation of this statute, sort of quasi-invasion-of-privacy claims,” he said.

Other claims areas that are relatively new include websites not in compliance with the Americans with Disabilities Act. “The website isn’t compliant if it doesn’t allow the disabled individual full use of that website because it hasn’t been programmed properly,” he said.

Travelers is among the insurers that will provide workplace violence expense reimbursement coverage that reimburses employers for certain expenses in the event of a workplace violence event. The expenses might include counseling, additional security, and services of a public relations firm to help a business through the crisis.

An employment practice claim is not a recommended experience.

“No one’s ever gone through an EPLI claim— which is a tremendously burdensome process in terms of the documents that have to be turned over, all the emails, the personnel files, the deposition the employer has to go through— no one’s gone through that process and ever said, ‘Boy, we’d like to do that again,’” Williams said.

NAPEO19 Annual Conference & Marketplace

September 16-18, 2019

The conference planning committee continually strives to improve the content of the conference and this year will be better than ever!

From an educational point of view, there will be three tracks:

  • PEO Operations: This is new for 2019. Thanks to NAPEO’s Conference Chair Norman Paul, we have designed a new and ongoing focus to help PEOs improve operationally with instructional guidance in the areas of payroll, workflows, and overall efficiency.
  • Compliance: This topic is not only important to PEO customers, but to the liability of PEOs. The landscape and requirements are ever-changing and NAPEO’s staff and committees are staying on top of this to make your lives easier and reduce liability. This track will keep you abreast of the latest changes in the law and how best to navigate them.
  • Growth: Now is a great time to be in the PEO industry. The industry is growing and the market is embracing PEOs and outsourcing HR functions. NAPEO has been hard at work creating tools for our members to increase awareness and drive home the value of PEOs. In addition, your industry colleagues will be sharing their best practices about what works for them to grow their PEO’s.

Look forward to seeing everyone there! Check out the below link for more details on this years Conference.

https://www.napeo.org/annual-conference-2019

Applied Underwriters Fined $3 Million Over EquityComp Program

 

The State regulators continue to clamp down on insurers that use side agreements (aka Program Agreements) for large deductible/loss sensitive programs that are not properly filed with the various Offices of Insurance Regulation. Florida, New York and California have been particularly active in this realm, with Illinois specifically writing a white paper on the overall large deductible topic and PEO that I spoke on a few years ago … https://peocompass.com/role-large-deductible-policies-peos-failures-small-workers-compensation-insurers/ .

Additionally, the National Association of Insurance Commissioners (“NAIC”) has been very active in the enforcement of side agreements… “One significant forms-related issue is that there are sometimes agreements outside of the insurance contract–that is, they are not specifically referenced within or attached to the insurance contract— established between the insurer, the employer and perhaps a TPA or another party. This is an issue because insurance laws typically require the filing of the policy forms and accompanying endorsements used to write workers’ compensation insurance.” This definition from their white paper “Workers’ Compensation Large Deductible Study”, first published in 2006. https://www.naic.org/prod_serv/WCD-OP-06.pdf

Bottom line is that there is a marked increase of enforcement on the state level of non-approved side agreements and I would anticipate more carriers being called out for their lack of proper filings and having approval to use the side agreements applicable to their large deductible/loss sensitive offering(s).

From our friends at workcompcentral.com …

The New York State Department of Financial Services has fined Applied Underwriters $3 million for offering workers’ compensation insurance bundled with side agreements that weren’t filed with or approved by the department.

In announcing the fine on Thursday, DFS said the bundled programs were sold under names including EquityComp and SolutionOne. The products, sold in New York from 2010 through 2016, included guaranteed-cost workers’ comp policies issued by Continental Indemnity Co., an Applied subsidiary, along with a “reinsurance participation agreement” that employers were required to enter into as part of the program, according to the department.

DFS said the RPAs involved complex cost calculations that were presented to employers in a misleading way. 

“Under the formula, policy fees could rise rapidly with the first few claims to levels substantially higher than what would have been paid under a typical linear retrospective model,” DFS said.

In fact, the non-linear model was unique enough that Applied received a patent for it in 2011, according to DFS.

Financial Services Superintendent Linda Lacewell said Applied Underwriters had been “illegally operating outside of the department’s oversight to sell a complex product to hundreds of New York small and medium-sized businesses.”

Applied Underwriters on Thursday said it was pleased to have reached a settlement with DFS after the matter had been under review for three years.

But Jeffrey Silver, general counsel for Applied Underwriters, denied any wrongdoing by the company.

“There was no wrongdoing on our part whatsoever, but there were filings that the department thought should have been made,” Silver said in a statement provided to WorkCompCentral. “The nature and structure of the program was disclosed to participants who were large employers, and the participants were advised by their insurance brokers and other professionals.”

In the statement, Silver described Applied’s loss-sensitive program as a captive insurance program, which he said is covered in New York by a separate captive insurer law. The program gave businesses an incentive to improve their safety, he said, and a “significant number” of EquityComp participants did expand their safety programs, leading to lower workers’ comp costs.

The New York DFS launched its investigation of Applied Underwriters in December 2015. The company voluntarily stopped offering the side-agreement program in New York after the probe started. Under a DFS consent order, Applied won’t offer any equivalent side agreements and will file any future products with the department for approval. In addition, Applied won’t enforce any arbitration provisions in contracts with New York employers.

The fine comes as a sale of Applied Underwriters, which is owned by Berkshire Hathaway, is pending. The agreement with DFS removes a possible obstacle to approval of the sale by the state of New York, Applied said through a spokesman.

The New York Post reported last month that the Applied Underwriters buyer was Bahamas-based United Insurance Co., which planned to acquire Berkshire’s 81% stake in the company, along with shares of the company owned by two executives. The Post cited a filing with the California Department of Insurance as the source of its information.

The Applied Underwriters spokesman said on Thursday that the Post’s report was inaccurate and incomplete, but he declined to provide information on the buyer.

A quarterly filing provided by CDI stated that Berkshire Hathaway entered into a stock purchase agreement this year with United Insurance Co. to sell its 81% interest in AU Holding Co., the parent company of Applied Underwriters, and that United had also agreed to acquire Sidney Ferenc’s 7.5% interest in AUH. The stock purchase agreements were assigned to Steven Menzies, who owns 11.5% of the company, according to the filing.

Berkshire Hathaway confirmed in February that it was selling Applied Underwriters, saying at the time that part of the reason for the sale is that AU competes with other workers’ comp insurance companies that Berkshire Hathaway fully owns. A spokesman wouldn’t comment at the time on whether controversy over Applied’s EquityComp program contributed to the decision.

Regulators in New Jersey have also been investigating Applied Underwriters, the New York Business Journal reported. Regulators allege that the company “marketed and sold an unapproved workers’ compensation program with impermissible retrospective rating,” according to a New Jersey Department of Banking and Insurance filing.

Applied Underwriters declined to comment Thursday on whether states other than New York were investigating its EquityComp program, or to say in which states the company still offers the program.

The Applied Underwriters website continues to list EquityComp as one of its programs, “designed for companies with premiums in excess of $250,000 that seek flexible risk financing.”