Archive for January, 2005

Poppy Seeds and Drug Testing: False Positives?

Tuesday, January 11th, 2005

Many employers are aggressively testing job applicants and employees for drug use. According to a brief article in today’s New York Times (registration required), it is now scientifically proven that poppy seeds can cause false positives for opiate abuse. Poppy seeds come from the same plant that produces heroin.
Arnahad O’Connor points out that “eating a couple of bagels heavily coated with poppy seeds can result in morphine in a person’s system for hours, leading a routine drug test to come back positive.” However, the amount of opiates in the bloodstream is far lower than if the individual is abusing pain killers. Indeed, you cannot get high, no matter how many bagels you eat! IN response to the issue of false positives, the federal government recently raised the threshold for opiates in workplace testing, to 2,000 nanograms a milliliter, up from 300. Under the new standard, eating three large poppy seed bagels could push a person over the 300 threshold, but not the 2000.
For a less serious take on this issue, we recommend the amusing summary in Straight Dope. And for the definitive history, check out According to this posting, written by Barbara Mikkelson, the issue began back in 1990, when a police officer was suspended for four months because his drug test showed positive for morphine. He had eaten four (!) poppy seed bagels the day before the urine sample was taken. He was subsequently reinstated with back pay after it was determined that poppy seeds — not drug use — had produced those results. (Let’s hope the officer received some nutrition counseling!)
Mikkelson also points out that furloughed prisoners from the federal prison system must agree in writing not to eat any products containing poppy seeds while in half-way houses or while on probation. I wonder if this requirement will be eliminated, given the above change in federal drug standards.
The utility and justice of drug testing is well beyond the scope of today’s blog. But it is worth noting that a poppy seeded bagel with cream cheese, or a nice slice of poppy seed cake, will no longer put your employment in jeopardy. Happy eating!

State WC news: RI, HI, CA

Monday, January 10th, 2005

Rhode Island: For the first time since 1998, RI workers comp rates will be reduced by 20.2 percent, slightly more than the NCCI recommendation of 18.3 percent, but less than the attorney general’s call for a 27.5 percent reduction.
Hawaii: The state Department of Labor and Industrial Relations is proposing regulatory changes for HI workers’ comp and hopes to bypass legislative hearings to get these administrative changes enacted. Some of the changes have to do with vocational rehabilitation, specifically in the area of treatment guidelines, and a limit on rehabilitation plan durations. Hawaii’s comp costs are high, and there are other changes that will need to be addressed legislatively, such as temporary disability limits and eligibility for physicians of record.
California: a press release from the Division of Workers’ Compensation indicates that new CA regulations for Independent Medical Reviews (IMEs) have been approved and physicians are encouraged to apply as medical reviewers.

Independent Contractors, Revisited

Sunday, January 9th, 2005

In a January 6, 2005 article in the Wall Street Journal (available to subscribers only — but accessible at the Teamsters website), Monica Langley outlines the working conditions of “independent contractors” who work for FedEx. They drive their own vehicles, but wear FedEx uniforms and adhere to FedEx policies. Their delivery schedules are sometimes set by FedEx — especially where commitments have been made to specific pick up and delivery times. FedEx says they are independent, because they can buy and sell their routes and they provide their own equipment, but clearly there is a significant question as to who “controls the work.”
As Langley reports, although there is no single formula for measuring control, a worker is likely to be considered an employee “if he or she works set hours, is required to follow instructions on how to do the job, receives training from the employer and works on the employer’s premises.”
FedEx may well have crossed a line by promising specific pickup or drop-off times to valued customers beyond the service guarantees normally offered by the company. By adhering to these schedules, “independent contractors” may not really be independent. Langley writes that one former driver complained that in his haste to meet the target “he regularly urinated in cups or old bottles in the back of his truck.” Yikes! You might want to wear plastic gloves when opening the package!
In California, New Jersey and Montana, courts have determined that Fed Ex’s “independent contractors” are in effect employees. These cases are under appeal. Meanwhile, there is a lot of money at stake. Langley writes that in its quarterly report to securities regulators last month, FedEx “disclosed the proceedings over FedEx Ground’s “owner-operators” for the first time and warned that they could “result in employment and withholding tax liability for FedEx Ground.” It said it couldn’t estimate the size of the potential liability.”
If the courts do in fact determine that the over 13,000 “independent” drivers are in fact employees, Fed Ex will be required to pay benefits, administer witholding and, most important from our perspective, provide workers’ compensation benefits for these people. That would be a lot of payroll and a lot of workers’ comp. And it could well be retroactive. I wonder how many independent contractors have been disabled by work-related accidents or injuries in this fast-paced industry. They would surely welcome an opportunity to collect the comp benefits available only to “employees.”
We have blogged the intriquing area of “independent contractors” before and we will surely do it again. It’s not going away. From our perspective, true independence rightfully requires people to carry their own insurance. Independent contractors, by definition, are not “part of the work team.” But this situation appears to involve an area where these contractors waddle like FedEx employee ducks and quack like them, too. If indeed they are “ducks”, they deserve all the consideration and benefits of the thousands of people who are currently part of the FedEx team. If, in turn, this becomes a cost of doing business that must be borne by the customers, so be it.

Trends and issues at the start of a new year

Thursday, January 6th, 2005

As we embark on the new year, many weblogs and business publications have been recapping 2004 or making predictions for the coming year. Here are a few we’ve noted.
George’s Employment Blawg suggests that a good way for employers to begin the new year is to update the employee handbook and offers some tips for key areas to address.
Rough Notes offers a looks ahead to the insurance market in an article entitled Analysts foresee bottom-line woes for insurers in

The Basics of Experience Rating, Part Two: When Do Losses Really Count?

Tuesday, January 4th, 2005

In our previous blog on experience rating, we discussed the disproportionate impact that frequency has on an employer’s workers’ compensation premiums. The first $5,000 of each claim (primary losses) are counted dollar for dollar in the calculation of the “mod.” Losses above $5,000 are discounted substantially. Therefore, a lot of small claims can raise your premiums faster than a single large claim. Once again, for an excellent overview of experience rating, we recommend NCCI’s white paper.
When are the numbers actually crunched to determine an employer’s premium? Do employers have to obsess about reserves throughout the policy year or is there an optimum time to review losses?
When it comes to determining the experience rating for your next policy year, there is only one day that really counts. About six months after the end of your policy year, a summary of your losses (the unit stat report) is prepared by your insurance carrier(s) and submitted to your rating bureau. For employers with open claims in prior years, it is essential to make sure that the numbers contained in the unit stat report are accurate and reflect an up-to-date understanding of the status of each open claim.
When Should you Look at Losses
So when should an employer review open claims? If your company has more than a half dozen open claims, you should review the losses at least quarterly. Request a loss run from your carrier (your agent can help with this). Go over each open claim with the claim adjuster, to make sure that you have a clear and effective strategy to achieve closure. Ideally, you are working with the adjuster to return the employee to full or modified duty. If, on the other hand, return to work appears unlikely, you should be working toward closure by settling the claim. In the world of insurance, “the only good claim is a closed claim.” This quarterly review process ensures that you have an appropriate focus on every open claim.
For employers with just a handful of open claims, quarterly reviews are usually not necessary. At a minimum, request a loss run three months after the end of your policy year. This gives you plenty of time to review the status of each open claim and take action toward resolution. You have fully three months to impact reserves prior to the submission of that all-important unit stat report.
“Aggravated Inequity”
There may be times when a claim is closed after the unit stat report has already been submitted, but still prior to the beginning of the next policy year. If the claim closes at least 25% below the prior reserved level, you are entitled to a recalculation of your experience rating under the “aggravated inequity” rule. This rule, containing a deliciously inexplicable name, applies only if the claim is closed. If the reserves are reduced but the claim remains open, you are not entitled to a recalculation. All of which brings us back to our primary point: make sure you are comfortable with the reserves three months prior to the submission of the unit stat report.
Savvy managers don’t have to spend every waking moment worried about reserve levels for open claims. There is that one time of year, however, when a laser-like focus on open claims can be very helpful in controlling losses. Make note of your policy end date, move forward three months, and place a post-in in your calendar to review your loss runs. You will be taking action just ahead of that one crucial moment when reserves really count.

West Virginia revokes 400 business licenses for defaulted workers compensation premiums

Monday, January 3rd, 2005

The West Virginia Department of Tax and Revenue, in conjunction with the Workers Compensation Commission (WCC), has revoked the business licenses of 400 employers that owe $2.4 million in workers’ comp premiums, interest, and penalties. West Virginia is one of 6 states with an exclusive state fund – in other words, WCC is the sole provider of workers compensation coverage in the state. According to recent news, WCC has more than $3 billion in unfunded liabilities and the idea of privatizing the state fund is under consideration. The unfunded liabilities in the state