Archive for November, 2007

Risky Business

Thursday, November 8th, 2007

Cavalcade of Risk is up, hosted by MyWealthBuilder. It’s a delectable potpourri ranging from personal risk (auto and health insurance choices, avoiding Alzheimers through diet) to global issues (a history of the subprime mortgage mess). The wide ranging subject matter reminds us that risk management is something we all do, every day, even if we limit our thinking to professional implications. This week’s Cavalcade is fun and informative – well worth checking out.

Late for Work: When Does It Really Matter?

Wednesday, November 7th, 2007

For 17 years, Tommy Holly worked for Clairson Industries, a plastic injection molding company, as a mold polisher. At age 20, Tommy was in a motorcycle accident which left him a paraplegic. Despite the disability, Tommy established himself as an excellent employee. His job reviews were consistently positive. He was neat, meticulous and well organized. He had one problem: because he was wheelchair bound, he was often late for work. Sometimes the corridors inside the plant were blocked by pallets; sometimes the rain slowed his exit from his vehicle; and on rare occasions, bowel problems sent him back to his home for a change of clothes. Usually his lateness was no more than a minute or two and had no impact at all on his evaluations.
Long into his tenure, the company hired a new personnel director with the intriguing name of Cloteen Kilkelly (scroll down this site for her photo). Cloteen eventually rose to company president (it’s not just cream that rises, as you will soon see). Cloteen implemented a new “no fault” tardiness procedure. Whenever employees clocked in late for the shift – with late defined as one second or more! – they were charged with “half an occurrence.” After 9 occurrences, the employee was terminated. By “no fault” Clo (let’s get informal) meant that no excuses were allowed. Late is late. Needless to add, arriving promptly for the shift was defined as an “essential” component of every job.
Even though Tommy had a problem clocking in on time, he made up his admittedly frequent tardiness without fail on the same day it took place. Tommy would skip his break, work through lunch and work past the end of the shift, as needed. In addition, his job was not on the assembly line, where his tardiness might impact the ability of others to perform their work. Promptness to the nearest second might possibly have been an “essential function” for assembly line workers, but it was marginal for Tommy.
You can surely see where this is going. Tommy hit the 18 incident mark, tipping the scale at 9 occurrences. With no excuses tolerated, he was terminated. For the record, the cumulative late time was one hour and 13 minutes – all made up, as we noted, on the same day.
A Plaque for Clo?
When Tommy filed suit under the ADA, the case was dismissed under summary judgment by the Florida’s central district court, which found that he was unable to perform an essential function of the job (getting to work at the precise start of the shift). The court accepted Clairson’s contention that such promptness was an “essential function” of the job. Shame on the court for jumping to conclusions.
The appeals court over-ruled the summary judgment and remanded the case for further consideration. Tommy is going to win this case. It’s a no brainer. He is certainly disabled. He was able to perform the job with a no-cost accommodation that required very little from the employer. The accommodation would have no impact on the company’s ability to perform the essential work in a timely manner.
The most puzzling part of this sad tale is the obtuseness of the employer. They had a highly skilled and motivated worker. Tommy had proven over the course of 17 years that he could perform the job extremely well. Good workers like Tommy are hard to find. Instead of recognizing his unique circumstances and accommodating his obvious disability, the company stood behind a rigid, ill-conceived personnel policy – one that is punitive for every worker, not just someone with a disability. Clairson’s tardiness policy – and their unwillingness to accommodate Tommy Holly – merit a “worst practice” plaque on the Insider’s Management Wall of Shame.

Cold comfort: Crandall Canyon survivors and workers comp

Tuesday, November 6th, 2007

Lee Davidson of Salt Lake City’s Deseret Morning News looks at the workers’ compensation benefits that will be paid to survivors of the Crandall Canyon Mine disaster, asking, “How much is a miner’s life worth?” The article illustrates several realities about the workers comp system: it was neither designed as a mechanism to make an injured worker (or his or her survivors) whole, if any measure can indeed ever make someone whole after a serious injury or death; nor was it designed as an enforcement measure to ensure compliance with safety standards. Rather, it is a no-fault social insurance that serves as a safety net in the event of a work-related injury, illness, or death. But because it is the “exclusive remedy” in work-related occurrences – meaning that the employee cannot sue the employer – sometimes it doesn’t seem to be a sufficient remedy, particularly when matters involve multiple deaths and real or perceived flouting of safety standards. And as Davidson points out, benefits pale in comparison to those awarded in many civil suits. On the other hand, there is certainty and immediacy to the benefits, rather than the uncertainty, waiting, and burden of proof involved with litigation – that’s the trade off. It may not seem equitable in every individual case, but in the aggregate, it is a system that has worked well for nearly a century.
Some state laws do allow for exceptions to exclusive remedy in cases of employer or insurer misconduct, although the bar is pretty high. One such reason under many state laws would be if willful intent could be established, but this generally requires establishing a standard of intent that goes beyond recklessness. By the same token, while no-fault generally extends to workers, there are exceptions that may result in denial of benefits, such as intoxication. The bar for these exclusions can be pretty high, too – we recently discussed an Ohio case of a teen worker at Kentucky Fried Chicken, in which benefits were upheld despite violation of company safety rules. In some states, such as Arizona, even intoxication is insufficient reason to deny benefits. Exceptions notwithstanding, workers comp is no-fault in nature. Occasionally, suit can be brought against a third party, such as a manufacturer of faulty equipment that resulted in the accident. This is called subrogation and is often initiated by an insurer or employer to recoup costs.
Is the stick big enough?
The article also raises the issue of whether the financial cost to employers is sufficient to ensure concern for safety. Workers comp has two pricing mechanisms to address the cost of risk. One, as the article points out, is that rates vary depending on the specific industry and job classification. Obviously, the risk for a clerical worker at an ad agency is not the same as the risk for a construction worker. Industries with high rates of injuries, such as roofers and miners, pay substantially more for comp. Secondly, a company’s unique loss experience is factored into the rates just the way that it is in auto insurance for most drivers. An employer with poor loss experience will pay a significantly higher rate than a competitor with favorable loss experience. But beyond pricing for loss, workers comp generally does not encompass any penalties or damages for safety violations. Penalties would be the province of OSHA, or in this case, the Mine Health & Safety Administration (MHSA).
Certainly, a case could be made that that regulatory actions need to carry more weight – Crandall Mines had many prior citations, but apparently of insufficient magnitude to effect a change. In the case of mining, many think this is a fox guarding the hen house scenario. There is no disputing that many OSHA fines are little more than slaps on the wrist to large corporations and some serial safety violators. Often, media will report on the imposition of a fine but won’t follow up to see the frequency with which federal penalties get reduced or go unpaid entirely. Obviously, to have a deterrent effect, measures need to have strong teeth. For example, criminal penalties for serial safety violations that result in deaths might be warranted. We like incentive programs that align interests, but recognize that sometimes you need to carry a big stick.
In most instances, workers comp does the job that it was intended to do, but in some instances, it does not seem sufficient or fair. The regulatory and legal hair splitting in this post certainly offer cold comfort to survivors. We would hope that events of this nature might serve as a catalyst for more and better safety, but that is what we hoped for after tragedies in West Virginia, too.

New York Border Wars?

Monday, November 5th, 2007

We have been tracking the new insurance requirements in New York (blogs here and here). It is no longer sufficient for out of state comp policies to list New York under “other states” coverage (section 3C). If employees from out of state want to work in the Empire State, New York must be listed specifically under 3A of the policy. That is a huge logistical problem, especially for the states bordering New York, where employees routinely cross state lines in the course of doing business. It’s an even bigger problem for out-of-state carriers who lack a New York license. They cannot list New York on their policies.
The Governor’s office has been working with the Workers Comp board to clarify the requirements. Well, that’s what they say they’ve been doing, but all the Insider sees are increasingly muddied waters. At this point, insurers and agents are basically on their own. If they have a specific question about where coverage is required, they can write to the board. The Board will try to provide an answer, but the answer itself will not be published to benefit others. In other words, each case will be reviewed on its merits. Kind of like the way New York manages comp claims, with heavy-handed judicial review for every tiny step in the process. It’s cumbersome, it’s expensive and it’s remarkably ineffective. At this point the state seems to be conveying a New York-style message to out-of-state carriers, agents and businesses: “If you don’t like it, work somewhere else!”
A Modest (Legislative) Proposal
Attempts to stir up New York employers (and unions) to support their colleages in other states have failed dramatically. New York employers see this as someone else’s problem. So here’s a modest proposal: let’s take up the legislative cudgel in New Jersey, Pennsylvania, Vermont, Massachusetts and Connecticut. Each of these states can pass a law requiring that all New York companies doing business in the states name them in Section 3A of their comp policies. Call it “tit for tat.” I suspect that once New York employers (and their carriers) feel the heat and the unreasonableness of this requirment, they will lobby for changes in the proverbial “New York minute.”
In the meantime, new Board Chair Zach Weiss will have his hands full. His office is about to be bombarded with requests for clarification from carriers and employers around the country. He didn’t write the law, but he is now responsible for implementing it. Good luck to him and to everyone else stuck with the consequences of this well intentioned but ill-conceived law.

No “Trick or Treat” for Health Wonks

Thursday, November 1st, 2007

The “anti-Halloween” edition of Health Wonk Review is up, hosted by Hank Stern at Insureblog. It’s truly amazing. If you’ve never sampled this pot-pourri of health-related blogs, now is the time. It doesn’t get any better than this witches’s brew of historic events and contemporary thought. Bravo, Hank. (And no, I did not know that it was on this day in 1512 that the Sistine Chapel first opened to visitors. Michaelangelo painted this entire masterpiece in an ergonomically compromised position, flat on his back. No way he could get away with that today!)