Posts Tagged ‘workers comp’

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Employee Misclassification: The Beat Goes On And On And On And…

Wednesday, July 8th, 2015

Bill Clinton used to say that (fill in the blank) would last “until the last dog dies.” Well, friends, today’s topic is all about a dog that won’t die, absolutely refuses to die, will outlive us all, cannot be killed. You get the point.

Eleven years ago (I almost feel like writing “in a galaxy far away”), the Insider started to track the illegal practice of misclassifying employees. We found that, while it was almost ubiquitous in the construction industry, its tentacles reached into other industries as well. We saw it as widespread right in our backyard of Massachusetts. We found a 2005 paper addressing the issue in the Maine construction industry published by the Labor and Worklife Program, Harvard Law School and the Harvard School of Public Health. We conducted employer seminars on it in many states.

At the time, we thought it was a pretty egregious practice that would be hard for state Attorneys General to ignore, so it would probably get fixed lickety split. We were half right. It was egregious, and Ags from the majority of states published stern regulations, as did state Departments of Insurance. But “fixed?” Nope.

Then, in 2005, a national class-action lawsuit with hundreds of plaintiffs from 30 states was filed against FedEx Ground alleging that workers were misclassified as independent contractors. This was mother’s milk to us. We had our bogeyman, and his name was Fedex. Since then, we’ve written about this Dorian Grey issue ten times. Here’s an example from 2006

FedEx loses contractor battle in Mass – Last year, my colleague Jon Coppelman blogged that FedEx should beware of Massachusetts when calling drivers “independent contractors.” Last week, the Massachusetts Department of Workforce Development ruled that a FedEx ground driver was not an independent contractor, and was therefore illegally denied unemployment benefits. Of course, this opens a can of worms about the denial of other statutory benefits, like workers comp. This is not the end of the lawsuits by any means. FedEx faces ongoing challenges in multiple states. The moral of the story: if you work with independent contractors, be sure they meet state and federal criteria to qualify as such.

Fast forward to now. Specifically, to Wall Street Journal writer Laura Weber’s 30 June story “Bosses Reclassify Workers To Cut Costs.” Ms. Weber’s story manages to be both objective reporting and poignant at the same time. Here’s an exccerpt:

Employers have long shifted work from employees to independent contractors, often relabeling the workers and slightly altering the conditions of their work, court documents and settlements indicate. Now, businesses are turning to other kinds of employment relationships, such as setting up workers as franchisees or owners of limited liability companies, which helps to shield businesses from tax and labor statutes.

In response, some state and federal agencies are aggressively clamping down on such arrangements, passing local legislation, filing briefs in workers’ own lawsuits, and closely tracking the spread of what they see as questionable employment models.

All this is happening against the backdrop of a broader shifting of risk from employers to workers, who shoulder an increasing share of responsibility for everything from health-insurance premiums to retirement income to job security. Alleged misclassification of workers has been one of the primary battlegrounds of this shift, leading to high-profile lawsuits against Uber Technologies Inc. and FedEx Corp., among others. Both have recently lost or settled big cases. Uber is appealing one decision, and FedEx settled in California for $228 million but is continuing to challenge classification lawsuits in other states.

Today I’m an employee; tomorrow I’m an Independent Contractor; the next day a Franchisee, or, oh, I don’t know, CEO of my own one-person LLC. Not only will the dog not die, his bark is really loud.

Very smart people are cooking up these schemes. I ask you – Do you think they are:

  • Bettering the lives of America’s workers?
  • Enhancing American productivity?
  • Propelling more workers into the ranks of the dwindling middle class?
  • Growing shareholder value?

I’d like to know what you think. Write me at tomlynch@lynchryan.com.

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The wacky world of workers comp

Friday, March 11th, 2011

We have to wonder if TV has really jumped the shark when we heard the premise of an upcoming sitcom today.
Now you’ve probably all been feeling slighted: there have been cop shows, doctor shows, teacher shows, even mortician shows – why the heck don’t claims adjusters and insurance agents ever get any love?
Relax, your prayers are answered: Morgan Fairchild to Star in Comedy Pilot Presentation ‘Workers Comp’. The show is being produced in Florida.
That scintillating topic of workers getting injured on the job, there’s a hilarious premise: Fraud hijinks! Injury pratfalls! Wacky claims! Processing snafus! Can’t wait to see it!
I guess this is as good a time as any to announce our new Hollywood division: “Lynch Ryan: Workers Comp Consultant to the Stars. ”
(Thanks for the tip go to Helen King Knight)

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Workers Comp Insider: 5 years and counting!

Tuesday, September 9th, 2008

Yay us! This month is our 5th year blogging anniversary so we were pleased to be named to Lexus-Nexus Top 25 Blogs for Workers Compensation — and to see a few of our esteemed colleagues on the list, too. We have to laugh because when we started, we weren’t sure we would find enough to post about to make it to year 2, let alone year 5. And back then, the business blogging landscape was pretty thin indeed, so we’d never have foreseen such a robust community emerging for such a niche topic.
You are reading post #934. In the 1680 days we’ve been keeping track, we’ve had 900,000 visits from 600,000 unique visitors. We generally have about 18 to 20 thousand visitors a month, and as would be expected, about 85% of our visitors come from the U.S., but Canada, the UK, and Australia also make a good showing. We’ve had visitors from about 200 countries, including some that challenged our geographic awareness: Kiribati? Burkina Faso? (sidetrack: how many countries can you name in 5 minutes?)
In honor of the event, we thought we’d dish up our top 15 all-time greatest hits. These posts reflect the most searched for topics, as well as the ones that you, our readers, have clicked on the most:

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Workers compensation and recessions

Wednesday, May 14th, 2008

Are we in or headed to a recession? Each of us might have our own opinions based on the industry we work in, the number of times we have to fill our gas tank during the week, and the area of the country where we live. According to the economic cognoscenti, the jury is still out – some industry insiders say yes while others disagree. At least some industries say they are in a recession and in a recent survey, nearly 80% of affluent Americans believe a recession has already hit the U.S.
What would a recession mean for workers compensation? A few weeks ago, Insurance Journal looked at the issue of recession and its impact on insurance as viewed by independent agents in various sections of the country, who offer commentary on both actual and anticipated effects. Some note that it is somewhat unusual to have a recession occurring in conjunction with a soft market. There isn’t much mention in the way of workers comp, except in terms of noting that declining payrolls lead to lower workers comp premiums. Some agents note that significant business curtailment has been in evidence in the housing and construction industry.
The past may be the best predictor of the the future. The Minnesota Department of Labor & Industry compiled a 2002 report on the effects of recession on workers comp as evidenced by various state studies.
Conventional wisdom points to a preliminary spike in claim frequency as employers reduce ranks – there is some anecdotal discussion about an increase in fraud, although most data doesn’t support that. Overall, during a recession the number of claims tends to decline – there are fewer workers, and those workers may be more timorous about filing claims, fearing job loss.
While frequency drops, severity tends to increase. Researchers in MA suggested this might be because businesses find it more difficult to provide light-duty work; also, due to the fact that because more experienced workers are retained, the average injury will be more severe. A California study also noted that recessions may add to claim severity by increasing the time it takes for a worker to find a job.
In a six-state study, researchers noted that “…recessions increase back-end cost drivers (i.e., increase the cost per claim) to a greater extent than they increase front-end cost drivers (i.e., increase the number of claims). They state that recessions are ‘characterized by increased use of the system, longer duration claims, and more frequent and larger lump-sum settlements.'”
Minnesota also reported in some detail on their own state’s experience with a workers comp during a recession, a report which our colleague Joe Paduda discussed at some length.
During a recession, employers should be doing what they should always be doing: preventing injuries from occurring, tightly managing any injuries that do occur, and helping injured workers to recover and return to work as expeditiously as possible. While there is always cause to keep an eye on things during any sudden shift in employment, the stories about an increase in fraud may be overblown. As the researchers in the Minnesota report note, boom times pose a greater risk for a rise in frequency as organizations experience a sudden influx of inexperienced workers.

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NCCI 2005 Issues Report – a look back, a look ahead

Wednesday, April 6th, 2005

Every spring, NCCI publishes a series of reports that paint a portrait of the workers compensation industry’s health. These include an annual “Issues Report,” followed later by a “State of the Line” report. For those of us who work in the industry, these reports offer a quick look of where we’ve been and provide a cookie trail for where we are likely headed. They are mandatory reading for industry insiders, but they are not just for insurance wonks. If there’s one drum we continually like to beat here at Workers Comp Insider, it’s that the more employers understand about the insurance industry, the better prepared they can be to weather any market vagaries.
The 2005 Issues Report has been released, and in his Annual Snapshot (PDF), executive director Stephen Klingel paints a good news/bad news scenario of a market in transition. Some of his observations include:
Insurer reserve deficiencies were reduced by approximately $5 billion dollars. Although improved, reserve deficiencies are still a problem. In workers comp, losses have the famous “long tail” – that is, they play out over years. Insurers set aside reserves for the estimated cost of the claim. If they don’t set aside adequate reserves, when it’s time to pay the piper, insurer insolvencies occur and havoc ensues. Insurer insolvencies still loom as a potential problem.
Medical costs – particularly prescription drug costs – are still galloping away. Wage replacement was always the largest share of lost time claim cost, but now medical costs represent 55% of the cost, on average. In some states – AL, AZ, IN, KY, TX, and WI – the cost approaches 70%.
Frequency continues to decline. That’s good news. It means that employers are doing a better job in the area of safety. NCCI reports “significant declines occurred in fatal, permanent total, and permanent partial claim frequency.” But on the flip side of the coin, severity is increasing. That means that the medical costs and/or the duration of claims are rising. Not so good.
Terrorism Risk Insurance Act (TRIA) uncertainty looms. The uncertainty about whether Congress will extend TRIA casts a pall over the industry. The clock is ticking, it is due to expire at the end of the year. TRIA provides a federal backstop or safety net for insurers in the event of any catastrophic events. Because workers comp is mandatory coverage, it is a line of insurance that is particularly exposed – insurers can’t exclude terrorism coverage when issuing policies.
The residual market is stabilizing. The residual market is sometimes called the assigned risk pool, or more familiarly, “the pool” or “the market of last resort,” while the rest of the market is known as the voluntary market. If you are an employer, you might get thrown in the pool for any of a number of reasons: your loss experience may be terrible or you may simply be in a high-risk industry. For one reason or another, no one wants to write your policy. NCCI reports that the residual market now represents about 13% of the total premiums, up from about 10.7% in 2003. However, the rate of growth for the residual market appears to be appears to be slowing.
NCCI

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The long tail of insolvencies: Colorado, New York employers face potential assessments

Tuesday, March 8th, 2005

Some employers in Colorado and New York are learning that the so-called long tail of workers comp has more than one meaning. In the wake of a multitude of insurer insolvencies in recent years, many state guaranty funds are buckling under the burden, and turning to employers to help pick up the pieces.
Like many other states, Colorado has been suffering the ill effects of insurer insolvencies. In recent years, at least 14 insurers have gone out of business. The 1971 demise of Reliance is the most prominent and most notorious example. The Colorado Insurance Guaranty Association has been paying claims for injured workers of the insolvent insurers, but the Association now faces more than $40 million in unfunded liabilities. To shore up the troubled fund and continue paying claimants, the Association has taken to a new tactic: billing 26 of Colorado’s larger employers more than $2 million.
… recently, employers have been surprised by letters announcing, in some cases, that they owe the association hundreds of thousands of dollars for claims that were paid. The association has had the power to recover money from large employers for more than 10 years, experts say, but few policyholders knew about it.
It has only been recently — within the last 18 months — the association has sought payment.
This comes as an unwelcome surprise to the employers who are being assessed. Employers are already contributing to the guaranty fund by way of a 2% surcharge on their premium.
This is a scenario that may soon be playing out in New York as well in the form of increased employer assessments. We recently posted an item about the dire straights of the Workers’ Compensation Security Fund. The Fund was scheduled for complete exhaustion as of the end of February leaving 7.500 injured workers in the lurch, but a deus ex machina in the form of an unexpected sum of cash from another state fund and from the liquidators of Home Insurance Co. bought a few weeks.
Among the proposals to shore up the Fund:
A doubling of assessments on some employers is part of the Pataki administration’s recommended solution to the impending bankruptcy of the Workers’ Compensation Security Fund, along with borrowing $50 million from another state insurance fund. Both are subject to approval by the state Legislature.
Colorado and New York aren’t alone, simply the two states that are in the headlines this week. Obviously these short-term fixes are band-aids at best, and injured workers and employers alike deserve more security and more protection from our industry.
For those of you interested in a more in-depth treatment of the issue of insurer insolvencies, here are two policy-orientated papers of note:
Managing the Cost of Property-Casualty Insurer Insolvencies in the U.S. (PDF) from the Center for Risk Management and Insurance Research, Georgia State University, December 2002. Note that one of the authors of this report is a fellow blogger, Martin Grace of RiskProf.
Managing Insurer Insolvency 2003 (PDF) prepared for the Foundation for Agency Management Excellence by Stewart Economics, Inc., September 2003.

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Free safety educational materials

Monday, January 17th, 2005

Some state workers compensation authorities have very robust educational materials and information on their websites, and from time to time, we will point to tools or resources that we find. Several states have state funds – that is, the state provides insurance to employers, either exclusively or on a competitive basis. One might expect a certain level of depth to the educational materials provided by state funds. Here are a few we’ve found:
Utah Workers Compensation Fund Safety Topics. More than 60 safety topics, many in both English and Spanish, are available in PDFs.
Ohio Bureau of Workers Compensation Safety Publications. More than 40 guides and manuals are available in PDFs.
Washington State Department of Labor and Industries has a variety of posters and safety guides available in PDFs. The site also offers some employee and employer training guides, including PowerPoint presentations.
Lousiana Workers Compensation Commission Safety Articles. More than 60 archived articles on various safety topics are available online.
A note of caution: workers compensation laws vary state to state, and while many of these materials are general in nature, certain materials may be state-specific.

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R.I. Court Holds Nightclub Owners Personally Liable

Thursday, August 19th, 2004

In a reversal of a prior Labor Department ruling, the Rhode Island Workers Compensation Court ruled that Michael and Jeff Derderian, owners of The Station nightclub, could be held personally liable for their failure to obtain workers compensation coverage for their employees. According to Insurance Journal:
“The ruling means that the brothers’ personal assets can be tapped to pay the more than $1 million fine levied against their company, Derco LLC, for not having the insurance in place when their nightclub burned, killing 100 people including four employees.
The ruling is under appeal. There is some legal wrangling going on about whether owners and managers of limited liability companies can be held personally responsible for fines and penalties. Suffice it to say that state authorities take a dim view of this type of employer fraud and penalties can be severe. Employers can be required to pay compensation plus a penalty for any injuries or deaths. Other penalties might include substantial fines or jail time. Also, because the employer has not held up their responsibilities under law, the “exclusive remedy” shield may be pierced, exposing the employer to civil suits.
Last week, we wrote about another case of on-the-job fatalities in Florida where the employer did not have workers compensation coverage. In this case, as they have done in other premium fraud cases, Florida authorities issued a stop work order, shutting the business down.
Many experts think that failure to secure workers compensation coverage may well be the largest single source of workers compensation fraud. And like all insurance fraud, it is often the honest insureds that pay the freight one way or another. In California, for example, caring for injured workers of uninsured employers costs the state almost $25 million a year. However, the parties that generally pay the steepest price for this type of fraud are the injured or deceased employees and their families.
More on this topic:
Workers’ Comp and the Station Nightclub – Workers Comp Insider archives, December 2003
Ohio Getting Tough on Premium Coverage – Workers Compensation archives, July 2004
Nolo’s Quick LLC: All You Need to Know About Limited Liabilities – Chapter 1 is available online

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Florida shuts down uninsured employer after two worker deaths

Thursday, August 5th, 2004

A few weeks ago, there was a horrific Florida construction accident that claimed the lives of two workers and injured several others. While laying concrete on the third floor of a new condominium complex, the roof collapsed. News reports of the accident were anguishing – many workers barely jumped to their safety, with others trapped by debris and hardening concrete, coworkers scrabbling frantically to save them. One man was trapped in concrete to his waist but managed to extricate himself before it hardened.
The following is an excerpt from a Florida Sun-Sentinel story after the accident:
“After the awful screeching of the collapsing luxury townhouse building, the first sounds Arturo Ruiz Gil heard were his co-workers’ cries for help.
The 20-year-old construction worker had just fallen 30 feet from the top of the building onto a wet concrete surface. Pushing aside the rubble, he managed to crawl out with his brother, Andres Ruiz Gil, and uncle, Valentin Ruiz, before the concrete hardened.
“We kneeled down, all three of us, and prayed to God and to the Virgin of Guadalupe to help us and help the ones who were trapped,” Andres Ruiz Gil, 19, said.
Two workers were killed and five were injured late Thursday afternoon when the third floor of the building under construction collapsed west of Hobe Sound. Another six construction workers at the Tranquility complex escaped injury, including a 13-year-old West Palm Beach boy.”
In the aftermath of the accident, the owner of Mac’s Construction and Concrete, the subcontracting company where the workers were employed, expressed regret calling the accident a “freak accident.”
Almost immediately, some unusual things were apparent. One of the workers who narrowly escaped injury was a 13 year-old boy, a potential violation of child labor laws. The subcontractor had a history of OSHA citations and fines. And more recently, it was learned that the subcontractor did not have workers compensation coverage for his employees as is mandated by law.
The state of Florida has recently been cracking down on just such employer fraud, and they stepped in slapping a stop work order on the construction subcontractor. (This linked story in Insurance Journal also has an interesting discussion from readers.) Under the law, the offending employer could be liable for fines of 1.5 times the amount of the coverage avoided a day in damages. Other fines and charges could be brought depending on the accident investigation. For example, most states are extremely strict in enforcing child labor laws.
This is a sad and terrible story for so many reasons. Rarely are fatal work accidents freak events – most could be prevented with adherence to safety rules and OSHA standards. It also echoes a shameful story we’ve addressed here before – the heightened vulnerability of Mexican workers whose on-the-job death rate is two to four times higher than other workers.
Related posts
Ohio Getting Tough on Premium Coverage
Dying at Work – Part I and Part II
Modern Day Slavery
More on immigrant workers
When Workers Die
Workers Comp and the Station Nightclub

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Top 10 reasons injured workers retain attorneys

Monday, July 26th, 2004

The Public Entity Risk Institute (PERI) has a wealth of resources on its site so we’ll be adding it to our sidebar under “organizations.” In digging through the site we came upon a symposium topic that was presented last December by Massachusetts plaintiff attorney Alan S. Pierce entitled Top Ten List as to Why Injured Workers Retain Attorneys. (pdf) The article presents a good overview of practices that are fairly guaranteed to drive an injured worker into the arms of an attorney – all from the perspective of an attorney who has seen his share of worker grievances. It’s instructive reading in how not to treat an employee who has been injured on the job. You can read his full remarks in the linked article, but here’s an overview of his top ten reasons:
1. Claim is denied
2. No contact by employer or insurer
3. Overbearing or intrusive contact by the employer
4. Bills unpaid, prescriptions unreimbursed
5. Lawyer advertising/solicitation
6. Advice of friends, family, or medical provider
7. Lack of modified duty work/employer harassment after return to work
8. Worker/employer dissatisfaction
9. Loss of health insurance; other benefits
10. The accident that never should have happened
PERI offers access to a wealth of other risk management articles and papers by industry experts from past symposiums, and while some are geared to topics that are specific to the needs of its member organizations, (e.g., fire departments) many cover general employer-related issues.

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