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March 2011

Mar 01
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FOUR WAYS TO STOP EMPLOYEE EMOTIONAL DISTRESS CLAIMS

By Workplace Safety

A trucking company told one of its drivers that it would replace him if he refused to accept certain assignments. These assignments required him to violate federal regulations that limit the number of hours he could drive in a given period. When this came to light, the company fired him for violating regulations. His job loss caused him such severe anxiety that he needed medical attention. He later sued his former employer for infliction of emotional distress; a court awarded him $300,000.

As this case illustrates, indifference to employees’ emotional well-being can cost employers hefty penalties. What is a valid emotional distress claim? How serious must an incident be to qualify? And what can employers do to stop these claims from happening?

Emotional distress claims often accompany discrimination claims. For example, a worker who claims that the employer discriminated against him because of his race may also seek damages for emotional distress resulting from the alleged discrimination. They can also occur in conjunction with wrongful discharge suits, such as the one involving the truck driver. Courts will not hold employers liable for just any workplace incidents that upset employees. Rather, emotional distress claims must meet several requirements:

  • The employer’s actions must be intentional or reckless. In the case of the truck driver, the employer knowingly gave him assignments that forced him to exceed legal limits on driving time, then fired him for following orders. An employer might demote an employee because of his age, in the belief that younger workers will perform better. Another example is an employer denying promotion opportunities for female employees because men have traditionally held those jobs. These are all intentional acts; the trucking company’s acts might have been reckless.
  • The employer’s conduct must be extreme or outrageous. Some conduct is bad enough to strike an ordinary, reasonable person as meeting these descriptions. Such a person might find the trucking company’s firing of an employee for doing what he was told to be outrageous. Harassing, disciplining or firing a worker for participating in union organizing activities is illegal and might impress a jury as outrageous conduct.
  • There must be a direct connection between the employer’s actions and the employee’s mental distress. If the worker was emotionally healthy prior to the incident and suffering from anxiety after, the court is likely to find that the employer caused the injury. However, if the employee had other external situations occurring at the same time (death in the family, illness, divorce, etc.), the employer could plausibly argue that the distress resulted at least partly from these other factors. The court might find the employer only partly to blame or dismiss the claim entirely.
  • The employee must suffer severe emotional distress. Merely being upset about a bad day at work is not sufficient. The distress must be severe enough to require psychiatric or medical attention. An employee who felt sad for a few days after a chewing-out from his boss probably does not have a valid claim. One whose doctor admitted him to the hospital for observation and treatment probably does.

Employers can avoid emotional distress claims by clearly informing supervisors that they will not tolerate discriminatory or harassing behavior. They should also provide safe means for employees to report these types of incidents. They should keep employees’ health status in mind when making adverse employment decisions, as those suffering from serious illness are vulnerable to emotional distress. Finally, they should make all adverse employment decisions carefully and base them on valid business reasons. Taking these steps will makes these claims less likely, reduce workers’ compensation costs, and hold down employment practices liability insurance premiums.

Mar 01
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DON’T LET POOR WORKPLACE ENVIRONMENT QUALITY MAKE YOUR EMPLOYEES SICK

By Workplace Safety

Workplace conditions have a substantial impact on employee performance. By workplace conditions, we aren’t just referring to an employee having the opportunity to advance, being recognized for a job well done, or salary or benefit offerings. Believe it or not, the quality of the air in the workplace has just a substantial impact as all of the above. Most have already heard the term sick building syndrome (SBS) being used to describe situations where occupants of a particular building experience health and comfort effects from spending time in the building. However, employers have just recently begun to realize the extent to which a sick building can effect employee output.

What Causes Air Quality Problems In The Work Environment? Every environment has a unique combination of external and internal factors. So, what causes problems in your neighboring business isn’t necessarily what’s causing problems in your business. Knowing this, each environment must be evaluated to determine what combination of factors is present in any particular building.

One factor that has received a great deal of attention from the media lately is chemical contaminants. The consequences of chemical contaminants are sometimes fatal. This type of contaminant enters the air one of two ways – off gassing occurring from the internal operation of equipment or machinery or from the contaminants found in chemical products like pesticides and fertilizers being blown inside the building. In either case, these contaminants are likely to accumulate in the environment and cause health effects if there isn’t an adequate supply of circulating fresh air.

Contaminants caused by fungi, mold, or bacteria are also concerns. Building fungi and bacteria are often the result of carelessness and are usually discovered during routine site inspections. If the environment is hospitable, fungi and bacteria begin to grow very quickly. They are commonly found in places like a wastebasket containing food, a poorly or infrequently cleaned coffeepot, or filthy staff break room. All of these sites of contamination can quickly add up and become a major problem. On the other hand, mold is an altogether different issue. It’s more often uncovered through a professional inspection and requires professional removal.

The detrimental effects of poor air quality can spread rapidly. Resolutions should be initiated immediately after the source of contamination is identified. Of course, it’s best to prevent the contaminants from becoming an issue in the first place. According to The National Institute of Occupational Safety and Health, the following steps can be helpful to maintain good air quality in your building:

  • While the HVAC isn’t running, the condensation pan should be inspected and cleaned of debris. A solution of 1% to 5% sodium hydrochloride can be used to sanitize the condensation pan. Rinse the pan with clear water.
  • Some HVAC units with rooftop outdoor air intakes might need to have a bird screen installed. The installer of your unit can usually tell you if this is a necessary step. If so, it should be inspected monthly.
  • Make sure that all rooftop exhaust fans are within operational guidelines. If not, they should be immediately replaced or repaired.
  • Since a leaky air filter can decrease the effectiveness of the filter, it should always fit tightly within its rack and not have any open spaces or gaps.
  • Routinely inspect intake air vents. Negative pressure could occur if the exhaust fans are operational and the air vents are blocked. This can cause the HVAC system to become imbalanced and produce moister untempered air. The end result is moisture control problems.
  • Routinely clean any accumulated dust from the fan coil unit and fiberglass liner. If the fiberglass liner has deteriorated, has turned black, or is otherwise soiled, then it should be replaced.
  • Prior to turning the HVAC system on, you should properly exhaust the building. Any warm and humid air that has accumulated during non-operational hours can condense when it’s mixed with the cool air from the air conditioner. The added moisture from condensing might create a rain forest effect.
Mar 01
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CONSUMER-DIRECTED PLAN GROWTH CONTINUED IN 2010

By Employment Resources

Results of a recent survey show that 12.4% of all U.S. employees with insurance are covered by consumer-directed health plans (CDHP). Although at a slower rate than was seen in 2009, CDHP’s have continued to steadily grow thus far in 2010. The UBA Health Plan survey, by United Benefit Advisors, obtained health plan data from 11,413 employers and 17,113 plans during the October 1, 2009 through June 4, 2010 survey. The survey solely focused on retiree and active health plans and directly related benefits.

The UBA survey is rather unique in that the survey provides not only data relevant to and from larger companies, but a proportionate amount of mid-size to small businesses. The UBA data was compiled with the purpose of supplying relevant, comparative, and factual health plan benchmarks to aid employers of all geographic areas, sizes, industries, etc. in making critical benefit decisions for their businesses.

The survey found that CDHP’s grew at an 18.1% clip in 2010, roughly half of trend reported in 2009. One reason for the slower growth rate was early year employer uncertainty if consumer-directed plans would be restricted by U.S. health care reform. When the healthcare reform legislation was enacted, it ended up not directly addressing health reimbursement arrangements (HRA) or health savings accounts (HSA) use, aside from increasing non-qualified HSA distribution penalties (after December 31, 2010) from 10% to 20% of withdrawn money.

UBA Health Plan Survey Key and Highlighted Findings

  • Preferred-provider plans (PPO) provided health coverage to 65.7% of all 2010 insured U.S. employees. Health maintenance organizations (HMO) provided coverage to 15.4% of employees. The rest were covered under CDHPs.
  • The average 2010 cost increase for all plan types was 8%, with that of CDHPs being 7.3%.
  • The largest geographical concentration of CDHPs was in the Northeast U.S. region at 26.7%. The second largest geographical concentration was in the Southeast U.S. region at 22.9%.
  • Eighty one percent of all CDHP plans in the Northeast U.S. region contained 100% co-insurance.
  • For a single employee, the average employee contribution to an HRA was $1,310 in 2009 vs. $1,481 in 2010. For a family, the average employee contribution was $2,502 in 2009 vs. $2,857 in 2010.
  • The average employee contributed $113.00 towards single coverage and $443.00 for family coverage across all plan types.
Mar 01
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DON’T MAKE THE MISTAKE OF ONLY LOOKING AT COST WHEN EVALUATING NEW HEALTH PLAN CARRIERS

By Employment Resources

Over recent years, at least from a percentage standpoint, health plan costs continue to rise substantially. These hikes and the continued premium increases are simply more than many businesses are able or willing to absorb. This conundrum leaves many employers trying to decide if they should pass on part or all of the increased cost to their employees, cutback on benefits, or seek a different carrier offering a more cost-effective plan. If leaning toward the third option, remember that many factors go into evaluating and vetting potential carriers. Even when considering a health insurance carrier change due to being dissatisfied with customer service, record of claim payment, or services offered by your current carrier, employers should carefully evaluate potential new carriers before jumping aboard. Here are 10 key questions that you might want to ask when evaluating and vetting potential carriers:

  1. Is the carrier financially stable and licensed? Insurance rating services and your state insurance commission can help you determine many of these important stability issues.
  2. Does the carrier only issue coverage under the stipulation that a certain number or percentage of your employees enroll?
  3. How does the carrier set their premium rates and allocation of premium cost among claims, commissions, and administrative expenses or fees?
  4. Does the carrier have a sufficient range of providers and locations in their provider network and how many employees will have to make a provider change under the potential new carrier’s provider network? Employees often cite having to change from their current provider or usual hospital and having to pay more to continue with their current provider as the most disruptive elements of a carrier change.
  5. Does the carrier have a positive reputation when it comes to the accuracy and efficiency of claim payments? It’s important to ensure that the carrier has a positive history since employee dissatisfaction in this area can really hurt you during the renewal period. As far as overall reputation, it might be helpful to ask the carrier to provide you with references from customers with a similar sized, located, and niche business.
  6. Does the carrier offer a choice when it comes to plan options like co-payments and deductibles? Choice is important to employees and raises the likelihood of their satisfaction with the plan. It can also result in substantial cost savings, as some employees will opt for cheaper high co-payment and deductible options.
  7. Does the carrier offer plans with preventive screening and wellness programs? Services like these can be a cost saver in many areas, even extending into increased employee productivity and decreased employee absences.
  8. What technology does the carrier use to facilitate ease of access to plan information and, if that portal doesn’t provide sufficient information, is there a real person accessible to address the issue? Having such can save you money and time by cutting down on the calls participants make to your human resource department to have their coverage or claim questions answered.
  9. What steps does the carrier implement to control cost and waste and ensure appropriate care? You might use quality indicators, such as those under the Healthcare Effectiveness Data and Information Set (HEDIS), to determine the performance and effectiveness of a plan on issues like how the plan responds to complaints or access to medical specialists.
  10. What is the carrier’s definition of key contract provisions, such as dependents, usual and customary, coordination of benefits, and covered employees, and what are the caps, exclusions, and limitations on services? Of course, none of the above should seem extreme. It’s also important that the provisions reflect the unique needs of your work force.

As you evaluate carriers and plans, you’ll be glad that you didn’t just look at cost. The above questions will help you get started weighing cost and coverage with the carrier’s stability, reputation, and responsiveness to determine the best carrier and plan for your business.

Mar 01
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PROTECTING THE LIFE OF YOUR BUSINESS WITH A BUY-SELL AGREEMENT

By Employment Resources

You and your business partner or partners have a clear and common vision of how to run your business, where it’s going, and how it’s going to get there. As a team, you’ve worked together each and every day to share the daily demands and shape the success of your business. That said, have you thought about what would become of the business and all your hard work if you or one of your partners became ill, was injured, or died?

A business doesn’t have to become disabled or die just because one of the owners retires, dies, or becomes too sick or disabled to work. Whether the transition of business management or ownership needs to take place after death or during life, it can be orderly accomplished through appropriate business succession planning.

A buy-sell agreement is a tool commonly used in business succession planning. This planning feature, when correctly funded and designed, can orderly establish the value at which the business will be taken over and who will be doing the taking over. The owner can have a peace of mind from knowing that the business has a predetermined basis for which it can be sold in a ready market, thereby giving the owner a source of funds when they need it, such as when they are ready to retire. If the owner was to die prior to the above predetermined basis occurring, then the buy-sell can be used to meet the survivor’s needs or pay hefty estate taxes.

Although there are several ways that a buy-sell agreement can be established, an entity purchase agreement and cross purchase are the two most often used:

Cross Purchase

Due to favorable tax results, this is a highly used approach by many small businesses. It’s generally used by businesses that only have a small number of owners. The cross purchase is typically funded with a life and/or disability insurance policy that each of the owners must maintain on their co-owners. The death benefits from the life insurance policy aren’t subject to taxation since the owners, not the business, actually own the individual life insurance policies. Each of the business owners are legally obligated to purchase the ownership interest of the other co-owner(s) upon death. The deceased owner’s estate sells the owner’s interest to the surviving owners in exchange for the proceeds from the life insurance policy. The surviving owners will get a step-up in the business’s tax basis. Alternatively, the insurance cash value can also be used if one of the co-owners was to need to fund a buyout during their lifetime. One point to remember regarding a cross purchase is that administration is smoothest when there are only a limited number of owners and will become increasingly difficult to administer as the number of owners increase.

Entity Purchase Agreement

This type of buy-sell agreement works somewhat like the cross purchase, but it’s the business, not the owners, that will maintain an insurance policy on each owner and agree to purchase any deceased owner’s interest in the business. As such, the taxation is different.

The death benefits under both an entity purchase and cross purchase agreement, whether being paid to the business or an individual, are exempt from federal income taxation. However, unlike with the cross purchase, there are certain situations that a C corporation can be subject to the corporate alternative minimum tax under an entity purchase. There’s also not a step-up in basis under the entity purchase plan.

Hopefully this brief overview of the entity purchase and cross purchase types of buy-sell agreements has spurred you to think about how vitally important business succession planning is to your business. Of course, this short article couldn’t possibly cover all the factors to consider when developing a business succession plan. As you begin the preparations for you business succession plan with your attorney, accountant, and insurance agent, they should be able to answer any additional questions or concerns you might have.

Mar 01
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THREE STRATEGIES FOR IMPROVING YOUR SAFETY CULTURE

By Risk Management Bulletin

Developing an effective safety culture is something we all seek to achieve. Dr. Earl Blair of Indiana University has tapped into his extensive reading and experience in facilitating labor-management safety-related negotiations to develop these key strategies:

Strategy #1: Work toward a 100% reporting culture

Focus on developing openness in reporting injuries and “near misses,” as well as encouraging workers to identify and report unsafe conditions.

Don’t insult employees with such slogans as, “All injuries are preventable” and “No injuries are acceptable.” Although there’s nothing wrong with a vision of no workplace accidents, avoid evangelizing – most employees don’t believe in this approach, making it counterproductive. Blair cites examples of underreporting based on fear of retaliation adding that these slogans focus on the downstream (injuries), don’t give workers specifics on how to improve, and are often nothing more than “feel good” catch phrases for management.

To develop a 100% reporting culture based on employee trust, management needs to make reporting easy, ensure anonymity (wherever possible) and take high profile follow-up actions – employees need to know that they’ve been heard.

Strategy # 2: Develop safety awareness with meaningful safety rules

Too many companies have such voluminous and complex safety procedures that they’re “unknowable.” It makes sense to invite participation from workers in developing rules that are dynamic, practical and relevant, monitored and enforced, communicated effectively, and improved continually.

Strategy # 3—Help leaders understand how to act consistently in developing a safety culture

“Most CEOs are very bright people,” notes’ Blair, “but they don’t know how to lead in this area.” Safety professionals must help teach leaders how to develop the culture. Workplace safety is a multifaceted web of processes, systems, and people. The best solutions focus on observation: leading by walking around (LBWA) monitoring the workplace, and, most importantly, listening to workers.

Blair’s conclusion: “Developing a safety culture isn’t rocket science – it’s far more complex than that.”

Mar 01
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NAPPING AT WORK? YOU’RE NOT DREAMING

By Risk Management Bulletin

The days of the eight-hour night’s sleep are gone for millions of working Americans. However, getting six hours or less of shut-eye just isn’t enough for most people to function well and safely on the job.

Losing sleep causes an array of health, safety, and productivity problems in the workplace. According to University of California, San Diego Professor Sara Mednick, a strategic nap is not only restorative, but can also make workers safer and more productive. Mednick, the author of Take a Nap! Change Your Life, says a 20-minute doze resets the system and offers a burst of alertness and increased motor performance.

In contrast to caffeine, studies have shown that naps improve both alertness and cognitive abilities without interfering with nighttime sleep. As with exercise, naps help the body and mind recharge.

More and more employers are finding that permitting employees to catch a few ZZZs while they’re on the clock “is good for business and incredibly lucrative in terms of productivity,” Mednick points out. Employers who offer nap breaks consider them affordable.

The benefits become even more significant for people in safety-sensitive jobs in which rest can stave off accidents and injuries. Mednick points to one study which found that in some cases doctors working long hours made 700% more errors due to fatigue than those who worked fewer hours. Napping is also especially important for people who work changing shifts and rarely get the recommended amount of daily sleep. Taking a brief nap before heading to work can benefit shift workers.

Many companies support workplace napping, including Nike, Google, Cisco Systems, and Ben & Jerry’s. Some offer a quiet room with a couch or special napping pods, while others let employees strap on noise-reducing headsets and nod off for a bit at their workstations.

Longer working hours, longer commutes, and less nighttime sleep are making make the case for workplace naps even more compelling. Says Mednick, “There’s no way we can do without sleep. Science has not found a way to replace it with a pill.”

Mar 01
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PROTECT YOUR BUSINESS AGAINST CYBER LIABILITY

By Risk Management Bulletin

Cyber crime struck more than four in 10 (43%) U.S. businesses in 2009 according to the Computer Security Institute’s Computer Crime and Security Survey.

The number of data security breaches in companies is growing exponentially as they rely more heavily on technology and the Internet. Every organization needs to protect its priceless data and develop ways to prevent breaches that can create hefty direct cleanup expenses – not to mention severely damaging customer trust and loyalty.

Legal protection against this threat remains spotty at best, because laws covering the protection and disclosure of confidential consumer information vary widely from state to state.

To make sure that you invest in technologies and policies that safeguard your confidential data, we’d recommend taking these precautions:

Enlist management in the fight against cyber crime. This responsibility extends far beyond the information technology department. Putting a top manager in charge of your cyber risk management will make all employees more likely to understand the problems involved and work to curb them.

Identify and quantify your vulnerability to cyber crime. Consider hiring a third-party expert to evaluate your exposure to cyber risks and the potential financial impact of a breach. This specialist should provide answers to such questions as:

  • Is the firm retaining any private data about clients, vendors or employees?
  • What’s the best way to evaluate the costs and benefits of additional IT loss-prevention expenditures?
  • Should we buy Cyber Risk insurance?

Get your HR team involved. Implement cyber security processes in every area of the business, including the HR department. As the driver of company culture, HR can help support and strengthen these procedures. Because the lines between employees’ personal conduct and their business conduct — during business hours — can be unclear, HR must define and communicate the company’s privacy policy, as well as rules and requirements regarding employee use of the Internet and social networking sites as public forums.

Because security breaches usually occur both in areas of the organization generally considered to have adequate security protocols — and in unanticipated areas — it makes sense to carry Cyber Risk coverage. A number of quality insurance companies remain committed to this market. Although there’s no replacement for sound risk management, a comprehensive insurance policy can provide a solid last line of defense.

Our risk management professionals would be happy to help you find the coverage that can help protect your business. Just call or e-mail us.

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