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NEWSLETTERS
NEWSLETTERS
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561-683-8383
December 2008 |
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In this issue
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Case Study: General contractor enjoys a Workers' Comp drop of $245,302 in just four years
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National trends in Workers Comp premiums changing |
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Q & A: Remuneration issues: overtime, salary adjustments, USERRA |
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Case Study: General contractor enjoys a Workers' Comp drop of $245,302 in just four years
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Insured
A commercial general contractor with 110 employees and revenue of $52 million in 2006 and 150 employees and revenue of $75 million in 2008.
Situation
A 62% Workers' Comp surcharge drove up the company's Experience Modification Factor to 1.12, costing them an additional premium of $185,000 per year. It also restricted the company from bidding work for large corporations that required a 1.00 or lower Experience Mod.
Assessment
The CWCAs review of the 2004-2005 Experience Mod work sheet, along with the loss data from the previous four years and the OSHA logs, revealed that the number and severity of claims was much higher than expected.
Solution
The CWCAs showed the general contractor how they were paying the insurance company $3 for every $1 paid in claims. The contractor accepted an aggressive rehab plan of action that included the installation of a safety committee and improved training and record keeping. The CWCAs provided administrative support for the company by running the Workers' Comp process and training the safety coordinator.
In addition, the CWCAs worked with the client in establishing a relationship with an Occupational Medical Center, initiating a claim reporting system and a return-to-work process. The CWCAs also assisted the contractor in completing necessary job descriptions, and initiating a wellness process that has resulted in lowering the company's healthcare costs and increasing employee productivity.
Result
The Experience Mod went down from 1.12 to 1.03, with a projected 2007-2008 Mod of .95. The 2008-2009 mod is .69. Because of the radical reduction in the number and size of Workers' Comp claims, additional discounts were negotiated, lowering the premium cost from $430,302 in 2004 to $394,000 in 2005, $365,318 in 2006, $303,000 in 2007 and $185,000 in 2008.
The company uses its low Experience Mod and excellent safety record to beat their competition for work.
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National trends in Workers Comp premiums changing
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Although the soft commercial market continued throughout the third quarter of 2008, deteriorating underwriting results may mean there will be a turn in the pricing cycle. According to Evan Greenberg, chief executive of Ace Ltd, The end of the soft market in insurance has arrived. According to Greenberg, premiums charges in most lines of commercial insurance have abruptly stopped falling and will gradually start to rise.
Industry expert, Joe Paduda notes there are two major factors that will reverse the trend of dropping rates: "Medical trend in the group world is approaching double digits. Historically the work comp medical trend rate has been somewhat higher than group trend. The investment market has imploded, likely driving down the value of the funds held for reserves and surplus. While most investments are in what used to be thought were 'safe' instruments, it may well be that regulators and rating agencies, newly sensitized to the potential problems with even 'safe' vehicles, will require carriers to take down the value of funds held in reserve."
In California, often a precursor for the entire country, the State Compensation Insurance Fund announced November 13 that it will boost its Workers' Compensation insurance rates by an average 8.9 percent in January, ignoring the California insurance commissioners call for a smaller increase. The National Council on Compensation Insurance has proposed a significant rate increase in Floridas workers compensation rates, the result of a recent state Supreme Court ruling. The ruling, Emma Murray v. Mariner Health Inc., essentially struck down a cap on fees to lawyers who represent injured workers.
The NCCI, which proposes rates for insurers in Florida, is asking for an 18.6 percent rate hike over a two-year period. If approved, the hike would apply to new and renewed policies effective on or after March 1. |
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Q & A: Remuneration issues: overtime, salary adjustments, USERRA
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Q. I am confused about NCCIs rules regarding overtime. Is there a situation when overtime can be 100% excluded?
A. Overtime is never 100% excluded. The overtime exclusion applies to the half time portion of the time and a half pay. You still pay on the straight time way. For example, an employee is paid $20/hr for straight time and $30/hr for overtime. The employee works 50 hours. Forty hours are paid at $20/hr and 10 hours at $30/hr for a total of $1100. The Work Comp premiums are paid on $1000 that is 50 hours times $20.
Q. In light of the economic conditions, we are considering changing the base hours and salary of some of our professional employees. Would this practice jeopardize overtime exemptions?
A. Changes to an employees salary can jeopardize the overtime exemption provided by the Fair Labor Standards Act (FSLA). A case related to Wal-Mart in the 10th U.S. Circuit Court of Appeals found an employer that frequently adjusts a professional employees salary to match the employees expected hours will lose the overtime exemption provided by FSLA. The case is Archuleta v. Wal-Mart Stores, Inc., 10th Circuit, No. 07-1065 (Oct. 6, 2008)
Q. We have an employee who resigned to join the Army. Since he voluntarily resigned does USERRA still apply?
A. Yes. Section 1002.88 of the U.S. Department of labors USERRA regulations stipulate that even if the employee tells the employer that he or she does not intend to seek reemployment, the employee does not forfeit the right to reemployment after completing uniformed service. Moreover, the employee is prohibited from waiving specific rights under USERRA and USERRA supersedes all other contracts, agreements, etc. that reduce or limit any right or benefit provided under the law.
Landscaping
A new NIOSH fact sheet outlines occupational hazards in the landscape services industry.
An average of 197 landscape services workers, typically employed in landscape and irrigation installation, lawn care, tree removal, general landscape maintenance, and snow removal, died from on-the-job injuries each year between 2003 and 2006.
The use of tools or machinery during tree trimming or removal is particularly hazardous and has led to falls, struck-by incidents and electrocutions. The industry's fatality rate 25 deaths per 100,000 workers is similar to high-risk industries such as agriculture and mining, the agency said. Federal statistics show that although landscape services workers make up 0.8 percent of the U.S. workforce, they experience 3.5 percent of total occupational fatalities.
Mining
The Mine Safety and Health Administration has issued a document outlining the criteria the agency uses to evaluate electrical apparatus.
The updated document published Nov. 4, covers what criteria MSHA will use to ensure the circuits of electrical apparatus are "intrinsically safe" as required by 30 CFR.
Transportation
DOT final rule on direct observation of urine delayed
A Department of Transportation final rule permitting direct observation of urine collection for drug testing has been temporarily delayed, pending a decision from the U.S. Court of Appeal for the D.C. Circuit.
The proposed rule would mandate direct observation during return-to-duty and follow-up drug testing for commercial motor vehicle drivers. Direct observation for return-to-duty and follow-up drug testing will continue to be an employer option.
Concerns center around privacy rights. In response, DOT stressed in an information sheet that only individuals who previously have shown willingness to endanger public safety, who have a greater likelihood of using illegal drugs in the future, or have a higher than average motivation to cheat on a drug test must undergo direct observation. Officials said the amendments were necessary because of a noticeable increase in the availability of products designed to help drivers manipulate drug tests, such as prosthetics that carry clean specimens.
FMCSA issues final rule on trucker hours of service
A Federal Motor Carrier Safety Administration final rule on truck driver hours of service retains limits that have been struck down twice in federal appeals court.
The final rule published in the Nov. 19 Federal Register, allows drivers to spend 11 hours behind the wheel each day and to reset their weekly on-duty clocks after 34 consecutive hours of rest.. This is an increase from the former limit of 10 hours.
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