Archive | Work Comp RSS for this section

Moving the Goalposts: How Wage & Hour Litigation is Reshaping the American Workforce

By: Jack McCalmon

wage-and-hourAnother day, another wage and hour class action lawsuit filed against another employer …

One New York publication headline reads:

“Lawsuit: Four Central New York companies cheated workers out of ‘hard-earned’ pay.”

No trial, verdict or settlement yet … just a filed claim, but one that reflects the latest trend of some of the media painting employers as stealing from their employees. Rick Moriarty “Lawsuit: Four Central New York companies cheated workers out of ‘hard-earned’ pay,” (Apr. 13, 2015).

Flower Foods, Inc. faces a potential class action lawsuit by 200 workers in North Carolina, who allege Flowers Food’s has a long-standing, illegal practice of classifying distributors of its bakery items as independent contractors.

The plaintiffs’ trial attorneys argue that by misclassifying the workers, the employer avoids paying wages, including overtime, pensions, and other benefits of employment.

Flower Foods argues that the workers should be classified as independent contractors because they are engaged in other activities, like sales and promotions.

Flower Foods is just one of many, misclassifications cases the trial bar and the DOL are filing against employers in every state and against employers in all industries. The case is just one among other lawsuits against similar employers that use contractors to distribute their goods. Through litigation and regulation, the trial bar and federal and state governments are reshaping how employers classify and pay their employees and view contractors. James McCarthy “Lepage Bakeries’ parent firm faces class-action lawsuit over ‘independent contractors,'” (Apr. 8, 2015)

Although headlines “dumb down” and sensationalize the issue, reports often omit that many of the practices now demonized, like using independent contractors as distributors, have occurred for decades and were deemed a compliant and normal industry practice in the past.

In fact, the law that enforces these practices has been in place for over 75 years, but only in the last six years, have the government and the trial bar chosen to interpret them in the manner we see today.

Talk about moving the goal posts … But why now?

Obviously, all workers want the additional wages and benefit from the new interpretation (or recent enforcement) of the rules now allows. But, the “real money” does not go to the workers, it goes to the trial attorneys and the government.

Although workers may receive a few hundred dollars or even a thousand or more in back pay if they are successful, trial attorneys receive multi-millions in fees, literally taking half or more of the fees due to the workers. For that reason, wage and hour class actions are the fastest growing workplace-related litigation type in our courts today.

For the government, the reason is also money, but in the form of taxes. The more employee wages are paid, the more payroll taxes are collected.

Although the DOL and the trial bar argue that they are doing this for workers, in the end, it is workers and consumers who take the hit when employers raise prices to pay for the increased wages, taxes, and benefits.

Services will take a blow as well, and entire industries will go away, like the person who delivers your newspaper or delivers them to vending machines … most are independent contractors paid by the publisher to deliver the paper. Ironically, the same media, that accuses employers of stealing, is, based on the legal theory proposed under the Flowers case, doing the same missteps other employers are.

Like it or not, employers have to reevaluate how they pay and classify their employees and contractors. Eventually, all employers will be targeted. Arguing that this is how it has always been done for decades will not persuade plaintiffs or regulators today.


The Government’s Misclassification Initiative: Why Use of Independent Contractors Is A Target

Written exclusively for Hartford Help

ICon Professional Services, a leader in 1099 contractor compliance and payroll and benefits administration, released a report earlier this year exposing a significant gap between executives’ perceptions and reality about misclassification risk.

The survey methodology used a sampling of senior executives to provide insight on their worker misclassification experiences. Respondents came from a range of industries including energy, government, health care, and technology. Employers with fewer than 100 workers using only a few independent contractors a year were polled, as well as employers with more than 5,000 workers using hundreds of independent contractors.

According to ICon’s report:

  • Eighty-four percent of respondents plan to maintain or increase their investment in independent contractors in 2015.
  • Half of respondents use up to 20 independent contractors per year. Thirty percent use up to 100 independent contractors per year and, 15 percent utilize more than 500 contractors per year.
  • Thirty-seven percent retain their relationship with contractors for up to a year. Twenty-eight percent maintain relationships for up to three years.
  •  Nearly seven-in-ten respondents use independent contractors because of their unique specialist skills.

The report also reveals that 77 percent of respondents think their total financial risk exposure to failing a worker misclassification audit is below $100,000. In reality, for 100 independent contractors paid an average $100K annually, an employer’s financial risk could exceed $4,500,000. Only 57 percent of respondents have “great confidence” in knowing the exact number of independent contractors they are currently using.

According to Dana Shaw, COO at Icon,

The majority of Fortune 2000 employers are either ignoring or seriously underestimating the reach of the government mandates and therefore financial risk to which they are exposing themselves. With the contingent labor market on the rise, business leaders can’t afford to ignore the importance of properly classifying their employees.
Ann Warren for ClearEdge Marketing, “Companies Largely Unaware of Financial Risk of Independent Contractor Misclassification, Reveals ICon Survey Report,” (Oct. 6, 2014).

Commentary and Checklist

The Internal Revenue Service (IRS) estimated that 3.4 million employees were misclassified as independent contractors back in 2011. The IRS estimated an annual revenue loss of $3.4 billion because of the misclassifications.

Independent contractors reduce labor costs because employers do not have to pay their unemployment taxes, workers’ compensation, overtime, health care, and other benefits. As revealed in the survey, many employers take advantage of specialized skills. Some employers use independent contractors to keep the number of employees down, which allows them to avoid regulations that apply to larger employers.

To crack down on misclassification, the U.S. Department of Labor (DOL) announced the Misclassification Initiative and teamed up with the IRS and state governments to rectify the problem. To fund the Initiative, the government issued $14 million to combat misclassification, including $10 million in grants to states to identify misclassification and recover unpaid taxes, and $4 million for DOL investigators. In 2012, the DOL’s Wage and Hour Division requested an additional $3.8 million and 35 full-time employees for increased enforcement related specifically to misclassifications.

Federal and state governments continue to focus time and money on detection and deterrence of misclassified workers.

In the event your organization is audited, the DOL will closely examine the relationship between the organization and your independent contractors. “Independent” is the key word in determining whether your relationships pass muster. True independence depends largely on how much the employer controls the contractor’s activities.

The Supreme Court has held that employee status is not determined by the timing or mode of pay. According to the DOL, “independent contractor agreements” also are not determinative, and neither is the fact that the individual is incorporated or licensed as a separate business entity.

There is no single rule or test for determining whether a person is an employee or independent contractor under the Fair Labor Standards Act and tests vary from state to state.

Here are some considerations for employers trying to keep their contractors independent:

  • Independent contractors should furnish their own equipment.
  • Consider the permanency or length of the independent contractor relationship. Longer relationships will draw more scrutiny.
  • Make sure no one in your organization exercises specific direction and control over the contractor’s employees.
  • Although labels are not determinative, contractors should have their own workers’ compensation insurance and be licensed and incorporated.
  • Similarly, even though “independent contractor agreements” are not decisive by themselves, have one anyway. Make certain that the workers are employees of the contractor and that the contractor is responsible for hiring, firing, payroll, paying workers’ compensation premiums, and managing workers.
  • Make sure contractors exercise managerial skills that influence their profits and losses.
  • Make sure independent contractors maintain their own initiative and judgment in open market competition. The contractor should have other clients and contracts.
  • Employers should consult with legal counsel and tax professionals before deciding an individual is an independent contractor.

Wage & Hour Violations on the Rise – Why Employers Should Be Concerned

The Wage and Hour Division of the United States Department of Labor (DOL) recently released its fiscal year 2013 statistics.

In FY 2013, the DOL received 25,628 complaints and concluded 33,146 complaints. The DOL successfully recovered $249,954,412 in back wages for 269,250 employees. This is a marked increase over earlier FY 2009 report.
The majority of recovered wages were for unpaid overtime.

Some of the low-wage industries that have seen the greatest increase in recovered back wages since FY 2009 are: agriculture, restaurants, and hotels and motels.

In addition, the DOL considered over 1,000 cases of child labor violations. “Fiscal Year Statistics for WHD,” (Dec. 2014).

Commentary and Checklist

The DOL and the IRS are working together to find and resolve wage issues.

Employers should ask themselves the following when assessing their wage and hour policies:

  • Are your exempt employees properly classified? Too many employers classify employees as exempt when they are really non-exempt.
  •  Are your non-exempt employees receiving overtime when they work over 40 hours per week? All overtime, no matter how short the time period worked, must be accounted for and compensated.
  •  Are your non-exempt employees receiving proper credit for all their time spent working on your behalf? Employers who do not correctly compensate employee time, especially when an employee is on the employer’s premises, create risk.
  •  Are your non-exempt employees receiving their breaks and other compensated time as required by federal and state laws? Laws differ, but many state laws require mandatory paid breaks during the day.
  •  Are your employees receiving all the wages due to them? Class actions are emerging against employers who unlawfully deduct money from employee checks.
  •  Have you had your risk advisor or employment counsel review your wage and hour practices? If not, now is the time.


General Safety Obligations for Employers

OSHA laws apply to every workplace. Here are the primary employer responsibilities according to OSHA:

Employers must provide their employees with a workplace that does not have serious hazards and follow all OSHA safety and health standards. Employers must find and correct safety and health problems. OSHA further requires employers to eliminate or reduce hazards first by changing working conditions rather than just relying on masks, gloves, ear plugs or other types of personal protective equipment (PPE). Switching to safer chemicals, enclosing processes to trap harmful fumes, or using ventilation systems to clean the air are examples of effective ways to get rid of or minimize risks.

Employers must also:

  • Inform employees about hazards through training, labels, alarms, color-coded systems, chemical information sheets and other methods.
  • Keep accurate records of work-related injuries and illnesses.
  • Perform tests in the workplace, such as air sampling required by some OSHA standards.
  • Provide hearing exams or other medical tests required by OSHA standards.
  • Post OSHA citations, injury and illness data, and the OSHA poster in the workplace where workers will see them.
  • Notify OSHA within 8 hours of a workplace incident in which there is a death or when three or more workers go to a hospital.
  • Not discriminate or retaliate against a worker for using their rights.

Note that if you are in the states listed below you must also comply with state laws and regulations. To get more info go to OSHA, your state OSHA site, or the BNA State Law Summaries on HR That Works.


3 Ways to Reduce Work Comp Exposures

?????????????????????????????????????????????????????????????????????????????????You’ll hear a lot about the ways to lower your work comp costs, reduce your experience modifiers and improve your loss histories. But what about the real things you can control? Your Exposures. Here’s a few tips on lowering the actual risks you may face when it comes to work comp.

  1. Do you conduct pre-hire fit for duty exams?  More than two in three companies don’t spend the time or money on these exams, aren’t aware that they were available, or don’t  know how to conduct them. The bottom line: You don’t want to hire a future Comp claim.
  2. Have you ever calculated the total cost of your Workers Comp claims? Only one in three businesses do so. For every dollar paid in claims, there’s at least another dollar of bottom line impact in reduced productivity, lost customer satisfaction, cost of replacing an employee, etc. Bear in mind that insurance companies have little incentive in preventing or managing Comp claims, especially when the interest rate on your modifier is in the double digits. In fact, it’s the most expensive money your company will ever borrow.
  3. Do you have a formal return-to-work program? Once again, less than half of companies do so, even though these plans make eminent sense. The program should acknowledge concerns and fears by both employee and supervisors. Many Comp claims take on a life of their own because managers ignore injured employees as “damaged goods,” rather than trying to nurture them back to work – and then wonder why some of them malinger on claims.

I encourage you to read this report, and then follow up with us if you have any questions.

Landscaping Insurance

Ringen um den  handgemachten  GartenzwergLandscaping provides more value than just a better view for homeowners or business owners. In fact, studies show that well-designed landscaping can help protect water quality, improve air quality, and even lower crime rates. A study in a recent editon of Smart Money Magazine showed that the average homebuyer values a well-landscaped home 11.3% more than it’s base price. From a real estate perspective, landscaping investments are nearly always recouped when a home is sold, and good landscaping design can greatly reduce the time a home is on the market.

As a landscaper, owner of a landscaping company, or lawn care provider, you take great care to create, plan and maintain a beautiful outdoor environment. The same care should be taken to make sure your business is protected against the risks of your trade. The right landscaping insurance can help ensure that your business will continue to thrive after unforeseen accidents, injury or property damage.

4 Coverage Types for Landscaping

 What Is Landscapers Liability Insurance?

Landscapers and lawn care companies require a general liability policy that provides the following coverage:

  • Property damage: Includes damage to public or third-party property caused by you or your employees
  • Bodily injury: Covers bodily injury or death to a third party caused by you or your employees
  • Products/completed operations: Covers any products or completed work that your company sells
  • Advertising injury: Covers you if your advertising causes harm to the reputation of another person; includes slander, libel and false claims about business competitors in your advertising.

What Is Business Owners Insurance for Landscapers?

A business owners insurance policy, also called a BOP, is designed for small businesses with less than $5 million in sales and no more than 100 employees. It includes a group of coverages that meet the needs of a small business owner.

Here’s an overview of the basics contained in the policy. Keep in mind you can add additional coverage, if needed.

  • Property damage: Covers rented or owned office buildings, warehouses, storage facilities, garages and other property. You normally have to add a tools and equipment floater or clause to protect specialized tools and equipment.
  • Business income: Protects against the loss of income and operating expenses if your business is shut down as a result of a covered event.
  • Equipment breakdown: Covers your equipment if it stops working due to operator error, power surges, or other mechanical malfunctions.

A tools and equipment floater may be needed, since you work with specialized equipment that is expensive to replace. Also, if you are a sole proprietor and do not employ other workers or have business property other than your vehicle, you may be able to drop some of these coverages and just carry general liability. These two items are good to discuss with your insurance agent.

Should I Carry Workers Compensation?

Normally, workers compensation is a state-mandated coverage. If you have employees, your state most likely will require you to carry a policy. In some states, all business owners must carry workers compensation for their own protection, even if they do not hire employees.

Workers comp covers your employees in the event of job-related illness, injury or death. The policy includes medical and diagnostic expenses for treatment and pays a portion of the employee’s wages if they cannot return to work.

In most states you are not required to carry this coverage if you are self-employed and the only worker in your business. In that case, you can choose to have workers compensation or decline coverage, however it can be a very valuable coverage to have if you suffer a work-related injury or sickness.

 Do I Need Commercial Vehicle Insurance?

As a landscaper or lawn care provider, you most likely spend a lot of time in your vehicle traveling to different jobs.  When you drive, you are at risk of a commercial vehicle accident during the course of  business. Your personal auto policy will most likely not provide coverageif you’re using your personal vehicle for commercial use. Make sure you have all your cars, vans,  trucks and trailers insured with a commercial vehicle policy. Any vehicles you use for business purposes can be added to this policy.

Compare Landscapers Insurance Quotes

General liability, business owners policies, workers compensation and commercial vehicle coverage are the keys to a well-maintained risk management plan for your landscaping or lawn care business. While these are pretty straightforward coverage options, it’s important to consider that the process of finding the right coverage to protect you might not be so simple.

Researching insurance options that fit your needs and budget is a process you shouldn’t take lightly. Understanding how much your business is worth and what kind of legal issues you could face are both things you can discuss with an insurance agent or a lawyer before you buy a policy. When you shop smart, you’ll get the coverage you need to go about your business confidently.

DART Rate Key to Avoiding OSHA Visits

dartEven if your business is on OSHA’s “hit list” for 2014, you may be able to dodge an inspection based on your DART rates from the previous three years.

DART—Days Away, Restricted or Transferred—includes injuries resulting in days away from work, injuries resulting in restrictions from normal job duties or injuries resulting in both. OSHA uses the DART rate to determine which employers will be targeted for inspection in its yearly Site-Specific Targeting (SST) Inspection Program.

But during this year’s SST program, OSHA plans to skip inspections for those businesses that made it on the hit list but have had low DART rates in two of the three years between 2011 and 2013. There are exceptions to this, some of which include:

  • Your business didn’t respond to the survey and send in the required OSHA data.
  • Any of the Certified Safety & Health Official (CSHO)-calculated DART rates from 2011-2013 are at or above 3.6.
  • Any two of the DART rates are below 3.6, but any two of the CSHO-calculated DAFWII case rates are at or above 2.2. (DAFWII stands for Days Away From Work due to Illness or Injury).

To protect the health and safety of workers nationwide, OSHA created the SST Inspection Program to proactively examine employers with the highest rates of occupational injuries and illnesses. Each year, employers must report their injuries and illnesses on the “OSHA Work-related Injury and Illness Data Collection Form.” Using data collected from the surveys, OSHA creates an annual “hit list” of employers targeted for a programmed inspection. The “hit list”—a primary list and a secondary list—consists of up to15,000 employers with the highest rates of injuries and illnesses.

There’s no guarantee that OSHA will bypass inspections based on prior years’ DART rates beyond this year, but always aim to keep your DART rate low. For more information on OSHA’s SST program, its 2014 hit list and its inspection plan for 2014, contact Tower Insurance Agency today.