THE NEWEST cyber and financial fraud threat facing businesses is deepfake technology, which criminals are using to extract money from unsuspecting accounts payable personnel.
A finance worker at a multinational company in Hong Kong was duped into transferring $25 million to criminals who had used deepfake technology to pose as the business’s chief financial officer during a video conference call, according to local police.

A deepfake is an artificial image or video generated by a special kind of machine learning called “deep” learning. The creations have grown increasingly sophisticated and harder to detect.

How it happened

The worker received an e-mail from what he thought was the company CFO, inviting him to attend a teleconference with him, other company executives, and staff, according to Hong Kong police. The digitally recreated version of the CFO then ordered money transfers during the video conference call.
Based on instructions the employee got during that call, they transferred 200 million Hong Kong dollars ($25.6 million) to various Hong Kong bank accounts in a series of transactions.
The employee did not interact with the deepfakes during the video conference, and he later told police that others on the call looked and sounded like people he knew in the organization.
In fact, all of the other people on the call were fakes of real people in the company. The criminals had used deepfake tech to alter publicly available video and footage found online to create convincing digital versions of the others in the meeting.
Police said that the case was one of several recent incidents in which criminals had used deepfake technology to change publicly available video and other footage to steal from people and companies.

Warning to US businesses

This type of attack is essentially an extension of the wire transfer fraud, a threat that’s been growing in recent years.
These scams usually start with e-mails or even phone calls from scammers posing as someone higher up in an organization, a client or vendor. The end goal is to convince an employee with access to the company’s payment systems to transfer funds to the criminals.
Deepfake technology adds a dangerous new arrow to wiretransfer fraud criminals’ quivers, making the scam even easier to fall for.
To avoid being victimized, the law firm of Fischer Phillips recommended in a November 2023 blog that businesses:

Provide deepfake training to staff. You should already be training and providing refresher meetings on preventing cyber attacks of all sorts. Consider educating them about the dangers of deepfakes and provide the Hong Kong case as an example. Cover ways to spot deepfakes, including:
• Blurry details,
• Irregular lighting,
• Unnatural eye and facial movements,
• Mismatched audio, and
• Absence of emotion.

Urge staff to be suspicious. Your employees should be able to comfortably question the legitimacy of information and be urged to report suspicious activity.
Use strong authentication protocols. Put in place robust measures — like multi-factor authentication and similar tools — for accessing sensitive information and systems.

Insurance coverage

If your organization has a cyber insurance policy, it might cover a wire transfer fraud loss. The coverage provided by cyber insurance can vary significantly between insurance companies and policies. Some cyber policies may explicitly cover wire fraud, while others require additional endorsements or riders to provide adequate protection.
A commercial crime policy will cover losses resulting from the use of a computer to fraudulently transfer funds from inside the business premises or the insured’s bank to an outside party.
However, policies may only offer coverage if an employee was fraudulently involved in the wire transfer fraud. This type of funds transfer fraud is basically the only computer-related coverage that a crime policy offers.

WITH THE California commercial property market increasingly stressed with fewer and fewer insurers willing to write policies in the Golden State, the state insurance commissioner has floated a plan aimed at easing the crisis.
The main thrust of the new proposal is to make it easier for insurers to get their rate-hike requests approved, efforts that have been stifled due to laws that have been on the books since the early 1990s from a law known as Prop. 103. As well, insurers are limited in the types of data they can use to justify rate increases, which has constrained them from being able to ask for hikes that are adequate to cover their potential liabilities.
The proposed rule changes, along with others that are coming this year, are aimed at luring insurers back into the marketplace after one carrier after another has either stopped writing commercial property in the state altogether, or restricted how many policies they will write in California, and where.
While insurers are still writing policies in California, their numbers are shrinking, making renewals a difficult process for many businesses. Insurers have also gotten pickier about properties they are willing to cover, with some setting limits on the age of a building and taking into consideration whether the property owner has filed any claims in the last three years.

The commissioner’s plan

Insurance Commissioner Ricardo Lara’s proposed regulations, one of those prongs, would allow insurers to use catastrophe models to better predict insurance rates for wildfire, terrorism and flooding. Currently, they are only allowed to use historical claims data, which is backward-looking and does not account for the surge in risk and costs that’s occurred during the last five to 10 years.

As well, they are not allowed to consider the growing risk caused by climate change, or wildfire risk mitigation measures taken by communities or regionally as a result of local, state and federal investments.
Mark Sektnan, vice president for state government relations for the American Property Casualty Insurance Association, said this change would go a long way towards addressing the insurance crisis in the state.
“As Californians grapple with record inflation and become increasingly vulnerable to climate-driven extreme weather, including catastrophic wildfires, this is a critically needed tool to help identify future risks more accurately and set rates that reflect our new reality,” he said. “More accurate ratemaking will help restore balance to the insurance market and ensure all Californians have access to the coverage they need.”
The trade-off for consumers will be the likelihood of more insurers coming back into the market to write commercial property and homeowner’s insurance in exchange for them asking for large rate hikes.
The latest proposed regulation follows another that was introduced in late February that would speed up approvals of rate-increase requests. These can sometimes take years if the Department
of Insurance asks for more supporting documentation, which can reset the rate approval process, delaying final approval.
Some insurers have waited more than two years to get their rate hikes even considered.
Current rules “lack clarity and fail to specify the exact materials and information required in a complete rate filing application given the change in times and increased complexity of filing,” according to the Department.
This proposed rule codifies clearer instructions for what supporting documentation insurers must submit when filing for rate increases.

The takeaway

A public hearing on the proposed catastrophe-modeling regulations will be held on April 23 and it’s the department’s plan to get these new rules implemented by the end of 2024, along with the rules on speeding up rate-increase requests.
In the coming months, the department plans to propose additional regulations as well as legislation in order to get insurers to write business in the state again.
If enacted, it’s hoped that the various planned changes will provide some relief to homeowners and businesses in the state.
We’ll keep you posted as this develops.

EFFORTS ARE afoot to create new laws and regulations that would require California employers to include the opioid overdose medication Narcan in their first aid kits. Cal/OSHA’s Standards Board has received a petition from a safety group asking it to create new regulations requiring workplaces to stock medications that can reverse opioid overdoses.

On the legislative front, two state assembly members have introduced bills that would require workplace first aid kits to include naloxone hydrochloride, the substance that can reverse overdoses.
More than 83,000 people died of an opioid overdose in 2022 in the U.S., including nearly 7,000 Californians, according to the Centers for Disease Control.
Naloxone, sold under the brand names Narcan and RiVive, is available in an over-the-counter nasal spray or as an injectable.
These medications temporarily reverse overdoses from prescription and illicit opioids, are not addictive, and are not harmful to people when administered.
In its Dec. 8 petition to Cal/OSHA’s Standards Board, the National Safety Council asked it to add naloxone to the list of required items in both construction sites as well as general industry workplaces.
“With the number of workplace overdose deaths on the rise, opioid overdose reversal medication is now an essential component of an adequate first-aid kit,” wrote Lorraine M. Martin, president and CEO of the NSC.

Legislation

Two bills are in play.
AB 1976: Authored by Assemblyman Matt Haney (D-San Francisco), this bill would require first aid kits on job sites to include Narcan. It would require the Standards Board to draft enabling regulations by Dec. 31, 2026.
AB 1996: Authored by Assemblyman Juan Alanis (D-Modesto), this measure would require operators of stadiums, concert venues and amusement parks to stock Narcan. It would not require Cal/OSHA to create new regulations as the measure is aimed at helping members of the public.

The takeaway

In light of the opioid overdose epidemic, more and more employers and operators of facilities that cater to the public have started stocking naloxone.
With opioid overdoses so prevalent in U.S. workplaces (18% in California alone), the simple addition of this over-the-counter medication can save the life of a worker.
Narcan is available for around $40 at most major retail pharmacies. It’s a simple and inexpensive addition to a first aid kit for any employer. It would be good practice to keep a pack in your safety kit… just in case.
Meanwhile, if any of the legislative and possible regulatory efforts become law or regulation, we’ll let you know.

THE WORKERS’ Compensation Insurance Rating Bureau of California will recommend changes to class codes for some electronics manufacturing sectors, as well as increases to the wage thresholds for construction industry dual classifications.
The move comes after the Rating Bureau’s governing committee unanimously approved proposed changes, which will be sent in March to the state insurance commissioner for approval. If approved, the changes will take effect Sept. 1, 2024.
Here’s what’s on tap:

Dual-wage increases

The Rating Bureau will also recommend increasing the thresholds that separate high- and low-wage earners in 16 dual-wage construction classes as shown below. These class codes have vastly different pure premium rates for workers above and below a certain threshold. Lowerwage workers have historically filed more workers’ comp claims. Rates for lower-wage workers are often double the rates for higher-wage workers.

Electronics manufacturing

Another proposed change would link two more classes to the 8874 companion classification, which was created in September 2022 to cover certain low-risk classes in the electronics industry group.
Currently, 8874 is a companion class that covers payroll for lower-risk jobs in hardware and software design and development, computer-aided design, clerical and outside sales operations for
two classes:

• 3681 (manufacturing operations for electronic instruments, computer peripherals, telecommunications equipment), and
• 4112 (integrated circuit and semiconductor wafer manufacturing).

The new proposal would move to 8874 similar low-risk white-collar personnel currently assigned to class 3572 (medical instrument manufacturing) and 3682 (non-electric instrument manufacturing).

The Bureau is also recommending merging class code 3070 (computer memory disk manufacturing) with 3681(2) (computer or computer peripheral equipment manufacturing). If this recommendation is okayed, the higher pure premium rate of $0.46 per $100 of payroll for class code 3681 will apply to the new combined code.

Class 3070 currently has a pure premium rate of $0.25 per $100 of payroll and the new rate would be phased in at 25% per year until class 3070 is eliminated and all employers are moved to class 3681.

THE CALIFORNIA Workers’ Compensation Uniform Statistical Reporting Plan requires that employers report small, medical-only first-aid claims to their insurance carrier.

 

Many employers fail to report these claims as they consider them too small since the worker doesn’t lose any time from work and they don’t have to go to a doctor. Under Rating Bureau rules, employers are required to report the cost of all claims for which any medical care is provided and medical costs are incurred — including those involving first aid treatment — even if the insurer did not make the payment.
The term “small medical-only claim” is also used to refer to first aid claims.
For workers’ comp purposes, that also means that the injured worker did not miss work because of the injury. Besides these rules, there is a very good reason for reporting these claims because what starts as a first aid claim can develop into a larger claim over time. At that point, if you never reported the claim in the first place, coverage issues may arise.

Additionally, any physician attending any injured employee must send copies of the Doctor’s First Report of Occupational Injury or Illness to the workers’ compensation insurance carrier or employer within five days of the initial examination. The insurer or employer must submit the physician’s report to the Department of Industrial Relations (DIR) within five days of receipt.
Penalties for non-compliance Any employer or physician who fails to comply with the submission of the Doctor’s First Report for first aid claims may be assessed a civil penalty of not less than $50 nor more than $200 by the DIR if a pattern or practice of violations or a willful violation is found.

FIRST AID CLAIM EXAMPLES
• Abrasions and cuts that require cleaning, flushing, or soaking.
• Using hot or cold therapy for a muscle injury.
• Drilling a fingernail to relieve pressure, or draining fluid from a blister.
• Removing foreign bodies from the eye using only irrigation or a cotton swab.
• Removing splinters or foreign material from areas other than the eye by irrigation, tweezers, cotton swabs, or other simple means.

THE EQUAL Employment Opportunity Commission continues seeing a steady flow of complaints for one of the more common forms of workplace bias — age discrimination.

 

The number of court filings the EEOC made under the Age Discrimination in Employment Act (ADEA) in fiscal year 2023 was more than double that of fiscal year 2022. As the EEOC steps up its efforts under the Biden administration, it’s crucial that employers have in place policies and employment standards to avoid any appearances of discrimination against workers based on age.

The ADEA prohibits harassment and discrimination on the basis of a worker’s age for individuals over 40. This extends to any aspect of employment, including hiring, job assignments, promotions, training, benefits and more. The law even applies to employers that use third party recruiters to screen job applicants, according to EEOC guidance.

What you can do
Age discrimination in the workplace doesn’t just negatively affect employees. It also affects your company. Over the past 15 years, age discrimination cases have accounted for 20- 25% of all EEOC cases — and such cases typically receive the highest payouts.
Ageism in the workplace is bad for business. Not only do you risk a large settlement, but you also miss out on a large talent pool of older workers in your hiring practices. You also miss out on the major contributions that older workers can make to your organization.

To prevent age discrimination at your firm:

• Train your managers and supervisors on age discrimination and that it won’t be tolerated. Have in place consequences (and follow through on them) for managers who discriminate against an employee due to any protected status, including age.
• Consider taking out any sections of your application that disclose information about an applicant’s age. Removing the date that an applicant graduated or completed their degree is helpful. This can allow hiring managers to focus on the skills and experience an applicant brings to the table rather than their age.
• If you have to go through a layoff, ensure you don’t make any decisions based on age. You should focus only on two things during this process: making choices solely based on performance and the necessity of the position they hold. Even a seniority-based system is acceptable.

The takeaway and insurance
Often when the EEOC settles these cases, it will require the employer to sign a consent decree requiring them to implement age-discrimination training for hiring managers.  You shouldn’t wait for an order by the agency to do the same.
Finally: In the event you are sued for age discrimination, if you have in a place an employment practices liability policy, it may cover your legal costs and any potential settlements or verdicts.
Besides age discrimination, these policies will cover a host of other lawsuits by employees.

RECENT CASES

• In March 2023, Fischer Connectors settled with the EEOC for $460,000 over accusations that the manufacturer fired a human resources director and replaced her with two younger workers after she had spoken up about company plans to replace other older workers.
• In September 2023, two former IBM human resources employees who were both over 60, sued IBM after they were terminated, alleging age discrimination.
• Wisconsin-based Exact Sciences agreed to pay $90,000 to settle a lawsuit alleging that it discriminated against a 49-year-old job applicant based on his age after it had turned him down for a medical sales rep position in favor of a 41-year-old.
• A 52-year-old woman sued a Palm Beach restaurant, alleging violations of the ADEA and the Florida Civil Rights Act of 1992. She claims that after working for 10 years as a seasonal server, she was terminated on the grounds that the restaurant was moving to year-round employment, yet continued to hire young seasonal workers.

EVERY YEAR, bills passed by the state Legislature and signed into law by the governor take effect, and 2023 was a busy legislative session in Sacramento. The end result is another set of new laws that employers need to stay on top of in the New Year.

 

1. Sick leave law expanded
A new law that took effect Jan. 1 increased the amount of paid sick leave days California workers are eligible for to five days (40 hours), up from the current three, or 24 hours.
The new legislation applies to virtually all employees in the state. Under the law, businesses have two options for providing sick leave:
Up front: They can provide all five paid sick days up front for the year, and these days can be used immediately.
Accrual: They can build up paid sick leave by either accruing one hour of leave for every 30 hours worked, or providing 40 hours of leave by the 200th day of the year.

2. Pre-employment cannabis screening
Employers in California are no longer allowed to ask a job applicant about past cannabis use. The legislation, SB 700, bars employers from conducting pre-employment drug screenings for cannabis. In addition, the new law, which took effect Jan. 1, prohibits companies from penalizing workers for their off-the-clock cannabis use. Another measure, AB 2188, makes it unlawful for employers to “discriminate” against a person for failing a workplace drug test that only detects inactive cannabis compounds called metabolites.

3. FAIR Plan increases its limits
With more and more California businesses being forced to go to the California FAIR Plan for their property coverage, the market of last resort has increased its commercial property coverage limits to $20 million per location from the previous $8.3 million. This should bring a semblance of relief to companies located in wildfire-prone areas, who have seen their commercial
property insurance non-renewed and who have been unable to find replacement coverage.

4. Workplace violence law
A new law, which takes effect July 1, requires employers with at least one worker to have in place a workplace violence prevention plan, and conduct workplace violence prevention training
and keep a log of violent incidents in the workplace.

The prevention plan must include:
• Procedures for the employer to accept and respond to reports of workplace violence.
• Procedures to communicate with employees regarding workplace violence.
• Procedures for responding to workplace violence emergencies.

Employers will also be required to train their workers on the plan and on how to respond to violent incidents or threats of violence.

5. Treasury reporting rule
A new Treasury Department rule requires businesses with fewer than 20 employees and less than $5 million in revenue to report ownership and control information to the Financial Crimes
Enforcement Network (FinCEN) as part of an effort to cut down on fraud, money laundering and the funding of terrorism that could run through anonymous business entities.
The new rule was prompted by the passage of the Corporate Transparency Act enacted in 2021, but which took effect Jan. 1. Companies formed after Jan. 1 will have 30 days to file that
information with FinCEN. Existing companies will have to start filing that information starting Jan. 1, 2025.

6. No more non-competes
Under two new laws, non-compete agreements with employees are expressly illegal starting in 2024 and if an employer requires one be signed, it could provide grounds for a lawsuit by the worker. Here’s a rundown of the two laws:

AB 1076 – This law adds new requirements and penalties to existing cases that make it illegal for employers to include non-compete clauses in employment contracts or require an employee to sign a non-compete agreement that doesn’t meet exceptions under the law. The law also requires employers to notify current employees who signed non-compete agreements that they are now void
under California law by Feb. 14, 2024. This also applies to former employees who were hired after Dec. 31, 2021.

SB 699 – This legislation bars employers from enforcing a non- compete agreement that is void under state law. Most notably it would make void an agreement signed by an employee out of
state who later relocates to California. It also provides employees and job applicants a private right of action, including awards for injunctive relief, actual damages and attorney’s fees, and costs if an employer requires them to sign a non-compete. Additionally, it makes a violation of the statute an act of unfair competition — another possible legal risk.

7. New joint-employer rule
The National Labor Relations Board has issued a final rule that expands the definition of what’s considered a joint-employer relationship and increases employers’ potential liability.
Under the rule, two or more entities may be considered joint employers if they share one or more employees and they both can determine the workers’ essential terms and conditions of employment. If a company is deemed a joint employer with another entity, each can be held liable for labor law violations that the other commits.

The new NLRB rule applies to almost all industries, but will have the most effect on companies that use staffing or temp agencies, firms that are third party employers, and franchisors.
The rule took effect Dec. 26, 2023 on a prospective basis, meaning it applies to any cases filed on or after that date.

8. Reproductive-loss leave law
Starting Jan. 1, workers in the Golden State can take up to five days off for a “reproductive loss,” defined as a miscarriage, stillbirth, failed adoption or failed surrogacy experienced by an
employee, their spouse or partner. Under the new law, SB 848, workers are not required to take all five days consecutively, but they must use them all within three months of the event.
If an employee experiences two reproductive losses in a year, they will be eligible for 20 days off.

9. New telecommuter class code
If you have staff who work remotely, you’ll want to know that there is a new California workers’ compensation class code. After droves of employees starting working remotely after the
COVID-19 pandemic began in 2020, the Workers’ Compensation Insurance Rating Bureau created a new telecommuter class code (8871) and tethered its pure premium advisory rate to the 8810
clerical classification for easier administration.
Under Rating Bureau rules, code 8871 will receive its own rate which is 25% lower than the clerical rate. If you have remote workers, you’ll want to ensure they are in the telecommuter class
code to enjoy the lower premium.

10. Minimum wage hike
The state minimum wage increased at the start of 2024 to $16 from last year’s $15.50. While that wage is for the state, a number of cities and municipalities have minimum wage rates that are higher. Additionally, a new law, AB 1228, raises the minimum wage for fast food restaurant workers in the state to $20 an hour, starting April 1, 2024. This rate will increase annually through 2029 based on inflation. v

COMMERCIAL PROPERTY owners throughout California are getting hit with significant insurance rate hikes and non-renewal notices as a confluence of factors reverberate through the market.

The commercial property insurance industry is struggling with years of losses after paying out billions of dollars annually for increasingly costly and numerous wildfire claims in California and other natural disasters around the country.
While massive costs dominate the conversation, there is another factor that is contributing just as much to rising insurer costs: The role of reinsurance.

Reinsurance explained

Just like you mitigate your risks by buying insurance, your insurance company does the same by purchasing reinsurance.
This coverage pays claims when they reach catastrophic levels or a certain threshold, like those from massive wildfires.
These arrangements call for the reinsurer to cover the cost of claims for a certain region or for a certain risk, like wildfires or hurricanes. Each reinsurance treaty is different and they are often tailor-written for individual insurance companies.

Without reinsurers taking on a good portion of catastrophic claims, insurance rates would be much higher than they are today. But that’s changing.
Reinsurers pay for a significant portion of any global catastrophe as they are the backstop for insurers around the world. And catastrophes have been growing in number and scope all over the planet.

During the first half of 2023, natural catastrophes caused $52 billion in insured damage globally, which is 18% higher than the average of $44 billion in the past 10 years and 39% higher than the 21st-century average of $38 billion, according to a report by Swiss Re.

The U.S. accounted for $34 billion of the world’s insured property losses in the first half. The nation also accounted for 13 of the 17 global natural catastrophe events that each caused more than $1 billion in insured losses, according to the report.

What reinsurers are doing

Raising rates – Reinsurance companies have been raising their rates significantly. A recent report on the trade news site Artemis.com said property catastrophe reinsurance rates had
seen a substantial average increase of approximately 30% during July 1 renewals.

Reconsidering where they provide coverage – Reinsurers have also started pulling back from covering properties in areas or regions that are at higher risk for natural disasters, particularly California and Florida, the latter due to increasingly costly hurricane damage and the former due to the increasing wildfire risk.
When reinsurers pull back, the primary insurers often have to take on more of the risk themselves.

Changing terms – Reinsurers are taking on less risk than they have in the past by raising attachment points, forcing primary insurers to take on more of the cost of claims.
Reinsurers are changing conditions for paying claims, getting more stringent in their definitions of various catastrophic events and triggers for paying claims.

The takeaway

While this hard reinsurance market continues, there is hope that rates will stabilize in the future bringing relief to insurers, and more importantly: You.
Both reinsurers and insurers are struggling to catch up with increasing costs and the “new normal.” Once they adapt, your premium may be more predictable.

CALIFORNIA INSURANCE Commissioner Ricardo Lara has issued an order that cut the average advisory workers’ compensation benchmark rate across all classes by 2.6%, starting Sept. 1.

The benchmark rate, also known as the pure premium rate, is a baseline that covers just the cost of claims and claims adjusting, but not other overhead like rents, underwriting costs, and provisions for profit.

The rate is advisory, and insurers can use it as a guidepost for pricing their individual policies. Individual premiums that employers pay will depend on a number of factors, including the pure premium rate, the carrier’s own pricing methodology, and the employer’s claims and claims cost history, location, and industry.

Why the rate is falling

The insurance commissioner’s decision cuts the average published pure premium rate to $1.46 per every $100 of payroll, compared to the current $1.50.

Despite the average rate decrease of 2.6%, individual class codes may see swings as much as plus or minus 25%. Several factors are driving the lower rate decision:

• Slowing claims cost inflation
• Falling frequency of claims
• Lower overall claims costs
• Stable medical costs
• Fewer COVID-19 claims
• Lower claims-adjusting costs.

What insurers are doing

The most recently available industry average level of pure premium rates filed by insurers with the Department of Insurance is $1.71 per $100 of payroll as of Jan. 1, 2023, which is about 14.6% higher than the current published rate of $1.50. In 2022, carriers were charging $1.68 on average.

While the workers’ compensation market remains competitive and rates continue hovering around record lows, the final rate any employer will pay will depend on several factors beyond the pure premium rate. Some employers may see rate increases instead.

Factors that can influence the prices include the employer’s:

• Industry.
• Geographical location (employers in Southern California, for example, face a unique claims environment that results in a surcharge).
• Individual claims experience.

FLEET OPERATORS face an increased risk of potential liability if they are not diligent about checking their drivers’ moving violation records with the state Department of Motor Vehicles, in addition to the Federal Motor Carrier Safety Administration’s Drug and Alcohol Clearinghouse.

As of 2020, it became mandatory that all motor carriers sign up their drivers in the Clearinghouse and run their driver rosters through the system to clear them for duty. But many companies are skipping this step and only checking their drivers’ records with the DMV, which may not reflect any suspensions issued by the Clearinghouse.

Clearinghouse rules require that drivers be tested for drugs prior to being hired and randomly throughout the year. This helps employers weed out drivers who may be at higher risk of both moving violations and accidents.

The Clearinghouse

The Clearinghouse was created to keep commercial drivers who have violated federal drug and alcohol rules from lying about those results and getting a job with another motor carrier.
This electronic database tracks commercial drivers’ license holders who have tested positive for prohibited drug or alcohol use, as well as refusals to take required drug tests, and other drug and alcohol violations.

The Clearinghouse tracks a driver’s drug and alcohol tests and bars them from operating commercial vehicles after they fail a test. If they want to return to driving, they must successfully pass a return-to-duty process that includes substance abuse treatment and a test to evaluate their readiness.

The restriction can be lifted if the driver signs up for a Clearinghouse program that will test them 14 times in two years, with the first 12 tests having to occur in the first year.
This cost all comes out of the driver’s pocket.
This system is an important check on drivers and helps employers reduce their exposure.
The Department of Motor Vehicles is required to check the Clearinghouse before issuing a new or renewing a commercial driver’s license.

The takeaway

While it is the law that employers follow Clearinghouse procedures, because it’s a new system, many companies are failing to follow the rules.
If you are relying only on pulling a driver’s moving violation record and not the Clearinghouse, you are in breach of regulations and could leave your firm exposed.
If you employ a driver who is under suspension from driving by the Clearinghouse and they are involved in an accident, the victims could build a case that your organization was negligent in letting the individual drive and not checking the Clearinghouse first.
If they can prove negligence on a fleet operator’s part, the business could be in for a hefty court judgment.