IF YOU are operating a small business, you are likely relying on a small staff to get the job done. Many employees in small firms have to wear many hats and if one of them or an owner should die, the business could suffer greatly from that sudden loss of talent. If you don’t have “key man” insurance, that setback could be devastating to the viability of your operations, whereas coverage would provide you with extra funding that you would need while recovering from the loss. Keyman insurance is life insurance on a key person or persons in a business. In a small business, this is usually the owner, a founder or perhaps a few vital employees. These are the people who are crucial to a business – the ones whose absence would sink the company. You need key man insurance on those people.

Key man insurance basics

Before buying coverage, give some thought to the effects on your company of possibly losing certain partners or employees. In opting for this type of coverage, your company would take out life insurance on the key individuals, pay the premiums and designate itself as the beneficiary of the policy. If that person unexpectedly dies, your company receives the claim payout. This payout would essentially allow your business to stay afloat as you recover from the sudden loss of that employee or partner, without whom it would be difficult to keep the business operating in the short term.

Your company can use the insurance proceeds for expenses until it can find a replacement person, or, if necessary, pay off debts, distribute money to investors, pay severance to employees and close the business down in an orderly manner. In other words, in the aftermath of this tragedy, the insurance would give you more options than immediate bankruptcy.

Determining whom to cover

Ask yourself: Who is irreplaceable in the short term? In many small businesses, it is the founder who holds the company together – he or she may keep the books, manage the employees, handle the key customers, and so on. If that person is gone, the business pretty much stops.

Determining amount of coverage

• The amount of coverage depends on your business and revenue.
• Think of how much money your business would need to survive until it could replace the key person, come up to speed and get the business back on its feet.
• Buy a policy that fits into your budget and will address your short-term cash needs in case of tragedy.
• Ask us to get some quotes from different insurers. • Check rates for different levels of coverage ($100,000, $500,000, etc.)

WITH THE current isolation orders for most workers in California, many companies have had to scramble to put systems in place to allow their employees to telecommute. Many businesses are not set up for having employees work from home, and they have legitimate concerns about productivity and communications. But there are steps you can take to make sure that you keep your employees engaged and on task.

1. Make sure they have the right technology

If you don’t already have one, you may want to consider setting up a company VPN so your employees can access their work e-mail and databases. You will also need to decide if you are going
to provide them with a company laptop, and you need to make sure that they have an internet connection that is fast enough to handle their workload. Also provide an infrastructure for them to be able to work together on files. If they are not sensitive company documents, they can use Dropbox or Google Documents, which allow sharing between co-workers.

2. Provide clear instructions

It’s important that you provide clear instructions to remote workers. Some people do not perform well without direct oversight and human interaction. Without that factor, you will need to spell out your expectations and the parameters of the projects they are working on in detail. Make it clear that if they are confused or unsure about any part of the work, they should contact a supervisor for clarification. If you can eliminate misunderstandings, then your workers can be more efficient.

3. Schedule regular check-ins

To hold your employees accountable for being on the clock, schedule calls or virtual meetings at regular intervals. Even instant messaging works. During these meetings they can update their
superiors on their work. This also helps with productivity, since there are consequences for failing to meet expectations and coming to the meeting empty-handed. Their supervisors should be working when they are, so they can be in regular communication.

4. Keep employees engaged

One of the hardest parts of working from home is the feelings of isolation and detachment from colleagues. It’s important that you build in interactive time for your workers. One way to do that is by using a chat program like Slack, Hangouts or WhatsApp (which has a group chat function). For remote workers, these programs are a blessing because they make it easy to keep in touch with their colleagues in and out of the office – and they level the playing field, so to speak, by making distance a non-issue.

5. Cyber protection

With employees working from home, you also increase your cyber risk exposure, especially if they are using a company computer that is tapped into your firm’s database or cloud. Teach them cyber security best practices, such as:
• Not clicking on links in e-mails from unknown senders.
• Making sure their systems have the latest security updates.
• Backing up their data daily.
• Training them on how to detect phishing, ransomware
and malware scams, especially new ones that try to take advantage of people’s fears about COVID-19.

As the new year gets underway, now would be a good time to double down on your workplace safety efforts to see if there are any areas that you may be overlooking.
While your safety regimen may be top-notch, there is always room for improvement and you can consider these options as recommended by EHS Today:

Use a 10-second rule

Workers should consider using the 10-second rule before resuming a task after a break or disruption. During this time before resumption, the worker can conduct a mental hazard check, which EHS Today refers to as STEP:
S – Stop before resuming a job or beginning a new task.
T – Think about the task you are about to do.
E – Ensure potential hazards have been identified and mitigated.
P – Perform the job.

Take advantage of OSHA training

The OSHA Outreach Training Program provides training for workers and employers on the recognition, avoidance, abatement and prevention of safety and health hazards in workplaces. Through this program, workers can attend 10-hour or 30-hour classes delivered by OSHA-authorized trainers. The 10-hour class is intended for entry-level workers, while the 30-hour class is more appropriate for workers with some safety responsibility. Information is on OSHA’s website. Communicate with non-English-speaking workers Non-English-speaking laborers have more workplace accidents than their peers. The language barrier may keep them from reporting workplace hazards and they may not understand safety instructions.

If you have non-English-speaking workers:
• Ensure that training is fully understood.
• Try to get any safety training materials also printed up in Spanish, and other languages prevalent in your workplace.
• If you have one, provide them a contact in your organization that speaks their language, so that they can get answers to any questions they may have or to report concerns.

Urge employees to speak up

Let your workers know that there will be no retribution for reporting perceived workplace hazards, no matter how minor. You can also implement the third suggestion above, and reward employees that point out safety issues.

Make your training engaging

The best safety training programs are those that employees remember. Some good ways to make sure the information is retained include using real-life examples, story-telling, skits and strong video presentations.

Do more than OSHA requires

OSHA’s regulations are meant to be comprehensive, but every workplace is different and for a truly effective safety program you should fine-tune your safety requirements specifically for your workplace. In other words, you can go a step beyond what OSHA requires.

Watch each other’s back

You should also instill a sense of responsibility among your staff to look out for each other. If a worker sees another performing a job in an unsafe manner, they should step in to offer assistance. This can be done without being intrusive or confrontational.
Some good approaches include: “Hey, would you like me to watch out for your safety?” and “As you know, you need to be wearing cut-resistant gloves to perform that task.”

The new decade is starting off with a tsunami of new laws and regulations that will affect California businesses. Companies operating in California will have to be prepared for significant changes or open themselves up to potential litigation, fines, and other risks.

Here’s what you need to know coming into the new year:

1. AB 5

The controversial AB 5 creates a more stringent test for determining who is an independent contractor or employee in
California.  Known as the “ABC test,” the standard requires companies to prove that people working for them as independent contractors are:

A) Free from the firm’s control when working;
B) Doing work that falls outside the company’s normal business; and
C) Operating an independent business or trade beyond the job for which they were hired.

Legal experts recommend that employers:

• Perform a worker classification audit, and review all contracts with personnel.
• Notify any state agencies about corrections and changes to a
worker’s status.
• Discuss with legal counsel whether they should now also include them as employees for the purposes of payroll taxes, workers’ compensation insurance, federal income tax withholding, and FICA payment and withholding.

2. Wildfire safety regulations

Cal/OSHA issued emergency regulations that require employers of outdoor workers to take protective measures, including providing respiratory equipment, when air quality is significantly affected by wildfires. Under the new regs, when the Air Quality Index (AQI) for particulate matter 2.5 is more than 150, employers with workers who are outdoors are required to comply with the new rules. These include providing workers with protection like respirators, changing work schedules or moving them to a safe location.

3. Arbitration agreements

Starting Jan. 1, the state will bar almost all employee arbitration agreements. AB 51 bars employers from requiring
applicants, employees and independent contractors to sign mandatory arbitration agreements and waive rights to filing
lawsuits if they lodge a complaint for discrimination, harassment, wage and hour issues. Businesses groups sued to overturn the law on the grounds that it is preempted by the Federal Arbitration Act.

4. Overtime rules

New federal overtime regulations are taking effect for non-exempt workers. Under the new rule, employers will be required to pay overtime to certain salaried workers who make less than $684 per week – or $35,568 per year – up from the current threshold of $455, or $23,660 in annual salary.

5. Consumer privacy

Starting Jan. 1, under the California Consumer Protection Act, businesses that keep personal data of residents are required to safeguard that information and inform website users how their personal data may be used. The law applies to firms with $25 million or more in annual revenues or those that sell personal information as part of their business.

6. Return of the individual mandate

A new law brings back the individual mandate requiring Californians at least to secure health insurance coverage or face tax penalties. This comes after the penalties for not abiding by the Affordable Care Act’s individual mandate were abolished by Congress in late 2017. Starting in 2020, California residents are required to have health insurance or pay excess taxes. This will affect any of your staff who have opted out of your group health plan as it may mean they are going without coverage, unless they have opted to be covered by their spouse’s plan. If you have staff who didn’t enroll in your plan for 2020, they may have to wait until your group’s next open enrollment at the end of the year. That could force them to pay tax penalties.

7. New audit, X-Mod thresholds

The threshold for physical workers’ compensation audits for California policies incepting on or after Jan. 1 is $10,500 in annual premium, a drop from $13,000. This means that any employer with an annual workers’ comp premium of $10,500 or more will be subject to a physical audit at least once a year. On top of that, the threshold for experience rating (to have an X-Mod) has also fallen – to $9,700 in annual premium as of Jan. 1, from $10,000.

8. Harassment training partly pushed back

Employers with five or more workers were required to conduct sexual harassment prevention training for their staff by the end of 2019 under a California law passed in 2018. A new law extends the compliance deadline for some employers who had already conducted training prior to 2019. The original law, SB 1343, required all employers with five or more staff to conduct sexual harassment prevention training to their employees before Jan. 1, 2020 – and every two years after that. If you have never trained your staff, you should have done so in 2019.

But if you have, here are the new rules:
• If you trained your staff in 2019, you aren’t required to provide refresher training until two years from the time the employee was trained.
• If you trained your staff in 2018, you can maintain the two-year cycle and comply with the new Jan. 1, 2021 deadline. You did not have to repeat the training in 2019.

9. Hairstyle discrimination

A new law makes it illegal for employers to discriminate against employees and job applicants based on their hairstyle if it is part of their racial makeup. The CROWN Act (Create a Respectful and Open Workplace for Natural Hair), defines race or ethnicity as “inclusive of traits historically associated with race, including, but not limited to hair texture and protective hairstyles like braids, locks, and twists.” This new definition of race means that natural hair traits fall under the context of racial discrimination in housing, employment and school matters.

10. Reporting serious injuries

A new law broadens the scope of what will be classified as a serious illness or injury which regulations require employers to report to Cal/OSHA “immediately.” The new rules being implemented by AB 1805 are designed to bring California’s rules more in line with Federal OSHA’s regulations for reporting. It will mean that some injuries that were not reportable before will be, such as:
• Any inpatient hospitalization for treatment of a workplace injury or illness will need to be reported to Cal/OSHA.
• An inpatient hospitalization must be required for something “other than medical observation or diagnostic testing.”
• Employers will need to report any “amputation” to Cal/OSHA. This replaces the terminology “loss of member.” Even if the tip of a finger is cut off, it’s considered an amputation. As of yet, there is no effective date for this new law, as enabling regulations have to be written – a process that will start this year.

Gov.  Gavin Newsom has signed a measure into law that will greatly expand when employers are required to report workplace injuries to Cal/OSHA. The new law, AB 1805, broadens the scope of what will be classified as a serious illness or injury which regulations require employers to report to Cal/OSHA “immediately.” As of yet there is no effective date for this new law, but observers say regulations will first have to be written, a process that would start next year.

The definition of “serious injury or illness” has for decades been an injury or illness that requires inpatient hospitalization for more than 24 hours for treatment, or if an employee suffers a “loss of member” or serious disfigurement. The definition has excluded hospitalizations for medical observation. Serious injuries caused by a commission of a penal code violation (a criminal assault and battery), or a  vehicle accident on a public road or highway have also been excluded.

Compliance

Rules for reporting serious injuries and illness or fatalities are as follows:
• The report must be made within eight hours of the employer knowing, or with “diligent inquiry” should have known, about the serious injury or illness (or fatality).
• The report must be made by phone to the nearest Cal/ OSHA district office (note that a companion bill, AB 1804, eliminated e-mail as a means of reporting because e-mail can allow for incomplete incident reporting).

Because of the “diligent inquiry” component, employers should monitor any injured worker’s condition once they learn of an injury, particularly if they need to seek out medical treatment. A member of the staff should be on hand to monitor the employee and report to supervisors immediately if that person will need to be hospitalized. Employers should make sure that supervisors are made aware of the new rules so that any time a worker is injured to the point that they need to be  hospitalized, they know to notify Cal/OSHA within eight hours.

Also, if you have an employee that suffers a medical episode at work – such as a seizure, heart attack or stroke – you are required to report the hospitalization to Cal/OSHA. It’s better to err on the side of caution if an employee is hospitalized for any reason. Not doing so can result in penalties for failure to report or failing to report in a timely manner. Accordingly, it is important to educate management representatives, particularly those charged with the responsibility to make reports to Cal/OSHA, about the nuances of Cal/OSHA’s reporting rules.

One final note: The results of a serious injury or illness or workplace fatality will usually trigger a site inspection by Cal/OSHA, so be prepared if one should occur.

Worker’s Comp Insurance rates will likely continue sliding in 2020 after California’s rating agency submitted its recommendation that the state insurance commissioner reduces the average benchmark rates by 5.4%. If the recommendation is approved, it will be the rate ninth consecutive decrease since 2015 (some years had two decreases), which has resulted in the average benchmark rate for all class codes falling a combined 45% since then. 

The Workers’ Compensation Insurance Rating Bureau, which makes the filing at least once a year, said average claims costs continue falling due to the effects of reforms that took effect in 2014.  The Rating Bureau tracks workers’ comp costs in the state and makes the recommendations for changing the benchmark rates, which insurers use to price their policies. Every class code gets its own rate, which will change depending on the trends in claims costs and numbers for that class code.

WHY RATES ARE FALLING – Rates are still declining because:

• Old claims costs are less than expected.
• Claims are being settled more quickly.
• Drug costs continue falling sharply.
• Fewer liens on claims are being filed.

Insurers use the benchmark rates as guideposts for pricing their own policies, but in the end, they can price the policies as they wish. On top of the benchmark rate, insurers will add surcharges for various classes or regions, and add on administrative costs to arrive at their own rates. Also, rates will not fall for all employers.

 

 

 

 

 

Rates depend on a number of factors, including an employer’s claims history and region. Policies in Southern California, for instance, are often surcharged because of the amount of cumulative trauma claims filed in the region.  The state insurance commissioner will hold a hearing on the rate filing on October 14, and then make a final decision on the rate change.

What to do

Just because rates have been falling, do not waver in your focus on safety.  Here are some mistakes to avoid:

Complacency – When your premium falls, it’s easy to shift focus away from workplace safety, injury management and cost containment to other business matters. This is a mistake and can cost you in additional workplace injuries.
Focusing on just premiums – Indirect costs – including overtime, temporary labor, increased training, supervisor time, production delays, unhappy customers, increased stress, and property or equipment damage – represent several times the direct cost of an injury.
Expecting rates to stay low forever – Rates are cyclical. The key is to ride the low rates for as long as you can through unwavering attention to workplace safety and claims management.
Chasing low rates – One benefit you have from working with us is continuity, and jumping ship to another broker just to save a few thousand dollars on your premium is not always a smart choice, particularly if the new brokerage is not involved in helping you keep claims costs low.

 

 

Starting in 2020,  the threshold for California employers to be  eligible for experience rating (X-Mod) has been reduced by order of the state insurance commissioner. 

Commissioner Ricardo Lara in September approved the recommendations by the Workers’ Compensation Insurance Rating Bureau to lower thresholds for determining eligibility for experience rating and when a carrier needs to perform a physical audit of an employer’s payroll records.

NEW THRESHOLDS

Annual physical audit
As of Jan. 1, 2020: Any employer with $10,500 or more in annual premium.
Current threshold: $13,000 or more in annual premium.
Threshold for experience rating (to have an X-Mod)
As of Jan. 1, 2020: $9,700 in annual premium.
Current threshold: $10,000 or more in annual premium.

 

“Physical audit” is defined as an “audit of payroll, whether conducted at the policyholder’s location or at a  Remote site, that is based upon an auditor’s examination of the policyholder’s books of accounts and original payroll records (in either electronic or hard copy form), as necessary to determine and verify the exposure amounts by classification.”

The eligibility rating threshold is the amount of payroll developed during the experience period in each classification, multiplied by the expected loss rates for each class. If the total for all assigned classes is at or above the threshold, then the employer is eligible for an X-Mod.

Changes to dual-wage class codes

Lara also approved the Rating Bureau’s recommendations for changes to a number of construction dual-wage class codes. While most workers’ comp classes have one rate, in some classes the difference in claims costs between high- and  lowerwage workers is so great that a dual-wage  classification is needed.  In those cases, the workers above the threshold rate are assigned one rate, while those below that threshold are assigned a higher rate. The new thresholds are for 14 construction classifications, and any workers above the threshold will have a lower rate applied.

Governor Gavin  Newsom has signed a bill into law that will codify a court ruling from last year that set new ground rules for what constitutes an independent contractor, and which expands on that ruling.

There’s been a lot written in the media about the law, AB 5, and much of it misses the point. Some news reports have said it will spell the end of independent contractors in the state and that anyone a company hires to do a temporary job on contract must be treated as an employee.

Now that AB 5 is the law, state and federal labor laws will apply to independent contractors who have to be reclassified as employees.  That means they would be afforded all of the associated worker protections, from overtime pay and minimum wages to the right to unionize. Employers would have to cover them under their workers’ comp policies, and extend benefits to them as they do to other employees. The law also gives the state and cities the right to sue employers over misclassification.

AB 5 codifies and expands on a 2018 California Supreme Court decision that adopted a strict, three-part standard for determining whether workers should be treated as employees. Known as the “ABC test,” the standard requires firms to prove that people working for them as independent contractors meet certain standards:

THE ABC TEST
A) Must be free from the company’s control when they’re on the job;
B) Must be doing work that falls outside the company’s normal business; and
C) Must be operating an independent business or trade beyond the job for which they were hired.

 

The first prong aligns with the common-law test for employment and evaluates the degree of control exercised by the company over the worker.

The second prong examines whether the worker can reasonably be viewed as working in the hiring company’s business.

The third prong inquires whether the worker independently made the decision to go into business. The fact that the hiring company does not prohibit the worker’s engagement in such an independent business is not sufficient.

 

Occupations exempted include:

• Doctors
• Some licensed professionals (lawyers, architects, engineers)
• Accountants, securities broker-dealers, investment advisors
• Real estate agents
• Direct sales (compensation must be based on actual sales)
• Builders and contractors (who work for construction firms that build major infrastructure projects and large buildings)
• Freelance writers, photographers (provided the worker contributes no more than 35 submissions to an outlet in a year)
• Hairstylists, barbers (must set their own rates and schedule)
• Estheticians, electrologists, manicurists (must be licensed)
• Tutors (must teach their own curriculum)
• AAA-affiliated tow truck drivers. 

 

What employers should do

Legal experts recommend that employers:
• Perform a worker classification audit, and especially review all contracts with personnel.
• Determine which benefits and protections should be provided to any workers who are reclassified from  independent contractor to employee (think health insurance and other benefits).
• Notify any state agencies about changes to a worker’s status.
• Discuss with legal counsel whether you should also include a worker as an employee for the purposes of payroll taxes, workers’ comp insurance, federal income tax withholding,  ICA payment and withholding.

 

Note: Federal law remains unchanged. The IRS and National Labor Relations Board have their own independent contractor tests.

The Workers’ Compensation Insurance Rating Bureau of California will recommend dual-wage threshold changes to a number of construction classifications for the 2020 workers’ compensation policy year.

The Rating Bureau will make the recommendations to the Department of Insurance during its annual rate filing in June. The recommendations would have to be approved by the state insurance commissioner.

While most workers’ compensation classes have one rate, in some classes the difference in claims costs between high- and lower-wage workers is so great that a dual-wage classification is needed. In those cases, the workers above the threshold rate are assigned one rate, while those below that threshold are assigned a higher rate. This is usually because the higher-wage workers are generally more experienced and tend to suffer fewer workplace injuries compared to those below the threshold.

There are 18 dual-wage classes, but not all of them are in line for changes. Opposite is the list of changes the Rating Bureau plans to recommend in its rate filing.

 

One of the key tenets of effective management and happy employees is for managers to lead by example. And it’s  especially difficult for managers that do not exhibit to their  subordinates the traits they expect of their workers.

A recent study by Florida State University shines the light on what employees think of their managers by focusing on how guilty they are of the time-honored seven deadly sins.

Researchers, who polled 750 mid-level employees, said workplaces are seeing increased levels of hostility due in large part to a deterioration of trust between supervisors and the people they manage. Worse yet, the poll found that employees who feel their bosses are guilty of sins have impaired work productivity and poorer health.

The employees polled were asked to describe how often they personally experienced a direct supervisor’s sins of wrath (anger), greed, sloth (laziness), pride, lust, envy and  gluttony in the workplace.

The seven deadly sins are a classification of objectionable vices that have been used since early Christian times. The most common sins that were reported across genders, different industries and levels of responsibility were sloth, lust, pride and greed.

The poll found that:
• 41% of employees said their boss habitually pushes work on to others rather than doing it himself or herself (laziness);
• 33% said their boss tries to get others to stroke their ego (lust);
• 31% said their boss seeks undeserved admiration (pride);
• 27% said their boss pursues undeserved rewards (greed);
• 26% of employees said their boss frequently has trouble managing his or her anger;
• 23% of employees said their boss hoards resources that could be useful to others at work (gluttony);
• 19% said their boss regularly acts enviously toward others who experience good things.

The fallout

While this would seem to be bad in and of itself, the results of having a boss that is guilty of one or more of these sins are worse.

EFFECTS ON WORKERS
• Employees contributing less effort.
• Workers feeling overloaded by doing their supervisor’s work.
• Staff being less likely to make creative suggestions to bosses.
• Employees looking for new jobs.
• Physical and emotional problems and exhaustion among workers.
• Workers feeling anxious.

What to do

The above highlights the need for you to ensure that your
own supervisors exhibit behavior that is conducive to strong
employee productivity and maintaining a workplace that is
devoid of hostility.
The lesson from this study: lead by example. Work with
your supervisor