APRIL 2021 – Risk Management – Supply Chain Disruption Lessons from Pandemic


BESIDES THE health and economic devastation that the COVID-19 pandemic has left in its wake, it has also caused supply chain disruptions that have affected a number of industries.

The fallout for companies of all types illustrates the fragility of most businesses’ supply chains. The pandemic has left retailers with half-empty shelf space because product manufacturers couldn’t keep operations going due to raw material or personnel shortages, while a number of carmakers and other manufacturers have had to suspend operations because of a global semiconductor shortage.

But it’s not only large companies that suffer, and small businesses are especially vulnerable. That’s why it’s important that you have in place a solid plan for averting and dealing with disruptions to your supply chain if you rely on materials and inputs from outside vendors.

Here’s what you can do to manage this growing risk.

Understand your supply chain

Start by identifying risks in your supply chain and develop ways to mitigate them.

FOUR MAIN EXTERNAL SUPPLY CHAIN RISKS

  • Flow interruptions – Problems with the movement of goods and materials.
  • Environmental risks – Economic, social, political, terrorism threat and weather-related factors that affect facilities and infrastructure. The pandemic falls into this category.
  • Business risks – Problems caused by factors like a supplier’s poor financial or general stability, or the purchase or sale of supplier companies by other entities.
  • Physical plant risks – Problems at a supplier’s facility. For example, a key supplier could have a machinery breakdown and/or regulators may shut the facility down.

 

Develop a plan

The best way to manage a supply chain disruption is to prepare for it. Start by undertaking a business impact analysis to prepare your company.

Form a team of key personnel to:

  • Identify alternatives to key suppliers. One option is to contract with an alternative vendor in advance, so you can certify them and ensure they can ramp up if you lose a critical supplier.
  • Model the impact of disruptions on your production and inventory for the four supply chain risks listed to the left. Think about how non-delivery of a key item
    would affect your operations.

Using that information, you can build contingencies for supply chain failures:

  • Plan for how you would respond to all “what if” scenarios that could affect your operations. Be realistic about assessing your capacity to respond to these scenarios.
  • Create a contingency plan for failure of any supply chain pillars. Identify the points at which you would need to execute risk-mitigating measures, like sourcing from other vendors or using new distribution channels.
  • In advance, amass a contingency management team that will bridge the divide between your departments during disruptions. This team must include senior
    staff who are influential with top company decision-makers.
  • Make sure your supply chain is flexible enough to deal with risks. Look at opportunities to address current supply chain bottlenecks; investigate alternative transportation network configurations or production systems.

 

The final backstop: insurance

You can address supply chain risks with business interruption insurance or contingent business interruption insurance.

Business interruption insurance.
This coverage, which is often included in a commercial property policy, covers lost profits after a company’s own facility is damaged by an insured peril.

Contingent business interruption insurance. This is often a policy rider that you can purchase. It covers lost profits if an insured peril shuts down a critical supplier, part of the transportation or distribution chain, or a major customer.

This coverage is triggered if there is:
1. Damage to property that prevents one of your suppliers from making products or delivering them.
2. Damage to property that prevents your customers from receiving your products.


APRIL 2021 – Social Engineering Crime – Business Compromise Scams Growing Fast


BUSINESS COMPROMISE scams that use both technology and a human touch to steal funds from businesses are growing as criminals engage in social engineering tactics to dupe unsuspecting employees.

Businesses have lost millions of dollars to social engineering scams, where attackers impersonate a company president or executive who is authorized to approve wire transfers to trick employees into transferring funds into a fake client or vendor account.

According to the FBI’s Internet Crime Complaint Center, in 2019 U.S. businesses were hit with an estimated 23,775 e-mail compromise scams that
resulted in aggregate losses of $1.7 billion. Figures for 2020 are not yet available.

Vishing – or voice phishing – attacks have been growing. The FBI in January warned of an increase in vishing attacks targeting employees working remotely in the COVID-19 pandemic, and of the heightened risks companies face when network access and broadening of online privileges may not be fully monitored.

 

How to train employees

Providing practical employee phishing training is key to keeping your company safe. The following are activities and tips to help you train employees to stay vigilant.

Remote workers should be vigilant in checking internet addresses, more suspicious of unsolicited phone calls, and more assertive in verifying the caller’s identity with the company, the FBI recommends.

When training staff, you should:

  • Explain what vishing and phishing is, how it happens, and what risks it poses on a personal and company level.
  • Explain the different types of phishing attacks.
  • Train your workers in identifying signs of phishing attacks, like e-mails with poor spelling and grammar, incorrect e-mail addresses (for example BobS@ Startbucks.com), and fraudulent URLs.
  • Train your staff in recognizing phishing links, phishing attachments, and spoofed e-mails. Additionally, your employees should know what steps to take after they identify a threat.
  • Conduct simulations that send employees fake phishing e-mails. The results should be shared with them to show how they fell for the scam and the damage that being duped into clicking on a malicious link can cause.

 

Insurance

As vishing and business e-mail compromise scams increase, more employers are seeking to add coverage in their commercial crime policies.
Typically, these policies have been used to cover losses for internal theft, but lately, about 50% of claims are for losses related to phishing and fishing scams.
The price of social engineering coverage varies by risk and limit, but it can often be added to a crime policy as a rider.
One thing though: social engineering coverage will often have lower limits than a typical commercial crime policy. This is because of the risk of much larger financial losses than a company could expect from internal theft or white-collar crime perpetrated by an employee.

 

ADVICE FROM THE FBI

  • Consider instituting a formal process for validating the identity of employees who call each other.
  • Restrict VPN connections to managed devices only (meaning not on employees’ personal devices).
  • Restrict VPN access hours.
  • Employ domain monitoring to track the creation of or changes to corporate brand-name domains.

APRIL 2021- Cyber Insurance – As Attacks and Costs Mount, Rates Climb Higher


CYBER INSURANCE rates are going to increase dramatically in 2021, driven by more frequent and more severe insured losses, according to a recent industry study.

The report by global insurance firm Aon plc predicted that rates would jump by 20% to 50% this year due to two main factors:

 

1. Cyber attacks are becoming more frequent

While publicly disclosed data breach/privacy incidents are actually occurring less often, ransomware attacks are exploding in frequency.

Ransomware incident rates rose 486% from the first quarter of 2018 to the fourth quarter of 2020. The comparable rate for data breach incidents fell 57% during the same period. The incident rates for the two types of events combined rose 300% over the trailing two years.

 

2. The costs of these attacks are growing

The average dollar loss increased in every quarter of 2020. Ransomware attacks were particularly severe – many of them resulted in eight-figure losses. Others may grow to that level as business interruption losses are adjusted and lawsuits against insured organizations proceed.

The combination of more frequent and more costly losses is a
recipe for higher rates.

Cyber insurance rates continued increasing in 2020, with rises of between 6% and 16% in the last four months of the year. In January 2021, most of the top 12 cyber insurance companies told Aon they were planning more drastic rate hikes. Nearly 60% reported that they would be seeking rate increases of 30% or more during the second quarter. None of them expected increases less than 10%.

 

New underwriting criteria

When insurers evaluate cyber insurance applicants, they will be particularly concerned with the organization’s overall cyber risk profile, its cyber governance and access control practices, and its network and data security. Prior loss history will be less important because the frequency of attacks is growing so quickly.

Some insurers may also cap how much they will pay for ransomware losses, or even exclude them entirely. They may also increase the waiting periods before coverage begins to apply.

 

WHAT BUSINESSES CAN DO

To improve your chances of getting more favorable pricing and coverage, the report recommends that you focus on:

  • Reducing the risk of cyber losses.
  • Measures to keep data private.
  • Building an internal culture of cybersecurity.
  • Preparing for ransomware attacks and disaster recovery planning.
  • How your contracts and insurance will respond to a supply chain security breach.
  • Understanding primary and excess coverage terms and
    communicating primary terms to excess insurers.

April 2021 – Stimulus Plan Expands Business Assistance


THE $1.9 TRILLION American Rescue Plan Act (ARPA) that President Biden signed into law on March 11 contains a number of provisions intended to help small businesses and other organizations hurt by the pandemic.

Foremost, it includes additional Paycheck Protection Program (PPP) loans to struggling businesses, and a number of special grants to companies in industries that have been especially hard hit, including restaurants, movie theaters, concert spaces, and museums.

The measure also includes provisions extending a number of tax credits to employers affected by the pandemic, in order to make it easier for people laid off during the health emergency to access COBRA coverage after they lose their jobs and their health coverage.

ARPA opens up a new opportunity for businesses that have been hurt by the pandemic to access financial aid to keep their doors open and stay viable. Many of the programs build on ones introduced earlier in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and extended by the Consolidated Appropriations Act of 2021 (CAA).

PPP extended

The law authorizes another $7.25 billion for the Paycheck Protection Program, which offers forgivable loans to small firms and other organizations that have been hit by the pandemic.

These loans are forgivable if 60% of the funds are used on payroll and the rest pays for mortgage interest, rent, utilities, personal protective equipment or certain other business expenses.

While the legislation set the deadline to apply for March 31, the deadline was extended until June 30 after Congress passed supplemental legislation.

Other assistance

There are a number of other provisions of the new law aimed at providing financial aid:

  • $10 billion for state governments to help leverage private capital and make low-interest loans and other investments to help their small businesses recover.
  • $15 billion to the Economic Injury Disaster Loan grants program to be given to small businesses in underserved areas, especially minority-owned enterprises.
  •  $29 billion for financial relief grants to restaurants. The maximum grant size will be $5 million for restaurants and $10 million for restaurant groups. The Small Business Administration will administer these grants.
  •  $15 billion will be added to the Shuttered Venue Operators Grants program, which was launched by the CARES Act. More funds will be made available to
    museums, theaters, concerts, and other venues that had to shut down due to COVID-19-induced restrictions. This program has not yet launched.

Tax credits

Originally enacted under the CARES Act and CAA, the Employee Retention Credit (ERC) lets certain employers take advantage of a tax credit for qualified wages paid to employees.

The CARES Act capped the ERC at $5,000 per employee for 2020. The CAA, passed in late 2020, expanded the ERC to apply to qualified wages made between Jan. 1 and June 30 this year. It also increased the maximum amount of the credit to $7,000 per employee per quarter.

The new stimulus law extends the ERC through the end of this year. That means that eligible small firms can take a tax credit of up to $28,000 per employee for 2021.

Who is eligible: Businesses that were either fully or partially suspended as a result of COVID-19-related government orders that restricted their ability to operate and generate sales. Also, any business that has gross receipts that are less than 80% of gross receipts for the same calendar quarter in 2019.

ARPA also makes eligible for the tax credit for any start-up businesses that also suffered revenue losses as a result of the pandemic. In addition, ARPA extends through September the availability of paid leave credits to small and midsize businesses that offer paid leave to employees who may take leave due to illness, quarantine, or caregiving due to the pandemic and any closure orders.

Employers that offer paid leave to workers who are sick or in quarantine can take dollar-for-dollar tax credits equal to wages of up to $5,000.


December 2020- EMERGENCY REGULATIONS – COVID-19 Workplace Safety Rules Take Effect


THE CAL/OSHA Standards Board has approved new emergency regulations that will impose strict rules on employers to implement safeguards in order to reduce the risk of COVID-19 spreading in the workplace.

The sweeping rules extend the reach of protections to employer-provided housing and transportation, as well as THE CAL/OSHA Standards Board has approved new emergency regulations that will impose strict rules on employers to implement safeguards in order to reduce the risk of COVID-19 spreading in the workplace.

The sweeping rules extend the reach of protections to employer-provided housing and transportation, as well as imposing new reporting requirements on employers who have workers that contract the coronavirus. The new rules took effect Nov. 30, so employers need to ramp up immediately to comply with them.

HIGHLIGHTS OF THE NEW REGULATIONS

  • Physical distancing and mask-wearing are required unless it is not possible to Wear masks on the job. If physical distancing is not possible, the employer would have to explain why.
  • Employers must provide face coverings and ensure they are worn by employees over the nose and mouth.
  • At fixed work locations where it is not possible to maintain physical distancing, the employer shall install cleanable partitions that effectively reduce aerosol transmission between employees.
  • Employers must implement cleaning and disinfecting procedures for frequently touched surfaces and objects, such as doorknobs, elevator buttons, equipment, tools, handrails, handles, controls, bathroom surfaces and steering wheels.
  • Employers will be required to have a written COVID-19 prevention program. Cal/OSHA will allow the program to be incorporated into an existing injury and illness prevention plan or be stand-alone.
  • Employers must identify and evaluate COVID-19 hazards with participation from employees, and then correct those hazards.
  • Employers must investigate cases among their employees. If they discover one of their staff has contracted COVID-19, they must notify all employees at a worksite who might have been exposed, within one day. Workers who may have been exposed must be offered COVID-19 testing at no cost.
  • Employers must report coronavirus cases in their workplaces to local health authorities.
  • Employers must maintain medical records related to COVID-19 and provide those records to the local health department, the California Department of Public Health, Cal/OSHA, and the National Institute for Occupational Safety and Health (upon request).
  • Employers must implement a system of record-keeping to track all COVID- 19 cases in the workplace.
  • Employees with COVID-19 symptoms may not return to work until at least 10 days since symptoms first appeared, and not until after 24 hours have passed since the employee had a fever of 100.4 or higher and after all symptoms have passed.

There are even rules for disinfecting and cleaning employee housing and  transportation if the company provides them. The regs also include provisions that are beyond the scope of workplace safety regulations, such as requiring employers to maintain employees’ earnings, seniority and benefits when they are off work because of COVID-19.

Key takeaways

The new rules took effect Nov. 30, so you will need to immediately prepare.  You should:

  • Prepare for new record-keeping requirements,
  • Write COVID-19 prevention program guidelines,
  • Implement testing protocols according to the
    regulations, and
  • Prepare policies and procedures for notifying affected staff and others of possible COVID-19 exposure.

December 2020 – COVERAGE ISSUES – Your New Year Insurance Checklist


AS 2021 gets underway and while you’re making New Year’s resolutions, you should also resolve to review the state of your business’s insurance program.

The best way to do that is to start by reviewing your enterprise’s activities in the past year and how they may affect your insurance policies in the new year. What you find as you go through the following checklist may surprise you.

Did your operations change last year? Workers’ compensation and commercial general liability (CGL) insurance premiums are based in part on the type of work your business does.

If your business changed, the insurance company may revise how it classifies your operations when it audits your records. This could cause your premiums to increase; inform the company now to avoid a surprise later.

Did your payroll and sales change? These premiums are also based on the amounts of your payrolls and sales. Employment practices liability insurance premiums are based on the number of employees.

If you had a good year and these numbers increased, expect to pay additional premiums at audit time. Conversely, if both shrunk, ask your insurer to reduce its estimates so you can get the return premium now.

Did you acquire, form or sell any businesses? CGL policies typically provide short-term coverage for some newly acquired or formed entities. After 30 or 90 days, that coverage disappears unless you report the new entities to the insurer.

Workers’ comp policies do not automatically cover a new entity. If your business and the new entity have common ownership, you may be able to add that entity to your policy, but you must report it to the insurer.

Did your properties change? Did you buy or sell any buildings? Lease new ones? Add on to or upgrade any buildings? Buy new equipment? Make sure your insurer knows about these changes.

Some property insurance policies provide limited automatic coverage, but only for 30 days or so. Also, the amounts of insurance on your properties should reflect the cost of replacing them. If your building is 30% bigger than it was this time last year, you may be underinsured.

Did your auto schedule change? If you have sold, replaced or added any vehicles, make sure your insurance company has an up-to-date list of all vehicles. Do you need new or additional insurance? Could you afford to pay for legal costs, settlements, penalties, lost income and recovery measures if you were sued over a network data breach or suffered a ransomware attack? If not, you may need cyber insurance.

Could a client sue you for alleged errors or omissions in your work? If so, you might need professional liability insurance. Also, you may need greater amounts of general liability and automobile liability insurance, especially if you work for other firms. They often require their vendors and contractors to carry high insurance limits. You may need a commercial umbrella liability policy for additional amounts of insurance.

The takeaway

You’ve worked hard to build your business, and your work
deserves protection. By using this checklist, you will get a good
start on protecting what you have while you work in 2021 to
make it grow.


December 2020 – Top 10 Business Laws and Regulations for 2021


EVERY YEAR starts with a bevy of new laws and regulations affecting  employers and business in California, and many of the new rules this time around are an outgrowth of the COVID-19 pandemic and its effects on workers.

 

Employers in the year ahead have a number of changes they will have to contend with, some of which were enacted near the end of 2020 as emergency regulations or legislation. The following are the top 10 laws and regulations affecting employers in 2021.

1. COVID-19 workers’ compensation rules

AB 1159, which took effect in September, requires that workers’ compensation benefits be extended so that any employee who reports to a workplace and contracts COVID-19 is presumed to have contracted it at work, making them eligible for workers’ comp  benefits.

But the law also imposes sweeping reporting rules for employers that have outbreaks in their workplaces (it’s considered an outbreak if 4% of an employer’s workers test positive for COVID-19). Under new rules by the Workers’ Compensation Insurance Rating Bureau, though, COVID-19 illness claims will not count against employers’ experience modifiers (X-Mods).

Under the law, when reporting a COVID-19 claim employers must provide the following information:

  • The date the worker tested positive
  • The workplace address of the worker during the 14 days before the positive test, and
  • The highest number of employees who reported to work in the 45 days preceding the last day the employee worked in the workplace.

The above must be reported for each worker COVID-19 case. The law sunsets on Jan. 1, 2023.

2. Cal/OSHA COVID-19 regulations

Cal/OSHA in November enacted emergency regulations that require employers to implement safeguards i to reduce the risk of COVID-19 spreading in the workplace. The rules require employers to create a COVID-19 prevention plan, require masks in the workplace, social distancing and other ways to reduce the likelihood of virus spread.

Employers must investigate coronavirus cases in their workplace. If a worker contracts COVID-19, they must notify all staff who may have been exposed, within one day. Workers who may have been exposed must be offered COVID-19 testing at no cost. Employers must report every new case to local health authorities.

3. Cal/OSHA law adds confusion

Before Cal/OSHA came out with its emergency COVID-19 regulations, Governor Newsom signed into law AB 685, which adds to Cal/OSHA’s responsibilities in policing COVID-19 protections.

The law expands the agency’s authority to issue stop-work orders to workplaces it deems a COVID-19 “imminent hazard.” The law also requires employers to notify a number of parties (state agencies, local authorities, employees, contractors and more) if they have coronavirus infections in any of their facilities.

Notice to employees must include information regarding benefits the employee may be eligible for under federal, state and local laws, including workers’ comp, COVID-19-related leave, company
sick leave, state-mandated leave, and more.

4. Expansion of California Family Rights Act

SB 1383 expands the California Family Rights Act to cover even smaller employers – those with five or more staff. The CFRA, which requires covered employers to provide up to 12 weeks of unpaid leave a year for family and medical leave purposes, had until now applied to employers with 50 or more workers .

The new law also expands the scope of “family members” for whom employees can take leave to help care for them to include siblings, grandparents, grandchildren and domestic partners. Also, the law expands the definition of “child” to include all adult children.

5. Independent contractor law tweaked
AB 2257, which took effect in September 2020, revises the controversial AB 5 independent contractor law by adding a number of exceptions for certain classes of workers.
AB 5 created a new standard for discerning what workers should be classified as employees or independent contractors and it swept up a number of professions in its net, causing some
consternation and hand-wringing among both employers of those contractors and the independent contractors themselves. The professions that are now exempt include (among others):

  • Graphic designers
  • Web designers
  • Consultants
  • Freelance writers
  • Translators
  • Editors and content contributors.

6. Wildfire smoke safety regulations

Cal/OSHA is working on permanent wildfire smoke regulations to protect  outdoor workers when the air worsens during major events. An emergency regulation is set to expire Jan. 31, 2021, at which time Cal/OSHA hopes to introduce the permanent replacement that would require employers to protect their outdoor workers from smoke if the Air Quality Index (AQI) exceeds 150.
The regulations apply when the AQI for airborne particulate matter 2.5 microns (PM2.5) or smaller is 151 or greater. The permanent regulations are expected to cover training and methods for protecting workers (like moving them inside or providing N95 respirators during high-smoke conditions).

7. New classification for telecommuters

There is a new workers’ compensation class code to assign to employees who work from home, an outgrowth of the coronavirus pandemic which thrust so many people into working from home. The new class code, (Clerical Telecommuter Employees – N.O.C.), applies to employees that work from home or “away from any location of their employer,” doing office clerical work. This class code, available on policies effective Jan. 1 or later, is to be used for employees which would have been classified under class code 8810, Office Clerical employees, that are doing work at home 50% or more of the time.

8. Sick leave and kin care law

Under Labor Code, an employee was entitled to use up to half of their annual accrued sick leave to care for a family member, but not the full amount of sick leave they have. AB 2017 gives employees the sole discretion to use as much of their sick leave as they want to care for a family member, with no approval from their employer required. The law took effect. Jan. 1.
A “family member” is defined as a child, parent or guardian, spouse or domestic partner, grandparent, grandchild or sibling.

9. Data protections strengthened further

California voters last year passed Prop. 24, which established a new law: the California Privacy Rights Act of 2020. The CPRA amends and strengthens the state’s current data protection
privacy law, the California Consumer Privacy Act (CCPA), which governs how organizations have to protect personal data that they collect. The CPRA gives additional rights to consumers and places extra obligations on businesses. It provides additional protections for sensitive personal information, expands the CCPA’s opt-out rights to include new types of information-sharing, and requires businesses to provide additional mechanisms for individuals to access, correct or delete data, with a particular focus on information used by automated decision-making systems.

While the law doesn’t take full effect until Jan. 1, 2023, it has a 12-month look-back period. Privacy experts advise companies to start working on their data protection infrastructure in 2021 in order to be ready for this expansive new law.

10. State minimum wage increases

As of Jan. 1, California’s minimum wage increased to $14 for employers with 26 or more employees, and to $13 for those with 25 or fewer employees. Local minimum wages may also have risen. Check your local rules for other minimum wage requirements.


Worker’s Compensation – COVID-19 Prompts Rate Hike Recommendation – OCTOBER 2020


THE COVID-19 pandemic seems to have reversed years of falling workers’ compensation rates in California, as the Workers’ Compensation Insurance Rating Bureau has recommended that average benchmark rates be increased by 2.6% for 2021.
The recommendation was forwarded to the California Department of Insurance, which will schedule a hearing on the recommendation in the fall.
It should be noted that the 2.6% increase recommendation would be an average across all class codes, as the Rating Bureau plans to allocate the expected COVID-19 costs by weight across the state’s overall industrial sector. Note that even low exposure classes will be surcharged.
The Bureau in its recommendation aims to apply the surcharge on a weighted basis according to each class code’s share of growing COVID-19 claims costs. It is considering a tiered surcharge model based on an employer’s risk, as follows (for examples, see below):

High risk – A 12-cent surcharge per $100 of payroll.
Medium risk – A 6-cent surcharge per $100 of payroll.
Low risk – A 4-cent surcharge per $100 of payroll.

 

The X-factor


The Bureau’s actuarial committee noted that the pandemic does present challenges for predicting workers’ compensation costs. “The 2021 policy year will still be impacted by COVID-19, but some trends may stabilize. The challenge will be projecting exposure and claims frequency (for COVID-19 claims),” the committee wrote in a report. Actually, the overall effect of COVID-19 on rates going into 2021 was 4%, according to the Rating Bureau. Had it not included the COVID-19 surcharge, it would be asking for a 1.3% decrease in benchmark rates.

The reason is that claims costs and claims frequency have been falling and long-term claims are costing less than originally anticipated. The Bureau also forecasts that the recession caused by the pandemic will also have a profound effect on overall claims: it projects an overall 6.3% decrease in claims frequency due to slowing economic conditions.

Interestingly, COVID-19 claims are not supposed to count against employers’ experience rating and loss histories, according to new rules that took effect in May. However, the claims are having an overall effect in terms of workers’ comp benefit payments. The Bureau also has to price in the uncertainty over the future of COVID-19. Will it get worse, or will it begin to wane? Will there be a vaccine and new and improved treatment regimens that reduce mortality or decrease symptoms and hospitalizations?

It is concerned that some low-risk industries may be getting a surcharge that is still out of proportion to their actual risk, particularly with people who are working remotely. It plans to further study the issue and will likely amend the filing depending on the results.


Law Adds Independent Contractor Exemptions – OCTOBER 2020


A NEW LAW has come to the rescue of a number of freelance professions by exempting them from the onerous requirements of AB 5, which required most independent contractors to be classified as employees in California. Governor Gavin Newsom on Sept. 1 signed AB 2257 as an urgency measure so that it took effect immediately. If you remember, AB 5 set a new standard for hiring independent contractors, requiring many to be reclassified as employees covered by minimum wage, overtime, workers’ compensation, unemployment and disability insurance. It created a three-pronged test that needs to be satisfied to determine if someone is an independent contractor or an employee.

To be independent contractors under AB 5’s “ABC test,” workers must (A) work independently, (B) do work that is different from what the business does, and (C) offer their work to other businesses or the public. All three conditions must be met.

It is prong B that’s problematic. For example, a freelance writer working for a magazine would not be doing something different than the business does. The new law sets limits on the amount of income someone can receive while doing this kind of work before being considered an employee. AB 2257 also expands the “business-to-business” definition in AB 5 to cover a relationship between two or more sole proprietors.

 

 

 

 


New Law Creates COVID-19 Claim Framework – OCTOBER 2020


GOVERNOR GAVIN Newsom has signed legislation that creates a new framework for COVID-19- related workers’ compensation claims. SB 1159 replaces an executive order that Newsom made on March 18 that required all employees working outside the home who contracted COVID-19 be eligible for workers’ compensation benefits if they file a claim. The new law expands that rebuttable presumption” that a coronavirus case is work-related to front-line workers, as well as employees in workplaces that have had an outbreak of cases. The new law is retroactive to July 6, the day after Newsom’s executive order expired, and is set to expire Jan. 1, 2023.  Employers with fewer than five employees are exempt under the statute.

SB 1159’s three parts

Part 1. The law codifies Newsom’s prior executive order that provided a “rebuttable presumption” that COVID-19 was contracted in the scope and course of work by employees working outside of the home who get infected.

Part 2. The law provides a rebuttable presumption that firefighters, law enforcement officers, health care workers and home care workers who contract COVID-19, contracted it in the workplace.

Part 3. The law creates a rebuttable presumption that a worker’s COVID-19 diagnosis is work-related within 14 days of a company outbreak. Under SB 1159, an outbreak is defined as when four employees test positive at a specific place of employment with 100 or fewer employees and, for larger places of employment, when 4% of the employees test positive. It’s also deemed a workplace outbreak if the employer had to shut down due to the coronavirus.

Rebutting a claim

Employers can rebut the presumption that COVID-19 was contracted at work if they have:
• Proof of measures they put in place to reduce potential transmission of COVID-19,
• Evidence of the employee’s nonoccupational risks of contracting COVID-19,
• Statements made by the employee, or
• Any other evidence normally used to dispute a work-related injury.

REPORTING REQUIREMENTS

When an employer learns of an employee testing positive, they must report to the insurer the following information within three business days:
• The date the employee tested positive.
• The address or addresses of the employee’s specific place(s) of employment during the 14-day period preceding the date of their positive test.
• The highest number of workers who reported to work in the 45-day period preceding the last day the employee worked at each specific site.

Filing False Information Can Result in a $10,000 Fine

The Rossi Law Group has the following recommendations for employers in California:
• Keep track of all locations each employee works at, the number of employees on each day at each location, as well as a log of those that test positive (including the date the specimen was collected).
• If you are aware of any staff who have tested positive between July 6 and Sept. 17, you have 30 days after Sept. 17 to report the positive test to the claims administrator.
• You must also report to the insurer positive COVID-19 results for employees that are not filing claims. In that case, you must omit personal identifying information of the employee.
• Provide any factual information to the claims administrator that could help rebut any claim of work-relatedness.

The law also has some teeth: Anyone who submits false or misleading information shall be subjected to a civil fine up to $10,000.

One last thing…

The governor also signed into law AB 685, which requires employers to report an outbreak to local public health officials. Employers must also report known cases to employees who may have been exposed to COVID-19 within one business day.