While we haven’t seen a change yet in the way carriers are interpreting warehouse vs. manufacturing exposures, they may begin to enforce the rule down the road.  This could mean a rate change, and ultimately, an overall increase in premium.

Here are a few important examples from the NCCI Bulletin.

1A – Manufacturing risk with all operations within a single NCCI state

A staffing client company is a manufacturer of aluminum beverage cans and is appropriately assigned to “Can Mfg.,” code 3220. Once the cans are produced, they are packaged and delivered to the insured’s distribution warehouse located in another city, but within the same state. When a customer places an order, the cans are delivered by the insured’s employees in company trucks.

Manufacturing risks, including those assigned to code 3220, encompass the receipt and storage of the raw materials, the manufacturing operations and the warehousing of the finished goods. As code 3220 does not include drivers, employees transporting the cans from the production facility to the warehouse and from the warehouse to the customers are classified to “Drivers, Chauffeurs, Messengers, and Their Helpers NOC – Commercial,” code 7380.

1B – Manufacturing risk with operations in more than one state, but both in NCCI jurisdictions

Assume a staffing client’s production facility is in State A and the distribution warehouse is in State B. Both states are subject to NCCI jurisdiction. Although the distribution warehouse operation located in State B is solely dependent upon the manufacturing operation conducted in State A, Rule 1-D requires the appropriate classification for a risk’s operations be determined by state. Code 3220 would not apply to State B because the risk is not conducting any manufacturing operations in that state. A warehouse code would also not be assigned as the risk is not in the business of storing the goods of others. The appropriate wholesale store classification, in this example “Store: Wholesale NOC” – code 8018, is the proper classification.

The appropriate state assignment for the drivers will be determined by the specifics of the particular situation. A driver that merely delivers the cans from the manufacturing facility in State A to the distribution warehouse in State B should be assigned to State A because they are working from the headquarter state. Drivers delivering the cans to customers should be assigned to State B as the distribution warehouse is considered their “base terminal.”

1C – Manufacturing risk with operations in more than one state, one being an NCCI jurisdiction and the other an independent bureau state

Assume a staffing client’s company production facility is located in State A, an NCCI jurisdiction. The distribution warehouse is situated in State C, an independent bureau state.

The independent bureau state is concerned only with the operations of a business within their particular state. Code 3320, or the applicable can manufacturing classification, would not apply since the insured is not manufacturing cans in State C. A warehouse code would also not be assigned, as the risk is not in the business of storing the goods of others. By analogy, the appropriate wholesale store classification would most likely be assigned. The proper classification would be determined based on the classification rules for the particular independent bureau state.

We’re inching closer to the January 1, 2014 implementation date. To help you further prepare, we’ve also answered additional questions asked throughout the webinar below.

Affordability

Q: If you offer affordable minimum value within the 9.5% criteria, could you also offer more traditional indemnity plans as a lower cost alternative?

A: Starting in 2013, indemnity plans must meet specific criteria starting in order to be offered.  As long as they do, you can offer them, however, they will not satisfy the employee’s personal legal obligation to be covered by comprehensive insurance. Purchasing indemnity coverage in and of itself doesn’t satisfy the individual mandate to have coverage.

Enrollment

Q: How is open enrollment impacted by measurement periods?                

A: Once they get through their initial measurement period – the one that begins when they are hired – they will become an ongoing employee, and measured against the ongoing employee measurement period. This ongoing measurement period will coincide with your plan year, so at the next open enrollment, you’ll check to see if they qualify. If they do, you’ll offer coverage again.

Stability Period

Q: What’s the difference between a measurement and stability period?

A: Measurement periods and stability periods are related. During measurement periods, you are measuring how many hours variable-hour employees are working on a daily or weekly basis.  If they meet the 30 hour/week average, then you offer them coverage during the subsequent stability period. At the same time, another measurement period starts and you start monitoring hours again. It’s not the most straightforward process, but your Assurance representative can work you through the details.

The Shady Side: Unsafe Observations

Organizations often times rely too heavily on unsafe worksite observations, and then misuse the data collected through safety inspections or behavior-based systems.

For Example:  Your staffing company’s safety observation process only collects unsafe observations. After digging into past data, you discover one crew has five unsafe observations in ladder use and another crew has no unsafe observations in ladder use. Assuming both did similar work, which crew was safer? Your first inclination is to claim the crew with no unsafe observations. However, you’re assuming both crews were observed.

The absence of unsafe observations could easily be attributed to not observing a crew at all. Instead, staffing companies should strive to record safe observations which will prove that an observation did in fact take place. We’ve traditionally found there are more safe observations than unsafe with a common ratio of 36:1. By using representative sampling, collecting both observations can provide you with a ratio of safe vs. unsafe. For example, would you be more concerned about a ratio of 50% unsafe or 2% unsafe in electrical?

The Sunny Side: Safe Observations

Besides the obvious advantage of recording who was observed, what was observed and the location, safe observations also provide you with the following.

• By actually counting a representative amount of safety observations, and not just checking a box for the entire project, you can determine the context of your findings. For example, you find three unsafe observations for failure to use safety glasses. Now, if there were only three workers observed, then this is significant. If there were 300 other workers who were wearing safety glasses, then the gravity of the findings is diminished.
• Safe observations allow for positive employee feedback. The idea is to move away from the safety “cop” mentality of busting workers for safety violations.
• Only through safe observations can you measure improvement. Let’s say you had a large number of unsafe observations for a certain hazard and implemented an action plan to address it. How would you know it got better? Keep in mind that an absence of unsafe observations could mean nobody is looking! An improved ratio of safe vs. unsafe should support an improvement in the targeted, specific safety process you were concerned about.

Keep in mind an absence in injuries does not necessarily equate to a safe worksite, as presented in the examples above. By documenting both safe and unsafe observations, you can now actually measure “what is safe” and start looking towards a brighter future.

Here’s a list of areas where potential coverage gaps can exist:

• Coverage for property of others in the care, custody and control of your employees under your General Liability policy
• Coverage for temporary employees driving client vehicles under your Auto Liability policy
• Coverage for temporary employees’ negligent actions under your Professional Liability/Errors & Omissions policy
• Coverage for a suit made against your client by one of your temporary employees under your Employment Practices Liability policy
• Coverage for theft of your client’s property by your temporary employee under your Crime policy

Example Claim Scenario

A temporary employee is working at your client’s warehouse, moving boxes with a forklift.  The employee loses control of the forklift, running into a wall and causing damage to both the forklift and the wall.

General Liability policies cover bodily injury and property damage claims that arise during the course of your day-to-day business. A standard General Liability policy has an exclusion for damage caused to property in your (or your employee’s) care, custody, or control.  Therefore, unless your policy was endorsed to remove this exclusion or to add a specific sub-limit for this coverage, it would only provide coverage for damage to your client’s wall, but not to the forklift.

To keep your claims costs on the nice list this year, ensure you have the aforementioned coverages.

Yes, it’s our very own Diane Poljak.

Eight years ago, Diane came to Assurance to make her mark on the staffing industry as a broker. Her in-depth knowledge, passion for the company and competitive spirit has landed her a new gig at Assurance – Senior Vice President, Practice Leader of the staffing team.

Get to Know Diane 

AA: What strengths do you bring to this new role?

• In a few words, passion and an open mind.

AA:  What would you consider your leadership style to be?

• Collaborative, optimistic and full of spirit!

AA: What challenges will you overcome?

• An exciting challenge for me and my team is providing new and innovative solutions to our clients when it comes to Health Care Reform and Workers’ Compensation. These key issues are at the forefront of the staffing industry, and Assurance is on the front lines right along with them.

AA: In your past life, what other types of leadership roles have you had?

• In high school, I was captain of the golf and basketball teams (don’t laugh – I was a very feisty point guard – albeit short). I had a lot of “rah-rah” moments back then. I loved to win (and still do)!

AA: How do you relieve stress?

• If it’s nice out after work – I just go outside and relax on our deck. Amazing what a little fresh air and relaxed demeanor can do to a person’s mind when they are stressed. It just melts away…

AA: Do you have a favorite website or app?

• I’m addicted to Wikipedia and the USA Today app. I also love the Shazam music app.

For staffing firms that generate over $350,000 in annual workers’ compensation premiums and have good claims experience, this can be a great alternative to a traditional Guaranteed Cost plan. The plan places more weight on actual loss experience and rewards insured’s that have good risk management programs in place.

At the onset of the policy, the carrier will decide what the annualized premium will be based on similar factors used in a Guaranteed Cost plan. In addition, the carrier will use a specific mathematical formula to determine what the final Retro premium will be based on actual losses the insured experiences during the policy year. The formula is applied once the policy term is over – hence the name “Retrospective”. If claims are lower than originally anticipated, a return Retro premium or refund will be issued back to the staffing firm (subject to a minimum premium amount). If claims are higher than originally anticipated, the insured will be required to pay the carrier an additional Retro premium (subject to a maximum premium amount).

It’s important to remember that the plan is designed to have a minimum and maximum premium. At a minimum, the carrier will be able to cover the administrative costs related to servicing the policy. At a maximum, the insured will be able to limit or cap the amount the carrier can collect under the policy should there be a bad claims experience.

Advantages

1. Good claims experience is rewarded by a reduction in ultimate premiums paid.
2. Usually little to no collateral is required compared to other loss sensitive plans.
3. Workers’ compensation risk is defined by a minimum and maximum premium.

Disadvantages

1. Cash flow is not as favorable as a large deductible program.
2. Claim services cannot be unbundled to a third party administrator.
3. If the Insured has a bad loss experience, they are required to pay the carrier additional premium (again, subject to a maximum or capped amount).

A typical premium range for this type of insurance program is anywhere from $350,000 to $1,000,000. Speak with your insurance broker to see if this is a workers’ compensation program that fits your staffing company.

The most common industry classification system is managed by the National Council on Compensation Insurance (NCCI) and has more than 2,000 class codes housed in the Scopes Manual. A workers’ compensation classification code is based on the operations of your business and the corresponding risk associated with the workplace exposure. Each class code has a premium rate associated with it. For example, the classification code for a client who’s staffing office clerks should carry a significantly lower rate than the code for a client who supplies roofers.

Why Class Codes Are Important

An employer’s best self-defense against incurring a large additional premium during an audit is to obtain adequate guidance regarding how to properly classify exposures for workers’ compensation coverage. Assigning the correct code gives you a better indication of the type of job you are assigning a temporary employee, the risks associated and the resulting claims that can occur. If you’re using the wrong code, you’re not getting an accurate representation of losses and have less of a chance of properly managing risk. This can affect your experience modification rating, which in turn, impacts premium.

How to Find a Code

The easiest way to find a code is to refer to the alphabetical index. Keep in mind, you don’t want to be too specific when looking for a code, or you’ll never find it. You need to think in broad generic terms. This advice was given out by the NCCI. Finding the general category will help lead you in the right direction. For each code, there will be several things listed:

• Phraseology – general description of the operations 
• Cross Reference – other descriptions that apply to the codes
• State Special – lists any exceptions you need to be aware of for specific states
• Scope –what you need to read to make sure you have the best class code for the job you’re placing

Don’t Get Tricked By Wording

You’ll need to be on the lookout for specific words in the phraseology of the code you’re reading. It could impact how you classify your temps:

• All employees or all other employees: No other classification can be assigned unless noted in the wording. This applies even if some operations are at a separate location. The standard exceptions don’t follow this role such as clerical, drivers, sales etc.
• Includes or &: If this wording appears, those operations are included in the code. For Example, Class Code 8868 includes clerical so that would not be separately rated as 8810.
• NOC or not otherwise classified: If there is not a more specific code available, then you would use the NOC of that industry. For Example, there are multiple retail store codes specific to the product being sold. If the type of retail store you are looking at does not fit into the specific codes available, you would use the Store NOC code in the Scopes.
• To be separately rated: Operations or employees referenced after this wording in the phraseology must be separately classified.  
• F: If you have the letter “F” attached to a code, it means the code is subject to the federal statutes, and you should check with your policy to ensure you have proper coverage under your workers’ compensation policy.

Our May newsletter will discuss some of the more commonly confused class codes and key points to help you identify the right one!

The Affordable Care Act (ACA) has presented many confusing and difficult challenges for U.S. businesses. We addressed some of these challenges in our Health Care Reform: IRS Regulation Updates webinar on January 29, 2013. Throughout the webinar, we had a number of health care reform questions from staffing companies both large and small. With only an hour and a broad range of industries on the webinar, we weren’t able to dig deep into how this regulation will continue to impact the staffing world. We want you to have those answers so we’re giving them to you on Thursday, April 11, 2013.

We’ve got answers.

We designed a new health care reform webinar specifically for the staffing industry. This webinar will veer a bit from our previous Assurance University webinar formats in order to cater more towards you, your questions and specific concerns the staffing industry has as a whole. The webinar will be more interactive and the content stems from you. How? Well, we compiled the list of staffing questions from the January 29 webinar and used those for the first half of our webinar presentation (If you weren’t able to attend, the webinar recording is available on our Assurance University Replay page). An open forum will then follow where you’ll be able to submit additional questions to Mark Lam, Benefits Compliance Specialist at Assurance, for immediate feedback. 

This webinar will help staffing companies:

• Understand ACA basics including who is subject to the Shared Responsibility provisions
• Discover the Safe Harbors in place to ensure compliance with the Affordability provisions
• Examine the types of measurement periods and solutions for enrollment delays

Register today.

Staffing Regulatory Provisions Forum – Thursday, April 11, 2013.

Paw Up on Legal Liability

Because the company owns the computers employees work on, the company can legally be held liable for any illegal or discriminatory content employees view or distribute on those computers. One concern is discrimination and sexual harassment. This can result from an employee sending inappropriate emails, as well as viewing pornography or content that promotes hate and discrimination. Even if the individual is not distributing inappropriate content, an employee walking by could be offended and take issue with the company, or even sue, for being subjected to a hostile work environment.

Digging in the Mud

Another legal liability for employers is any computer activity that involves or leads to illegal activity. This can include accessing illegal information, participating in illegal activities online or using information found online to commit a crime. In addition, child pornography is of particular concern for employers, both because of the severity of the crime and because studies show that many people who view such content do so during work hours.

In any of the above cases, even if the employer was unaware of the inappropriate or illegal activity, it can be held liable for negligent supervision of employees. Legally, any content stored on the computer is technically both in the employee’s and employer’s “possession.”

Barking at Intruders

Accessing unauthorized webpages can also pose risks to the company’s computer or network. Just one click of the mouse can expose a computer to a destructive virus or allow a hacker to access to sensitive company information. This is often referred to as cyber liability.

Bad Bite

There can be significant costs associated with claims of computer or Internet abuse by employees. Lawsuits and settlements can be extremely costly to the company, whether it’s for discrimination, harassment or illicit activity. In addition, dismissing employees guilty of misconduct can be expensive and time-consuming, both in finding and training a replacement and in potential legal fees if there is litigation.

REMEMBER: Avoid being put in the dog house through a liability claim. Create an effective Internet usage policy for your company using the human resources department, IT department and your insurance broker.

• Discuss safety with onsite employees and demonstrate your commitment to their wellbeing
• Listen to the concerns of workers and supervisors
• Gain further understanding of jobs and tasks
• Ensure employees are performing the duty outlined in the job description
• Identify existing and potential hazards
• Determine underlying causes of hazards present
• Monitor hazard controls, such as personal protective equipment, engineering controls, policies, and training
• Recommend corrective actions

Aspects to Examine

When inspecting a client’s facility, arrive unannounced, so you can see the work environment as it is on a daily basis – without being “cleaned up” prior to your arrival. 

Every inspection must examine who, what, where, when and how. Pay particular attention to items most likely to develop unsafe or unhealthy conditions because of stress, wear, impact, vibration, heat, corrosion, chemical reaction or misuse. Inspect the entire workplace area each time and observe travel patterns of employees between equipment. Also, include areas where no work is done regularly, such as parking lots, rest areas, office storage areas and locker rooms.

Workplace Elements

Look at all workplace elements including the environment, equipment and current safety processes in place. Environment hazards are noise, vibration, lighting, temperature, and ventilation. Equipment hazards are comprised of materials, tools and any apparatus used for producing a product or a service.  A proper inspection involves how the worker interacts with other elements in a series of tasks or operations. For instance, are the correct tools in use? Are workers standing for prolonged periods of times? Are there job rotations or risky behaviors by fellow employees?

Types of Workplace Hazards

Types of workplace hazards and conditions include:

• Safety hazards through inadequate machine guards
• Biological hazards caused by organisms such as viruses, bacteria, fungi and parasites
• Chemical hazards caused by a solid, liquid, vapor, gas, dust, fume or mist
• Ergonomic hazards caused by anatomical, physiological, and psychological demands on the worker, such as repetitive and forceful movements, temperature extremes and awkward postures arising from improper work methods and poorly designed workstations, tools, and equipment
• Physical hazards caused by noise, vibration, energy, weather, electricity, radiation and pressure.

Check for these various types of hazards, write down corrective actions and discuss your findings with your client. This could save your business from a potential costly claim and an employee from being injured. If you don’t inspect, you can’t correct. If you don’t look, you’re on the hook for a workers’ compensation claim.