How To Manage Risk In Your Contingent Workforce

Transcription

1 Wednesday 3:45 pm Veranda C Concurrent Session: Workers Compensation Costs and Safety Risks in Your Contingent Workforce Making the Business Case for Strong Risk Management in the Contingent Workforce Speakers: Geoff Goldwater, Principal, Odell Studner Stephen Clancy, Director, Contingent Workforce Strategies and Research, Staffing Industry Analysts

2 Workers Compensation Costs and Safety Risks in Your Contingent Workforce Session Objective: In this session we will discuss best practices on how to keep your contingent workers safe and how to ensure your safety related costs are kept under control. Session Description: Contingent workers are subject to the same sorts of on the job risks as your traditional employees. Unfortunately, in many cases, they don t receive the same safety and other training that they need to minimize their risk of injury. Meanwhile, having these same contingent workers on the payroll of a staffing provider doesn t necessarily solve all your safety related problems or minimize the resulting costs that will ultimately be passed along due to high workers compensation costs. With independent contractors there are an entirely different set of concerns. During this informative discussion we will examine the topic of safety from a variety of angles.

3 What do all of these have in common? SOW Employee Leasing (PEO) Employer of Record Service VMS (Vendor Management System) Outsourcing Services Temporary Staffing Franchising/ Licensing Facilities Management/Managed Services MSP (Master Service Provider)/Supplier Direct Sourcing Tiered Suppliers Independent Contractor Payrolling

4 Models of Alternative Staffing or Labor Interchange Co-Employment - Legally referred to as a Joint Employer relationship, co-employment is often used to describe the relationship among two or more organizations that exert some level of control over the same worker or group of workers. Coemployers often share some degree of liability for shared employees. ASA Staffing Industry Risk Philosophy

5 Rationale of use Reduction of capital investment Compliance Flexibility Operational restrictions Use of technology Expertise Expense reduction Transfer of UI & other payroll taxes Transfer of Workers Compensation premiums & losses

6 Areas of risk Lack of training Poor screening / credentialing Lack of financial solvency EEOC related issues (wage & hour) Theft / property damage HIPPA (Cyber Liability) Medicare / Medicaid, SCHIP set asides

7 Areas of risk State filings / Licenses OSHA (related bodies) Citation Co-employment Compliance (partial lease situations) Workplace violence Elimination of WC exclusive remedy Lack of insurance coverage for non employee exposures

8 Areas of risk-related costs Missed deadlines / opportunities Brand impairment Involvement in class action $1,000 per incident fine for HIPPA violations Legal fees related to uncovered claims Unfunded payroll & pension related liabilities

9 Areas of risk-related costs Increased labor cost Increased workers compensation rates Fines related to Federal & State safety violations Workplace violence Movement into tort system from Statutory Workers Compensation system

10 Case studies (The Good the Bad & the Ugly) Bad Ugly Good

11 Best Practice Focus for The Bad Case Study Know your culture Have an internal audit /quality control process

12 The Bad Challenge: ~ East Coast (NJ) manufacturer & distributer of meat & poultry products. ~ Increasing number of onsite incidents leading to 2 significant OSHA violations, as well as increasing rates from staffing services being utilized for 3 rd shift work, and increased seasonal activity.

13 The Bad Actions Taken: ~ Utilized one vendor for all contingent workforce needs based upon technology platform & pricing. ~ Performed initial review of vendor partner in making selection, however did not have process in place for annual / mid term review.

14 The Bad Results: ~ Vendor chose insurance program that did not align with coverage needs & contractual obligations. o Employee of vendor working in the distribution facility files law suite stating that the end user client did not provide a safe work environment. o End user client forwards law suite to vendor stating that this is a WC claims matter. o Vendor reports as WC claim to WC provider, whom in turn states that no WC claim naming vendor has been filed. o Vendor attempts reporting of claim to general liability under the concept of contractual liability. o General Liability provider denies claim with a reservation of rights, based on a WC exclusion endorsement that was added to the policy at renewal 2 months earlier. o Stop gap solution is in place in that the Vendor has the Alternate Employers Endorsement on their policy naming the end user, and will be able to pick up costs as a 3 rd party action over claim, however they will be funding defense cost out of pocket. ~ Post claim situation End user has made the decision to utilize an alternate model allowed in the state of NJ, where all Contingent Worker s are included on their WC program under the Voluntary Compensation endorsement, similar to the use of an OCIP, ensuring viable coverage being in force. ~ End result pricing has increased 3 fold.

15 Pause for Best Practice Discussion

16 Best Practice Focus for The Bad Case Study Know your culture Drive the process

17 The Ugly Challenge: ~ West Coast manufacturer & distributor of Urethane products. ~ Extremely price sensitive relationship with vendor.

18 Actions taken: The Ugly ~ Vetting process utilized by the manufacturer focused on contractual requirements, as well as obtaining a certificate of insurance evidencing adequate limits of coverage. ~ Based on pricing sensitivity vendor made the decision to utilize a 3 rd party (PEO) to obtain Workers compensation coverage.

19 The Ugly Results: ~ PEO ran into coverage cancellation issues. As Vendor was not a Named Insured on the policy, carrier was not required to notify them of the coverage issue. ~ Based on gap in coverage that existed for a 28 day period, 14 injured employees, were left without workers compensation coverage. ~ One claim of the 14 included a worker that had been exposed to the product, in manufacturing facility, and had not been trained on protocols eliminating cross exposure between the manufacturing facility, and distribution facility resulted in a 3.2MM reserve. ~ Although the liability associated with the claims would have been address via contractual risk transfer, the issue became one of litigation.

20 Pause for Best Practice Discussion

21 Best Practice Focus for The Bad Case Study Know your culture Drive the process Have an internal audit / quality control process Institute an annual Safety Continuous Improvement initiative, incorporating all parties in the work environment.

22 The Good Challenge: ~ Online marketplace with significant distribution hubs spread across the country. ~ Increasing costs from all vendors had lead to increased bidding philosophy. ~ Had over 120 different companies servicing their contingent workforce needs, with 5 different models being employed by different vendors to meet their needs.

23 Actions taken: The Good ~ Investigated feedback from vendors that increased costs were directly associated with workers compensation claims activity and increases ~ Instituted 5 year plan to consolidate vendor relationship to one MSP. ~ Interviewed multiple candidates based on: o Culture fit. (nice way of saying extremely high expectations) o Niche experience. o Technology platform. o Risk management model / experience.

24 Results: The Good ~ In year 4 of process vendor relationships has been reduced from original 120 relationships to 2 MSP platforms partners. o Oversight of CW spend o sub vendor usage & compliance o IC Compliance ~ Creation of Risk Management partnership program o Organization of RM practices for all EEs at distribution sites Orientation & training Accident investigation Onsite nurse management facilities with Telephonic nurse triage for 24hour presence

25 Pause for Best Practice Discussion

26 How to practice basic Risk Management Best Practices? Risk Identification (every situation is different) Assessment of risk vs. reward RM techniques - Avoidance (if you shouldn t being doing it don t) - Retention (Voluntary Comp / OCIP) - Insurance (SIA / OSG White Paper) - Transfer ( Contractual: Hold Harmless & Indemnification) Create a safety culture partnership with your solution provider. - Performance based contracts - RM Best Practices Checklist

27 Safety Culture of Excellence Leadership Employee involvement Measurement systems Commitment to continuing improvement OSHA Claim Cost Estimatorhttp:// mator.html?

28 Q & A