Greatest hits of 2008; Top ten of all time
It's that time of year when the media takes a look back at the top stories of the preceding year so we thought we'd jump on the seasonal bandwagon and offer a retrospective of our top posts for 2008, along with a list of the top 10 most popular posts of all time.
Your top 20 favorites of 2008
Bullshit as Science: A Test for Malingerers
Eight steps to controlling workers' compensation costs in your company
Your top 10 all-time favorites
You're fired! Should you terminate an employee who is on workers compensation?
Your top 10 all-time favorites
The Hazards of Deconstruction
When we think of safety on the construction site, it's usually in the context of new and renovated buildings. But deconstruction is fraught with hazards, too. Just as the timing and sequence of events in building must be constantly reviewed from a safety perspective, deconstruction requires a similar review. You could say that failure to anticipate safety concerns, whether you are building or unbuilding, is criminal. That's just what the grand jury decided in New York City.
The Deutsche Bank building in lower Manhattan was a victim of the 9/11 attacks. The building withstood the initial blasts, but the structural damage was too severe for repair. The building had to come down. In the process of this deconstruction, a fire broke out in August 2007. Firefighters do not distinguish between buildings going up or coming down: they rushed in to put out the blaze. Firefighters Robert Beddia and Joseph Graffagnino died in the blaze.
In the anguish that always follows this type of fatality, fingers have pointed in many directions and then settled on two individuals: Mitchell Alvo, an executive of subcontractor John Galt Corporation, and Jeffrey Melofchik, a site safety supervisor for Bovis Lend Lease, the construction management company. (You can read the New York Times article by William Rashbaum and Charles Bagli here.)
What went wrong? Where did deconstruction decisions cross the line into criminal behavior?
Timing and Sequence
In deconstruction, it's not just what you do, but when you do it. At the time the fire broke out, the building's sprinkler system had been dismantled. The fire exits had been sealed off (to facilitate asbestos abatement). A standpipe designed to carry water to the upper floors had also been dismantled. Finally, cheap, non-fire-retardant plywood had been used in deconstruction. None of these actions in themselves are criminal acts, but because they combined to create extraordinary hazards in the event of a fire, they resulted in grand jury indictments.
You may wonder what role New York City played in the hazardous conditions. Plenty, but the city dodged indictment due to the formidable legal obstacles in establishing liability for a public entity. Nonetheless, the city has agreed to acknowledge its failures and establish a new division in the Fire Department, to be staffed with 25 civilians. Its mission will be to inspect high-rise buildings under construction or demolition. Let's hope they do a better job than the city's crane inspectors...
My thoughts wander to Jeffrey Melofchik, the site safety supervisor. In retrospect, he must be going over and over the sequence of events that lead to the deaths of the two firefighters. Beddia and Graffagnino haunt his dreams. Now his guilt and self-reflection become a very public process as he faces a daunting accountability for his actions. My guess is that there is plenty of blame to go around, but in this sad tale, two men are apparently in position to take the fall.
The Big Squeeze on FedEx
We have frequently blogged the labor issues at FedEx, the ubiquitous delivery giant. FedEx relies on "independent contractor" drivers for business and neighborhood deliveries. An interesting article by Corey Dade in the Wall Street Journal (subscription required) discusses the potential impact of a Democratic Congress on FedEx's business model. An 800 pound gorilla has just taken a seat in the board room beside FedEx CEO Fred Smith.
FedEx began 35 years ago as an airline. As such, it fell under the Railway Labor Act of 1926, which made unionization of public and commercial transport companies extremely difficult. By contrast, UPS began as a trucking company and was subject to the National Labor Relations Act from day one. UPS is unionized: they pay workers more than FedEx, they provide better benefits. (Of course, the Wall Street Journal points out that these higher wages and benefits have hurt the growth of UPS stock.)
With the pending Democratic control of Congress, FedEx finds its business model under fire. Representative James Oberstar (D-Minnesota) will propose an amendment to the Federal Aviation Administration Act that would remove truck drivers, couriers and other FedEx employees from the Railway Labor Act. In other words, the door to unionization will be thrown wide open.
The Journal article does not mention the difficulties that FedEx has had in state courts, where their so-called "independent contractor" drivers, who wear FedEx uniforms and drive FedEx trucks, have been consistently found to be FedEx employees. FedEx finds itself caught in a big squeeze: potential changes in enabling legislation opening the door to unions plus state level pressures to reclassify 15,000 drivers as employees. The entire business model is at risk.
FedEx has remained profitable during the recent downturn, posting a 3% increase in net income. Nonetheless, CEO Smith has voluntarily reduced his own salary by 20% and has given up his bonus. The company has also cut wages for all employees and stopped contributing to employee retirement plans. Because the workforce is union-free, the company has been able to react quickly and unilaterally to reduce (payroll) expenses.
This type of maneuvering would be much more difficult - if not impossible - under a unionized workforce. Rates of pay, benefits and working conditions are all subject to collective bargaining - never a speedy process when take-aways are on the table. It's ironic that the very flexibility that keeps FedEx profitable during this economic downtime is also the source of FedEx's troubles in the long run. It's always difficult to predict the future, but the 800 pound gorilla stalking FedEx appears ready to light up a cigar.
Cavalcade of Risk; introducing some blog finds
Nancy Germond, blogger at Insurance Copywriter makes a fine debut as host of this week's Cavalcade of Risk #67. It's a good issue. Plus, we like Nancy - we've linked to some of her risk management columns at AllBusiness before. Note her recent timely column: Top Ten Ways to Avoid a Santa Suit.
Other blog reads
While we tend to focus on workers comp and insurance in our blog recommendations, we read many peripheral blogs that we like so we thought we would bring a few new finds and favorites to your attention.
Through a good post on safety glasses, we've just discovered Assembly Blog, a web adjunct of Assembly magazine - that's great, maybe we aren't looking hard enough, but we haven't discovered too many manufacturing themed blogs.
Thoughts from Training Time is a substantive blog that we like to read now and again. As might be expected, the general theme is on training, but posts run the gamut on a variety of human resource and productivity topics.
Wally Bock's Three Star Leadership Blog is a great filter for some of the best weekly business reading. Wally usually begins each week with a roundup of good posts he culls from the business press and often features a midweek roundup from business blogs.
We wish there weren't a need for this blog, but unfortunately there is since homicide is one of the leading causes of death for women in the workplace. Domestic Violence and the Workplace is written by Kim Wells, Executive Director of the Corporate Alliance to End Partner Violence. It's an important issue, and Kim highlights some of the best practice initiatives by some of the nation's largest employers. Also on the topic, see last month's article in Fortune: Domestic violence: Your coworker's dark secret
OSHA rule on Personal Protective Equipment in effect January 12, 2009
Last week, OSHA unveiled its final rule on Clarification of Employer Duty To Provide Personal Protective Equipment and Train Each Employee. To comply with this standard, beginning January 12, 2009, employers must provide personal protective equipment and hazards training for each employee covered by the standards. According to OSHA:
"The amendments add no new compliance obligations. Employers are not required to provide any new type of PPE or training, to provide PPE or training to any employee not already covered by the existing requirements, or to provide PPE or training in a different manner than that already required. The amendments simply clarify that the standards apply to each employee."
The Pump Handle offers a good post about why a clarification of the OSHA PPE rule was necessary. Essentially, it was needed to eliminate ambiguity and to ensure a consistent approach in OSH review decisions. The post cites an egregious violation by a Texas employer who failed to equip or train a number of undocumented workers who were hired to remove asbestos from a building. it was a flagrant violation - the employer began operating secretly at night behind locked gates after being ordered to shut down by a city building inspector. In OSHA citations, there was ambiguity about whether his conduct should result in one aggregate violation or individual violations for each employee who was exposed.
Health Wonk Review, medical costs, price hikes, joint & several liability, and more
Health Wonk Review — The “Just the Facts, Ma’am” Edition - hosted by Vince Kuraitis at e-CareManagement - Dragnet fans take note!
NCCI report on medical benefits - The medical share of total losses has grown dramatically — from just over 40% in the early 1980s to almost 60% today. NCCI takes a closer look: Analyzing the Shift in the Medical Share of Total Benefits (PDF)
Price hikes forecasted - economists at Swiss Re are predicting a deep recession and price hardening across all lines of insurance through 2010, insurance and reinsurance inclusive.
Walmart death - This topic has been making waves in the law blogs. Troy Rosasco talks about the likelihood that exclusive remedy will preempt any lawsuits in the case of the trampling death of a Walmart employee in a post-Thanksgiving sale stampede, and talks about how the retailer could face criminal investigations. Of course, that doesn't mean that lawsuits haven't been filed - Eric Turkewitz updates us on the family bringing suit; Walter Olson offers his perspective on "5 minute after" suits. My colleague Jon had blogged about this last week: Walmart's Killer Bargains.
Can you say Joint & Several liability? - a recent study profiled in Risk and Insurance shows that small business owners are not fully aware of the financial risks involved in obtaining workers' compensation insurance through self-insured groups. Despite several high-profile failures, "...85 percent of respondents indicated that they had not seen, read or heard about the closure of several self-insured groups over the past year. More than one-half (58 percent) of respondents reported that they were unaware that companies belonging to self-insured groups remain financially responsible -- often for years -- for the claims of all companies in their group, not just their own businesses." See: joint & several liability.
Fumes and confined space - We noted a sad story last month about two amateur winemakers in France who died after being overcome by fumes while trampling grapes. While this might sound like unusual circumstances, the issue of confined space and the danger of fumes is a significant agricultural risk. Hydrogen dioxide-related deaths (PDF) also occur in manure pits - there have been several instances when rescuers enter the pit only to succumb to the fumes as well.
Dollar Tree's Investment
On December 1 we blogged the story of Taneka Talley, an employee of the Dollar Tree stores who was stabbed to death at work by a deranged racist. We believed that Talley's death was compensable under workers comp, as she died at work, performing her job (she was stocking shelves at the time of the assault). Dollar Tree's TPA denied the claim under the theory that the death was not work related because the killer was motivated solely by Talley's race (she was African American). A few of our readers agreed with the denial.
This was no personal dispute. Talley and her assailant had no prior relationship. She died because she was in the wrong place at the wrong time. If she had been stabbed on the street, there would be no workers comp claim. But she died while working, so in our view her orphaned son is entitled to benefits.
Dollar Tree's mission statement refers specifically to the importance of good judgment: "Do the right thing for the right reasons." Well, Dollar Tree has now agreed to pay the full amount allowed by California workers comp for death benefits. The company's statement asserts that it was acting voluntarily because "we feel this is the right thing to do." Mission accomplished!
In this emotion-laden situation, a literal and nit-picking interpretation of the law is simply not in the company's best interests. To be sure, a case for denial can be made. They might even prevail in workers comp court (we doubt it), but Dollar Tree had much to lose in the court of public opinion. Some customers had called for a nationwide boycott and protesters picketed the Fairfield store where Talley died. With this agreement to pay the claim in full, Dollar Tree ends a public relations nightmare and preserves its standing in the community. Dimes to dollars, that's money well spent.
Maryland officials monitoring GM solvency related to workers compensation
With the Big 3 automakers discussing potential fallout if the federal government doesn't come through with a bailout package, there is one aspect of the fallout that would likely be a mere footnote in the wake of such a massive failure, but that would be of interest to thousands of workers: the issue of what happens to workers compensation claims.
Maryland officials are considering and planning for such a scenario now in the case of GM. The state's Workers' Compensation Commission (WCC) is closely monitoring GM and other distressed, self-insured firms with operations in Maryland. Officials note that GM has 200 employees statewide that are covered for workers compensation under the company's self-insured plan. They note that even in the case of a bankruptcy (which GM states it is not considering), the funding for claims would not automatically be wiped out. R. Karl Aumann, chairman of WCC, said it's rare for a company to default on its workers' compensation program. The last time this happened, he said, was with Bethlehem Steel Corp., which declared bankruptcy in October 2001.
In the case of property and casualty insurer insolvencies, every state has a safety net for policyholders, usually in the form of a Guaranty Fund. However, these funds do not necessarily cover self-insured employers, according to an overview of the insolvency process and guaranty fund laws by the The National Conference of Insurance Guaranty Funds:
Q: Am I covered by a state property and casualty guaranty association if I purchased my policy from an unlicensed carrier or a managed care plan?
A: No. Guaranty associations cover only licensed insurers. Companies not licensed in the state, surplus lines carriers, managed care plans, preferred provider organizations (PPOs), Health Maintenance Organizations (HMOs) and self insured plans are not covered under the property and casualty guaranty association statutes. If you purchased coverage from one of these entities, and the company is now insolvent, you may file a claim with the Liquidator. There may also be other guaranty associations that may provide coverage for policies issued by these types of organizations. Your state Department of Insurance can provide you additional information.
Q: How can find out if my company was licensed in my state?
A: Check with your state Department of Insurance. They should have a listing of all admitted companies.
However, many states have some type of guaranty mechanism established that covers self-insured entities. Here are some resources to learn more about the protections that your state affords:
State Insurance Departments
Self-Insurance Guaranty Funds of America
State Guaranty Fund websites
State Guaranty Fund Directory (PDF)
In the case of bankruptcies, workers comp claims payments are often considered a priority - see this discussion of a recent court ruling in Pennsylvania. However, insurers may be out of luck when it comes to payment for workers comp premium in the case of bankruptcy. In the 2006 case of Delivery Service, Inc., et al v. Zurich American Insurance Co., The U.S. Supreme Court ruled that a workers compensation insurer does not have a priority claim against a bankrupt business for unpaid premiums under bankruptcy law.
For more information on State Guaranty Funds and insurer insolvencies, see the Bob Hartwig's excellent overview for the Insurance Information Institute, which includes a chart about the top 10 largest insurer insolvencies:
Year / Insolvent company / Payments / Recoveries / Net cost
- 2001 Reliance Insurance Co / $2,265,845,612 / $1,415,385,230 / $850,460,383
- 2002 Legion Insurance Co / 1,272,694,066 / 227,503,349 / 1,045,190,717
- 2000 California Compensation Insurance Co / 1,049,745,420 / 327,756,089 / 721,989,331
- 2000 Fremont Indemnity Insurance Co / 843,405,746 / 643,377,434 / 200,028,312
- 2001 PHICO Insurance Co / 699,420,144 / 205,770,569 / 493,649,574
- 1985 Transit Casualty Insurance Co / 566,549,902 / 379,499,906 / 187,049,996
- 2000 Superior National Insurance Co / 555,797,035 / 174,168,193 / 381,628,842
- 1988 American Mutual Liability Insurance Co / 543,085,140 / 238,199,539 / 304,885,602
- 1986 Midland Insurance Co / 531,641,477 / 50,648,348 / 480,993,129
- 2006 Southern Family Insurance Co / 516,844,804 / 246,101,399 / 270,743,405
Walmart's Killer Bargains
Jdimytai "Jimbo" Damour took a temp job for the Christmas rush at the Walmart in Green Acres Mall on Long Island. Some rush. When a crowd of bargain hunters pushed into the store at 5 am on "Black Friday," Damour, a 34 year old who weighed 270 pounds, fell to the floor and was trampled. He died within an hour of heart failure. Undeterred by Damour's plight, many shoppers pushed on toward the electronics department, where big screen TVs were going for $800.
Damour was employed through Labor Now, a temp agency. Because Walmart was not the employer of record, Damour's family has a number of options for legal recourse. They have filed suit in the Bronx Supreme Court, alleging that Damour's death was caused by "the carelessness, reckless negligence, wanton disregard for public safety and gross negligence" in the "staging, conducting and advertising for sales events."
The lawsuit names Walmart, the shopping mall and the security company employed by Wal-Mart to control the crowd. Heck, they may as well include the advertising company that stirred up the masses. Despite what appears to be a good faith - albeit unsuccessful - effort to control the mob, the settlement is likely to be substantial.
The Green Acres Mall, where the incident took place, has a troubled past. According to New York Times reporters Ken Belson and Karen Zraick, the mall opened in 1956 on the site of the Curtiss Wright Airport. It was one of the first open-air shopping centers on Long Island, with 1.2 million square feet of retail space. In the 1980s, the mall was dubbed the "car theft capital" of Long Island. In 1990, four moviegoers were shot, one fatally, when two groups of teens opened fire in a movie theatre. What was playing? Appropriately enough, The Godfather, Part III.
The most telling comment concerning this sorry indictment of consumer mania came from an anonymous employee stationed at the time of the mayhem in the electronics department. "It was crazy. The deals weren't even that good."
Cavalcade of Risk #66 and sundry workers comp news notes
Cavalcade of Risk #66 is posted at Political Calculations, where the blogger who goes under the alias of Ironman takes an innovative approach by offering two editions with all posts presented in a grid-like format, applying a blog post rating system. See Investment Grade and Kit and Caboodle versions for this week's entries.
State cost variations - Risk & Insurance looked at variations in state workers comp costs for employers in all 50 states and determined that in this regard, Arizona is the most favorable place for employers. Other states with low workers' comp costs include Arkansas, Indiana, Virginia, North Dakota and South Dakota. Michael Keating reports on survey results and discusses various structural factors within a state system that contribute to workers compensation costs. Note: my colleague Jon Coppelman was quoted in the article.
Ohio - another scandal brewing? - According to The Cleveland Plain Dealer, "Federal agents are investigating links between Cuyahoga County Auditor Frank Russo and a politically connected firm that manages medical claims of injured workers and employed Russo's son, according to subpoenas and interviews." It's a complicated story, and apparently part of a larger story on a federal investigation into Cuyahoga County corruption.
The $18 million fraud charge - The CEO and CFO of Staffing Services, a firm based in southern California, are being charged with conspiracy to defraud the State Compensation Insurance Fund of $18 million in premium payments. While news reports aren't specific as to how, the pair are being charged with providing false information. While we can't know specifics in this case, such charges often relate to misclassification of employees. The stakes for this type of fraud are high - if convicted, each of the two men face the potential for 20 years in prison and up to $40 million in fines.
Weathering the storm - worth your time: The Financial Crisis & the P/C Insurance Industry: Challenges Amid the Economic Storm - a presentation and analysis by Robert Hartwig of the Insurance Information Institute. This was presented to the Excess/Surplus Lines Claims Association in late September.
Blood-borne disease and healthcare workers - the Centers for Disease Control has recently issued the results of a study showing that health care workers face an increased risk of dying from blood-borne diseases, such as HIV, and related illnesses compared with workers in other fields. The study encompassed data over a 20-year period, including 248,550 deaths from HIV/AIDS, hepatitis B and C, liver cancer and cirrhosis. Researchers were unable to determine how much of the increased risk is related to occupational versus non-occupational exposure.
Icon Cleaners: Amityville Horror Revisited
For many of us, Amityville NY brings to mind a book (and movie) called the Amityville Horror, which tell the story of an innocent couple moving into a house whose prior inhabitants had been murdered. The house is haunted by the ghosts of the deceased. If the story were to happen again, the house would surely be cleaned by Icon Cleaners.
New York's Labor Department has determined that Icon Cleaners unlawfully deducted hundreds of thousands of dollars from the paychecks of their 170 cleaners. Icon called these people independent contractor "technicians" - all of whom wore Icon uniforms, worked under Icon control and used Icon equipment. Not only were they not independent, they labored under conditions of virtual servitude.
Here's how Icon functioned: each employee was forced to pay a $500 security deposit upon being hired at the company, which could either be paid for up front or deducted from subsequent paychecks. ("Congratulations on your new job, sucker!"). Technicians often found their paychecks reduced for a variety of (illegal) reasons:
- In the event that a customer was not satisfied with the service provided by the company, or if the wrong services were rendered, a deduction was made from the employee’s paycheck.
- In instances where the company was doing a promotional campaign on discounted services, these discounts were taken out of employee paychecks.(!)
- If an employee indicated that he or she needed extra assistance on a particular project, in some instances Icon Cleaning would provide another worker for the project and that worker’s wages were deducted from the requesting employee’s paycheck.
- If a customer provided a check to the employee and it bounced, the employee was required make up for the lost revenues through payroll deductions.
Technicians worked up to 12 hours a day, 60 hours a week cleaning air ducts and carpets in private homes and businsses. After the illegal deductions had been made, some workers brought home less than $100 in a given week. They had been taken to the proverbial cleaners.
It's not surprising to find that customer satisfaction mirrored the working conditions; you can read some disgruntled customer comments here.
There is no mention of worker immigration status in the press release from the Department of Labor, but I suspect that illegal workers would be more likely to tolerate these intolerable working conditions. It's ironic, of course, that Icon is in the cleaning business. When it comes to fundamental employee rights, it doesn't get any dirtier than this.
Legal Advice on the Cheap
Dollar Tree is a national company with stores in all 48 states. Everything they offer costs a buck. (They are doing very nicely in this recession.) Here's how they describe themselves:
Walk into one of our stores and it hits you immediately: this is a place where shopping is fun. We call it "Thrill of the Hunt". We have worked hard to create an environment where our customers can discover new treasures every week. Where entire families can enjoy looking for that special something.
As you will soon see, the "thrill of the hunt" has become a very unfortunate metaphor for the Dollar Tree experience, at least for one hapless employee.
Taneka Talley worked at a Dollar Tree store in Fairfield, California. On March 29, 2006, Tommy Joe Thompson walked into the store not looking for a bargain, but for someone black. Identifying Talley as a person of color, he stabbed her to death. Talley left a son, Larry, who was 8 years old at the time of the murder.
It seems pretty obvious that Talley was in "the course and scope" of employment at the time of her murder. She had no prior relationship with Thompson. Her death, therefore, is a compensable event under workers compensation. Thompson's racist motives have no bearing on that compensability.
Well, it appears that it's not just the merchandise at Dollar Tree that's worth a buck. Their legal advice is equally on the cheap. Dollar Tree's TPA, Specialty Risk Services, has denied the Talley family claim for survivor benefits. Their reasoning? Thompson's sole motivation for attacking Talley was her race. The death had nothing to do with her being a Dollar Tree employee. She just happened to be at work when Thompson walked into the store on his demonic errand.
The insurer's denial is based upon testimony during Mr. Thompson's mental competency hearing. District Attorney Dane Neilson asked psychiatrist Herb McGrew, "You know that he (Thompson) got up that morning and he said, 'I'm going to kill a black person.' She was unfortunately, the first person he saw, correct?"
"Correct," McGrew said.
It took the jury less than half an hour to determine that Thompson could understand the proceedings against him and was competent to stand trial. At some point, if this case reaches a judicial proceeding, Specialty Risk's denial of the claim will be brushed aside with equal fervor. Dollar Tree would do well to work out a (generous) settlement prior to any such hearing.
If Dollar Tree needs additional motivation to reach a settlement, perhaps they should begin by reading their own "mission and values" statement:
Attitude: Responsibility, Integrity, Courtesy
Judgment: Do the Right Thing For The Right Reasons.
Commitment: Honor and Respect for Self and Company
Do the Right Thing for the Right Reasons, indeed.