Safety Culture

Craft Incentive Programs With Care

While most safety incentive programs are well intended, employers must ensure that they don't backfire and discourage reporting.
By: | May 11, 2016 • 6 min read
The Bait

What kinds of safety incentives lessen injuries and illnesses, and what kinds inadvertently discourage workers from reporting?

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Safety professionals say it’s all in how an incentive program is structured, and perhaps even more importantly, how the importance of maintaining a safe work environment – especially for workers and their families — is communicated.

In 2012, the U.S. Occupational Safety and Health Administration issued a memorandum calling for employers not to provide incentives that effectively discourage employees from reporting their injuries.

Disincentives include awarding paid time off to a unit that has the greatest reduction in incidence rates or maintaining an injury-and illness-free worksite for a period of time.

“If employees do not feel free to report injuries or illnesses, the employer’s entire workforce is put at risk,” OSHA wrote.

“Employers do not learn of and correct dangerous conditions that have resulted in injuries, and injured employees may not receive the proper medical attention, or the workers’ compensation benefits to which they are entitled.

“Ensuring that employees can report injuries or illnesses without fear of retaliation is therefore crucial to protecting worker safety and health.”

The agency last year issued an updated memorandum that detailed the differences between a positive incentive program and one that discourages reporting.

“A positive incentive program,” wrote the agency, “encourages or rewards workers for reporting injuries, illnesses, near-misses, or hazards; and/or recognizes, rewards, and thereby encourages worker involvement in the safety and health management system.”

The memorandum included examples of positive incentives such as “providing tee shirts to workers serving on safety and health committees; offering modest rewards for suggesting ways to strengthen safety and health; or throwing a recognition party at the successful completion of company-wide safety and health training.”

The agency warned that incentive programs that focus on injury and illness numbers often have the effect of discouraging workers from reporting an injury or illness.

Disincentives to reporting, it said, “may range from awarding paid time off to a unit that has the greatest reduction in incidence rates to rewarding workers with a celebration for achieving an injury/rate reduction goal or maintaining an injury-and illness-free worksite for a period of time.”

“There are also programs that actually defeat the purpose, by telling people that they can get paid if they don’t have accidents. But that sends the wrong message.” — Brent Jones, safety officer, Red River Army Depot

But these are just memorandums, and since there are no hard and fast rules about such programs, many employers are confused about what is now acceptable to OSHA, said Don Enke, director of risk control services at Safety National.

Enke recently spoke about OSHA’s view of incentive programs in a webinar, “Out Front Ideas with Kimberly George and Mark Walls,” sponsored by Safety National and Sedgwick.

“I think what OSHA is looking for is, does your program have characteristics that would compromise safety, discourage reporting a claim, or even delay reporting a claim?’” Enke said.

“They definitely don’t want anything delaying reporting. And they don’t want anybody retaliated against if they report a claim.”

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Traditional safety incentive programs often reward employees for having a certain number of days without any injuries. However, that could discourage employees or their supervisors from reporting an injury, a key concern of OSHA’s.

“What I’m seeing in the workplace with various clients is more of a progressive program of leading indicators vs. lagging indicators,” Enke said.

“It’s recognizing employees for various proactive safety behaviors. That is where I’m seeing more progressive programs or employers moving in that direction, where it’s part of their safety culture.

“They’re getting employee buy-in and ownership, and they’re making employees part of the program where they are involved with hazard indications, reporting near misses, reporting unsafe conditions, even involved with audits, training programs — even taking online training courses.”

Tamara Ulufanua-Ciraulo, director of insurance, Stater Bros. Markets

Tamara Ulufanua-Ciraulo, director of insurance, Stater Bros. Markets

Tamara Ulufanua-Ciraulo, director of insurance at Stater Bros. Supermarkets in San Bernardino, Calif., said that safety professionals need to review their incentive program to make sure the organization is not pushing people to not report.

For example, at Stater Bros., no single store carries the sole burden of its own claim costs, Ulufanua-Ciraulo said.

Costs are now spread out across all stores, and each store has a pro rata share of the cost based on man-hours and how injuries are reported.

“That way, no one injury can hurt a store’s profit and loss statement, which minimizes a manager’s desire to not report,” she said.

For its employees, Stater Bros. rewards them for engaging in safe practices that minimize injuries. The grocer holds annual recognition parties, with raffle prizes of gift cards, gas cards and apparel, and catered breakfasts for certain years of no reported injuries.

But Ulufanua-Ciraulo believes incentives like these don’t result in employees not reporting, because the company has also changed the culture about safety, with bulletins saying that what’s most important is the employee — not the organization.

“We recognize employees’ good intentions by giving them positive recognition for staying safe,” she said. That has helped dispel any misunderstanding about reducing injury costs being the company’s top priority, which leads workers to not report.

Brent Jones, safety officer at Red River Army Depot in Texarkana, Texas, said it comes down to how safety incentives are structured and then communicated to employees: “The right tools in the wrong hands can always be detrimental to the organization.”

“We do offer safety incentives, but we don’t tie them to injury rates or anything like that,” Jones said. “Instead, we reward for good behavior in trying to reduce injuries.”

The depot has an “on-the-spot” incentive program, in which supervisors can recognize employees for going above and beyond the standards.

For example, supervisors wouldn’t recognize an employee for wearing personal protection equipment, “because that’s what they’re supposed to do.”

But if an employee reports potential safety hazards, that goes above and beyond, so their supervisor can hand them a ticket that can be redeemed at the safety office for a gift, such as glasses, coffee mugs, backpacks, coolers, chairs, umbrellas.

These all have the depot’s safety logo on them, which also helps the safety team’s communication efforts by publicizing the depot’s commitment to safety when employees use these items outside of the workplace.

The program only works if there is good communication, Jones said.

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“A lot of programs are poorly communicated and, in my opinion, don’t work,” he said. “There are also programs that actually defeat the purpose, by telling people that they can get paid if they don’t have accidents. But that sends the wrong message.”

If leadership of an organization thinks incentive programs are only there to encourage fewer accidents, then that’s likely going to give OSHA cause to view their incentive program merely as a way to discourage injury reporting, Jones said.

“The message to employees is that they should keep themselves safe so they can go home to their families without injury,” he said.

“That brings it home a little bit with a whole new outlook. How that message is delivered probably means the most, even with an incentive program.”

Katie Kuehner-Hebert is a freelance writer based in California. She has more than two decades of journalism experience and expertise in financial writing. She can be reached at [email protected]
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Regulatory Trends

Beware: Increased OSHA Enforcement Ahead

Experts explain what changes employers can expect from OSHA in the near future.
By: | May 2, 2016 • 10 min read
Inspecting

Higher penalties, threats to traditional safety incentive programs, and changes to when — or if — post-accident drug testing is allowed are possible changes coming from the Occupational Safety and Health Administration this year, according to two industry experts.

The landscape is increasingly turning into more of a “gotcha” mentality, they suggested, meaning employers need to be especially vigilant about crossing their T’s and dotting their I’s when it comes to issues involving the agency.

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During a recent webinar, the two revealed some of the sobering new realities and offered suggestions for employers. Among the issues discussed is what they say is OSHA’s increased publicizing of employers that are fined by the agency for violations.

“The one thing that really sticks in everybody’s craw is the press releases,” said Susan Wiltsie, an attorney with Hunton & Williams. “It used to be they’d just put out press releases for fatalities or huge penalties, or when they are big deals. Now, they do it in more than that. I had an ergonomics settlement where the fines were less than $10,000, and we got a press release.”

The Occupational Safety and Health Administration’s increasing use of press releases is part of what many experts have said is a plan to embarrass and give incentives to employers to maintain safer workplaces.

Instead of issuing press releases for violations amounting to $50,000 as was done in the past, they are now being issued for smaller violations. Employers penalized by OSHA may want to do whatever is necessary to avoid the negative publicity.

“My message to clients is, ‘it’s not yet in the news here; let’s try to do the right thing,’” said Don Enke, director of risk control services at Safety National. “The thing that sticks out to me is, regulation by shaming and press releases, which I just think is a terrible way to enforce.”

Fines Increasing

The agency will likely be issuing many more press releases later this year since fines will soon be increasing.

As of August, employers will likely see higher penalties for Occupational Safety and Health Administration violations. Legislation signed by President Obama allows the agency to increase its fines for the first time in years.

The Occupational Safety and Health Administration’s increasing use of press releases is part of what many experts have said is a plan to embarrass and give incentives to employers to maintain safer workplaces.

According to the speakers, OSHA was one, if not the only, agency that was exempt from increasing its fines for most of the last two decades.

The new legislation allows OSHA to make a one-time catchup assessment reflecting inflation from the period 1990 to 2015, as well as annual increases based on inflation. The cap, according to the speakers, is $150,000.

“You could be looking at fines increasing anywhere between 75 to 80 percent beginning this fall,” Enke said. “So when you do the math, a ‘willful’ or a ‘repeat’ violation that typically carries a maximum penalty of $70,000 could be $120,000. A ‘serious’ or other than serious violation that typically carries a maximum $7,000 penalty may be closer to $12,500 to $13,000.”

Wiltsie and Enke discussed a variety of OSHA-related topics during a recent Out Front Ideas with Kimberly George and Mark Walls webinar, sponsored by Sedgwick and Safety National.

Safety Incentive Programs

Many employers are confused about what is now acceptable to OSHA in terms of safety incentive programs. As the speakers explained, there is no hard and fast rule saying an employer may or may not have such a program, which have been used for many years.

“Really, the debate is whether or not OSHA feels like it’s aligned with their view of what an effective safety incentive program is,” Enke said. “I think what OSHA is looking for is, ‘does your program have characteristics that would compromise safety, discourage reporting a claim, or even delay reporting a claim?’ They definitely don’t want anything delaying reporting. And they don’t want anybody retaliated against if they report a claim.”

Traditional safety incentive programs often reward employees for having a certain number of days without any injuries. However, that could discourage employees or their supervisors from reporting an injury, a concern for OSHA.

“What I’m seeing in the workplace with various clients is more of a progressive program of leading indicators vs. lagging indicators,” Enke said. “It’s recognizing employees for various proactive safety behaviors. That is where I’m seeing more progressive programs or employers moving in that direction, where it’s part of their safety culture.

“They’re getting employee buy-in and ownership, and they’re making employees part of the program where they are involved with hazard indications, reporting near misses, reporting unsafe conditions, even involved with audits, training programs — even taking online training courses.”

The concern about safety incentive programs was heightened recently when OSHA sought public comments during the rulemaking for a separate issue. The proposed rule in question would require employers to report their OSHA recordable injuries for publication.

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“That rule, when it went for public comment was a proposed rule that would require employers with more than 250 employees to do quarterly reporting of their recordables to OSHA and smaller employers to do it annually,” Wiltsie said. “But what OSHA did in a nasty, sneaky way was to extend the comment period to ask for comments about incentive programs. … This sneak proposed rule about incentive programs and OSHA retaliation also is likely to include some pretty nasty stuff about drug testing.”

Drug Testing

There have been some estimates that up to one-third of workplace accidents involve workers impaired by drugs and/or alcohol. But Wiltsie said OSHA wants to discourage post-accident drug testing because it could cause impaired employees to delay reporting their accidents.

“You think?” she said. “Of course they are not going to report their accident if it resulted from their drug and alcohol use until they’ve sobered up. That’s the whole reason why employers need these policies requiring immediate reporting so they can test the employee before they’ve sobered up and find out whether drugs or alcohol contributed to the accident and of course put that person into the comp system so they can get the medical coverage they need through comp; and, finally, because we’re all good guys not bad guys, to fix whatever the safety issue was if there is a safety issue that contributed.”

“Do we really want OSHA deciding what is and isn’t acceptable entertainment in this country? Look at what else they could go after — horse racing, NASCAR, the NFL. All that’s now fair game. It shows how controversial OSHA’s approach has gotten.” — Susan Wiltsie, attorney Hunton & Williams

Wiltsie believes OSHA wants post-accident drug and alcohol testing allowed only if it meets the definition of “reasonable suspicion” that the worker was impaired. She questions what is supposed to happen if there were no managerial witnesses to an accident or someone with reasonable suspicion training.

“You know OSHA’s going to be all over that and consistent with these days with OSHA, what the employee says is deemed to be true and what the management says is deemed to be false,” Wiltsie said.

“So if management says there’s reasonable suspicion and the employee says ‘oh, but I didn’t have anything to drink, I’m not high, I didn’t take any prescription drugs that weren’t my prescription,’ they are going to believe the employee. So this is going to be a hot mess.”

General Duty Clause

OSHA’s use of the general duty clause to penalize employers is another concern among employers. The general duty clause requires employers to provide a workplace that is free from recognizable hazards causing or likely to cause harm to employees.

Although a fundamental part of the OSHA Act, the general duty clause has become “extraordinarily controversial” in the last few years, Wiltsie said. “The case that got everybody’s attention was the Seaworld case. For the first time, OSHA was using the general duty clause to address areas of what we look at as entertainment. They are not statutorily prohibited from doing that, but it was new terrain.

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“This year, there are no more orca shows at Seaworld. Do we really want OSHA deciding what is and isn’t acceptable entertainment in this country? Look at what else they could go after — horse racing, NASCAR, the NFL. All that’s now fair game. It shows how controversial OSHA’s approach has gotten.”

According to Wiltsie, ergonomics and workplace violence are also areas where OSHA is using the general duty clause to fine employers. “Oh my goodness, prisons and health care centers, particularly mental health facilities. OSHA is hammering them under the general duty clause because they can’t control people who are otherwise predisposed either because they are felons or they have significant mental health issues that make them have a tendency to violence,” she said.

“How on Earth is a psychiatrist or a prison guard supposed to control that, and yet OSHA’s making that the employer’s responsibility.”

A third category of “extreme controversy” is chemical exposure limits. “On the regulatory horizon is a very innocuous sounding pre-rule called the ‘revocation of obsolete health,’” Wiltsie said.

“What OSHA wants to do through that rulemaking is to eliminate Permissible Exposure Limits that are currently OSHA standards; just completely strike them out so they can use the general duty clause to enforce PELs of chemicals that they want to use, not the ones that the law currently requires. That’s going to be a big deal.”

Joint Employment

Employment situations in which more than one company is involved can be tricky in terms of determining who is responsible for an employee’s health and safety. The millions of temporary workers is a prime example.

“From my standpoint, OSHA’s view is both the host employer and the staffing agencies bear joint responsibility for compliance, safety training, health and safety. When it comes to regulatory requirements, they both bear responsibility,” Enke said.

“We’re seeing citations where both employers and the agencies are negligent. For employers, they can be cited for violations whether under multi-employer enforcement policies or jointly for different violations.”

Enke related an incident in which both a host employer and temporary agency were fined for failing to implement a hearing conservation program. “A shocker to me,” he said. “That gets me thinking about contract employees. What are the specifics around that?”

“OSHA is trying to be transparent,” Wiltsie said. “What they are trying to accomplish is to cite everybody; make every employer who’s in a given workplace take responsibility for the safety of that overall workplace. I think practically it’s unfeasible.”

The speakers suggested employers make sure their contract language with temporary agencies is clear in terms of which organization has responsibility for which issues. By working things out on the front end, employers may avoid OSHA citations later on.

“My rule of thumb is to treat temp workers no differently than staff employees,” Enke said. “Whether those temp workers are used for 60 or 90 days, don’t treat them any differently. That includes medical surveillance, safety orientation training, personal protection equipment, etc. That’d be my recommendation. I’d be hard-pressed to treat them any differently, given what OSHA is doing.”

Additional Solutions

“Shore up your safety programs,” Enke advised. “In this environment with OSHA, they are looking for every opportunity to sink their teeth into you from a violations standpoint. Be diligent, look for gaps in your program, correct them. Don’t be lax. And by all means, if you’ve been hit with a prior violation, do what you can to prevent a recurrence.”

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Taking shortcuts and failing to cross your T’s are red flags to OSHA, Enke suggested. “When you look at the press releases, some of the violations were easily corrected.”

Both speakers also recommend contacting the local OSHA office to get a pulse of the type of enforcement being emphasized locally. “Your best chance of getting penalties back down is informal. Federal OSHA policies are 100 percent against you. Local may not be,” Wiltsie said.

“Go into that with hat in hand when appropriate or guns blazing when appropriate. Be fair and accurate about when you screwed up, and use it as an opportunity to develop a relationship with the local OSHA office. Making a good impression for good cooperative relations gets you in less trouble down the road.”

Nancy Grover is the president of NMG Consulting and the Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at [email protected]
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Sponsored: Liberty International Underwriters

Helping Investment Advisers Hurdle New “Customer First” Government Regulation

The latest fiduciary rulings create challenges for financial advisory firms to stay both compliant and profitable.
By: | May 5, 2016 • 4 min read
SponsoredContent_LIU

This spring, the Department of Labor (DOL) rolled out a set of rule changes likely to raise issues for advisers managing their customers’ retirement investment accounts. In an already challenging compliance environment, the new regulation will push financial advisory firms to adapt their business models to adhere to a higher standard while staying profitable.

The new proposal mandates a fiduciary standard that requires advisers to place a client’s best interests before their own when recommending investments, rather than adhering to a more lenient suitability standard. In addition to increasing compliance costs, this standard also ups the liability risk for advisers.

The rule changes will also disrupt the traditional broker-dealer model by pressuring firms to do away with commissions and move instead to fee-based compensation. Fee-based models remove the incentive to recommend high-cost investments to clients when less expensive, comparable options exist.

“Broker-dealers currently follow a sales distribution model, and the concern driving this shift in compensation structure is that IRAs have been suffering because of the commission factor,” said Richard Haran, who oversees the Financial Institutions book of business for Liberty International Underwriters. “Overall, the fiduciary standard is more difficult to comply with than a suitability standard, and the fee-based model could make it harder to do so in an economical way. Broker dealers may have to change the way they do business.”

Complicating Compliance

SponsoredContent_LIUAs a consequence of the new DOL regulation, the Securities and Exchange Commission (SEC) will be forced to respond with its own fiduciary standard which will tighten up their regulations to even the playing field and create consistency for customers seeking investment management.

Because the SEC relies on securities law while the DOL takes guidance from ERISA, there will undoubtedly be nuances between the two new standards, creating compliance confusion for both Registered Investment Advisors  (RIAs)and broker-dealers.

To ensure they adhere to the new structure, “we could see more broker-dealers become RIAs or get dually registered, since advisers already follow a fee-based compensation model,” Haran said. “The result is that there will be likely more RIAs after the regulation passes.”

But RIAs have their own set of challenges awaiting them. The SEC announced it would beef up oversight of investment advisors with more frequent examinations, which historically were few and far between.

“Examiners will focus on individual investments deemed very risky,” said Melanie Rivera, Financial Institutions Underwriter for LIU. “They’ll also be looking more closely at cyber security, as RIAs control private customer information like Social Security numbers and account numbers.”

Demand for Cover

SponsoredContent_LIUIn the face of regulatory uncertainty and increased scrutiny from the SEC, investment managers will need to be sure they have coverage to safeguard them from any oversight or failure to comply exactly with the new standards.

In collaboration with claims experts, underwriters, legal counsel and outside brokers, Liberty International Underwriters revamped older forms for investment adviser professional liability and condensed them into a single form that addresses emerging compliance needs.

The new form for investment management solutions pulls together seven coverages:

  1. Investment Adviser E&O, including a cyber sub-limit
  2. Investment Advisers D&O
  3. Mutual Funds D&O and E&O
  4. Hedge Fund D&O and E&O
  5. Employment Practices Liability
  6. Fiduciary Liability
  7. Service Providers D&O

“A comprehensive solution, like the revamped form provides, will help advisers navigate the new regulatory environment,” Rivera said. “It’s a one-stop shop, allowing clients to bind coverage more efficiently and provide peace of mind.”

Ahead of the Curve

SponsoredContent_LIUThe new form demonstrates how LIU’s best-in class expertise lends itself to the collaborative and innovative approach necessary to anticipate trends and address emerging needs in the marketplace.

“Seeing the pending regulation, we worked internally to assess what the effect would be on our adviser clients, and how we could respond to make the transition as easy as possible,” Haran said. “We believe the new form will not only meet the increased demand for coverage, but actually creates a better product with the introduction of cyber sublimits, which are built into the investment adviser E&O policy.”

The combined form also considers another potential need: cost of correction coverage. Complying with a fiduciary standard could increase the need for this type of cover, which is not currently offered on a consistent basis. LIU’s form will offer cost of correction coverage on a sublimited basis by endorsement.

“We’ve tried to cross product lines and not stay siloed,” Haran said. “Our clients are facing new risks, in a new regulatory environment, and they need a tailored approach. LIU’s history of collaboration and innovation demonstrates that we can provide unique solutions to meet their needs.”

For more information about Liberty International Underwriters’ products for investment managers, visit www.LIU-USA.com.

Liberty International Underwriters is the marketing name for the broker-distributed specialty lines business operations of Liberty Mutual Insurance. Certain coverage may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds. This literature is a summary only and does not include all terms, conditions, or exclusions of the coverage described. Please refer to the actual policy issued for complete details of coverage and exclusions.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty International Underwriters. The editorial staff of Risk & Insurance had no role in its preparation.




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LIU is part of the Global Specialty Division of Liberty Mutual Insurance.
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