Experts: OSHA Wants to Shame Employers Into Compliance

Some say OSHA is making a concerted effort to embarrass employers into creating safer workplaces.

By: Nancy Grover | July 20, 2015

Is OSHA engaged in a conspiracy against employers? Possibly, say workers’ comp experts.

Recent actions by the agency combined with proposed changes to reporting requirements and a controversial white paper have led some to believe there is a concerted effort to at least shame employers into creating safer workplaces. During a recent webinar, two experts warned of stepped up enforcement actions and advised employers to make sure they are prepared.

Assistant Secretary of Labor for Occupational Safety and Health David Michaels believes some employers allow hazards to exist in their workplaces “because they recognize that it is not in their financial interest to abate serious hazards, especially in the short term.” The language was included in a statement Michaels released in July 2010, soon after his appointment. He noted that the likelihood of an inspection “is low” and the fines are “inconsequential.”

“When David Michaels was appointed (assistant secretary of labor for occupational safety and health) in July 2010 he issued a press release, and in that he essentially said OSHA needs to make a ‘fundamental transformation’ in the way it addresses workplace hazards,” said Mark Sullivan, senior consultant at Aon Risk Solutions.

Michaels’ message wasn’t subtle. “In some cases, ‘regulation by shaming’ may be the most effective means for OSHA to encourage elimination of life-threatening hazards and we will not hesitate to publicize the names of violators, especially when their actions place the safety and health of workers in danger,” he wrote. “To do this, we will issue more hard-hitting press releases that explain more clearly why we cited a specific employer.”

Sullivan and attorney Melissa A. Bailey of Ogletree, Deakins, Nash, Smoak & Stewart PC discussed the agency’s stepped up enforcement, publicity surrounding that enforcement, and a recent controversial white paper issued by the agency during a webinar. How Will OSHA Changes Impact Your Workers’ Compensation Program? was part of the Out Front Ideas with Kimberly and Mark educational series sponsored by Sedgwick and Safety National.

White Paper

“As someone who’s done OSHA work for over 15 years, I follow policies carefully,” Bailey said. “I don’t recall a situation where this kind of white paper [was issued and] not related to a specific hazard. To me this is pretty unusual.”

The white paper, issued earlier this year, linked workplace injuries to income inequality. It coincided with the release of a series of reports from Propublica and NPR that were critical of the workers’ comp system.

“I haven’t seen this kind of policy paper from OSHA before on a global issue,” Bailey continued. “It matches up with the general mood of OSHA and the Department of Labor: ‘Let’s look at global issues and really advocate for policies we want.'”

According to the speakers, the white paper is further evidence of OSHA’s determination to force employers to comply with agency regulations in the face of budgetary cutbacks over the last several years.

Electronic Reporting Proposal

In addition, the speakers noted that OSHA plans to implement a new reporting requirement soon. While not changing what employers are required to track, the proposed rule would mandate the electronic submission of injury and illness information on a quarterly basis for establishments with more than 250 employees, and annual summaries of work-related injuries and illnesses for establishments with at least 20 employers in certain high-hazard industries.

The agency said it will eventually post the data online although the identification of the employer and employees will be redacted. How the agency would maintain the confidentially of employers on the public database remains to be seen, the speakers said.

“In some cases, ‘regulation by shaming’ may be the most effective means for OSHA to encourage elimination of life-threatening hazards and we will not hesitate to publicize the names of violators, especially when their actions place the safety and health of workers in danger.” —Assistant Secretary of Labor for Occupational Safety and Health David Michaels

“This is really a very major change in the recordkeeping system,” Sullivan said. “Under the current method, OSHA log information remains in-house unless OSHA inspects [the company] or requests it as part of a survey. This would modify the law to expand OSHA’s authority to collect that data.”

Sullivan noted one concern is that the proposal may drive companies to focus more on post-loss lagging indicators rather than leading indicators. “Leading indicators are pre-incident measurements,” he said. “Lagging indicators are collected after the incident and include traditional numbers, the rate or cost of injuries. They don’t by themselves reflect the effectiveness of safety management. Leading indicators include steps to prevent injuries such as training, audits, incident investigations, and corrective actions.”

OSHA has indicated the proposed rule would improve workplace safety and health through better tracking. But the speakers believe there are other reasons.

“This would be a tremendous benefit for union organizers,” Bailey said. “The message could be to an unorganized facility, ‘the facility that voted us in last year has had far fewer accidents than your facility, so vote union.'”

The posting of the information could also present problems for contractors.

“The use of injury rates has really been a prevalent practice for some time as part of the selection criteria to select safe contractors, especially in the construction industry,” Sullivan said. “In my experience, some of these ignore leading indicators and can cause an employer to be rejected on injury rates alone. That can result in severe hardship if they lose large contracts.”

Preparation Is Key

Employers can protect themselves against unwanted OSHA citations by establishing basic safety management. Sullivan noted several steps outlined in a standard from the American National Standards Institute:

Management commitment to show senior management provides direction and policy and resources for a company to have and execute a safety process.
Employee involvement.
Planning, including ongoing hazard assessment and prioritizing.
Implementation and operation, including the design and review of emergency procedures, safety training.

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].

How a Carrier Partner Can Help Navigate a Challenging Management and Professional Liability Market

A combination of a choppy economy with increased claims frequency and severity could lead to rate increases in the Management & Professional Liability market.

By: Risk & Insurance | April 3, 2024

Rates in the management & professional liability (M&PL) markets were on the rise from 2020 to early 2023 and are now falling rapidly.

M&PL divisions manage a number of different insurance products including management liability (D&O), professional liability (E&O), employment practices liability (EPL), fiduciary liability policies, cyber, etc. In 2023 and into 2024, a big influence on the marketplace has been the extremely aggressive and softening public company D&O market.

Though these rates have been softening for management liability, that may change over the next few years as companies continue to adjust their business models motivated by economic uncertainty. Layoffs were up nearly 200% last year, Forbes reported, even as other recession indicators, like the inflation rate, improved. A recession could lead to an increased claim activity and force carriers to raise rates.

“Whenever there is a meaningful downturn in the economy, we tend to see claim frequency pop up,” said George Schalick, Jr., senior vice president of the Management and Professional Liability Division at Philadelphia Insurance Companies (PHLY).

With continued fiscal uncertainty, businesses potentially already burdened with pandemic-related claims should seek a carrier with a long history in M&PL products. They will provide much-needed risk management guidance and be better positioned to support their insureds during market fluctuations.

Why Insureds Might See an Uptick in M&PL Claims

George Schalick, Jr., Senior Vice President of the Management and Professional Liability Division, Philadelphia Insurance Companies

The current soft market might come as a bit of a surprise as it does not track with previous underwriting cycles and economic conditions. Afterall, many privately held and non-profit organizations struggled during the early days of the pandemic with shutdowns and rapidly declining revenues. But the Government assistance programs, like the Paycheck Protection Program loans, helped keep many afloat during the tough times.

“During COVID many organizations stopped doing business until they were able to sort out all of the health and safety challenges,” Schalick said. “They were forced to lock down, but then all the government assistance programs allowed them to keep people employed. The increased volume of claims we anticipated we would see coming from the lockdowns and restrictions that were imposed upon businesses in the U.S. didn’t manifest at first.”

“Just because there wasn’t an onslaught of reported claims at the beginning of the pandemic, doesn’t mean the circumstances that would give rise to a claim being reported didn’t occur. Courts and the judicial system were closed or slowed and now that they are back open, we’re starting to see the circumstances that occurred during the COVID lockdowns becoming claims today,” Schalick said. “Litigation is progressing.”

Added to the delayed pandemic litigation is a concern over newer claims that might be filed as the country inches toward an economic downturn. Though a recession was avoided in 2023, experts think a soft dip could occur in 2024, with 76% of economists saying there’s a 50% or less chance of an economic downturn this year — that almost always results in more management liability claims.

“During the Great Recession in 2008, we saw an almost immediate spike in claims because of the economic conditions and the pressure it placed on organizations. They were making personnel changes with significant belt tightening almost immediately.” Schalick said.

What’s in Store for M&PL Policy Rates in 2024?

Despite an uptick in claims and increased economic uncertainty, management liability rates haven’t increased, resulting in market-wide pricing levels that may not meet the increased pressure of rising settlements and jury verdicts.

“Rates are going the other direction and settlement values are not falling,” Schalick said.

The mismatch between rates, claim frequency and severity is, in part, because carriers experiencing the dramatic soft market in the public D&O market are seeking premium gain in the private and non-profit market.

“In the public company market, the rates have been decreasing significantly. The rates were increasing in the private, not-for-profit market, and rightfully so, but there’s a desire to supplement overall mid-size D&O for carriers who also write private not-for-profit, and they see that as an opportunity to aggregate premium,” Schalick said. “So the always competitive landscape in the private, not-for-profit market has dramatically increased in the last 18 to 24 months.”

Still, companies of all sizes and types should be concerned about management liability rates in the future. Legal system abuse is resulting in increases in both the amount of litigation and the size of verdicts plaintiffs are receiving.

Certain areas of the country are particularly vulnerable to this type of legal system abuse. As a result, insureds in these localities are likely to be vulnerable to rate increases.

“The environment is so positive for the plaintiff that forces premium increases so carriers are able to stay in that market long term,” Schalick said.

Why a Tenured Carrier Partner Can Help Insureds Navigate An Uncertain Market

It’s clear that insureds are facing an uncertain M&PL market over the next few years. Fortunately, carriers with a long history in the M&PL space will be there to offer stability.

Philadelphia Insurance Companies has been supporting this market for 35 years. PHLY is committed to offering long-term rate stability, even as economic and claims trends start to push premiums upwards. They have an appetite for all sorts of companies, large and small, for-profit and nonprofit alike.

“We’ve been at this game for a long time and are one of the most tenured underwriters in this space,” Schalick said. “We like to stay very consistent.”

PHLY has worked with both for-profit and non-profit on management liability policies. With dedicated M&PL teams throughout the company’s 13 regions, PHLY provides the support agents and brokers are looking for on behalf of their clients. The teams know their regions well and can respond to local trends. They’re also dedicated to making the renewal process as easy as possible for their partners and policyholders.

“We have real confidence in our results, so we focus a lot on making the renewal experience as painless as possible for all agents and insureds,” Schalick said.

The company is also investing in tools to help insureds avoid losses. Earlier this year, they launched a new online risk management platform, PHLYGateway, which offers resources for insureds on how to create an employee handbook and trainings on issues such as recognizing workplace sexual harassment and discrimination.

If insureds have questions, they can consult a Best Practices Help Line, provided via the platform. That way, they can get on the spot risk management guidance to help them prevent claims.

To learn more, visit: https://www.phly.com/mplDivision/managementLiability/default.aspx.

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

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