12-12-2016; New U.S. Dept Labor Secretary-to-be Will Change for the Better; IL Rules on Large Deductible WC Insurance To Start Soon; Non-Competes For Line Workers A Bad Idea and more

Synopsis: The U.S. Work Comp/Safety and Risk Industries Can Expect Changes to OSHA and “Overtime” Rules and Lots of Other Important Things--Trump Nominates Fast Food Exec for Labor Secretary

Editors’ comment: President-Elect Donald Trump has nominated Andrew Puzder, the chief executive officer of CKE Restaurants, as head of the U.S. Department of Labor. CKE Restaurants, Inc. owns, operates and franchises some of the most popular brands in the quick-service restaurant industry, including the Carl’s Jr.®, Hardee’s®, Green Burrito® and Red Burrito® restaurant brands. The CKE system includes more than 3,300 restaurant locations in 42 states and in 28 countries. CKE is headquartered in Carpinteria, California.

As a Washington newbie, Puzder lacks a track record to indicate what changes he will implement when he takes the helm at the Department of Labor. As a successful businessman and manager, Mr. Puzder has been a critic of minimum wage hikes and new overtime rules. He is expected to take a pro-business approach to his new position. Puzder worked on the Trump campaign as an adviser and fundraiser.

President-elect Trump’s nomination of Mr. Puzder is subject to confirmation from the U.S. Senate, where Mr. Puzder will face tough questions from grumpy Democrat Senators on his positions on minimum wage, sick leave, work safety and the Affordable Care Act.

The U.S. Work Comp Community Can and Should Forget About the Feds Imposing Their Will on the WC System in Your State

Last week, national work comp observer Joe Paduda noted growing concerns in the U.S. Work Comp community about the growing concept of federalization of state work comp systems. The whiny folks at ProPublica put out a report last year about the Demolition of Workers’ Comp to try to press for such intervention, claiming some state work comp systems don’t truly cover everything an injured worker needs. Following that model, it appeared more likely could have been some sort of federal standard for minimum work comp benefit for all states.

“For those in the workers’ comp world concerned about a new [federal] commission on work comp, your concerns are gone,” Paduda said. We strongly agree with this national WC pundit.

OSHA Is Also Certain to Change in the Interests of U.S. Business

Please also note OSHA or the Occupational Safety and Health Administration is a division of the U.S. Department of Labor and will report to Mr. Puzder.  We are certain there will be a completely new administration with a business focus. In our view, the outbound group was very strong about using their position and using it to “punish” businesses that were forced to report many unfortunate and unplanned occurrences at their work sites. Our favorite example was a young man sadly killed in southern Illinois during logging operations. The OSHA investigators determined the company was not at fault for the unfortunate death. However, while they were there, the OSHA folks used the opportunity to investigate with their fine-toothed combs and then nit-pick and issue citations with hefty fines. The only effective answer to those federal meddlers was to file suit in federal court to try to block the fines—that cost can be well over $50,000 in fees and costs.

Following Trump’s victory in last month’s election, we predict the new Occupational Safety and Health Administration is certain to take a gentler approach to enforcement under the new administration, placing a greater emphasis on voluntary compliance and less on punishment.

Let’s Hope Secretary-to-be Puzder Can Protect Jobs and Carefully Slow Automation and Drones

On a related note, the U.S. workers’ comp community is watching with some trepidation to monitor the populist movement to ratchet up the minimum wage. A study out of Oxford University shows that we could lose 47% of all our jobs within 25 years through a combination of globalization, automation and the fact so many people don’t have the skills that may be required for many available jobs. The higher the minimum wage rises, the more financial incentive there is for companies to spend the time and money to automate and end many minimum wage positions. Once a job is automated, we don’t feel that position will ever return to be handled by humans.

As we tell many of our human resources managers—you don’t need HR managers without “humans” to manage! In short, we feel Mr. Puzder should bring a strong management role to our government and may be able to work more closely with private industry to keep people work and build jobs. If we are to move to automation, we feel folks like Andrew Puzder “get it” and will understand the bigger picture.

Post-Accident Drug and Alcohol Testing Is Almost Certain to Rapidly Change

As we outlined last week, the outbound folks at OSHA just enacted their nutty rule about “blanket” post-accident drug and alcohol testing. In short, they want you to make a reasoned decision when an accident occurs to decide whether impairment might or could have been a factor before you to decide to drug/alcohol test your injured worker. There are also at least two major exceptions to the requirement outlined in the last sentence.

We are telling all our clients and readers to hang on for the time being and not worry too much about this new OSHA rule. If you have a specific fact situation arise where you need rapid help on whether you can test after an accident, send me an email at ekeefe@keefe-law.com or call our office and ask for me. I assure you I can and will provide strong guidance on the best approach.

I will continue to report when/if the current post-accident drug and alcohol test rule is modified or more likely dropped under the inbound administration.

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Synopsis: Illinois Rules on “Large Deductible” Work Comp Insurance Coming to Policies Near You Shortly.

Editor’s comment: The large-deductible rule is on the agenda for a meeting of the Joint Committee on Administrative Rules tomorrow Dec. 13 in Chicago. If the committee places the rule on a “no objection” list, it will become effective by the end of December or in early 2017, according to a spokesman with the Illinois Department of Insurance.

The proposed rule would implement Senate Bill 1805, which Gov. Bruce Rauner signed into law in August 2015. The proposed Part 2909 of Section 155.44 of the Illinois Insurance Code would apply to insurers that

·         Have less than $200 million in surplus,

·         Are rated less than A- by A.M. Best Co. or

·         Have no A.M. Best rating.

Workers’ comp insurers not exempt from the rule would be required to obtain an audited financial statement from large-deductible policyholders during the underwriting process. The per-occurrence deductible amount under the large deductible agreement would be limited to 20% of the policyholder's net worth as determined by the audited financial statement. The insurers would have to require full collateralization of policyholders’ obligations under a large-deductible agreement, including policyholder obligations for employees located in other states. The collateral could take the form of a surety bond or letter of credit. The initial collateral would be determined by computing the standard premium and determining the amount by which the standard premium is reduced as a result of a large-deductible credit.

Nonexempt insurers that have issued a large deductible policy would be required to file an annual disclosure statement with the IL Department of Insurance.

Illinois is one of eight states with statutes in place regarding large-deductible workers’ comp policies. The others are California, Indiana, Michigan, New Jersey, Pennsylvania, Texas and Utah.

It is possible more states will follow suit, as the National Association of Insurance Commissioners or NAIC moves to finalize their large-deductible study written by its workers’ compensation task force in collaboration with the International Association of Industrial Accident Boards and Commissions, or IAIABC.

Although the NAIC report said large-deductible programs are “an integral component of the modern workers’ compensation insurance marketplace,” allowing employers in some cases to save on their insurance costs, the large-deductible policies come with risk. “If the employer has misjudged its ability to fulfill that obligation, or is simply unlucky, the financial consequences to the employer could be catastrophic, and the employer’s inability to pay could have a cascading impact on the financial health of the insurer,” the report noted.

Large-deductible policies may contribute to insurance carrier insolvencies, according to the NAIC study, and in those cases a state guaranty fund becomes responsible for covering unpaid workers’ compensation claims. The NAIC large-deductible study contains recommendations similar to some of the provisions of the pending regulations in Illinois.

The large-deductible report recommends states establish financial requirements for insurers writing large-deductible policies, and limit the risks employers could retain relative to their financial capacity. The NAIC study also calls for collateral requirements, including prohibitions against commingling collateral with other assets of the insurer or pledging the money for competing purposes. The NAIC study also recommends that an insurer’s staff evaluate the creditworthiness of large-deductible policyholders, with the underwriting department working together with the finance department, if necessary.

The NAIC Workers’ Compensation Task Force unanimously approved the large-deductible study during a meeting in San Diego on Aug. 28. The study is now on the agenda for the upcoming NAIC annual conference in Miami later this month. The NAIC Executive Committee and Plenary will consider adoption of the study on Dec. 13.

The Workers’ Compensation Task Force, meeting on Dec. 12, will receive a progress report on the large-deductible study. The task force is planning to work with the Financial Condition Committee in the coming year on implementation of the study’s recommendations.

Synopsis: Jimmy John’s Agrees to Pay $100K in Non-Compete Lawsuit and Stop Using Them for Line Employees.

Editor’s comment: Please note I hate non-compete agreements. Very few folks understand them and most of such agreements aren’t truly “enforceable” but such unilateral agreements still act as anti-competitive threats because the big company can always sue you and your new employer if there is an alleged breach of the agreement.

Jimmy John’s agreed to settle a lawsuit with the office of Illinois Attorney General Lisa Madigan over use of non-compete agreements, Madigan’s office announced. The Champaign, IL-based sandwich chain will pay the State $100,000 and must notify all current and former employees such agreements as they relate to counter staff or delivery folks are void and unenforceable.

In a lawsuit filed in June, Madigan alleged Jimmy John’s workers were required to sign a “highly restrictive” non-compete agreement as a condition of employment. The agreement prohibited sandwich shop workers and delivery drivers from working at similar shops while employed at Jimmy John’s and for two years after leaving the company. Employees were specifically barred from working at businesses earning more than 10 percent of their revenue from the sale of “submarine, hero-type, deli-style, pita, and/or wrapped or rolled sandwiches.”

According to the Attorney General’s office, the agreement applied to sandwich businesses located within 3 miles of any Jimmy John’s shop nationwide. This was later reduced to 2 miles in a “nearly identical version” of the agreement, the attorney general’s office states.

“This settlement helps ensure Illinois’ workers have freedom to change jobs in order to seek better wages, further their careers and improve their lives,” Madigan said in a statement. “Workers in Jimmy John’s sandwich shops should know they are not subject to these unfair and unenforceable agreements.”

The $100,000 provided to the attorney general’s office will fund education and outreach to raise awareness about the legality of non-compete agreements. As part of the settlement, Jimmy John’s must also remove such agreements from future hiring practices and agree to use non-competes in accordance with Illinois law moving forward.

Beginning in January, the State of Illinois will prohibit the use of non-compete agreements for employees earning less than $13 an hour as part of the Illinois Freedom to Work Act.

Shawn R. Biery, J.D., MSCC is KCB&A’s resident guru on non-competes. If you want a real one you can enforce and defend, Shawn can give you the requirements.

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