Major regulatory changes from OSHA and DOL rile many employers

In May, the Department of Labor (DOL) released two new rules that will have a significant impact on employers of all sizes and from all industries.

OSHA’s controversial final injury data submission rule worries many employers

OSHA’s stated objective in issuing the Improve Tracking of Workplace Injuries and Illnesses final rule that requires employers to electronically submit worker injury and illness data, which will be made public, is to “nudge” employers to focus on safety. However, employers worry about privacy, unwarranted adverse publicity, misinterpretation of data, damaging use of information by competitors, public shaming, underreporting, and a usurpation of Congressional authority.

What the rule means

  • Establishments with at least 250 workers must electronically submit to OSHA, on an annual basis, information from their OSHA Forms 300, 300A and 301.
  • Establishments with 20 to 249 employees in certain high-hazard industries, such as construction, manufacturing, forestry, and agriculture, but also merchandise stores, specialty food stores, and taxi and limousine service, will be required to submit information from their annual summary form, OSHA Form 300A.
  • The applicable employee count is the total number of employees at an individual “establishment” (single physical location) at peak employment at any point during the year, including temporary employees, seasonal workers and part time employees.
  • All submissions must be made electronically to a secure website. In theory, OSHA will scrub all employee-identifying information (but not employer-identifying information).
  • OSHA will then make information available on its public website in a searchable database. While in the past, the data submitted on the forms has been private, now it will be available for the public to see and use at its discretion.
  • The rule also changes employer obligations for ensuring employees report all work-related injuries and illnesses. To counteract workplace policies that may deter or discourage employees from reporting work related injuries and illnesses, the rule adds harsher scrutiny of employers’ recordkeeping practices and new punitive elements for under-reporting and under-recording.
  • The rule includes a somewhat unexpected provision adding penalties for employers that take actions deemed as retaliation against employees who report accidents and OSHA will be the arbiter of retaliation claims.

Timeline of effective dates

  • Aug. 10, 2016: Provisions barring employers from retaliating against employees and mandating that procedures for reporting work-related injuries and illnesses must be reasonable and must not deter or discourage reporting take effect
  • Mid November 2016: Federal OSHA-approved State OSH Programs must adopt requirements that are “substantially identical” to the new federal rule within six months after publication
  • July 1, 2017: Establishments with 250 or more employees and covered establishments with 20-249 employees in high-hazard industries must submit information from their 2016 300A Annual Summary
  • July 1, 2018: Establishments with 250 or more employees will be required to submit information from all 2017 forms (300 Logs, 301 incident reports, and 300As). Covered establishments with 20-249 employees in high-hazard industries must submit information from their 2017 300A Annual Summary.

Then, beginning in 2019 and every subsequent year, the information must be submitted by March 2nd each year.

The volume of data collected will be staggering and some doubt the ability of an agency the size of OSHA to manage it properly and the cost will be significant. While estimates vary as to the number of employers affected, most figures are in the half to three-quarter of million range.

What has employers worried?

  • Additional time and expense. Employers that do not maintain electronic records will have to set up systems, and others will have to modify their systems to interface with OSHA’s. For those employers who utilize an alternative to the OSHA Form 301, such as a workers’ compensation first report of injury, which is allowed by the existing rules, the changes mean that the employer also complete the OSHA Form 301.
  • Reported injury and illness information lacks important context of the circumstances, such as company size and cause of incident. An injury is recordable based on the outcome not the cause; it must meet the regulatory recording criteria. The report will not reveal if the injury was the result of employee misconduct, defective equipment from a third party manufacturer, another employer’s work activities, and so on.
  • Underreporting.There is great risk that employees will hide injuries to avoid having them publicized, and employers will find ways to keep their numbers down.
  • A very low threshold set for what constitutes a “high-hazard industry.” The threshold is a DART (Days Away, Restrictions and Transfers) rate of 2.0, which is close to average. (The Site Specific Targeting inspection program is 3.6)
  • Discouraging post-injury drug tests. According to a Business Insurance article, “OSHA rule discourages blanket post-injury drug tests,” the final rule does not ban drug testing of employees, but it does prohibit employers from using drug testing or the threat of testing as a form of adverse action against employees who report injuries or illnesses. Some lawyers recommend that employers do not have blanket drug testing policies, but limit drug testing to situations in which employee drug use is likely to have contributed to the incident and for which the drug test can accurately identify impairment caused by drug use.

What employers should do

While critics are actively voicing their concerns to Congress and there likely will be legal challenges, employers must begin to prepare now to comply with the new rule. Eric Conn, Chair of OSHA Workplace Practice Group, Conn Maciel Carey, advises:

  • Evaluate and begin to transition from paper-based injury and illness recordkeeping to an electronic recordkeeping system that is expected to interface with OSHA’s injury data submission portal
  • Provide refresher training in the recordkeeping requirements to the individuals responsible for maintaining 300 Logs and preparing 301 incident reports and 300A Annual Surveys
  • Engage counsel to conduct attorney-client privileged audits of injury and illness recordkeeping forms before submitting them to OSHA; continue to take a serious look at every injury and illness in the workplace and make a judgment about whether it’s reportable
  • Consider forming relationships with local occupational health clinics, where medical professionals are more sensitive to the types of treatment that turn otherwise minor injuries into recordable injuries (i.e., prescribing medication when over the counter medication or no medication would be just effective for the employee)
  • Evaluate and update injury reporting policies to ensure the proper notice is delivered to employees about reporting rights and expectations, and the reporting requirements are not too burdensome so as to discourage reporting of injuries (e.g., drug testing only when there are injuries, very short windows of time to report, etc.).

 

Final rule revising the current White Collar Exemption regulations

The long-expected final rule revising the current White Collar Exemption regulations raises the minimum threshold salary required to qualify as an exempt employee to $47,476, which is slightly lower than that proposed in 2015, but more than double the current salary threshold of $23,660. All employers throughout the country must meet the same mandatory salary level, $913 per week, to classify an employee as exempt.

The new rule also implements an automatic increase in the threshold salary level every three years based on the 40th percentile for salaried workers in the lowest-wage region.The rule also permits bonuses and incentive payments to count toward up to 10% of the new salary level. The updated rule, which will take effect Dec. 1, 2016, will affect 4.2 million workers, according to the department. It makes no changes to the current duties test.

Employers have a variety of ways to comply:

  • raise workers’ salaries to make them exempt from the overtime threshold
  • pay the mandated time-and-a-half overtime for those who do work more
  • reduce employee hours to avoid overtime work
  • reclassify employees and set their wages at a rate so that the total amount paid to the employee remains the same or reduce benefits or other compensation to off-set increases to the salary level (clearly not the objective of DOL)

 

In addition to the financial impact of increased payroll, employers must consider the effect on employees. Salaried workers who are reclassified as non-exempt workers may perceive this shift as a demotion in pay and status, as well as a threat to the reliability of their take home pay and flexibility to come in late or leave early. And what about answering emails and phone calls after hours? And will company phones and laptops mean an employee logs more OT? Telecommuters may feel Big Brother is watching. Moreover, benefits often differ for salaried and hourly workers.

Impact on Workers’ Compensation

Under the new rule, there is the potential for increased premiums, especially for small employers, given the role payroll plays in workers’ comp calculations. Raising wages or increasing overtime results in a gross increase in payroll, which is a factor in calculating workers’ comp premiums. The greater the payroll, the greater the premium paid. Claim costs may increase as well.

However, in most states (Pennsylvania and Delaware are exceptions) the premium portion of overtime pay is excluded from remuneration so the additional amount a worker earns for each hour of labor during overtime hours is not included. For example, if a worker who makes $20/hr. logs in 10 hours of overtime, only $200 of the $300 earned is included in the calculation.

It’s important to be sure there are clear records, breaking out the overtime paid. Also, let underwriters know the added payroll does not increase exposure because employees were already working overtime hours beyond 40 a week before the new rule but they were receiving a salary and not compensated for the overtime.

Take the time to plan

With less than six months until the effective date, employers should begin planning now:

  • Identify exempt positions where employees earn less than the new threshold. Decide if there are positions where you will increase the salaries above the new salary level. (If the salary is close to the threshold, it may be the best alternative.)
  • For employees likely to be reclassified, assess how many hours of overtime they now work. Review the tasks and determine what can be eliminated or reassigned. If overtime is necessary, weigh the pros and cons of outsourcing, adding part-time help, or paying overtime. Put restrictions on overtime work as needed.
  • Determine how benefits will change when moving from exempt to non-exempt.
  • If there are exempt employees who telecommute and will be reclassified, set up a system to monitor hours worked, such as software programs that monitor work activities. Be wary of the risk that employees will underreport hours worked and then later present claims for alleged off-the-clock work at overtime rates. Don’t be discriminatory, if some are allowed to continue to telecommute and others are not, there needs to be a solid reason (such as a disability) for the inconsistency.
  • Train reclassified employees on time recording policies. Remember many have not done this for many years or never did. Time tracking systems should be evaluated and potentially upgraded.
  • Update pay systems and ensure pay calculations have been properly restructured to reflect the proper hourly pay and overtime rates.
  • Plan how to communicate the changes to employees. Some employees will believe the shift from exempt to non-exempt status is something your company did for its own benefit. They may resent punching a clock, feel a loss of status, and be worried about flexibility. The onus is on HR and managers to evaluate individual situations and find a way to assure employees they’re not being “demoted” or “losing status.”
  • Consult legal counsel and expect challenges if some workers get pay raises to qualify for the new exempt salary level while other workers are reclassified as hourly employee.

The DOL website includes a video explaining the need for the change, as well as detailed “FAQs,” “fact sheets,” and guidance publications targeting some employers who will be particularly affected by the final rule – including non-profits, educational institutions, small businesses, and state and local governments.

For Cutting-Edge Strategies on slashing Workers’ Compensation Costs visit www.StopBeingFrustrated.com

David Leng, CPCU, CIC, CBWA, CWCA, CRM

Author | Speaker | Certified Risk Manager | Certified Work Comp Advisor

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