Category Archives: Employee Benefits

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Risk Link Roundup

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These topical articles highlight some interesting and relevant issues in the world of risk and insurance; from how Uber could impact the insurance industry, to Deepwater Horizon lessons-learned, to supporting workers with chronic conditions to board integrity.

What Will Be the Uber of Insurance?

From Insurance Thought Leadership: Insurance is ripe for disruption, and, given the conservative nature of the reigning carriers and large brokers, it is a fair guess that a lot of innovation will come from outside the industry. There are a few of candidates that might be in the winner’s circle when the dust settles.

Gard: Six Takeaways from Deepwater Horizon

From Marine Log: P&I club Gard estimates that BP’s claims and costs from the Deepwater Horizon disaster are more than $70 billion. Gard lists six important lessons emerging from the 2010 incident and the ensuing litigation during the past five years.

Employers Urged to Accommodate Workers’ Chronic Conditions

From Business Insurance: When it comes to workers with chronic conditions, employers should focus on providing accommodations and support rather than managing a disease, an expert said during the Disability Management Employer Coalition’s 2015 conference in San Francisco.

Integrity? The Buck Stops at the Board

From Listed Magazine: Companies are quick to blame “rogue employees” when they experience an ethical failure within. But employees merely reflect a company’s true and actual culture, internal controls and practices—all of which point right back to the board

Workers Comp Lessons from Major League Baseball

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NEW ORLEANS—Bringing workers compensation under central control and greater oversight has drastically changed the cost and efficacy of one of Major League Baseball’s biggest expenditures. Here at the final day of the RIMS conference, Anthony Avitabile, vice president of industry risk management for Major League Baseball, shared some of his insight on implementing a unified workers comp program to reduce expenses while offering better services.

Although not every business has the high-profile brand or famous talent of a professional sports team, MLB’s example offers some valuable lessons for how large companies with different facilities or franchises can reduce workers comp spend and enhance treatment for employees.

Before 2003, clubs operated individually, placing workers comp insurance independently.

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To do so, they called upon varying philosophies related to program structure, medical provider relationships, and off-season indemnity for minor league players who were out of work during a key earnings period outside of the game. Every franchise was fending for themselves when it came to procuring coverage and securing treatment for players. Since 2003, the league has required compliance with a group policy, featuring group insurance purchasing, unified philosophies, and greater information sharing about injuries, expenses and treatment standards. In the year before Avitabile’s program was put into place, total costs incurred peaked in 2002 at about .

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3 million, while costs in 2013 were down to .

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8 million.

Critical components of the new program include a drastic effort to understand and review losses across all franchises, what he called a “relentless” effort to manage the process in every club, incentivizing good behavior and results, and instituting universal standards in the approach to coverage. The league made a unilateral decision to dedicate the greatest spend to best-in-class service providers, for example, concluding that return to maximum medical improvement offered the biggest long-term savings. Seizing on the competitive nature shared throughout the league, Avitabile also issues one-page annual scorecards for the CFO and other executives in the individual clubs and review at an organizational level. These show performance relative to other clubs, highlighting top cost drivers and key ways to improve. A workers compensation quality council was also formed to focus on provider agreements, review complex questions regarding released players, and evaluate and implement in-house physical therapy and rehab operations.

Leveraging the full size and reputation of the league also offered substantial savings in negotiating with providers, which Avitabile cited as one of the biggest areas of savings when managed in advance of any injuries. Partially thanks to volume and ensured prompt payment backed by the organization, these pre-negotiated rates are typically below workers comp state medical fee schedules. Some of his tips for negotiating these provider agreements include:

provider agreement negotiation

Bringing some services in-house also offered considerable savings while maximizing reliable access to top treatment and consistent protocols. The league-wide move to in-house physical therapy instead of third-party treatment, for example, brought total incurred PT and rehab costs down from about $1.6 million in 2002 to approximately $340,000 in 2012.

New in Workers Comp: “Lifestyle Risk” and the Dangers of Telecommuting

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NEW ORLEANS—While controlling workers compensation costs often focuses on mitigating the risk of slip-and-falls or ensuring employees have proper safety gear, some notable exposures exist in employees’ everyday personal lifestyle choices. In the Thought Leader Theater at RIMS 2015, Fred Hubbs, a partner in the lawfirm Hall Booth Smith, P.C., discussed how different trends—from the obesity epidemic to telecommuting—can increase risk exposure in the workplace.

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As the workers comp system is based on principles of no fault and no personal responsibility and there are broad state definitions of what is medically necessary or what an employer is responsible for, employers are often vulnerable to what Hubbs calls “lifestyle risk.” Obesity, smoking, non-compliance with treatment for diabetes, and telecommuting can all put employees at risk, and either contribute to a compensable event or complicate the recovery process.

Obesity, which affects approximately 37% of Americans and is expected to his 50% by 2030, is a well-documented factor in workers comp, with obese workers filing twice as many claims that tend to be up to seven times more expensive and see these workers missing thirteen more days a year, while indemnity benefits paid can be five times higher. And some states have ordered employers to pay for weight loss that is medically necessary to facilitate recovery.

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Smokers are also drastically more likely to be injured at work, and smoking while on the job can lead to specific accidents in the workplace that are compensable. In fact, courts have ruled that, if smoking is only a slight deviation from job duties, an accident that occurs while a worker is on a smoke break is compensable. In at least two states, employers are also now required to pay for smoking cessation programs if doctors deem it necessary to help with recovery from surgery.

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For diabetic employees, a refusal to comply with treatment can expose employers, whether because of the increased risk of seizure, making a minor injury worse, or delaying recovery. Some treatments for injuries sustained on the job can also aggravate pre-existing diabetes, which can be a compensable event.

For all of these issues, Hubbs recommended that employers get more proactive to help employees be healthier, reduce workers comp costs, and even benefit from some incentives from new healthcare laws. Stop-smoking campaigns and weight-loss or activity-boosting initiatives can all aid in these efforts, and these employee-sponsored wellness programs are promoted under new healthcare laws, which may offer direct incentive to businesses that introduce them. Ensuring that employees are complying with doctors’ orders regarding these required efforts is also important, and may be actionable if employees are refusing. There are laws that require employees to comply if they are receiving workers comp benefits, Hubbs said, and employers should seriously examine their legal ability to stop compensation if an employee refuses to submit to a reasonable examination or treatment.

Finally, Hubbs cautioned that many employers should be more cognizant of the risks of telecommuting. While working remotely is certainly nothing new, it is continuing to grow, especially after President Obama signed the Telework Enhancement Act requiring government agencies to establish policies for working outside the office. These arrangements can severely complicate workers comp questions, however, as the lines blur surrounding whether an accident that occurs in the home is compensable and whether an employee is on or off the clock at any given time. To mitigate some of these risks, he recommended that employers:

  • Visit the “jobsite” to evaluate where employees will be working
  • Email or otherwise communicate when an employee is on or off the clock
  • Create a written and signed agreement that designates hours and breaks, designates rooms in the house as “office” space, specify what duties are included in the telework, designate “personal comfort” areas, and attach panel of physicians in states where appropriate

Court Dismisses EEOC Lawsuit for Lack of Jurisdiction

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On Sept. 22, 2014, in EEOC v. Vicksburg Healthcare LLC, et al., Judge Keith Starrett of the U.S. District Court for the Southern District of Mississippi granted defendant’s motion to dismiss an EEOC lawsuit for lack of personal jurisdiction and insufficient service of process. The EEOC had filed a disability discrimination claim on behalf of a nurse who worked at a hospital owned by a subsidiary of the defendant. The court held that the EEOC, which sued a subsidiary hospital in Mississippi and its Tennessee-based parent corporation, did not put forth prima facie evidence of the necessary factors to satisfy personal jurisdiction requirements for the parent corporation in Mississippi.

While this ruling is favorable for non-Mississippi parent corporations operating subsidiaries in Mississippi, it has larger significance for employers. It shows that nationwide jurisdiction is not a given when the EEOC sues. Additionally, the ruling provides the framework for how to prevent liability by avoiding personal jurisdiction.

Case Background

The EEOC filed an action on behalf of Beatrice Chambers alleging disability discrimination under Title I of the Americans with Disabilities Act of 1990. The complaint named Community Health Systems, Inc. (CHSI) and Vicksburg Healthcare, LLC (VHL) as Defendants, alleging that both CHSI and VHL have been continuously doing business as River Region Medical Center (River Region) in Vicksburg, Mississippi.

The EEOC alleged that the defendants terminated Chambers–who had worked as a nurse at River Region for about 36 years–because of her unspecified disability, and additionally failed to provide her with reasonable accommodations in violation of the ADA. VHL was a subsidiary of CHSI, which was incorporated in Delaware and had its principal place of business in Tennessee. While VHL admitted doing business as River Region and admitted employing Chambers, CHSI denied doing business as River Region and denied employing Chambers. Further, in its motion to dismiss, CHSI asserted the affirmative defenses of lack of personal jurisdiction, insufficient process, and insufficient service of process.            

The Court’s Decision

In granting CHSI’s motion to dismiss, the court held that the issue of personal jurisdiction was controlling. The EEOC has the burden of establishing a prima facie case for personal jurisdiction. The court noted that a non-resident defendant is amenable to being sued in Mississippi if: (1) Mississippi’s long-arm statute confers jurisdiction over the defendant; and (2) the exercise of personal jurisdiction comports with the requirements of federal due process. The Mississippi long arm statute consists of three prongs, including: the contract prong; the tort prong; and the doing-business prong. It was undisputed that the “doing-business” prong was case dispositive.

CHSI submitted an affidavit from its Senior Vice President and Chief Litigation Counsel to the effect that it did not conduct business in Mississippi and that it lacked sufficient minimum contacts to be hauled into court in Mississippi.

The affidavit confirmed that CHSI is a holding company with no employees; CHSI indirectly owned subsidiaries including VHL; CHSI neither operated nor controlled the day-to-day operations of River Region; CHSI and River Region maintained separate banking records and did not co-mingle funds; CHSI did not employ nor have control over any River Region staff; CHSI never made any employment decisions regarding Chambers; CHSI and River Region observed corporate formalities (including no overlap between the Board of Trustees of River Region and the board of directors of CHSI; the respective boards of River Region and CHSI each convened separate meetings, (the boards maintained separate minutes and records); and CHSI is not qualified to do business in Mississippi–owns no property there, has no offices there, does not market there, and does not pay taxes there.

Following well-established precedent, the court found this aggregation of factors to be dispositive. It held that the EEOC lacked personal jurisdiction to sue CHSI in Mississippi.

The court rejected the EEOC’s three arguments in opposition of dismissal. First, the EEOC argued that the 10-K form submitted by CHSI to the SEC demonstrated CHSI’s intent to do business in Mississippi as it often used language such as “we” when referring to the hospital.  The court rejected this argument, noting that the 10-K form also contained a provision saying the hospitals are expressly owned and operated by the subsidiaries. Next, the EEOC mistakenly speculated that the River Region employee handbook contained references to CHSI. The court cited an affidavit from CHSI’s litigation counsel clarifying that the entity referred to in the handbook was a different indirect subsidiary, and not the parent corporation. Finally, the EEOC erroneously relied on another case involving CHSI – Bass v. Community Health Systems, Inc., Case No. 2:00cv193 (N.D. Miss.). The court noted that no facts from that case illustrated that CHSI should be amenable to personal jurisdiction.

Implications for Employers

 When out-of-state parent corporations conduct business in Mississippi through subsidiaries, it is imperative that they observe corporate formalities to clearly maintain the parent-subsidiary relationship. Further, in documents such as 10-K forms and employee handbooks, employers must explicitly indicate that subsidiaries, and not the parent, own and operate local entities. If parent corporations follow the teachings of EEOC v. Vicksburg Healthcare, LLC, et al., they can avoid unwittingly submitting to personal jurisdiction in Mississippi courts while their subsidiaries do business there.

This blog was previously posted on the Seyfarth Shaw website.