I often resolve conflicts involving the classification of workers. Typically, I am educating the Workers Compensation Board about the types of work small business owners and consultants perform for specific entities so the Enforcement Unit can determine whether freelancers were truly independent contractors. Increasingly, I am assisting entrepreneurs with premium audits performed by the insurance carriers that have insured them for years (and are now providing them similar insurance at lower rates). I suspect that the decrease in premium costs has inspired greater scrutiny and attempts to reclassify workers in higher risk categories. To get a better understanding of the issue from many angles, I of course use the Third Ear Conflict Resolution process:
DEFINE THE CONFLICT: The employer and the insurance carrier disagree about the risk classification for some of the employer’s workers.
IDENTIFY THE INTERESTS: The employer wants to ensure it pays what is due, yet it must also protect its assets from useless or erroneous spending that can’t be easily recovered. It’s benefits administrator or other bill payer thought they were doing that. For the past five or more years, they have completed the annual premium audits, filed payroll and income taxes, and worked with an accountant to ensure all bookkeeping and filings were accurate. He believed he had done everything in strict compliance with all laws, and the business budgeted accordingly. He wishes he could understand how the organization now owes thousands of dollars it does not have.
The insurance carrier presumably wants to maximize profits for shareholders who are less committed to the corporate vision than to increasing their investment earnings. Yet the people who operate the corporation probably want to be fair–without losing their jobs. They all really just wish the employers would pay the premium adjustments because the appeals process takes additional time none of them have.
PLAY WITH THE POSSIBILITIES: If my clients could have these conflicts resolve in any way possible, they would pay only what is actually due. Their employees would be properly classified in low-risk categories when they serve sales and administrative functions. They would only pay high-risk premiums for workers who are actually performing work that puts them at risk for injury (e.g., manual labor, machine operation, driving). They would not be in adversarial positions with their vendors, no would they be treated like cheaters. Further, they want to be able to trust their insurance carriers, since they are required to have workers compensation insurance.
CREATE THE FUTURE: Here’s an example of what we do to prepare for a premium audit.
- We release any belief that the employer or anyone acting on its behalf has done anything wrong. Assigning blame wastes valuable time we need to address the audit and bill.
- We release any assumptions that the insurance carrier is trying to cheat the employer. We give the auditors the benefit of the doubt. If we assume anything, we assume that we know nothing about the process and need to ask more questions about how the premium adjustment was calculated.
- We ask for a detailed explanation of the audit results and copies of all documentation supporting the determinations.
- We review the audit for errors, understanding that the auditor’s knowledge of the business is very limited and that he or she is probably under pressure to complete as many audits as possible within a time frame that probably allows for imperfect work.
- We present the insurance carrier with a detailed Application for Review of the premium adjustment and invite the auditor to join us on site to see the work being performed in a day (or more, if so desired).
STAY ON PARR: We plan, act, revise, and repeat, until we get a fair result.
Notably, not everyone wants to take the time to do this–to stand up for what is fair, to challenge what appears as an 800-pound gorilla, or to risk retaliation. Unfortunately, this is what creates the environment in which abusive premium increases and other actions can be taken. As such, I invite you to look more closely at your premiums from year-to-year and the categories in which your workers are classified. When an increase occurs and appears unwarranted, request review and further explanation. Ask your insurance broker, attorney, and accountant to get involved early. Set time aside each year to ensure you are getting a fair deal at a fair price–under all of your agreements. Be a powerful, savvy entrepreneur who creates the experiences she wants.