Well, that is a great question. This question is difficult at best, and almost impossible to answer. Determining the insurance on a building is not black and white. There are several issues that make this question difficult to answer. When assessing building insurance there are a number of items to take into account:

• Timing of the Property Valuation. The cost to rebuild property is determined in advance, while the actual cost to rebuild property isn’t determined until after the loss. Why is this a problem:

• If a disaster occurs that affects a large area, for example the tsunami in Japan or a large earthquake in downtown Los Angeles, the cost to rebuild will be inflated over-night. So the initial rebuild cost will no longer be valid.

• Increases in construction costs can cause co-insurance penalties. Unfortunately, this cannot be identified before an actual loss.

• Age of the Building. Does the age of the building create special challenges that are hard to quantify? Is the building on a historic registry?

• Building Codes. Have the building codes changed requiring a significant upgrade in construction materials or construction methods?

• Unique Features. Does the building have unique building features that increase the cost of construction when compared to a building of similar age and type?

• Structural Changes. Has the tenant had any improvements or betterments installed?

All of these issues can create problems when determining the proper insurance limit for a building.

Insurance is a sunk cost and it is human behavior to attempt to keep the cost at a minimum. However, for a Property owner not properly insuring your building can be financial devastating if a loss occurs. The problem of insufficient insurance limits can become compounded by triggering penalties in the policies co-insurance clause. More about co-insurance in another post.

As a California employer by now you should have heard the term MPN, but what is an MPN and why is it important?  An MPN is a Medical Provider Network.  This is simply a network of doctors who specialize in industrial accidents that agree to treat injured workers on a fee schedule, and in turn increase the likelihood of gaining business (injured workers).   In my view, the goal of an MPN is to:

• Provide quality care to an injured worker
• Return the injured worker to the pre-loss physical condition as quickly as possible
• Get the worker back on the job and earning wages
• Reduce Workers Compensation claim’s cost by:
  • Keeping the injured worker within the MPN (reduces doctor shopping)
  • Reducing the likelihood of an injured worker finding a doctor who will treat and lien an injury, which lengthens the claim process
  • Returns control of a claim to the employer (by default the employer’s insurance company)

Cost Savings

The main cost saving element in this is the reduction of doctors treating an injured worker and putting a lien on the file/case.  Since the doctors have agreed to a fee schedule in exchange for being a member of the network there is little need to treat and lien.  A treating doctor can treat the worker without delay with the expectation of being paid.  Doctors not part of the network have little incentive to treat an injured worker as payment is not guaranteed.

If you have not already done so, implement your insurance carrier’s MPN.  It is quick, easy and can potentially save you money on your workers compensation costs.  Remember to update your MPN each time you change insurance carriers and to enroll all new hires throughout the year into your MPN.

For additional information please see: http://www.dir.ca.gov/dwc/MPN/DWC_MPN_FAQ.html. 

A storm is approaching, your business is at risk, do you have the right insurance?  Don’t leave it to chance.  Unless you take the proper steps to protect your assets you run the risk of a storm or natural disaster killing off the lifeblood of your business – your income.

Most individuals and businesses think about Property insurance in broad terms, but as you prepare your business for the future it is important to know what insurance companies look at when it comes to your property?

• Building – this is “real property.”  Anything permanently attached to the ground.  The building, the roof, permanently attached equipment, etc…
• Business Personal Property – this includes all of the following:
  - Furniture
  - Fixtures
  - Stock
  - Equipment 
• Business Income – Any expenses that would continue even after a loss, plus your net profit
• Extra Expense – Any costs that you would incur to quickly get your facility back up and operational

As you prepare for 2012, here are a few items to consider when it comes to your property insurance:

• What happens if you have a partial loss to your building, but the local government code requires that you tear down the whole building and rebuild, are you covered?

• What if you occupy an old or historic building?  You may be required by local code to rebuild with like kind and quality; that is great for the city, but what if you only need the function of the building?

• If you are a tenant, have you installed items in the building that have value to you, but not to the building owner?  Do you want to be compensated for the loss of the additions and alterations?

• Manufacturers and Retailers: How will your stock be valued at time of loss?  Do you carry a large amount of completed products?  Are you going to be paid the cost of the raw goods, the completed/wholesale price or the selling price?  Does how the property is valued have a potential impact on your bottom line?

• How long will it take you to rebuild, and bring back any lost customers?  Can you afford to lose any key people?  Do you want to retain all of your employees and how are you going to pay for them with the loss of revenue?

• Do you have a business that requires you to reopen immediately in the event of a loss?  How much money will it take after a loss to bring your business back up at an alternative location?

These are just some of the items to consider when planning your Property Insurance program.   If you want to know more about the types of insurance coverage you should be looking at for your business, read our post “Is your business prepared for a disaster? (Part 1).

So, as you evaluate your business and its preparedness for future success in 2012, don’t forget to look at your business risks and especially your property insurance.  Stay tuned…we have more to come on “Is your business prepared for a disaster?”

Have a happy, safe, and prosperous 2012!

The Goldstein Law Firm – November 2011 Newsletter

“Employers Who Willfully Misclassify Employees as Independent Contractors Must  Admit This Error on Their Websites and Pay Fines for Each Infraction of between $5,000.00 and $15,000.00; It’s Almost the End of the Year and Employer Must Consider Getting Rid of Unproductive Employees Before the New Year and Could Face an Increase in Post Holiday Sexual Harassment Claims From Holiday Season Parties”

Fall 2011 Labor & Employment Law Seminar is a Tremendous Success:

We held our 35^th annual Labor & Employment Law Seminar on October 19, 2011 at the Cerritos Center for the Performing Arts.  Many of our oldest clients and newest clients as well as professional relationships heard me discuss the following topics: (1) Have economic conditions and the wide spread use of the Internet and Social Media changed the basics of hiring, firing, and the legal protections for business reputation and trade secrets?; (2) How to protect and defend your organization from Plaintiffs’ lawyers targeting your organization for a costly wage and hour class action lawsuit; and (3) New developments in federal and state labor and employment laws that you should be aware of, including how to defend your organization from an unwanted union organizing campaign that will use the National Labor Relations Board’s new rules to unionize your employees and harm your business.

As a professional courtesy, if you were unable to attend our seminar but would like a copy of my seminar presentation, please e-mail me at cgoldstein@gpfirm.com or contact my office and ask to speak with my assistant Mr. William Lam, and he will e-mail you a copy of my presentation.

II.        Employers Who Willfully Misclassify Employees as Independent Contractors Must  Admit That Error on Their Websites and Pay Fines for Each Infraction between $5,000.00 to $15,000.00:

A new California law is intended to crack down on employers who misclassify their employees as independent contractors. For years I have been warning employers that federal and state agencies believe that 90 % of employees classified as “independent contractors” are in fact employees.  In the government’s view, employer misclassification results in the substantial loss of federal and state tax revenues that both employers and independent contractors (who are in actuality employees) should be paying into the government’s coffers.

Under the new law, SB 459, employers who willfully misclassified an employee as an independent contractor when the employee should have been classified as an employee, will be liable for fines per incident of between $5,000.00 and $15,000.00 and will be required to admit their error on their website for a year. The new law is being enforced by the California Labor and Workforce Development Agency (“LWDA”).  In my opinion, because LWDA currently lacks the staff and resources to enforce this statute, the new law will ultimately be enforced by attorneys in private lawsuits and class actions.

In determining whether a person is an “independent contractor” or an “employee”, I have found that government agencies and Courts look to the “economic realities” test. Therefore, regardless of the written independent contractor agreement that an employer may have with an employee, government agencies and courts look to the actual relationship between the employer and the person who the employer is contending is an independent contractor.

Ask yourself the following basic questions:

Do you have a written independent contractor agreement with the person that clearly states and shows that you or your organization do not control the methods or means by which the independent contractor performs his or her or its duties under the contract, but clearly states that you are only interested in the end result of the independent contractor’s performance? If the answer to this question is “No”, most government agencies and courts would reject your claim that you have a defensible independent contractor relationship.

Do you provide the location where the work is to be performed and the tools or equipment for the person to perform the contract? If your answer to this question is “Yes”, it could show together with other evidence that you have control over the method and means by which the independent contractor performs his or her duties thereby establishing an employer-employee relationship.

Do you provide employees to work with the independent contractor to perform their contract? If your answer to this question is “Yes”, it could show together with other evidence that you have control over the method and means by which the independent contractor performs his or her duties thereby establishing an employer-employee relationship.

Do you direct the independent contractor in the sequence of the work to be performed? If your answer to this question is “Yes”, it could show together with other evidence that you have control over the method and means by which the independent contractor performs his or her duties thereby establishing an employer-employee relationship.

Is the work performed by the independent contractor a part of the work that your employees regularly perform or is the work performed sporadic, of limited time duration and not a part of the regular work that your employees perform? If your answer to this question is that the work performed is part of the work that your employees regularly perform, it could show together with other evidence that you have control over the method and means by which the independent contractor performs his or her duties thereby establishing an employer-employee relationship.

Does the person work independently or require close supervision and/or instruction on how to perform his or her job duties? If your answer to this question is that the person requires close supervision and/or instruction on how to perform his or her job duties, it could show together with other evidence that you have control over the method and means by which the independent contractor performs his or her duties thereby establishing an employer-employee relationship.

Does the person have an investment in his or her business? If your answer to this question is “Yes”, it could show together with other evidence the existence of an independent contractor relationship.

Does the person have any professional certifications and/or business licenses that are required to perform the services? If your answer to this question is “Yes”, it could show together with other evidence the existence of an independent contractor relationship.

Is the person reimbursed for expenses incurred in the performance of the contract? If you answered “YES” to this question, it could show together with other evidence the existence of an employer-employee relationship because employees are “reimbursed” for their expenses and independent contractors pay for their expenses.

Can the person realize a profit or loss from performing services under the contract? If your answer to this question is “No”, it could show together with other evidence that the person is merely an independent contractor in name only.

Does the person make his or her services available to others in the relevant market? If your answer to this question is “No” then the person is merely an independent contractor in name only because real independent contractors do not have only one (1) client or customer, but have several clients or customers.

Is the person merely paid an hourly, weekly or other wage for performing services under the contract? If your answer to this question is “Yes”, it could show that the independent contractor is merely an employee.

If your organization uses any independent contractors you should not needlessly fall victim to this new and expensive law and immediately have your independent contractor relationships reviewed by The Goldstein Law Firm.

III.       It’s Almost the End of the Year and the Holiday Season is Here! Do Not Have 2012 Spoiled By Costly Post Holiday Legal Claims:

As in past years, I have warned employers about the legal risks and rewards of holiday bonuses; holiday cheer and parties; and how to minimize the legal and resulting financial risk that the informality of the Holiday Season creates.

A.        Bonuses and Holiday Cheer – Making Certain the Legal Risks Do Not Outweigh the Rewards

Despite the challenging economic environment, many of our clients have asked about the wisdom of giving holiday bonuses and holding parties.  If you decide to give holiday bonuses, make certain that you are not creating a permanent expectation and legal obligation to continue to give bonuses year after year, even if your company can no longer afford this practice.  The best way to preserve your right to discontinue holiday bonuses is by advising employees, in writing, that holiday bonuses are given at the sole and exclusive discretion of the company and may be discontinued at the sole discretion of the company. Also, recognize that in the age of wage and hour class actions, any Christmas or year-end bonus that you give your employees is dependent on hours worked, production and/or efficiency that they achieve, and becomes a part of the employee’s regular hourly rate of pay for the purpose of calculating overtime during the week in which the bonus is given. However, if the bonus is purely a gift, then the bonus does not have to be folded into the employee’s regular hourly pay rate.  Exempt employees’ bonuses do not have to be folded into their salary to create a higher base salary for the purpose of other benefit calculations, such as the calculation of vacation pay.

B.        Holiday Cheer

There is usually a legal nexus between holiday parties and the workplace because most employees believe that they are required to attend holiday parties given, and sponsored by, their employer. This nexus becomes even clearer when the holiday party occurs and gifts are exchanged in the workplace. However, if there is a benefit to the employer, or if the holiday party becomes a customary incident of the employment relationship, the employee who attends the party is still acting within the scope of his or her employment. This means that employees who engage in misconduct at a company sponsored event, such as engaging in sexual harassment or a fight, can still be disciplined for their actions. In addition, employers can be sued for sexual harassment that occurs at, or after, the party. Employers also can be sued depending on a wide variety of circumstances for injuries caused by an intoxicated employee who injures someone after the party as a result of becoming intoxicated at your company party.

C.        How to Avoid or Minimize Your Liability

1. If alcohol is served at your holiday party, limit and control the amount of alcohol your employees and their guests can consume at the party. Open bars with no time limits or controls over how much alcohol is being served, is an open invitation to a lawsuit should one of your employees injure either themselves or someone coming from your party.
2. Move in immediately to warn employees who you believe may be consuming too much alcohol and arrange for a safe means of transportation for them to return home.
3. Make everyone aware in advance of the holiday party, preferably in writing, that the company will not tolerate any misconduct under the guise of “holiday frivolity.”
4. Do not condone employee misconduct at your holiday event.  If you are going to warn an employee that he or she is violating company rules, do so in a discrete manner so that you do not embarrass or humiliate the employee in front of their guests or other employees.

The Legal Practice Areas of the Goldstein Law Firm

Employment Law – Wage and Hour Law – Labor Law – Shareholder Disputes

Business Litigation – Corporate Law  – Corporate Investigations - Appellate Law

Wrongful Death – Training & Workshops – Workers Compensation – EDD Appeals

Sexual Harassment Law – Discrimination Law – Disability Law – Serious Willful Claims

Labor Code 132(a) Claims  – Wrongful Death/Substantial Injury Claims – Cal/Fed OSHA

THE GOLDSTEIN LAW FIRM

8912 Burton Way

Beverly Hills, California 90211

Tel. No. (310) 553-4746

Fax No. (310) 282-8070

EMAIL: cgoldstein@gpfirm.com

Hurricane Irene is a “natural” example in showing all of us what we need to consider when preparing for a natural disaster and the steps we need to take to protect our businesses, our lively-hood.  Additionally, we should consider ways that we can help our clients weather the storm.

Most businesses run smoothly and do not encounter losses during their life cycle, but what happens to those that do?  A larger percentage than you think do not re-open after a loss.  Statistics show, that a number of businesses that have the good fortune to re-open after a loss, close within five years.  The question you need to ask yourself, is what can you do to protect your business?  

This is not all about insurance, although it is one of the components.  Some of the items you should consider are:

INSURANCE – First of all, do you have it?  Second, what type of insurance coverage do you have?

COVERAGES

• Building
• Business Personal Property
• Business Income
• Extra Expense
• Rental Income
• Valuable Papers
• Electronic Data Processing

CAUSES OF LOSS

• Fire
• Flood (including excess flood)
• Earthquake
• Theft

RISK MANAGEMENT – Have you put the following into place?

• Contingency plans
• Backup servers
• Pre-arranged locations for use in an emergency
• Data security & backup
• Loss mitigation

In our series of Business Preparedness we will explore the various insurance coverage and risk management plans to consider.  However, whether it is business or personal being prepared to survive on your own after an emergency is valuable for everyone to know. What this means is having your own food, water, and other supplies in sufficient quantity to last for at least three days. When a disaster strikes, local officials and relief workers will be on the scene after a disaster, but they cannot reach everyone immediately. It might be hours or days before help arrives. In addition, basic services such as electricity, gas, water, sewage treatment, and telephones may be cut off for days, or even a week or longer.  For a complete list of recommended items to have in a Emergency Supply Kit visit Ready.Gov