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ACP logoSedgwick is proud to support the Association of Claims Professionals (ACP) to advance our industry and sustain future growth and positive outcomes. The companies that make up the ACP are leaders in the claims management industry and include independent claims adjusting companies and third party administrators. ACP companies respond every day to individuals and businesses who suffer a loss such as a workplace injury, property or casualty damage, or liability. For the consumers in our industry, the ACP member companies help them recover from such a loss. For carriers and self-insured employers, ACP member companies act as strategic business partners and trusted advisors, providing professional claims services integral to risk management. ACP member companies provide a full range of claims services from claims adjusting to comprehensive claims management.

As the ACP site explains, the organization exists to:

  • Champion the growth of our industry and the recruitment of diverse, workforce-ready talent to meet our future needs.
  • Share best practices, information, tools, and educational resources that support our industry leadership and service excellence.
  • Monitor the national landscape for market shifts and help their membership maintain a sustainable competitive advantage.

In our Insights for 2017, we see regulation transformation as one of the key issues facing the industry this year. The ACP and Sedgwick both support the CLAIM Act that is designed to address inefficiency, redundancy and lack of consistency for claims adjusting by calling on states to adopt uniform, reciprocal licensure where an adjuster license is required. The Act aims to preserve state oversight and regulation to ensure consumers have timely, efficient and cost-effective claims services, and to remove barriers to efficient claim processing.

Sedgwick colleagues are highly trained professionals who are committed to providing the best service to the people we interact with each day. That is why we are a member of the ACP; we encourage you to learn more about ways the association and fellow members are working to ensure our industry stays strong and healthy by visiting the ACP website at www.claimsprofession.org.

Kimberly Brown, SVP, Government Relations

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Health HealthaffairsAffairs is the leading peer-reviewed journal addressing health, health policy and health care – including cost, quality and access. Since the early 1980s, health research published in the journal has been used to shape policy nationally. To my fellow health wonks and I, Health Affairs is a must read. I am proud that Sedgwick sponsored the February 2017 issue of Health Affairs. This special issue is meaningful to Sedgwick and our clients, as it is dedicated to shedding light on The Work/Health Relationship.

As Health Affairs wrote in their February 7 blog, “Work conditions can affect employees’ physical and mental health, and worker productivity can be affected by the demands employees face after returning home from the office.” The collection of papers included in the issue explores the evolving and complex relationship between employers and employee health and specifically the impact of health on work. During the February 7, 2017 briefing at the National Press Club in Washington, D.C., it was refreshing to hear researchers share their interests and insights into health, absence and workplace accommodations – all subjects deeply important to today’s business.

Some of the findings mirror issues we identified in our Insights for 2017 blog:

  • Employers are offering expansive benefit solutions. Health and benefit managers understand the link between member/patient experience and engagement in health. This issue advances thinking around the impact of health on work and importance of a productive, functional life at work and home as part of healing and general health. Jean Abraham, Wegmiller Professor in the Division of Health Policy and Management, School of Public Health, University of Minnesota presented her paper “Tracking The Changing Landscape of Corporate Wellness Companies.” It describes the business case for wellness and how improvements in worker productivity and engagement translates to business performance.
  • Ron Z. Goetzel, vice president of health and productivity research at Truven Health Analytics, senior scientist at the Johns Hopkins Bloomberg School of Public Health, and Chris Calitz, director of the Center for Workplace Health Research and Evaluation at the American Heart Association, provide a fascinating look at workplace programs, policies and environmental supports to prevent cardiovascular disease. Their research relates efforts to address comprehensive cardiovascular health risks with disease prevalence and medical expenditures.
  • An intriguing study by Robert K. McLellan, section chief of the Department of Occupational and Environmental Medicine at the Dartmouth-Hitchcock Medical Center and professor of medicine at the Geisel School of Medicine at Dartmouth, analyzes “Work, Health, and Worker Well-being: Roles and Opportunities for Employers.” The research appropriately acknowledges occupational hazards while addressing the costs of poor workforce health are collectively shared across workers and business.  A road map to work, health and well-being is included in the paper.

The depth of the papers is impressive and the topics cross a broad spectrum including the relationship between work and health, wellness programs, worker productivity, workers’ use of health services, work effects on health, job retention and health, insurance and ACA. The February issue of Health Affairs, The Work/Health Relationship, challenges us to think beyond work, productivity and health in silos and begin to evolve our thinking around integration of work and health and ultimately their impact on business performance. I encourage you to learn more about the February issue and Health Affairs at www.healthaffairs.org.

Next Wednesday, February 22, 2017, a similar issue briefing will take place in San Francisco. Those interested in attending in person or via webcast can register here.

Thank you, Sedgwick, for supporting The Work/Health Relationship issue alongside our co-sponsors, Integrated Benefits Institute and UnitedHealth Group.

Kimberly George, SVP, Corporate Development, M&A, and Healthcare

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laptop-return-to-workThe power of the process

Consistently using the Official Disability Guidelines (ODG) in workers’ compensation return to work management is a good industry practice, but there’s power in taking a step beyond. Investing additional time to fully understand important factors about the person impacted by injury – and then using that information to foster the right experience tailored for the individual within guidelines – is a best practice and shows how caring counts in the recovery process.

Recovery is generally delayed when an individual with pre-existing personal health conditions has an injury on the job. It is important to document personal health conditions and modify the claims management strategy in order to best meet the injured employee’s needs. The term “comorbidity” is often used in connection with “personal health condition.” Common comorbidities that may impact healing time are diabetes, auto-immune disorders, obesity, cancer, smoking and age. When handling claims, it is critical to know the number of days before the individual can safely get back on the job. A comorbidity calculator combines multiple diagnosis codes and influencing factors to give claims examiners and nurses an evidence-based disability duration.

Successful return to work management must also include the following factors in order to properly guide each injured individual safely back to their pre-injury job:

  • A documented plan with a return to work date on target with disability guideline calculations
  • Routine identification of behavioral health concerns included as part of early investigations and documentation, helping to engage behavioral health services and mitigate recovery delays
  • Treatment provider awareness of any pre-existing and unrelated medical conditions
  • Diligent prescription drug oversight – claims examiners and nurses should document the use of opioids, muscle relaxants and drug combinations from one or multiple prescribers, as these can prolong recovery and return to work
  • Strategic treatment planning and oversight by a clinician in order to keep full recovery on track
  • A claims examiner, nurse or return to work specialist working in one system for continual clarification and confirmation of actions and shared strategies

Claims examiners and nurses should carefully educate the injured employee about the recovery experience and partner with them to set and support return to work goals. Provider education regarding evidence-based care and safe return to work will also help with treatment planning. In addition, claims examiners should use evidence-based decision support for accurate claim reserving.

With ODG as the driver and personalized planning as the catalyst, delivery of care takes on a much more holistic approach. Following this process can make us more impactful advocates as we help restore injured employees to their daily lives and pre-injury work safely, quickly and effectively.

Robin Moleski, RN, BSN, CCM – VP, Clinical Operations

Read more in the edge magazine: Communication and teamwork: Keys to a successful return to work

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It’s a topic that gets much buzz – how will the cloud of legislation surrounding recreational and medical marijuana use impact businesses, specifically when it comes to compensability for workers’ compensation? I am sure you have all caught up on news about additional states voting to legalize marijuana for medical use and adult recreational use during the Nov. 2016 election. Let’s take a look at those changes, as well as what action they may prompt to shake up the state and federal status quo.

After receiving certified results of a state recount, 2016 closed with Maine Gov. Paul LePage issuing a proclamation of the Referendum Question 1 vote that allows recreational use of marijuana by those at least 21 years of age. Maine joins Alaska, California, Colorado, Massachusetts, Nevada, Oregon, Washington and the District of Columbia in voting to legalize marijuana for adult recreational use. Arizona was the only state where voters rejected a legalization measure during the November election.

With the passage of ballot initiatives in Arkansas, Florida and North Dakota, medical marijuana is now legal in 28 states and the District of Columbia, Guam and Puerto Rico.

An additional 17 states have laws that only allow the use of “low THC, high cannabidiol (CBD)” products for specified medical conditions. The National Conference of State Legislatures provides a summary of those state laws here.

Stickiness in the states

Despite the increase in the number of states that have legalized the medicinal use of marijuana, the impact on workers’ compensation claims was limited until about three years ago.

In 2014, New Mexico became the first state to have a state appellate court order a workers’ compensation insurance carrier to provide reimbursement to an injured worker for medical marijuana. The New Mexico Workers’ Compensation Administration began requiring employers and insurers to reimburse injured workers when the state’s healthcare provider fee schedule took effect Jan. 1, 2016. The trend continues to grow.

In two recent decisions, the Appellate Division of the Maine Workers’ Compensation Board affirmed two different administrative law judge (ALJ) awards reimbursing workers for their medical marijuana expenses, Bourgoin v. Twin Rivers Paper Co. and Noll v. Lepage Bakeries.

On Dec. 15, 2016 an ALJ in New Jersey issued an order in Watson v. 84 Lumber requiring reimbursement of an injured worker for medical marijuana payment. It should be noted that this is a division level case, so this decision is not binding on other New Jersey courts. The case is not being appealed.

It is noteworthy that in each of the above cases:

  • Marijuana was recommended by physicians only after other treatment regimens for chronic pain were attempted without success, and
  • These judges were not persuaded by the fact that marijuana remains illegal under federal law.

Federal haze

While there has been some activity on the federal side over the past year, it has not changed the fact that marijuana, even for medicinal use, violates federal law.

Marijuana remains illegal under federal law because it is listed under Schedule I in the Controlled Substances Act (CSA), along with other drugs such as heroin. Schedule I substances are illegal to distribute, prescribe, purchase, or use outside of medical research due to “a high potential for abuse” and “no currently accepted medical use in treatment in the United States.” As a result of this status, physicians recommend the use of marijuana instead of prescribe.

On July 19, 2016, the Drug Enforcement Administration (DEA) denied two petitions to reschedule marijuana concluding that it continues to meet the criteria for control under Schedule I because:

  • Marijuana has a high potential for abuse. This is based on the Department of Health and Human Services (HHS) evaluation and additional data gathered by DEA.
  • Marijuana has no currently accepted medical use in treatment in the United States. Using an established five-part test, it was determined that marijuana has no “currently accepted medical use” because, as detailed in HHS evaluation, the drug’s chemistry is not known and reproducible; there are no adequate safety studies; there are no adequate and well-controlled studies proving its effectiveness; the drug is not accepted by qualified experts; and the scientific evidence is not widely available.
  • Marijuana lacks accepted safety for use under medical supervision. At present, there are no U.S. Food and Drug Administration (FDA)-approved marijuana products, nor is marijuana under a New Drug Application (NDA) evaluation at the FDA for any indication.

Interestingly, the DEA noted that marijuana could not be placed in a schedule less restrictive than Schedule II in view of U.S. obligations under international drug control treaties.

Although marijuana is not being rescheduled at this time, on Aug. 11, 2016 the DEA announced a policy change meant to increase research by expanding the number of DEA-registered facilities allowed to grow and distribute marijuana for FDA-authorized research purposes.

Currently, the U.S. Department of Justice (DOJ) marijuana enforcement policy is to allow states to create their own “strong, state-based enforcement efforts,” but DOJ reserves its right to challenge the states’ legalization laws at any time necessary.

Congress passed the Consolidated Appropriations Act (CAA) of 2016 that in Section 542 restricts federal law enforcement activity in states that allow medical marijuana cultivation, distribution, and use. Now that voters in half of the states have voted for legalization of medical marijuana, will Congress take action to change its scheduling?

The new administration may change the broad leeway states have been given to regulate marijuana usage and sales.

  • President Trump has expressed varying views regarding medical and recreational marijuana over the years.
  • Attorney General nominee Sen. Jeff Sessions, a former federal prosecutor, has expressed opposition to medical and recreational marijuana.
  • Tom Price, a physician and nominee for Health and Human Services Secretary, has also been a vocal opponent of legalization.

If the conflict between federal and state law is not resolved politically, the U.S. Supreme Court may have the last word. The high court last weighed in on marijuana in 2005. In an unsigned opinion issued March 2016, the high court refused to hear a request from Nebraska and Oklahoma to declare Colorado’s legalization of marijuana unconstitutional because it is against federal law and therefore violates the Constitution’s supremacy clause, which states federal law trumps state laws. Justices Alito and Thomas dissented. Will President Trump’s nominee to the U.S. Supreme Court make a difference?

Yes, the future of federal marijuana policy and enforcement remains hazy. What is clear is that employers contending with this complex and rapidly changing issue must understand the laws and relevant legal decisions pertaining to marijuana in each of the states where their business operates.

In such an uncertain time, we will continue to provide updates and perspective. We recommend seeking legal assistance to develop a sound company policy addressing the use and reimbursement of medical marijuana for on-the-job injuries.

Darrell Brown, Chief Claims Officer

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Brian Gifford, PhD, Director of Research for IBI, discusses paid parental leave trends.

Brian Gifford, PhD, Director of Research for IBI, discusses paid parental leave trends.

On January 18, I attended the Integrated Benefits Institute (IBI) Paid Parental Leave and LOA Regional Event in San Jose, California. The topic of the day was the emerging trend of adopting paid parental leave policies and how employers are balancing their leave of absence policies with business goals. The event was well attended by employers and service providers and featured some of Silicon Valley’s top employers and leading industry researchers.

As I listened to the research presented by IBI, I was reminded of Sedgwick’s caring countsSM philosophy. IBI’s research revealed that employers are moving toward offering paid parental leave because they want to care for their employees, create family-friendly workplaces and build policies that are in line with prevailing social expectations. These employers care and, as a result, they are confident that offering an enhanced benefit will lead to more committed and loyal employees. Silicon Valley employers have used these policies to win the “war for talent” in a very competitive technology market and early results appear to be positive.

Brian Gifford, PhD, Director of Research for IBI, discussed the emergence of paid parental leave as a corporate priority. Brian opened by showing a map of the world and sharing that the United States is one of the only developed nations to not guarantee paid parental leave for employees. With all of the innovations that American businesses offer, why can’t we lead the charge and support parents in the workplace?

Until recently, research showed that paid parental leave has had limited national attention, yet it seems to remain on the upswing. Tabulating specific major media reports over a seven-year period, the research noted events that provoked and set in motion a more sustained effort to normalize paid parental leave. These events included Yahoo hiring Marissa Mayer as CEO when she was pregnant; the publication of the book Lean In: Women, Work, and the Will to Lead by Sheryl Sandberg, Facebook’s COO; Mark Zuckerberg, Facebook’s CEO, taking two months off when his child was born; and the important White House Summit on Working Families in 2014. Mix in a thriving NASDAQ market, low unemployment in the tech industry, an imbalance in gender representation in science, technology, engineering and math careers, and changing state and local mandates, and it is no surprise that paid leave is gaining traction. With companies such as Netflix, Adobe, Microsoft, Amazon, Spotify and Paypal announcing expansions to their paid family leave policies, and states and municipalities including New York and San Francisco mandating paid parental leave, many employers find themselves assessing what to do to stay competitive and ahead of the regulatory curve.

Representatives from Intuit, Adobe and Facebook answered questions and offered advice. All of these employers have policies focused on caring. Although the policies vary in scope and scale, they all started by trying to achieve a business goal and balancing new parents’ time off from work with other business imperatives. It seems simple to “do the right thing” and be a company that cares, but the challenges come when it is time to formalize and administer the policies.

Key lessons from the panel and others participating in the research included:

  1. Design the policy for what your business is trying to accomplish
  2. Leverage FMLA and disability experiences to help maintain business performance
  3. Focus on improving return to work experiences

A paid parental leave policy can be a win-win when it comes to employee benefit enhancements. Sedgwick’s absence management platform is designed to help employers administer various types of leave and support employees as they return to work. The key is to ensure that all programs and policies are designed with a primary focus – taking care of the employee. As a husband and father, I believe that employers moving toward paid parental leave will win…because caring counts.

Is your company considering adopting a paid parental leave policy? We are happy to work alongside you and find ways to address your challenges. If you already offer paid parental leave, we would like to hear about the benefits your business is seeing. Please share your comments with us.

Todd J. Squiers, Director, Client Development

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On December 8, I hosted a webinar along with Donna Hardaker, former Director, Wellness Works Mental Health America of California and Heather Holladay, Integrated Health Manager Pacific Gas and Electric Company. It was a fantastic discussion on a topic which needs much more attention: stigma and social prejudice toward employees with mental health challenges. If you were not able to attend, you can revisit the recorded webinar and our presentation slides.

The statistics and research findings are compelling: Approximately 1 in 5 people is dealing with a mental health situation on a daily basis, and studies show that people with depression have a 2.5 times higher risk of on-the-job injury. [1] Mental health challenges, regardless of whether they are situational or chronic, are fraught with societal stigma, which stifles diagnosis, treatment, open dialogue and awareness of mental health and caring for those impacted.

The workplace is no different, and some argue even greater stigma occurs at work among peers and leadership, which in turn impacts absence and productivity. In fact, in 2015 the National Survey on Drug Use and Health found that just over 35% of respondents cite social concerns as reasons for not receiving mental health services, second only to cost of care at over 45%. Even more specifically, 9.5% indicate getting care might create a negative image of them in the workplace. [2]

Employers have begun to address cultures of health and well-being in a variety of ways to improve workforce and employee health, impacting health and disability costs and employee engagement and experience. Eliminating mental health stigma and social prejudice is just one step in this broader initiative. Increased education and awareness in the workplace can help eliminate labeling and misconceptions that create barriers to those seeking mental health treatment or other accommodations.

As an employer, what steps can you take as you examine your workplace culture? I offer three areas we can begin to dialogue about in today’s blog. As the year progresses, we will address these and explore even more ways we can break down the barriers.

  • Integrating physical and mental well-being. Separate silos for physical and mental health are dissolving: benefits managers and risk managers alike are promoting a culture of health and tapping prevention-oriented strategies commonly available in group health plans (i.e. stress reduction, work/life balance, EAP). Education campaigns are raising awareness, and putting mental wellness on equal footing with physical health.
  • Educating managers and supervisors. Organizations are training managers and supervisors to better understand mental health conditions, to identify and address behaviors that might warrant outreach, and to reduce stigma surrounding mental health needs.
  • Stamping out stigma. Employees need to feel that requests for help will not be penalized and will produce real benefits. Some organizations are implementing peer advocate and peer support programs, positioning people who have successfully overcome stigma, societal predjudice and other challenges in their own lives as inspiring champions for their co-workers.

I encourage you to take the first step in understanding – download the Disability Management Employer Coalition (DMEC) “Mental health in the workplace” white paper we discussed on the webinar in December.  Sedgwick partnered with DMEC and Pacific Resources to create a great resource of information to help your organization get started on its journey.

http://dmec.org/wordpress/wp-content/uploads/Mental-Health-in-the-Work-Place_FINAL.pdfI hope part of your 2017 work resolutions will be to address this important issue and join us in our work to eliminate stigma and prejudice toward employees with mental health challenges. Think about it: what barriers and issues do you see in organizations? What ideas do you have for addressing them? Please leave me your comments, questions and suggestions, and we will try to incorporate them into a future post.

Bryon Bass, SVP, Disability and Absence Practice & Compliance

 

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2017 is here 2017-insights_portal-tileand poised to challenge and change our industry in many areas. I think we can all agree the technological advances are moving at an unprecedented pace. The terms artificial intelligence, drones and wearables are changing our lives. Still at the forefront for Sedgwick is our commitment to taking care of the people we serve. In 2017, topics related to mental health and prescription drug abuse are going to gain even more attention from employers. In addition, government regulations and legislative changes may create some of the most challenging landscapes we have ever faced as an industry.

We have been hard at work identifying what we believe will be some of the most important trends to focus on in the year ahead. The topics below reflect the key areas highlighted in Sedgwick’s “Insights for 2017” list. I believe that our list is a great resource and shines a light on the areas that your business should be ready to address. Click on the topic that you would like to read more about or click here to read the full Insights for 2017 list.

We will continue to offer our insights as we monitor the following business advancements and challenges throughout 2017:

lightbulb2-red Good Health Empowerments
Accessing care via technology
Balancing the scale of pain management
Supporting mental health initiatives
read more about these trends>
lightbulb3-orange Regulation transformations
Compliance enforcement
Navigating regulatory changes
Workers’ compensation strategies
read more about these trends>
lightbulb1-blue Consumer-Centric Progressions
Enhancing the claims experience
Bridging benefit models
On-demand consumerism
read more about these trends>
lightbulb4-yellow Risk circumventions
Crisis plans
Geo risks
Talent strategies
read more about these trends>
lightbulb5-green Tech modernisms
Artificial and emotional intelligence
Explosion in actionable data
Self-service innovations
read more about these trends>

Let us know what areas will be most important for your company in the coming year.  We welcome your feedback.

Jim Ryan, EVP, Casualty Operations

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Make prescription drug control one of your highest priorities

Pharmacy spend has been, and will continue to be, a hot-button topic for a cross-section of the healthcare industry. Workers’ compensation is no exception. Opioids, in particular, continue to be at the center of continual drug safety concerns, with strong potential to impact overall claim costs and, more importantly, the health, wellbeing and productivity of injured employees.

Tfreevector-checklist-2017he Centers for Disease Control and Prevention (CDC) reports that overdose deaths involving prescription opioids have quadrupled since 1999. From 1999 to 2015, more than 183,000 people died in the U.S. from overdose related to these drugs. The most commonly abused opioids include methadone, hydrocodone and oxycodone.

Unfortunately, the past misuse of prescription opioids is also the strongest risk factor for initiating the use of heroin. Increased availability, relatively low cost (as compared to opioids), and high purity are also risk factors associated with heroin use. In fact, 9 in 10 people who use heroin also abused at least one other drug.

However, opioids are not the only medications that are easily obtained and abused; musculoskeletal relaxants, benzodiazepines and sedative hypnotics, to name a few, are all commonly overprescribed and easily abused or misused, all of which are frequently utilized in the treatment of workers’ compensation injuries. Neuropathic agents thought by many healthcare providers as benign and free from abuse potential are making the headlines as some of the newest party drugs. Lyrica (pregabalin), classically categorized as a pharmacological anticonvulsant or neuropathic agent utilized for the treatment of fibromyalgia, neuropathic pain, post-herpetic neuralgia or partial onset seizures, has recently been identified as a recreational party drug increasing the number of emergency department visits due to overuse.
Beyond the rising misuse of prescription medication, the cost of prescription drugs continues to escalate, making the importance of tight monitoring and close management of the spend associated with pharmacy-related claims a paramount concern on minds of risk managers. A National Council on Compensation Insurance (NCCI) report noted that prescription drug prices increased 11% in 2014 – significantly higher than the 10-year average increase of 4%. NCCI also indicated that prescription drugs account for about 17% of workers’ compensation medical costs.

The following is a list of strategies that can be deployed by employers this year to minimize prescription drug abuse:

  • Deploy aggressive point-of-sale pharmacy clinician intervention
  • Be sure clinicians and pharmacists providing intervention services are armed with the latest drug trends and trained to educate and negotiate with prescribers and injured workers
  • Apply consistent best practice intervention indicators to routinely address complex pharmacy issues and long-term drug use; examples of indicators would be new start long acting opioids or dangerous drug combinations
  • Take advantage of 2017 Drug Enforcement Administration “Take Back” dates by getting employees involved with drug take back initiatives, which include safe drug disposal sites
  • Ensure continual maximum pharmacy network penetration in order to maintain clinical controls across the injured employee population
  • Utilize clinical resources such as pain management contracts, state-specific prescription drug monitoring programs, and urine drug screening to verify and confirm prescription utilization
  • Aggressively manage poly-pharmacy for dangerous medication combinations and unnecessary side effects, including increased sedation, euphoria or opioid induced-constipation
  • Leverage nationally established clinical recommendations, such as the 2016 CDC Guideline for Prescribing Opioids for Chronic Pain, American Geriatrics Society Beers Criteria, and state-specific workers’ compensation clinical guidelines, to further reinforce patient-centric safety concerns with prescribers

As always, you can reach out to any of our knowledgeable managed care team at Sedgwick for guidance to help you manage your prescription drug programs.

Shanea A. McKinney, PharmD, Director Client Services-Managed Care Client Services

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logo-dfehA recent ruling by the California Court of Appeal (Castro-Ramirez v. Dependable Highway Express, Inc. (2016) 2 Cal. App. 5th 1028) increases the sphere of influence of the state’s Fair Employment and Housing Act (FEHA) to include reasonable accommodations for non-disabled employees known to have a relationship or association with someone with a disability.

When the plaintiff in the case, Luis Castro-Ramirez, began working for DHE in 2010, his supervisor allowed him to shift his work schedule so he could administer dialysis to his son in the evening hours. In 2013, Castro-Ramirez got a new supervisor, who changed his work hours such that he was unable to attend to his son’s daily dialysis needs. Castro-Ramirez requested an accommodation to care for his disabled son and was denied. He refused the new schedule, and DHE terminated his employment. Castro-Ramirez sued and recovered under the association clause of the FEHA.

The federal Americans with Disabilities Act (ADA) includes protection from association discrimination, but that protection is somewhat limited. The ADA prohibits an employer from discriminating against an employee based upon their association or relationship with an individual who has a known disability. Under 42 U.S.C. §12112(b)(4), the term “discriminate” includes “excluding or otherwise denying equal jobs or benefits to a qualified individual because of the known disability of an individual with whom the qualified individual is known to have a relationship or association.” According to the U.S. Equal Employment Opportunity Commission (EEOC), the goal is to prevent employers from taking adverse actions based on unfounded stereotypes and assumptions about individuals who associate with people who have disabilities. However, associational discrimination was rarely litigated, and the intended scope of the principle involved three types of situations: expense, disability by association and distraction. (See 29 C.F.R. § 1630.8 and Den Hartog v. Wasatch Academy.) The association principle of the ADA was never intended to expand as far as the California Court of Appeal has taken it in the Castro-Ramirez ruling.

As explained by the National Law Review, the FEHA “makes it unlawful to discharge a person based on physical disabilities or other characteristics, including the association with a person who has or is perceived to have any of those characteristics.” Before Castro-Ramirez, the ADA required employers only to provide reasonable accommodations to their disabled employees, not to disabled individuals outside of the employment relationship. The Castro-Ramirez opinion expands the application of the prior ruling by requiring California employers to consider providing non-disabled employees with leave accommodations in order to aid those disabled individuals with whom they have an association or relationship.

Recommendations for California employers

The Castro-Ramirez case highlights the need for a critical eye toward accommodation options that should be considered. Unpaid leave beyond that required under the Family and Medical Leave Act (FMLA) or other FMLA-like state leave laws can be a reasonable accommodation under the ADA and FEHA. In light of the ruling in this case, employers should ensure their accommodation review programs consider such options for California employees who request time to care for disabled family members but have no other leave rights available.

It’s also good idea for those with employees working in the state of California to conduct regular reviews of their policies to ensure they prohibit all forms of discrimination. Additionally, human resources professionals should always listen closely and give serious consideration to employees’ requests for leave accommodations for disabled individuals with whom they are associated.

Employers must recognize that the ADA does not require a family relationship for an individual to be protected by the association provision. And of course, employment decisions should not be based on unfounded stereotypes and assumptions about individuals who associate with people who have disabilities.

Should you have any questions about this ruling, please contact your Sedgwick client services representative.

Kimberly Webb, national technical compliance director
Sedgwick

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The story is simple and familiar to any experienced property claims professional: a pipe breaks flooding the restaurant downstairs causing it to close for two weeks, or a worker unknowingly drills through a pipe while working on a customer’s equipment which contaminates product in production causing a production shutdown for 72 hours.  Either of these events results in a claim for lost prosprinlerfits. The business owner may not know that it should claim lost profits; the claim may say lost sales, revenue, business, production or income.  As a claims professional, your client is now asking you to determine what is owed to the party that was affected.

The American Institute of Certified Public Accountants defines the damages owed as follows:

Only lost “net” profits are allowed as damages. Lost “net” profit is computed, in general, by estimating the gross revenue that would have been earned but for the wrongful act reduced by avoided costs. Avoided costs are defined as those incremental costs that were not incurred because of the loss of the revenue. After the net lost profits are determined, any actual profits earned are deducted to compute the damages.

To summarize, the claimant is owed lost sales, less any avoided expenses.

For the example of the restaurant above, the property owner will likely present a claim for the sales they believe are lost, but even if the claimed lost sales are accurate the actual loss of profit is likely much less.  The business did not have to purchase food, pay employees, credit card fees, supplies, cleaning, etc., while it was shut down.  All of these expenses, and possibly more, were avoided partially or completely.  The actual loss to the business is the sales it would have earned less the costs it avoided.  Without analyzing and accounting for these costs the property owner  will receive a windfall from your client.

Let’s look at the more complex example of the worker who unknowingly drills through a pipe while fixing a machine.  The property owner sends a long list of damages including claimed lost production of $40,000. The property owner is asking for lost production, but did they lose sales as a result of the shutdown?  Probably not because if a business is shut down, but uses existing inventory or their customers wait a couple of days to get their product, no loss of sales occurred and therefore no profits were lost. Sales may be delayed, but not lost.  Additionally, the property owner may have other locations that can help make up lost production..  If the property owner incurred increased costs of production as a result of the event, such as overtime to make-up lost production, the client may owe for the increased costs. However, that is a separate analysis.

If after a thorough analysis, it is determined that the property owner did lose sales, there is still the matter of determining the avoided expenses.  In manufacturing cases, the expenses are often complex and based on calculations that spread out (amortize) costs over a large period of time. In addition to the obvious avoided costs such as raw materials that were not used, an analysis of production costs is often necessary to determine total avoided costs. A property owner will often state that these costs are fixed, but their own calculations may show that they assign a cost-based on machine hours or units produced. Without considering these avoided expenses, you may advise your client to pay more than they actually owe.

It is very easy to overlook avoided expenses when calculating lost profits  An experienced forensic accountant can determine which expenses are likely avoidable and if further analysis is prudent.

Please feel free to share your questions and thoughts with us.

Robert Fox, CPA
Managing Director, forensic accounting and business income services
Vericlaim, a Sedgwick company