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Column: Risk Management

Opinion | Is Risk Management Just an Illusion? What I Learned in Seven Minutes.

By: | June 1, 2018 • 3 min read
Joanna Makomaski is a specialist in innovative enterprise risk management methods and implementation techniques. She can be reached at [email protected]

Imagine taking a stroll down a city block on a sunny afternoon. As you walk the sidewalk, you pass restaurant patios, beauty salons, coffee spots and pet shops. You see students waiting for buses; folks taking lunch. Near the retirement home, you pass elderly residents moving along slowly, aided by walkers.

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Now imagine walking this same block a few days later, but this time with the knowledge that just a few days ago your neighbors lay dead along your route.

I took this walk in Toronto, together with thousands of fellow residents, first responders, dignitaries and neighbors. Beautiful vigils and interfaith services were held in honor of those killed and affected by the horrific van attack that took place here on April 23, 2018.

Makeshift memorials expanded with every hour. Banners — “Love for all. Hatred for none” — were carried along with us. Choirs sang. Mountains of flowers, candles, cards and drawings lay at every location where our neighbors were killed along this stretch of road, equivalent to two subway stops in length.

The march down Toronto’s Yonge Street brought together thousands who are still reeling after that murderous day in late April. It was a show of respect, unity and shared sorrow. A show of resilience. #TorontoStrong.

Anne Marie, Ji Hun, Andrea, So He, Geraldine, Renuka, Chul Min, Dorothy, Munir and 94-year-old Mary Elizabeth are dead.

They were deliberately run down by a speeding van driven by a killer who drove down the same sidewalks we marched today.

It took seven minutes. Seven minutes changed the lives of so many.

Seven minutes allowed for the senseless murder of 10 and injuries to many more. These seven minutes gutted me and made me question whether risk management was just an illusion when it comes preventing these mass murdering attacks.

This type of attack is an assault of the imagination for anyone with normal sensibilities. How can anyone of sound mind imagine a driver jumping the sidewalk of a busy city street, veering on and off the sidewalk at high speed and deliberately gunning for innocent pedestrians; including the most vulnerable from a local retirement community.

With time the flowers will wilt, and the memorials will be relocated. The city will eventually make claims for the damaged bus shelter, post boxes and benches.

These seven minutes gutted me and made me question whether risk management was just an illusion when it comes preventing these mass murdering attacks.

Risk managers with the local businesses and residences will claim their physical losses; but what can we say to employees or residents?

Are the risk managers changing their risk registers to include the threat of this act in the future? Should they?

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Or are we once again forced to chalk up this event as a random act of murder? Or are these events simply unpreventable?

As a tenacious risk professional, I hate conceding to this notion. But this event has brought me to my knees on this subject.

The city will likely install more concrete bollards and other structures to make it harder to recreate this act. But common sense says it is next to impossible to fortress a city fully to protect its populace.

And now I question if this is even the right approach. Is this the right risk management investment? I question a lot since this happened.

I grieve the loss of my neighbors. I grieve for the loss of innocence of my beloved city.

I grieve for the loss of the perceived effectiveness of risk management, a profession and practice that I commit myself to and very much believe in.  I will get past this, but I wonder — where do we go from here? &

More from Risk & Insurance

More from Risk & Insurance

Risk Focus: Workers' Comp

Do You Have Employees or Gig Workers?

The number of gig economy workers is growing in the U.S. But their classification as contractors leaves many without workers’ comp, unemployment protection or other benefits.
By: and | July 30, 2018 • 5 min read

A growing number of Americans earn their living in the gig economy without employer-provided benefits and protections such as workers’ compensation.

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With the proliferation of on-demand services powered by digital platforms, questions surrounding who does and does not actually work in the gig economy continue to vex stakeholders. Courts and legislators are being asked to decide what constitutes an employee and what constitutes an independent contractor, or gig worker.

The issues are how the worker is paid and who controls the work process, said Bobby Bollinger, a North Carolina attorney specializing in workers’ compensation law with a client roster in the trucking industry.

The common law test, he said, the same one the IRS uses, considers “whose tools and whose materials are used. Whether the employer is telling the worker how to do the job on a minute-to-minute basis. Whether the worker is paid by the hour or by the job. Whether he’s free to work for someone else.”

Legal challenges have occurred, starting with lawsuits against transportation network companies (TNCs) like Uber and Lyft. Several court cases in recent years have come down on the side of allowing such companies to continue classifying drivers as independent contractors.

Those decisions are significant for TNCs, because the gig model relies on the lower labor cost of independent contractors. Classification as an employee adds at least 30 percent to labor costs.

The issues lie with how a worker is paid and who controls the work process. — Bobby Bollinger, a North Carolina attorney

However, a March 2018 California Supreme Court ruling in a case involving delivery drivers for Dynamex went the other way. The Dynamex decision places heavy emphasis on whether the worker is performing a core function of the business.

Under the Dynamex court’s standard, an electrician called to fix a wiring problem at an Uber office would be considered a general contractor. But a driver providing rides to customers would be part of the company’s central mission and therefore an employee.

Despite the California ruling, a Philadelphia court a month later declined to follow suit, ruling that Uber’s limousine drivers are independent contractors, not employees. So a definitive answer remains elusive.

A Legislative Movement

Misclassification of workers as independent contractors introduces risks to both employers and workers, said Matt Zender, vice president, workers’ compensation product manager, AmTrust.

“My concern is for individuals who believe they’re covered under workers’ compensation, have an injury, try to file a claim and find they’re not covered.”

Misclassifying workers opens a “Pandora’s box” for employers, said Richard R. Meneghello, partner, Fisher Phillips.

Issues include tax liabilities, claims for minimum wage and overtime violations, workers’ comp benefits, civil labor law rights and wrongful termination suits.

The motive for companies seeking the contractor definition is clear: They don’t have to pay for benefits, said Meneghello. “But from a legal perspective, it’s not so easy to turn the workforce into contractors.”

“My concern is for individuals who believe they’re covered under workers’ compensation, have an injury, try to file a claim and find they’re not covered in the eyes of the state.” — Matt Zender, vice president, workers’ compensation product manager, AmTrust

It’s about to get easier, however. In 2016, Handy — which is being sued in five states for misclassification of workers — drafted a N.Y. bill to establish a program where gig-economy companies would pay 2.5 percent of workers’ income into individual health savings accounts, yet would classify them as independent contractors.

Unions and worker advocacy groups argue the program would rob workers of rights and protections. So Handy moved on to eight other states where it would be more likely to win.

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So far, the Handy bills have passed one house of the legislature in Georgia and Colorado; passed both houses in Iowa and Tennessee; and been signed into law in Kentucky, Utah and Indiana. A similar bill was also introduced in Alabama.

The bills’ language says all workers who find jobs through a website or mobile app are independent contractors, as long as the company running the digital platform does not control schedules, prohibit them from working elsewhere and meets other criteria. Two bills exclude transportation network companies such as Uber.

These laws could have far-reaching consequences. Traditional service companies will struggle to compete with start-ups paying minimal labor costs.

Opponents warn that the Handy bills are so broad that a service company need only launch an app for customers to contract services, and they’d be free to re-classify their employees as independent contractors — leaving workers without social security, health insurance or the protections of unemployment insurance or workers’ comp.

That could destabilize social safety nets as well as shrink available workers’ comp premiums.

A New Classification

Independent contractors need to buy their own insurance, including workers’ compensation. But many don’t, said Hart Brown, executive vice president, COO, Firestorm. They may not realize that in the case of an accident, their personal car and health insurance won’t engage, Brown said.

Matt Zender, vice president, workers’ compensation product manager, AmTrust

Workers’ compensation for gig workers can be hard to find. Some state-sponsored funds provide self-employed contractors’ coverage.  Policies can be expensive though in some high-risk occupations, such as roofing, said Bollinger.

The gig system, where a worker does several different jobs for several different companies, breaks down without portable benefits, said Brown. Portable benefits would follow workers from one workplace engagement to another.

What a portable benefits program would look like is unclear, he said, but some combination of employers, independent contractors and intermediaries (such as a digital platform business or staffing agency) would contribute to the program based on a percentage of each transaction.

There is movement toward portable benefits legislation. The Aspen Institute proposed portable benefits where companies contribute to workers’ benefits based on how much an employee works for them. Uber and SEI together proposed a portable benefits bill to the Washington State Legislature.

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Senator Mark Warner (D. VA) introduced the Portable Benefits for Independent Workers Pilot Program Act for the study of portable benefits, and Congresswoman Suzan DelBene (D. WA) introduced a House companion bill.

Meneghello is skeptical of portable benefits as a long-term solution. “They’re a good first step,” he said, “but they paper over the problem. We need a new category of workers.”

A portable benefits model would open opportunities for the growing Insurtech market. Brad Smith, CEO, Intuit, estimates the gig economy to be about 34 percent of the workforce in 2018, growing to 43 percent by 2020.

The insurance industry reinvented itself from a risk transfer mechanism to a risk management mechanism, Brown said, and now it’s reinventing itself again as risk educator to a new hybrid market. &

Susannah Levine writes about health care, education and technology. She can be reached at [email protected] Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]