Risk Report: Manufacturing

Struggling With Safety Rules

Manufacturers must comply with up to 26 different state safety plans.
By: | April 4, 2016 • 5 min read

Manufacturers that have operations in one or more states have the complex task of complying with either state or federal safety and health standards — and the provisions are not always in alignment.

Advertisement




Failure to do so means they run the risk of being hit with hefty fines totaling hundreds of thousands — or even millions — of dollars.

The U.S. Occupational Safety and Health Administration (OSHA) requires all companies to meet its regulations as a minimum. However, firms that have operations in one of the 26 states that have adopted their own occupational safety and health rules must also adhere to each state’s rules.

State-run programs are required to meet minimum federal requirements, but often they are more stringent. In many cases, companies operate in multiple states, so they have to subscribe to a range of different standards for each state.

Employers are required only to comply with the state-run program; if there is no state program, they must comply with the federal rules.

To compound this, according to industry sources, federal OSHA has just increased the maximum penalty by nearly 80 percent for failure to comply with its standards, meaning that companies that fail could be hit with a fine of $125,000 or higher for a serious violation.

And with thousands of cases of workplace injuries believed to be unreported every year, federal OSHA is now tightening the net on willful and repeat offenders.

Robert Cartwright, safety and health manager, Bridgestone Retail Operations LLC

Robert Cartwright, safety and health manager, Bridgestone Retail Operations LLC

“State plan standards are often higher or exceed those of federal OSHA,” said Robert Cartwright, safety and health manager for Bridgestone Retail Operations LLC and a board director of RIMS.

“With fire safety, for example, in states like California, where they have had a certain violation or frequency and severity of violation, the state may decide to apply their own set of standards that are tougher than the federal OSHA.

“In my experience, in those particular cases, the fines tend to be higher and the citations more detailed than they would be from the federal authority.”

State vs. Federal OSHA

David Carlson, Marsh’s U.S. manufacturing and automobile practice leader, said that state plans are often more stringent in terms of enforcement protocols and the composition of their hazard communication programs such as labeling requirements, exposure limits and types of chemical used.

For example, he said, California created a standard specifically focused on reducing and eliminating hazardous chemicals from the workplace. It has significantly tightened up exposure limits and the quantities that can be stored.

Dave Barry, senior vice president and national director of casualty risk control, Willis Towers Watson

Dave Barry, senior vice president and national director of casualty risk control, Willis Towers Watson

Dave Barry, senior vice president and national director of casualty risk control at Willis Towers Watson’s risk control and claims advocacy practice, said California’s state plan requires companies to implement a written injury and illness prevention plan, while federal OSHA does not.

Sometimes, he said, the U.S. regulations will be revised to match state rules, such as the requirement for reporting an amputation, hospitalization or loss of an eye within 24 hours, which had already been in force in states like California for several years.

“The state programs typically focus their efforts on the specific industries in their state, for example if they do a lot of agriculture, whereas federal OSHA standards are not necessarily geared toward one particular industry,” he said.

Advertisement




He said that regulations often vary widely from state to state.

On the other hand, Mike Heembrock, vice president and executive specialist, risk engineering at Chubb, said that states often fall short of federal OSHA enforcement performance in terms of inspections and fines because of staffing and resource limitations due to budget constraints.

“In general, because of the relatively low salary and operating budgets, states have struggled to recruit new inspectors and often they don’t have as much experience as federal inspectors, so it’s been difficult for them to meet federal OSHA performance criteria,” he said.

Risks for Manufacturers

Carlson said that the biggest risk for manufacturers operating in multiple states is to understand how to comply with different state and federal standards and record-keeping requirements.

“If you have operations, say, in California, Michigan, Oregon or Washington, those

David Carlson, U.S. manufacturing and automobile practice leader, Marsh

David Carlson, U.S. manufacturing and automobile practice leader, Marsh

all have their own state plan programs that you need to be aware of and comply with, not to mention the administrative burden and costs associated with complying with federal OSHA in other states where they may operate,” he said.

“That’s a challenge for not only a large manufacturer like Ford or GM, but also for smaller businesses with operations across the U.S.”

Carlson said that oftentimes companies become preoccupied with emerging risks such as cyber and overlook the broader risk of their employees’ health and safety.

“At the end of the day, the largest variable cost of risk for most manufacturers is still the workers’ compensation and employee benefits programs,” he said.

“The problem is that too many employers look at it simply as the cost of doing business; however if they focused on it, that’s the area where they could reduce claims and financially protect their balance sheet.”

Fines and Penalties

U.S. OSHA raised its penalties for the first time in 25 years, by 78 percent last November.

The maximum fine for a serious violation rose from $7,000 to $12,500, and the maximum willful or repeat violation increased from $70,000 to $125,000. State plans are expected to follow suit, taking effect from August this year.

And from now on, the penalties will be increased every year.

“I think we are going to see a lot more of these types of changes as the current administration leaves office,” said Barry.

Adele Abrams, Law Office of Adele L. Abrams

Adele Abrams, Law Office of Adele L. Abrams

“It’s been 25 years since the fee schedule has been increased and now it will be increasing every year, so I think we are going to see more additional requirements along these lines come into force.”

The maximum penalty per citation can also be higher if it is an egregious violation, said Adele Abrams, whose law practice is based in Beltsville, Md.

“If you have, for example, 10 employees working on a conveyor system in your facility and it doesn’t have adequate guards in place to protect them from injury, federal OSHA would usually issue a single citation with a maximum penalty of $70,000,” she said.

Advertisement




“However, if all of a sudden they decided it was an egregious violation, because there are 10 workers involved, you could be fined up to $700,000, and you would be put into a ‘Severe Violator Enforcement Program’ for at least three years.”

Christine Sullivan, vice president of risk control services at Lockton, said manufacturers should “avail themselves of the relevant programs that federal OSHA provides.”

“There are a lot of programs and resources out there than can help a risk manager to identify the pitfalls and build a thorough and reliable safety program.” &

Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him at [email protected]

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

Advertisement




That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

Advertisement




Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]