What Does PAGA Means To Your Business

What Does PAGA Means To Your Business

What Private Attorneys General Act ( PAGA ) Means To Your Business

The Labor Code Private Attorneys General Act (PAGA) authorizes aggrieved employees to file lawsuits to recover civil penalties on behalf of themselves, other employees, and the State of California for Labor Code violations.

PAGA lawsuits are not like your traditional class action suits where a group of employees come together to seek damages against an employer. Instead, a single employee can initiate, and any other employees that were affected by the same alleged violation are automatically included.

How Are PAGA Penalties Calculated?

PAGA lawsuits don’t involve damages, but rather penalties — 75 percent goes to the California Labor and Workforce Development Agency and the other 25 percent goes to the employee or employees. Penalties range from $100 to $200 per employee per pay period during the time of the violation.

It has been noted that large companies with hundreds or thousands of employees have mainly been the target since the law was enacted back in 2004. But the laws still apply to companies of any size with employees in California — even if the company isn’t headquartered in the state. Small businesses in California have also been effected, so you are not safe from PAGA law suits.

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Why Are There So Many Law Suits Against Employers?

Your employees and their would-be attorneys were given a tremendous power by the State of California in 2004. It did take them and the rest of the legal community a little while to it figure out. The law, titled the Private Attorney General Act of 2004 (“PAGA”), gives employees in California the right to bring a lawsuit against their employers for any violation of the California Labor Code. In short, it allows employees to step into the shoes of an enforcement agency like the Division of Labor Standards Enforcement and recover civil penalties on behalf of the California Labor Workforce Development Agency for aggrieved employees and their coworkers.

PAGA allows employees to sue for almost every Labor Code violation, not just serious violations or those dealing with health and safety.  And that aspect of the law was where the value of PAGA as a litigation tool was eventually recognized by the plaintiff’s bar.  Here’s why a PAGA claim can be so much more harmful to an employer than a regular Labor Code violation or Unfair Business Practices claim.

What are the Main Components of PAGA

PAGA has two main components that affect employers. First, PAGA gives employees the authority to sue as so-called Private Attorneys General to recover these monetary penalties for an employer’s violation of the California Labor Code. Before the enactment of the PAGA, employees could not bring civil actions in court to enforce non-monetary provisions in the Labor Code; only the State Labor Commissioner through the Division of Labor Standards Enforcement (“DLSE”) could do so.

The second component of PAGA is that it imposes monetary fines on employers for each violation of almost every single provision in the California Labor Code. If the Labor Code does not already provide for a penalty, the PAGA imposes on the employer a $100 fine for the first violation and $200 for each subsequent violation of the same provision.

What is scary, is these fines can be assessed for each employee or for each pay period, when applicable. If the Labor Code already provides for a civil penalty for the underlying violation, the employee can sue to recover that penalty on behalf of similarly aggrieved employees.

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How Do You Protect Your Business From a PAGA Law Suit?

Understand California Labor Code Requirements

PAGA lawsuits can apply to basically any violation of the California labor code. There are numerous provisions that apply, but there a few that tend to come up regularly in PAGA lawsuits:

  • Failure to provide a half hour lunch break for non-exempt employees
  • Failure to provide regular breaks,
  • Improper overtime calculations,
  • Paying below the minimum wage,
  • Bonuses that weren’t properly calculated,
  • Not including one of the nine specific pieces of information that must appear on wage statements in California
  • Not providing suitable seating

It’s not an easy feat for businesses to follow the complexities of the Labor Code and the Industrial Welfare Commission (“IWC”) Wage Orders as they relate to a particular employer’s business.

Many employers believe they are in complete compliance. However, because there are thousands of provisions in the Labor Code, all of which now can present an expensive trap for employers who are not careful. And because the Labor Code incorporates provisions from other codes, the list seems to keep on growing.

Create Compliant Policies For Your Business

Once you know the basic requirements that you have as an employer, you need to create specific policies that reflect those requirements. Rules and processes will ensure that you, your team and your leadership are all on the same page about what to expect, hopefully helping you avoid any employee issues in the first place.

GDI Insurance Agency, Inc. offers compliance tools to ensure that your California Small Business is protected against PAGA law suits. Contact us today 209-634-2929

HR Onboarding Toolkit

Review Policies Regularly to Be Sure Those Policies are Being Followed

But it’s not enough just to have those policies. You also need to uphold and enforce them on a daily basis. If management knows they need to offer lunch breaks to employees within the first five hours of a shift but they fail to do so whenever it gets busy, they’re opening you up for lawsuits. Performing regular audits of managers or others in leadership positions to make sure they’re following the processes you set out.

Good Record Keeping is Essential

You should already be keeping records of things like payroll and employee time sheets. But because of this type of lawsuit, it’s even more important to hold onto that data in case someone does come forward with an alleged violation. If someone says you didn’t provide proper breaks during a specific time period but you have time cards that prove employees received them, it could save you a lot of time, stress and money.

Take Care of Any Issues Immediately

When an employee brings forth a PAGA lawsuit, it starts with them notifying the California Labor and Workforce Development Agency and the employer, usually through an attorney. When this happens, the employer has 33 days to fix the alleged violation before the lawsuit is officially filed. So if you do find your business in this situation, it’s in your best interest to act quickly to fix the situation so you don’t end up strapped with large penalties that could cripple your small business.

PAGA is clearly gaining strength as a tool for plaintiff’s employment attorneys.  In light of this, employers should be preemptive in aggressively attempting to identify potential bases for claims against them of non-monetary Labor Code violations.  Once identified, those issues should be quickly remedied.  Otherwise, the first and last notice to an employer that a potentially-costly problem exists will be in the demand letter sent on behalf of an aggrieved employee by his or her attorney

GDI Insurance Agency, Inc.

California’s Leader in Insurance and Risk Management

As one of the fastest growing agencies in California, GDI Insurance Agency, Inc. is able to provide its clients with the latest and greatest of what the insurance industry has to offer and much, much more.

We are headquartered in Turlock, CA, with locations across the heart of California’s Central Valley, Northern California and beyond to provide a local feel to the solutions and services we provide our clients. We pride ourselves on exceeding our client’s expectations in every interaction to make sure that our client’s know how much we value and appreciate their business. Contact us today 1-209-634-2929 for your comprehensive business insurance quote!

Employment Practices Liability (EPLI) and 3rd Party ADA Claims

Employment Practices Liability (EPLI) and 3rd Party ADA Claims

Employment Practices Liability Insurance and ADA

It is unfortunate that few Insurance Agents and/or Brokers are aware of the coverage enhancements available in modern Employment Practice Liability Insurance (EPLI) policies for accusations and claims from 3rd party ADA.  And even more unfortunate is that many business owners do not know what is available coverage wise and how inexpensive those great enhancements can be.

3rd Party ADA Claims are nothing new in the realm of Employment Practices Liability and are traditionally explained in the following example:

EPLI and ADA

A delivery carrier is delivering a package to the business.  Unbeknownst to the business owner, the delivery professional makes an unwanted to unappreciated advance toward one of the employees of the business owner while he/she is signing for the package.  This employee can now make a claim of a hostile work environment toward the business owner for the actions of the delivery professional (the 3rd party).  

This is the type of example used by 100’s (if not 1,000’s) of agents and/or broker everyday.  However what about other 3rd party type claims?

EPLI ADA

Americans with Disabilities Act (“ADA”) Claims from 3rd Parties

Customers and/or Guests of a business or to a business location can file ADA claims whether they actually become customers of the business or not.  These types of claims are typically due to the ADA compliance of the space (building, suite, office, etc.) occupied by the business.  These claims can cost a business 10’s of thousands of dollars and countless hours to defend.  Then there are the damages and cost to remedy the space – but what if you are a tenant business and NOT the landowner?

Many business owners have heard horror stories where someone was blindsided by an ADA claim and was either devastated or completely put out of business; fortunately there is a preventative measure that can be taken and that is to ensure that your policies contain ALL the necessary bells and whistles.

EPLI and ADA lawsuits

The Number of Title III Lawsuits Tops 10,000 in 2018

The number of lawsuits filed in California increased by 54% from 2751 in 2017 to 4249 in 2018.  This record-breaking California number does not even include the many state court filings.

According to ADA Title III, the number of ADA Title III lawsuits filed in federal court in 2018 hit a record high of 10,163 – up 34% from 2017 when the number was a mere 7,663.  This is by far the highest number of annual filings since we started tracking these numbers in 2013, when the number of federal filings was only 2,722.  In other words, the number of cases has more than tripled.  The chart below shows the explosion in these types of suits

What is Causing the Drastic Increase in ADA Lawsuits?

There were close to 5,000 ADA lawsuits filed in federal court for alleged website violations in the first six months of 2018. According to an analysis by Seyfarth Shaw, a law firm that specializes in defending such cases. The firm predicted that the number of lawsuits will climb approximately 30% from 2017 to nearly 10,000 by the end of the year.

With online sales, reservations and job postings now a huge part of technology, advocates for the disabled say websites need to be as accessible to everyone, just as brick-and-mortar stores, restaurants and schools are.

Coverage IS Available for 3rd Party ADA Claims

The precaution to protect against 3rd Party ADA claims is already available to most business owners, but is sadly not offered by their Agent and/or Broker.  Many EPLI policies can actually be endorsed to provide coverage for the business owner for these exact types of cases.  As one would expect, the coverage provides for Defense Cost and Damages; however does not cover the remediation needed to bring a subject space up to compliance.  Even with this, the cost of the coverage is typically minimal as compared to the cost of not protecting one’s business.

If you’d like to get a quote or are unsure if your current policy covers 3rd Party ADA claims, please visit our EPLI page.

GDI Insurance

California’s Leader in Insurance and Risk Management

As one of the fastest growing agencies in California, GDI Insurance Agency, Inc. is able to provide its clients with the latest and greatest of what the insurance industry has to offer and much, much more.

We are headquartered in Turlock, CA, with locations across the heart of California’s Central Valley, Northern California and beyond to provide a local feel to the solutions and services we provide our clients. We pride ourselves on exceeding our client’s expectations in every interaction to make sure that our client’s know how much we value and appreciate their business. Contact us today 1-209-634-2929 for your comprehensive EPLI insurance quote!

Matthew Davis, MBA, CPCU, AAI

Coverage can also be provided on a standalone basis for Property Owners, Landlords, Property Managers, and Real Estate Professionals – Ask us how we can help with those as well.

Are You an Entrepreneur at Heart?

Are You an Entrepreneur at Heart?

Are you an Entrepreneur at Heart?

The insurance industry is one of the greatest industries.  In what other industry can anyone – and I mean ANYONE – have the opportunity to make as much income as they want and where the only limiting factor is one’s own effort?

Being still relatively young in the insurance industry and quite young for having as many years under my belt as I do, I often get questions and comments like:

“Why in the world did you chose a job in insurance?”

“You must have a family member in the business.”

“Insurance is so boring, how can you stand it?”

I do have a family member who was already in the business – my father, so that statement is true.  However I totally disagree with the idea that insurance is a boring profession.  I find the work challenging, the people I work with are amazing, and the competition in the marketplace is exciting and invigorating.  But the main reason I chose CAREER – not just a job – in insurance was because of the opportunity for personal and financial growth, a sense of fulfillment from being able to SERVE clients, and of course the ability to continually increase my income with no virtually ceiling.

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There is really only one reason why anyone in insurance production fails is because they are not walking, talking, living and breathing as an ENTREPRENEUR!  I have a friend that owns an extremely successful agency with locations across multiple states and he simply refuses to hire anyone into a production role who is not an Entrepreneur.  Individuals who are Entrepreneurial at heart are those that do not begrudgingly trod to work when the going gets busy or challenging, but rather spring in to office with a bounce in their step eagerly awaiting the opportunity tackle the challenges of the day.  The entrepreneur does not simply clock in at 8am and clock out at 5pm, but rather they are always thinking of their business – or book of business – and how they can improve and maximize its potential.  This is the beauty of the insurance industry – you CAN continually improve upon your book of business and continually reap the benefits of those improvements.  What else could be better?

Many, many insurance agents/brokers are living proof that the insurance industry is one of the greatest businesses to be in if you are looking to work hard for “X” period of time to then live the lifestyle you want for the rest of your life.  Many captive carriers use this as the carrot on the end of the stick that they dangle in front of new and prospective agents.  My biggest word of advice to such new and prospective agents is to look at the entire landscape of the industry and see where you would fit best – for most it would be in the Independent Agency model if they can gain entry to it.

Matthew Davis, MBA, CPCU, AAI
President
GDI Insurance Agency, Inc.

Maintaining Your Insurance Company Relationships

Maintaining Your Insurance Company Relationships

Maintaining Your Insurance Company Relationships

We in the retail insurance agency/brokerage segment of our industry are required to enter in to contractual relationships with many parties – insurance companies, wholesalers, employees, vendors, and with our clients.  Many times we as agency principals do not appreciate or give adequate consideration to the expectations in our insurance company relationships.

Very few agents will say that they do not pay attention to their clients and companies, but in practice they either partially or completely neglect them on a regular basis.

Like in Any Relationship, Both Parties Must Be Fed and Nurtured

Take a romantic relationship for example, successful relationships are where both parties are “giving” in their interactions with the other and are concerned about the other.  Everyone has been in a “bad” romantic relationship or one that was not great and a common denominator in many such cases is a lack of attention given to or fulfilling of the needs of the other.

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The Give and Take of Insurance Company Relationships

When we enter into insurance company relationships we take upon ourselves commitments that we agree to deliver to insurance company.  Many times these are commitments of Premium and Policy volume, Policy and Premium Retention, Adequate servicing of an assigned book of business, thorough field underwriting, etc.

If asked whether or not they are meeting their insurance company commitments, nearly all agency principals would answer yes, but in fact are not.  Are we providing exceptional service to our clients and relaying MEANINGFUL feedback to the insurance company that can then be utilized by the carrier to improve?

I’ve been in many meetings with other insurance agency owners where the meeting becomes a whining session where each is complaining that “XYZ” insurance company is not providing them with what they need, to which I like to respond with the following question… “What have YOU provided the carrier that makes you better than the next agent in their files?”

Production, profitably, and retention are always cited in response, but that is the same response that everyone else has as well.  You cannot stand out from the crowd by being the same as everyone in the crowd.

I happen to be blessed with mutually beneficial insurance company relationships with most of my agency’s insurance company partners (and yes, we think of them as partners and NOT adversaries).  Each carrier and its personnel have a wide breadth of knowledge and opinions that I’ve found to be very valuable.  I recently discussed workers compensation strategy with a carrier representative from an insurance company that does not write workers compensation.  The advice was spot on and ended up being extremely valuable as the marketing rep had been a retail agent/broker specializing in middle-market construction for nearly 10 years prior to making the transition to the corporate side.  If I had treated him/her as a typical agency owner treats their insurance company representative I would have never had discovered his/her background and been able to benefit from it.

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Don’t Over Promise…

Business relationships in general work best when the parties do NOT fail to meet their commitments – surprise, surprise.  I like the saying, “under promise and over deliver” because if you follow it and do err you err on the side of beating your objective and not missing it.

In the age of consolidations and automation in the insurance industry if we as agency owners cannot maintain growth and profitability for our insurance company partners we will not be partners much longer.

I know of an insurance company with a strong household name that is currently terminating longstanding agency contracts left and right for agents with profitable books of over $1M in premium due to their failure to maintain acceptable growth.  I feel for those agency owners on one hand but on the other they did sign on to growth commitments and they failed to perform.  My advice here is to never sign an annual production commitment agreement with a carrier without first knowing the terms of recourse the carrier will follow at the end of the period.

One thing to note is that insurance agencies are the outsourced sales and frontline customer service organizations for our insurance company partners so growth year-over-year will be expected.

Ask For Advice…

I make a habit of not ending ANY meetings or phone calls with our insurance company partners without asking for what they think we are doing well, what they see we are struggling with, and where they think we should put focus more of our effort and attention.  I know that in a “sales” mindset one does not want to shine a light on their weaknesses, but in an honest relationship one MUST; so I make it a habit of asking for criticism as often as possible.

Relationships Usually Come to an End…

Ultimately when you enter in to insurance company relationships with a carrier, vendor, etc. it is similar to entering in to a romantic relationship.  Your way of interacting changes at the onset of the relationship and once it terminates it is always a little awkward and rarely is does it end without resentment from at least one of the parties if not all.

Unfortunately many relationships have a limited lifespan and do come to an end (in business, romance, and friendship).  The best way to keep from having any hard feelings is to have open and honest communication as much as possible.  It is always fair to respectfully share your pleasure and displeasure with any party in a relationship – the key word here is RESPECTFULLY!  I know many agency owners that chose to yell and/or swear at their insurance company representatives and think that is how business is done.  It ends up being a shame for them and a blessing for those of us that value relationships as we then don’t.

Matthew Davis, MBA, CPCU, AAI

GDI Insurance Agency, Inc. 209-634-2929

WORKERS COMPENSATION AUDITS: The Good. The Bad. And The Ugly

WORKERS COMPENSATION AUDITS: The Good. The Bad. And The Ugly

Workers Compensation Audits

At GDI Insurance Agency, Inc., we have been inundated with countless new clients that are all suffering from similar – if not the same – issues regarding Workers’ Compensation Audits  that have gone awry.

We’ve found that the majority of these insurance customers with Audit Issues are located in and around the Turlock, CA area (many of which most are businesses most local residents would recognize).

Nearly all the clients were told something along the lines of, “…the audit is what it is and there’s not much that can be done about it”, or some variation thereof.

More often than not, that type of statement is FALSE!

In nearly every instance we’ve recently come across, there have been actions that were able to be taken in order to correct inaccurate audits. If an employer’s payroll at the end of a policy year is materially greater than he/she estimated at the beginning of the policy, then an audit should be anticipated (in many, BUT NOT ALL cases).

I’ve had two cases come across my desk recently that were so incorrect that if the clients would not have come to GDI Insurance for help that they may have jeopardized their own solvency. I now feel compelled to share one of their stories.

STORY 1 – Firm Located in Turlock, CA

The firm was once a client of GDI Insurance Agency up until 2005 when they decided to utilize another broker who offered them a slight premium savings. In 2010 GDI was asked to take a look at the Workers Compensation policy as they were being given an invoice for an additional 125%+ of their quoted premium as their Audit. Their original policy was quoted right at $65,000 for the year and at the end of that year their audit from the insurance company demanded an additional $85,000.

We agreed to look into the audit and discovered that the prior agent/broker had done nothing wrong, BUT… at the same time did not take the couple of tiny steps that would have aided their client. We stepped in an discovered that the root of the audit was due to a miscommunication between the independent auditor for the company and the client’s staff revolving around operations the auditor assumed the client was performing, but in actuality never performed (or ever plans to perform).

In the end the client had higher payroll and did have to pay an amount at the end of the audit of only $4,000. The audit was decreased by 95% by our office simply looking at the material and bringing up a few points of discussion with the auditor.

Why didn’t the prior agent/broker offer to help???

It is relatively known to many insurance customers that ALL premiums paid are commissionable their agent, and in California agents can make as much as 10-12% or more commission on workers compensation policies. So the prior agent had no incentive to offer to assist the client to correct the audit as they were hoping to receive an additional $8,500+ on the policy for simply letting the audit stand incorrect.

So what are The Good, The Bad and The Ugly of workers compensation audits?

THE UGLY – Are those audits that have been paid based on incorrect information or lack of explanation to the client.

THE BAD – Are those audits that are not yet paid, but are billed based on inaccurate data.

THE GOOD – Are those audits that go by without a hitch and are understood by the customer.

If you believe you are the subject of a bad insurance audit, either for workers compensation or any other type of policy, Talk To The Experts and GDI Insurance Agency, Inc. in Turlock by calling 1-209-634-2929 or visiting us online at www.gdiinsurance.com.

Matthew Davis MBA, AAI