For many families, life insurance death benefits have become one of the four major asset classes in their financial portfolios.

Unfortunately, life insurance has been treated as a stagnant asset — once purchased, it is only given cursory reviews.

For the affluent family, this is not only ineffective, but also financially imprudent.

A portfolio of life insurance assets needs a fiduciary level review. Families deploy capital into their life insurance strategies and have the expectation of strong future performance.

As with other family financial assets, many factors contribute to the opportunity for "better or worse than expected" performance.

In the absence of regularly scheduled reviews, an under-performing policy may go undetected, and to a point where "rehabilitation" of that policy becomes problematic.

Creating the opportunity for better performance lies in the professional management of the life insurance portfolio and a planned review strategy.

Successful life insurance portfolios are managed to the specific goals and expectations of the client family.

These are found in the family's insurance policy statement, which outlines what the family expects to accomplish with their life insurance. This is of particular importance when life insurance policies are owned in a trust vehicle. Trustees have a duty to exercise prudent fiduciary responsibility in managing the assets of the trust. This includes understanding and evaluating life insurance assets.

Unfortunately, a large number of trustees (particularly in the family and friends arena) do not have stated guidelines and procedures for managing and maintaining life insurance assets.

This not only leads to under-performing policies, but also missed opportunities to increase death benefits, reduce premiums and improve overall performance of the life insurance assets.

2012 — A Year Of Opportunities
The reunification of Estate and Gift Tax exemptions has created new opportunities for fiduciaries to shore up potentially problematic assets. Changes appear to be certain after 2012 so this is the year to review and act as necessary.

As with any part of the financial services sector, the life insurance industry is experiencing changes in products pricing and performance. There are four critical scenarios where a fiduciary review should be a priority:

Variable Universal Life Insurance — Market based investment assets are what support the performance and the long-term viability of this type of life insurance. The interplay of investment results, premium pattern and policy expenses can create, in difficult market times, a very "fragile" policy. This is particularly true where the insureds are age 55 and older. Careful review of policy options, projected premiums and performance assumptions is necessary in all market environments and particularly now.

Policies 10 years and older — Many product enhancements have not been automatically passed onto existing policyholders. Oftentimes a request to the current insurer will cause improved performance and possibly lower premiums. Additionally, underwriting policies has become much more sophisticated. Policies may have only had three classes (preferred, standard, smoker); while today there are as many as five underwriting classes with some insurance companies.

Changes in Lifestyle and Health — In the past, hobbies such as flying or scuba diving may have caused an increase in premiums. The cessation or change in a hobby may allow for a premium reduction. The same is true for many health conditions. Improvement in weight management, cholesterol or blood pressure all can lead to reduced premiums.

Industry Changes — Certain types of polices, some with significant guaranteed elements, are being "pulled" from the market. Life insurance companies are also consolidating, which can cause a block of policies to become effectively a wasting asset pool. This leads, ultimately, to under-performance for the policyholder.

The Review Process
In most situations engaging an independent third party to prepare a review of an existing portfolio of life insurance assets is the Trustee's best course of action.

A fiduciary level review of a life insurance portfolio should examine the following elements:

1. Suitability
   1. What are the needs of the family today versus "at issue" or since the last review?
   2. What is the family's financial situation? c. What changes have occurred in health or other insurability factors?
2. Product & Industry Opportunities
   1. What changes have occurred in the design of life insurance products?
   2. Are there opportunities within the portfolio to consider?
   3. Are there improved underwriting opportunities?
3. Current Portfolio Performance
   1. How has the existing portfolio performed relative to expectations?
   2. How is it projected to perform?
4. Life Insurance Company Stability
   1. Have the current providers had changes in their financial strength?
   2. Are they continuing to support life insurance as a core business?
   3. Are there other factors that need to be considered relative to the current carriers?
5. Tax Law and Federal Regulations
   1. What changes have occurred which could impact the life portfolio structure?
   2. What changes are proposed and/or pending?
   3. Are there new and/or proposed Federal regulations of life insurance that could impact the portfolio?
6. Observations and Recommendations for the Portfolio
   1. Financial Strategy
   2. Death Benefits
   3. Premiums and Premium Payment Methods
   4. Cash Values
   5. Product Strategy
      • Current
      • Alternative

By establishing a fiduciary review strategy for life insurance portfolios, clients gain peace of mind that they are maximizing performance opportunities. Trustees can feel comfortable they are honoring their obligation to the trust beneficiaries.

Historically, in the U.S. Healthcare system, a primary way to differentiate oneself as a healthcare provider has been to have impressive physical assets such as newly built clinics/hospitals/wings and medical equipment. This is logical when the legacy reimbursement model has incentivized activity (procedures, tests, prescriptions) instead of positive health outcomes. Anything that can be done that will create more activity creates more billing opportunities.

However, the DIY Health Reform movement has recognized that the flawed fee-for-service reimbursement model has been responsible for healthcare's hyperinflation. Some of the most interesting healthcare provider startups such as MedLion, National Surgery Network, and One Medical Group are using information technology (IT) rather than expensive equipment/facilities to differentiate themselves and affordably deliver superior health outcomes.

In an earlier article — Healthcare Disruption: Pharma 3.0 Will Drive Shift from Life Science to HealthTech Investing — I discussed how Health Information Technology has primarily been applied to administrative functions such as claims processing rather than core clinical functions such as decision support. In contrast, today's innovative healthcare providers recognize the changing dynamic of healthcare requires a fundamental rethink of the customer experience as has happened in many, many other industries.

With one third of the workforce being permanent freelancers, contractors, consultants and entrepreneurs, individuals are compelled to directly buy healthcare rather than rely on their employer as they have in the past. The percentage of people directly buying their own healthcare will approach 50% as more employers opt out of providing health benefits as they get priced out (most have already reduced the percentage of the health premium they cover). Thus, consumerism is beginning to pervade healthcare like never before. In response, the aesthetic of providers' websites matters much more. For example, the website of Benchmark Capital-backed One Medical Group would make Philippe Starck proud (see screenshot below).

Of course, it needs to go beyond aesthetically pleasing websites. Whereas technology has historically brought incremental administrative efficiency in healthcare, organizations such as Qliance and OneMedical have utilized technology for radical transformation. It's no coincidence that they are backed by the founders of Amazon, aQuantive, Dell, Expedia, and venture firms such as Benchmark — all organizations that used technology to disrupt entire industries. Qliance evaluated 240 different U.S. based electronic medical systems before rejecting them as too billing centric rather than patient and health outcomes focused. Instead Qliance is creating competitive advantage by custom developing their software systems using off-the-shelf and custom-built software.

The aforementioned organizations are all disruptive startups bringing dramatically lower costs and better outcomes. What's going on at the large health system level where there's greater complexity including legacy processes and systems? Let's look at one example from the heart of Silicon Valley — Stanford Hospital & Clinics.

This was our opportunity to come up with ideal ways of working, not simply to replicate our very poor processes when we put in the new systems — because that's just a really expensive copy machine.

Stanford Hospital & Clinics is implementing a traditional health Information Technology system from one of the leading Health IT vendors — Epic Systems. Epic is appropriately named as, by all accounts, the implementations and cost are also epic. All the Epic projects I've heard about are eight and nine figures for the cost of the software and implementation. The scale of projects sound similar to the early days of Customer Relationship Management where it could only be implemented by very large organizations. The market leader for Customer Relationship Management was Siebel and those projects regularly ran seven to nine figures (reportedly 10 figures in the case of Epic's Kaiser implementation) which is obviously out of reach for small and medium sized organizations.

Disruptive pricing didn't come from Oracle or other large client-server vendors to extend this important category into smaller organizations. Instead it came from cloud-based Salesforce.com dramatically bringing costs down. Perhaps more interestingly, Salesforce created an open ecosystem inviting 3rd party developers to address the wide array of customer requirements for particular job functions and industries.

Healthcare has a similar diversity of conditions and communities that will necessitate a 3rd party ecosystem. I would predict that as the closed nature of legacy client-server Customer Relationship Management systems created an opportunity for Salesforce, the legacy client-server Health IT vendor systems are similarly closed and will create opportunities for modern, open architectures from a new generation of tech startups.

By definition, the legacy systems have been optimized around the flawed fee-for-service model that pervades healthcare today. In contrast, the disruptive new care and payment models that are exploding around the country require a new ecosystem of technology platforms. Out of necessity, the new healthcare delivery models have demanded custom built software, but this should change as those models reach critical mass. A market for off-the-shelf software for the next generation of HealthTech will develop.

A pharma executive explained to me the need to focus more on health technology. "Based on the 'patent cliff' in healthcare and the need for continued research and development, promotional budgets are becoming tighter; technology offers a less expensive way of interacting with our customers. Simultaneously, while many physician offices have been reticent to adopt technology, the incentives being put before them are now changing their perspective on technology ... pharma companies have an opportunity to take advantage of this." She went on to explain how that "no see docs" (i.e., physicians generally barring pharma reps from meeting with them) may be more open to new technologies delivered through reps that can help achieve better outcomes.

The scale of the plans for new business models emerging from major pharma, health product/device and health plan organizations will have these previously complementary organizations increasingly competing with each other. Perhaps more interestingly, they will begin competing with the very healthcare providers they have offered their products/services to. The notion of coopetition is familiar to those in tech but will likely become a term that is no longer foreign in healthcare. Just as we've seen Media become more like Merchants, I'd expect we'll see healthcare suppliers acting more like providers. We've already seen healthcare providers become health plans.

Newspapers provide a cautionary tale for healthcare providers. It was the non-obvious competitors that have cratered the newspaper businesses. In this related article, I draw parallels between the behaviors I observe today with health systems and the behavior of newspaper companies in the second half of the 90′s. Consider that the byproduct of Denmark's shift to a focus on outcomes over the last couple decades has resulted in half of their hospitals closing as they are simply not needed anymore.

Healthcare providers must reinvent themselves or they'll meet a similar fate to the Denmark hospitals that are now closed. A key part of their reinvention will be enabled by a new generation of technology solutions.

Summary
Last year, the U.S. Department of Labor's Occupational Safety and Health Administration (OSHA) cited Tenneco Automotive Operating Company for 20 safety and health violations at its manufacturing plant in Hartwell, Georgia. Several violations involved hexavalent chromium exposure, which can lead to nose, throat, and lung damage. For more information, read the OSHA News Release.

Analysis
Are we killing future generations in exchange for meager fines? Are hard-working agencies such as the Occupational Safety and Health Administration and other international bodies sufficiently empowered to have the resources needed to inspect all manufacturing facilities on a regular basis and offer decent whistle blowing programs that truly protect the source of disclosure?

The obvious answer in the United States is an astonishing no.

The recent discovery of hexavalent chromium in a Georgia work place and the resulting news coverage has brought this type of danger to the forefront. Yes, hexavalent chromium can have very dangerous human carcinogen effects, has raised lots of awareness through the movie, "Erin Brockovich," and is detectable through analysis of drinking water.

Unfortunately, it is not alone. Numerous other chemicals can also be toxic. Biotoxin abrin, cyanogen chloride, hydrogen cyanide, potassium cyanide, sulfur mustard, nitrogen mustard, ricin, sarin and vx are among other potential contaminants that employees and surrounding citizens can end up facing.

All of these chemicals have such levels of lethal toxicity that they are posted on the Emergency Response Safety and Health Database by the Centers for Disease Control and Prevention (CDC) as used as part of chemical terrorism. Although some of these chemicals can cause relatively immediate allergic reactions, exposed individuals are often affected over a longer period of time, and the result can be a much more painful and grueling death. Most of the time, contamination through water, food and air/vapor gets absorbed in our bodies without us detecting their immediate presence. An international reform of the various laws appears to be required, as current U.S. fines for serious violations can be limited to $7,000 per incident.

Organizations such as the United Nations and the World Economic Forum have already created committees to study topics such as energy, water and food security. Their assessment of the economic and medical impacts of improper resource handling predicts negative bottom-line economic growth. It is rather unfortunate that instead of an initial investment of a few dollars on proper gloves and boots, current practices are to cut costs instead of saving lives of hundreds around the world.

Operational Safety
Yet, the problem remains that acceptable practices vary from one country to another, fines are low, and enforcement agencies need to be properly empowered and be equipped with more staff and resources for ongoing inspections at all relevant facilities.

For example, at the Port of Oakland in California, where evidence of the impact of toxicity has been measured in direct relation to the increased occurrence of serious medical issues, the choice between immediate economic gains to businesses versus long-term medical costs to individuals becomes a decision that profit-minded executives no longer second guess.

Although more and more of us try to exercise daily and eat healthier, what is the point if many of us are going to be exposed to any of these chemicals while trying to make a living?

The Environmental Protection Agency, the Food & Drug Administration, Occupational Safety and Health Administration, and the Department of Homeland Security cannot possibly be the sole source for ensuring safe conditions and compliance. Instead, each organization must truly prioritize safety and hold themselves accountable.

Here is a list of safety practices that can be easily implemented in nearly all facilities:

1. Ensure that all fire extinguishers are tested quarterly.
2. Test the ongoing air quality and test employees' exposure to chemicals.
3. Provide proper ventilation, A/C, heating and roofing.
4. Ensure that all personnel change gloves, footwear, masks, clothing and other protective gear based on the toxicity and frequency of the materials to which they are exposed.
5. Offer weekly security training to staff and, for heavily concentrated areas, ensure rotation of the exposed staff
6. Develop a plan to limit the exposure to all chemicals and work with local resources in offering ongoing compliance to exceed regulatory requirements.
7. Develop, practice and update emergency plans in case of a disaster on a quarterly basis.
8. Provide a separate change area for all personnel.
9. Provide separate storage facilities that are tested frequently to ensure avoidance of lethal leaks.
10. Adopt intense cleansing practices.
11. Share inventory listings of all chemicals onsite with your local fire department in case of extreme contamination, explosion or fire.
12. Maintain emergency kits, safety showers and eye washers within 300 feet of your staff.
13. Dispose of toxic waste using sealed containers on a timely basis and at authorized locations.
14. Ensure that all electrical equipment that handles toxics is equipped with on/off power switches.
15. Equip your facilities with plant-size surge suppressors at breaker boxes.
16. Test and maintain all equipment on a weekly basis, including but not limited to forklifts and other mobile equipment.
17. Test and maintain alarms on all boilers to identify challenges with pressure and water cooling systems.
18. Properly dispose of all contaminated and unused containers that are not going to be used; otherwise, ensure proper decontamination of units.
19. Equip your staff with proper communication devices such as hand-held radios so they can alert one another in case of incidents.
20. Test and calibrate measuring equipment frequently such as outdoor truck scales, etc.
21. Maintain a secured lab to verify on-site the toxicity of all products manufactured and sold.
22. Provide covers to all electrical mounts; chemical dust can easily penetrate exposed electrical plugs.
23. Provide guards on machines, along stairs and multi-level facilities to prevent falls.
24. Have extra safety gear that visitors (including suppliers or customers) can use.
25. Place appropriate health/safety posters in highly visible areas.
26. Consult with medical professionals and have employees get medical evaluations on a regular basis to ensure that toxicity levels are non-existent or low. First thing would be to perform a baseline level of their body upon pre-employment. Then, upon employment, test their blood quarterly for chemical levels.

Exposure to chemicals is an unnecessary occurrence that has incredible long-term costs. Let's work together on prevention and always trust, but verify!

Using Data To Define Quality Performance Based Networks
People in Workers' Compensation are beginning to power up their data to gain insight and objective decision support to structure their provider networks. To do that, physician and other provider performance is evaluated based on actual performance evidenced in the data. That seems simple enough on the surface, but it is fraught with challenges. A few are described here, along with a case description of fraud by data proliferation.

Primary Provider
Evaluating the data to determine provider performance quality is tricky. For instance, who among those treating a claimant should be held most responsible for claim outcome? Which provider is the so-called primary provider? Is it the first provider to see the claimant, the provider who has charged the most money, or the one who saw the claimant most frequently? There is no specific indicator in the data denoting primary provider, nor do providers generally self-identify in that way unless they are involved in a formal gatekeeper arrangement. Consequently, for analytic purposes a decision must be made regarding provider influence in the claim, aka, primary provider.

Distinguishing Individual Providers
Another common problem is that individual providers are often not differentiated in the data. Many payers accept bills "as is," meaning they do not require the billing entities to specify individuals. Typically, individual physicians and other providers are camouflaged under the organization's Tax ID. In the past, that was adequate because the purpose of the bill was to pay and record the transaction. But that is no longer good enough because of the demand for analytics.

Bills are now a significant piece of the data required for provider performance analytics. Therefore, for individual treating providers, the National Provider Identification number (NPI) or state license number is needed to recognize single medical doctors or other professionals treating claimants. Unfortunately these identifiers are usually not included in the data. Withholding payment is the most powerful method of generating compliance and payers have that power.

Moreover, among data issues, deliberate identity proliferation is even more damaging to accurate provider performance analytics.

Identity Proliferation
Medical fraud surfaces in many forms. Duplicate billing, up-charging, and optimizing charge codes and diagnostic codes (up-coding) are among the most common, but now newly creative methods are being employed by a few. Perpetrators are obfuscating the data to conceal their poor performance by proliferating their identities in the data.

By altering names or addresses slightly, thereby adding to their number, providers are able to cause the system to recognize each variation as a separate entity. That way, multiple provider records are created in the data, even though they are really all the same individual. Proliferating provider records in a data set effectively skews the results of performance analytics.

A Case Of Data Proliferation
Provider identify proliferation was discovered recently when a monthly billing report for an organization was analyzed. Fifty (50!) different name and address iterations for the same medical provider Tax ID were discovered. This had been attempted previously, but this time, the effort was extreme.

Is this provider representing themselves carelessly? Probably not. The provider knows computer systems consider data literally, so each submission would generate a new record, the hoped-for result. Without investigation, the provider's billing will not be questioned, yet when the provider's performance is analyzed, the results will be distorted and inaccurate.

The provider vendor will be paid because all 50 iterations have an acceptable Tax ID. However, the problem surfaces when executing provider performance analytics. Different claims are attached to the 50 different records for the provider rather than consolidated in one record for the provider. Performance indicators are distributed across the faux entities rather than consolidated for the single provider, thereby distorting performance results, a new-age form of medical fraud.

Real Solutions
As with many forms of fraud, the solution is to discover and subvert the effort early. Evidence-based quality networks composed of quality individual providers cannot be created using such distorted data. Payers should monitor their data to discover and expose such behavior as it occurs.

Payer systems are culpable, as well. Systems should be designed or updated so that multiple record entry is thwarted, either through administrative procedures for data entry or simple technical methods. Including individual identifiers such as National Provider Identification and state license numbers will add to the solution, forcing accuracy in provider records.

For the case described here, an additional solution was implemented. The multiple provider identities were merged electronically by the analytics company, thereby integrating the occurrences for this perpetrating provider. As a result, the provider's performance can be analyzed as a whole rather than in fragments.

Because claims actually associated with this provider are distributed across the multiple artificial provider records in the data, analysis of performance is inaccurate. Not surprisingly, when this provider's data was merged and re-analyzed, the provider ranked in the lowest performance quartile. Gotcha.

When an employee gets hurt at work, or at least claims that they did, it can be a very stressful time for employers. Sometimes the injury is obvious, the employee is not exaggerating, and the employee simply wants to go back to work as soon as possible. Other times there are conflicting stories about whether an injury actually occurred or whether the injury is as severe as claimed.

In addition to following the applicable reporting requirements, there are several things employers can do to help develop a stronger defense.

1. Write Down The Facts
When you find out that an employee intends to file, or has filed a claim for injury, write down all the facts you know. Talk to any witnesses who might have seen the accident happen. If the employee has not retained an attorney, speak with them. Find out what happened, when, what the conditions were, who was present, and any other facts you believe are relevant.

Be objective when you are discussing this. Your role is to gather information, not argue the case. You want to be careful to avoid a situation where your employee could claim that you discriminated against them for filing or threatening to file a workers' compensation claim. In California, your insurance company has 90 days to admit or deny a claim from the employer's first date of knowledge, so this information will be very important.

2. Make A Timeline Complete With Relevant Documents
Sometimes a workers' compensation claim is filed soon after an employee is denied a promotion or raise, is placed under disciplinary warning, or has an interpersonal conflict with a co-worker or supervisor. This information is highly relevant, particularly when many cases filed for injury to other parts of the body systems eventually include a psychiatric component.

In many cases, if a person claims psychiatric injury and the defense can demonstrate that it is at least partially related to a good-faith personnel action, the degree of permanent disability or even compensability of the psychiatric portion can be challenged.

Keep any doctor's notes, job applications with applicable history, disciplinary warnings, wage information, notes, and other documentation and present it to your claims adjuster or the insurance defense attorney. Include everything you have. A separate timeline will also be useful in defending your claim.

3. Take Photographs
Photographs of the scene of the incident, or alleged incident, taken from various angles can be very valuable in establishing whether a claim is credible. This is particularly true in cases involving vehicle accidents, the use of equipment, or the physical attributes of a building. Without photographic evidence, it is difficult to challenge an employee who might testify under oath or tell his doctors that the ladder was taller, the fall was further, or that something that was physically impossible occurred.

A few years ago, an employee claimed that the vehicle he was driving had struck a forklift, causing severe injury to his left leg and back. He had been terminated soon after for reckless driving and then decided to file his claim.

At deposition, I was able to produce a copy of a "parts cart" on four caster wheels that had simply rolled out of the way when struck. He reluctantly admitted that this cart was the "forklift," and the case settled for a nominal amount. A simple photograph saved thousands of dollars.

4. Attend The Deposition
If your defense attorney or insurance company schedules a deposition of the employee, if at all possible, you should attend. You will not be asked to testify, or say anything at all on the record, but you can listen to the testimony. Before the deposition, you can consult with the attorney or insurance hearing representative regarding the facts of the case. You know the situation and can provide valuable insights and help clarify any of their questions about the facts or the people involved before the deposition starts.

During breaks, you can speak with them about the testimony, give ideas about what they should ask, and suggest areas that could be clarified with the employee. Your presence will also help the employee realize that their version of facts may be challenged and can encourage them to be more truthful in their testimony. It will also give you an idea of what they may testify to at trial.

5. Keep In Communication
As a workers' compensation defense attorney, I always appreciate it when employers communicate with me. If you need an update, call your adjuster or attorney. If you learn new facts through the rumor mill that the employee is working somewhere else, or that the facts of the injury are not accurate, let the defense team know.

Of course, the best thing is to avoid injuries in the first place through promoting workplace safety, but when they happen or are alleged, these are a few ways that employers can proactively address these claims.

We are all familiar with the various classes of people provided for by both the Federal and State fair employment practices acts. These include the traditional race, gender, age, disability and many more too numerous to be listed here. Well, hold on to your hats as there seems to be a new one being added. It now seems that the unemployed are being added to the list.

The unemployment rate seems to be on the decline, i.e. around 8.3% still without jobs. However, this is still 3% higher than when the financial "fit hit the shan" almost 4 years ago. Obviously, when the ranks of the unemployed are high, employers who are looking to hire are inundated with candidates. So much so that some employers are now disqualifying qualified applicants by advertising that "the unemployed" need not apply.

In light of this phenomena in job advertisements, Congress in their usual, under-informed method of operating, as well as several states, have begun the process of amending their anti-discrimination laws to add "unemployed status" as a covered class. New Jersey has already passed such legislation and believe it or not, the California legislature is also considering a bill. I can only wonder if this tendency to stupidity will ever end. In the meantime, be forewarned ...

Can You Refuse To Hire A Felon?
Suppose you are looking to hire someone for a sensitive position? One where the person hired will handle large amounts of money and/or materials. Your normal practice is to conduct a criminal background check on all applicants. What do you do when during your initial telephone interview, the applicant reveals a significant criminal felony conviction for the distribution and sale of narcotics, she/he has served time, and is now on probation?

Most employers would normally reject this applicant out of hand. The basis for your decision would be two-fold. First is the timing of the recent conviction with the second being the very nature of the offense. The person you are looking to hire could be responsible for large amounts of money, merchandise or even supplies. You conclude that if this person is willing to sell drugs for money, they are too a high a risk for you to hire them. However, like the situation with the "unemployed" person noted above, don't be so hasty to act.

In this case (it is real), the applicant filed a charge of discrimination with the Equal Employment Opportunity Commission (EEOC) alleging race discrimination. Your initial reaction, which was mine as well, is "You have got to be kidding."

You conducted the interview over the phone so that you could not see what race the person was. Secondly, your decision to not hire was based on a legitimate business reason. You would think this would be more than enough to defend your position. Well, it was not ...

The Equal Employment Opportunity Commission decided that they would expand the overall scope of their investigation and began looking at this employer's entire hiring practices including its use of criminal background checks. They have taken the stance that an employer's policy or practice of not hiring someone because of a criminal conviction is a violation of Title VII of the Civil Rights Act of 1964 unless the policy or procedure can be show nto be a necessary business practice.

They start by using statistics that show that African-Americans and Hispanics are convicted at a higher rate than other races. They then extrapolate this to mean that employment decisions which have a criminal conviction component create an adverse impact on the two classes which they have labeled "adverse impact discrimination" which they define as a "substantially different rate of selection at all levels of employment."

It must be noted that both the Fair Credit Reporting Act (FCRA) and the Equal Employment Opportunity Commission as the enforcement agency have established the overall legal framework. Note that they are very serious about this issue as evidenced by the recent agreement entered into by Pepsi where Pepsi agreed to pay over 3 million dollars and to provide job offers and managerial and supervisor training to settle the case.

Here in California, an employer cannot ask questions about any arrest that did not end in a conviction and may not get this information from other sources. Even if the employer does gather this data, but does not use it in its employment decision, the fact that they had it could have a chilling effect on their final decision, which would be very difficult to overcome if challenged. The best way to protect yourself is the development and implementation of a policy that takes into consideration the actual offense, the timing (6 weeks ago or 16 years ago) and of course the very nature of the job that you are looking to fill.

This is very similar to what you go through when doing an interactive process with an employee who is ready to return to work. Employers need to be thorough in your hiring process and if someone is going to be rejected because of a criminal conviction, be sure to go that next step to ensure that you have all the information needed to make an informed and defensible decision. And of course document, document, document everything in case you are challenged.

And to add fuel to the "big brother is watching you" fire ...

The following is a direct quote from a recent Board of Equalization flyer (Publication 165):

"Board of Equalization (BOE) permit and license verification visits help educate business owners and keep our tax system fair".

"Most business owners know they need a state seller's permit to sell or lease merchandise in California ..."

I cannot argue with this statement. It is the next paragraph that scares me:

"As part of the Statewide Compliance and Outreach Program (SCOP), Board of Equalizattion representatives (SCOP specialists) conduct door to door visits to nonresidential businesses. They visit individual businesses to educate business owners regarding their tax responsibilities, to make sure the business has the required state tax and fee permits they need, and to make sure the business has a city or county business license, if one is required. In addition, they verify/update Board of Equalization account information and review business operations compared to returns filed to provide guidance on proper reporting." You can limit what they see, so if someone from the Board of Equalization arrives, ask for specifics as to what they want to see.

This article is an excerpt from the April 2012 edition of From The Hotline published by Stuart Baron & Associates and Workers' Compensation Claims Control. It is used with permission under the copyright of Stuart Baron & Associates.

If employers could have influence over their cost of workers' compensation insurance, wouldn't they want to know how?

If insurance agents would help their employer clients lower their costs, wouldn't that be a valuable service?

Most employers consider the renewal date of their workers' comp policy to be the most important annual date for their policy. Unfortunately, employers have been misinformed by the insurance community and this is not the most important annual date.

Yes, the renewal date is when the incumbent carrier offers a new 12-month policy with their rates. This is also the date when the employer's new Experience Modification is used to modify the rates the employer will pay. The Experience Modification is an important factor that rewards (lowering the Ex-Mod) for employers with little or no claims and penalizes (raises the Ex-Mod) for those employers who have had greater than expected claims for the employer's industry and size.

The application of the Experience Modification is a State process that applies to employers who meet a minimum annual premium. One of the goals of the Experience Modification process is to promote low claims activity and to provide a means to compare that success between employers.

The most important annual date to employers is the review and evaluation of all claims information from the employer's workers' compensation carriers before this data is presented to the California Workers' Compensation Rating Bureau. This data determines the Experience Modification that in turn calculates what the final rates the employer's incumbent, or any other insurance company, can offer when the policy renews. This event occurs approximately six months into the employer's policy term. The information provided includes payroll (per classification) and the actual value of each claim the employer may have incurred over the last 4 years. All insurance companies are obligated to use this Experience Modification factor.

Just before the information is sent is the time the claims information needs to be reviewed and perhaps questioned to make sure it is an accurate reflection of the employer's claims. In my experience, the majority of the value for open claims at this time can be lowered — which will result in a lower Experience Modification factor — which results in a lower future premium paid by the employer. This is really the most important time for employers to be involved — armed with advisors to review claims and audit payroll, the employer has a golden opportunity to reduce their future premiums.

Workers' compensation is unlike other insurance programs. Think of it as a credit line. Use it and you must pay it back plus more. So, workers' comp is more of a way of financing workers' comp claims.

It is amazing to me is that this most important annual opportunity for employers is continuously ignored by insurance agents, insurance companies, and employers (who typically are not informed of this opportunity). Those employers who know about this process become immediately engaged and involved and actively participate in this review process.

Any insurance broker who is not working with their clients to manage this information in an effort to reduce employer's cost is committing malpractice and should be dismissed. Unfortunately, I continue to see that most insurance agents overlook this important time because they are either disorganized, do not know what to do, or just don't care.

Insurance companies also seem to not have any financial incentive to lower employer costs. Even Warren Buffett, Chairman of Berkshire Hathaway, a large insurance holding company, commented that since open claims are like free money,we have all of these extra funds to invest to increase stockholder value and higher profits. (Stockholder Letters)

Facebook Frenzy Over Password Privacy Misses the Bigger Legal Point: Most Social Networking Profile Content is Off Limits for Hiring Decisions

Unless you took an early Spring Break on a deserted island over the last week, you've seen the explosion of media stories surrounding the practice by some employers of asking applicants for their Facebook passwords in order to view a profile (or Wall) that is set for viewing only by the individual's "friends," and therefore not publicly accessible.

The reaction was swift and almost universal condemnation of the practice as an invasion of privacy. One law professor likened it to asking for the applicant's house keys, in order to have a look around their personal living space.

Facebook's website focused exclusively on the potential privacy issue: The company strongly condemns the trend and urges users of the service never to share account information: "The most alarming of these practices is the reported incidences of employers asking prospective or actual employees to reveal their passwords. If you are a Facebook user, you should never have to share your password, let anyone access your account, or do anything that might jeopardize the security of your account or violate the privacy of your friends. We have worked really hard at Facebook to give you the tools to control who sees your information."

Two U.S. Senators who just happened to be interviewed on National television on Sunday morning (March 25, 2012), called openly for a formal investigation by the U.S. Justice Department to determine whether asking applicants for their password violates the Federal Stored Communications Act. They also called upon the Equal Employment Opportunity Commission to investigate whether the practice itself (presumably just asking for the applicant's password or viewing his/her social networking profiles) runs afoul of discrimination laws. There are rumblings about Congressional hearings and proposed legislation to ban this approach to the pre-employment process.

Turning to the Internet for information about job applicants isn't new. Public and private sector employers often perform Google searches for information on potential new hires and draw tidbits from many sources, including social networking sites. In a study last year of 300 hiring managers and recruiters, Palo Alto-based social networking monitoring service Reppler reported that 76% of hiring managers look at applicants' public Facebook profiles. An additional 56% are looking at Twitter.

Whether the practice of asking applicants for their Facebook passwords is legal or even advisable will be debated thoroughly in the weeks to come. The current Facebook frenzy about password privacy misses entirely the reality for hiring managers and Human Resources professionals: much of the information they are likely to see on an applicant's social networking profiles is simply off limits in any hiring decision. And, this is true even for information that is publicly available.

Under the laws enforced by the Federal Equal Employment Opportunity Commission (EEOC), it is illegal to discriminate against an applicant or employee because of that person's race, color, religion, sex (including pregnancy), national origin, age (40 or older), disability or genetic information. An employer may not base hiring decisions on stereotypes and assumptions about a person's race, color, religion, sex (including pregnancy), national origin, age (40 or older), disability or genetic information.

The California Fair Employment and Housing Act (FEHA) also prohibits employment practices that discriminate against applicants or employees on the basis of race, religious creed, color, national origin, ancestry, physical disability (including HIV-positive status) or mental disability, medical condition (specifically cancer-related conditions and genetic characteristics), genetic information (added in 2012), marital status, sex (including pregnancy, childbirth, or related medical conditions, and gender), age (40 years and older), sexual orientation, and gender identity or expression. It includes discrimination based on a perception that a person is a member of a protected class or is associated with a person who is, or is perceived to be, a member of a protected class.

Personal profiles on social networking sites such as Facebook and MySpace are a rich source of information about an individual: gender, sexual orientation, marital status, number and ages of children, national origin or ancestry of family members, religious affiliations or organizations, even preferred charitable giving. Pictures with family and friends don't have to be risqué to be revealing. Posts about the activities of spouses and children — activities, schools, ages, health issues, etc. — are all conveniently collected in a single location on the applicant's Facebook wall. Employers cannot use the majority of this information for any lawful purpose.

Consider the most common areas of employment discrimination lawsuits based on rejections of a job applicant: age, gender, national origin/race, religion disability and recently, genetic information.

Age Related Inquiries: Most hiring managers in today's environment know that they can't ask applicants for their age, birth year, or even the year they graduated from high school because it might reveal age-related information that they cannot use for any lawful purpose. So, what happens when the same savvy manager logs onto the Facebook profile and stumbles on a flurry of "Happy 50th Birthday," posts from the applicant's friends and family?

It's not a defense to a later age discrimination lawsuit to say, "Well, I didn't ask the applicant for his birthdate." You cannot use it to inform a hiring decision, just as you must ignore the applicant's date of birth if it is prominently displayed on an educational transcript properly obtained to verify the conferral of a required degree.

Gender, Family Status And Related Information: The Equal Employment Opportunity Commission provides the following pre-employment inquiries may be regarded as evidence of intent to discriminate when asked in the pre-employment context:

• whether applicant is pregnant;
• marital status of applicant or whether applicant plans to marry
• number and age of children or future child bearing plans
• childcare arrangements
• employment status of spouse
• name of spouse.

Now, consider the typical Facebook profile: posted pictures with family (including children), postings about school activities for the applicant's children, affiliations that may include religious schools, information that discloses the employment status, chatter about the travails of childcare or spouses, and more.

Religious Questions: Questions about an applicant's religious affiliation or beliefs (unless the religion is a bona fide occupational qualification) are generally viewed as non job-related and problematic under federal law. Do you attend church or synagogue? Do you belong to any outside organizations? What clubs or organizations do you belong to?

From a cursory review of a Facebook profile or "news feed," it is likely that your organization will uncover a lot of personal information. Some of this information will serve no employment-related purpose or will provide information regarding an applicant or employee that would be better left unknown.

National Origin Questions: Improper interview questions include questions about the applicant's "native language," or where parents and grandparents were born. Now, consider the Facebook post that congratulates the applicant's grandparents on their wedding anniversary, including a picture with the creative caption: "Gramma and Grampie's wedding picture from the old country."

Disability Related Inquires Are Strictly Forbidden: The Equal Employment Opportunity Commission's published "Prohibited Employment Practices" states: "As a general rule, the information obtained and requested through the pre-employment process should be limited to those essential for determining if a person is qualified for the job; whereas, information regarding race, sex, national origin, age, and religion are irrelevant in such determinations. Employers are explicitly prohibited from making pre-employment inquiries about disability."

Acquisition of Genetic Information — Including Family Medical History: Facebook and other social media sites are also a high risk area for acquiring improper genetic information about applicants and employees.

The Federal Genetic Information Non Discrimination Act (GINA) prohibits requesting, requiring, or purchasing Genetic Information about an applicant, employee or family member. And, it defines "genetic information" to include family medical history — down to fourth cousins. The Genetic Information Non Discrimination Act allows acquisition of genetic information that is publicly and commercially available. But, the Equal Employment Opportunity Commission expressly states that this does not apply to the acquisition of genetic information from "social networking sites and online media sources which require permission to access from a specific individual."

A manager who reads about an employee's family medical history on the applicant's Facebook page will not be able to defend against a charge by saying that the information was "commercially and publicly available" if the employee has set the privacy settings to "friends only." This is true even if the employee has previously accepted a "friend request" from the manager, or voluntarily provided his/her password to the employer for a pre- or post-employment process.

If a manager or Human Resources specialist learns protected information by doing a simple Google search, it will likely be an inadvertent acquisition. But, in-depth searches or visiting sites that are likely to uncover genetic information about applicants, employees or their family members violates Genetic Information Non Discrimination Act standards and California law. A post such as: "I can't wait for this weekend, when I'm participating in the Susan G. Komen Race for the Cure in honor of my grandmother and my sister" is enough information to cross the line by providing information you can't possibly use to make an employment decision. Just acquiring the information violates the tough new standards.

Avoiding Unlawful Recruiting And Hiring Practices
This isn't a new area of the law. And, it isn't a "gray" area either. If you cannot properly ask the applicant for the information in a personal interview, you cannot obtain it from any other source and then use it to deny an otherwise qualified individual an equal employment opportunity. The California Fair Employment and Housing Act specifically prohibits employers from asking questions about protected characteristics (or activities associated with those characteristics, such as family status and religious affiliations) unless the characteristic is related to the applicant's ability to perform the job. The California Fair Employment and Housing Act covers employers with as few as five employees.

Managers or others tasked with conducting interviews should be aware of areas involving impermissible inquiries. Remember, disability-related questions are unlawful on their face — the applicant has an automatic discrimination charge without having to prove the information was used improperly to deny employment. With every other area of protection, it is not the question itself which is unlawful — it is how the manager/employer uses the answer.

For example, if an applicant is asked about marital or family status and then is not hired because of those factors, the employer has discriminated on the basis of gender. Likewise, if a manager inquires about a person's age, date of birth or date of high school graduation, and then does not hire the person because of an objective determination that he or she does not have the skills for the job, no discrimination occurred. But, if the manager does not hire the person because of his or her age, and he or she is otherwise qualified for the job, the result is unlawful age discrimination.

Prevention Strategies
Develop concrete pre-employment practices, including background investigations and personal interviews. Then, train your Human Resources staff and managers or supervisors who make hiring decisions on what's lawful — and what's not. Develop a policy on whether the employer will search the internet or social media sites in hiring. If you decide to use social media in hiring, do the searches on applicants consistently and in a uniform manner. Notify candidates in writing about what your company gathers on the web.

Designate a non-decision maker to conduct the search. The individual should be properly trained to avoid improper access and to screen out information that cannot be lawfully considered in the decision-making process. That way, the non-decision maker can segregate the information that can't be used to make an employment decision, and can keep the decision maker from having to later explain how he or she ignored the plethora of information from the applicant's Facebook profile.

Finally, train your decision makers to rely only on objective, job-related requirements for vetting candidates for every job. Then, apply consistent documentation procedures to capture the non-discriminatory reason for the ultimate decision to hire or reject particular candidates.

Boardroom protocol is being exposed every day on the internet. Does Rupert Murdoch really think we can't see beyond his prepared remarks to determine for ourselves the "tone at the top" coming from his boardroom?

Imagine what happens when 100 million people on Twitter can now get involved in the conversation happening in the boardroom from the outside in.

I know that many people in the boardroom are still on the sidelines about social media. What will it take to get your board ready to tackle their willingness to learn what is happening on the internet? Will it take seeing your company's name in the news before you add digital literacy to your director's education? I can see the incredulous look on the directors' faces when the board is called on for their oversight of digital issues.

I can only imagine a board being characterized as:

• "illiterate": showing or marked by a lack of personal knowledge with the fundamentals of a particular field of knowledge.
• Or maybe a board will be portrayed as "ignorant": Lacking knowledge, information, or awareness about something in particular: "ignorant of social media."

Worse yet is as a board leader to know that it is true. So I ask, when are you planning to get digital and social media on your agenda? Who is going to be responsible for taking action to get it on your fall board agenda? Whatever title you have in the boardroom (board chair or lead directors), you are setting the boardroom agenda. Are you waiting for your CEO, Corporate Secretary, Corporate Counsel, Audit Committee Chair to bring resources and spend budget to get this to happen for you and your board?

Time To Learn Where Your Customers Spend Their Time
Social media accounts for 22.5 percent of the time that Americans spend online, according to "State of the Media: The Social Media Report." This is compared with 9.8 percent for online games and 7.6 percent for e-mail. You can read more in the New York Times.

This is a voluntary opportunity for you to keep your board current and relevant. If you're waiting for a regulatory push to get your boardroom thinking digitally, you may not be ready to take action and learn what is happening 24/7 on computers and mobile devices around the world.

Here are some statistics about digital connectivity to help you consider moving this up as a priority. Digital knowledge leads to opportunities for companies to grow, reach and help their customers, employees, investors and stakeholders. Are your business revenues connected to connectivity in Asia? Has digital connectivity impacted new patterns in:

• Consumer and supply chain behavior?
• Operating model innovations?
• Security and transparency issues?

Connectivity In Asia
Growth in mobile Internet usage is outpacing them all:

• 45% of metro Chinese are online via a mobile device at least monthly, up 21% from 2010.
• 11% of metro Indians access the mobile net monthly, up from just 1% in 2010.
• Japan saw the biggest jump in mobile Internet usage: 57% of adults now have access, up 24% from last year.

Are you challenging yourself to look beyond the status quo, to understand how changes are disrupting your business? Is your board operating in a twentieth-century mode? If so, your business is being challenged to expand communications, attend to shareholder concerns, address issues of trust, take on new technologies (cloud, social media) and more, in order to succeed in and meet the needs of the twenty-first century.

Preparing Our Board Leaders For What's Next
When most of our board chairs were deciding on a college major, the founders of Google were not yet born. Fast forward a couple of decades (or more), and we see that the career landscape has changed so drastically that jobs need new definitions: social media strategist, app developer, mobile web engineer.

How can you prepare for what's ahead? Cathy Davidson has a few ideas. She is a professor at Duke University and suggests that "65 percent of today's grade-school kids may end up doing work that hasn't been invented yet."

"We're 15 years into something so paradigm-changing that we have not yet adjusted our institutions of learning, work, social life, and economic life to account for the massive change."

www.theiirc.org The International Integrated Reporting Committee (IIRC)

Corporate Spring — Is It Only A Matter Of Time?
Salesforce.com CEO Marc Benioff last week predicted that following the Arab 'spring' uprising against dictators facilitated by social media, it would only be a matter of time before similar demonstrations would unseat CEOs — what he referred to as 'corporate springs.'

Benioff has said, "We need to pay attention [to the Arab spring] because it is not so long from now that we'll start to hear about corporate springs and enterprise springs. We've seen Mubarak fall, Gadaffi fall — when will the first corporate CEO fall for the same reason? Because of unhappy customers rising up, or not listening to their employees. Not paying attention. Because it is more important to listen than ever before. That is the social revolution."

On Leading A Digitally Intelligent Board:

1. Time is now to get your board "on board." Schedule a briefing to level-set the board on the fundamentals of your social media risks and opportunities:
   1. Have your board briefed on social media's impact on your business, competitors and mentions of key executives.
   2. Identify where your business is positioned in the conversation: Google, Yahoo, Bing, Facebook, Twitter, LinkedIn. Understand the sources where you can go to gain independent information and business intelligence.
   3. Expand your sources of information on the business beyond management reporting.
2. As you start asking digitally literate questions of your CEO, have a baseline "Social Media for the Boardroom" assessment of your company from an enterprise perspective:
   1. Know the risks on how your company is using social media;
   2. Have a map of your company's engagement:
      1. What marketing is doing for outbound conversations, along with other departments' usage (human resources, customer service, etc.)
      2. What is being said by whom on major social media sites: Google, Facebook, Twitter, LinkedIn.
   3. Become familiar with your own website from a corporate governance and investor relations perspective;
   4. Identify what policies are in place for employees, contractors, etc.;
   5. Begin the discussion on your business readiness to manage crisis communication on social media;
   6. Identify how your board is being portrayed in social media. Think executive and board compensation, say on pay, etc.

Use this briefing and/or assessment to introduce your board to the fast-changing communications happening on line.

If your board is beyond this basic information, it would be great to hear how you got this ball rolling. I'd love to hear how you see this digital business mandate being managed in the boardroom. Do you see a committee taking this on in their charter, or will individual board members be stepping up with "digital expertise and skills" to guide the conversations?