One of the hottest topics is the legalization of marijuana for adult (recreational) use. As you are probably aware, medical marijuana use has been allowed in the state of California for quite some time. However, recreational marijuana use remained illegal until this year. On Nov. 8, 2016, voters passed an initiative that allows certain recreational marijuana use. That initiative went into effect on Jan. 1, 2018.
It allows adults age 21 and over to legally purchase and consume marijuana in the state without the need for a medical referral card. Adults 18-20 still need a medical referral card to legally purchase in the state. The locations where marijuana use is prohibited include public places, places where smoking or vaping is prohibited and workplaces that maintain a drug- and alcohol-free environment. The bill says the state government will: “Allow public and private employers to enact and enforce workplace policies pertaining to marijuana.” Additionally, marijuana remains an illegal Schedule I substance under federal law, which employers must follow. This potentially means that employers can still drug test their employees, may refuse to hire those who use marijuana and may terminate employees who use marijuana (in the workplace or out) if it violates company policy. Therefore, based on the stated language in the bill, as well as federal law, employers with drug- and alcohol-free workplace policies may continue to maintain and enforce them in California.
One issue, in particular, that has many clients concerned is the effect legalization will have on workplace accidents. To be clear, this law does not make it legal to drive, operate machinery or otherwise take part in dangerous activities while under the influence of marijuana. However, California has not yet adopted a standard measure for marijuana impairment analogous to blood alcohol testing. Currently, the tests for marijuana detect THC (the chemical compound found in cannabis responsible for a euphoric high) in a person’s system from anywhere from three days to three months. Employers face a dilemma if an employee legally consumes marijuana outside of work, is no longer “impaired” and then is involved in a workplace accident. The potential exists that a post-accident test could detect marijuana (THC) in the employee’s system without proving any actual impairment at the time of the accident. According to the law as written, the employer could terminate that employee for violation of an existing drug-free policy. Given the nature of the debate and the publicity that the legalization is receiving, it is reasonable to anticipate pushback and litigation from employees terminated in that type of scenario.
With these issues in mind, Heffernan Risk Management Division recommends that our clients regularly revisit and review their existing substance policy with a qualified labor and employment attorney to protect all their interests. If they do not have one, this is a great time to recommend that they enlist the services of an attorney to have them assist in drafting an adequate policy. Presumably, ancillary laws and standards will be developed by the state over the next few months that will direct employers how to deal with these new concerns a little more clearly. Until then, it is important for us to refer our clients to the experts most able to advise them during this time of uncertainty.
I have a whiz bang idea for solving that pesky investigation issue that surrounds every workers’ compensation claim.
This idea will clearly get me that Nobel or Pulitzer Prize. Either one. I’m not fussy.
It came to me while I was reading an article about the NFLboosting its statistics tracking and accuracy with the use of RFID tags in the players’ shoulder pads. It seems these amazing little chips will allow NFL statisticians to know “real-time position data for each player,” as well as “precise info on acceleration, speed, routes and distance.” This is part of the NFL’s “Next Gen Stats” initiative for fans.
For those who are unaware, RFID (radio frequency identification) technology is the hot new thing. Essentially, an RFID tag contains a passive ID chip that can be activated by receivers as it passes near them. The tag requires no battery power and is highly reliable. Stores like Walmart now use them extensively to track and monitor inventory changes. Even my Florida SunPass tag uses one. The small sticker on my windshield allows me to zip through tolls and access parking at Tampa International Airport without talking to anyone or even rolling down my window. Of course, the tag also allows the state to bill me for that activity and serves to notify the NSA that I am on the move again. But the NSA probably already knew that. The complete loss of privacy is a small price to pay for not having to chat up a friendly toll taker.
I am so glad the NFL has gone with RFID. It is a much more reliable technology than those old scanner barcodes. That was a disaster — having to get the player to run into the end zone six times before the scanner could capture the touchdown — but I digress. . . .
While the article on the NFL and RFID was prattling on about all the useless stats fans could now have access to, I was thinking in an entirely different direction. I recognized that the NFL has inadvertently invented the personal “black box” for workplace accidents. Think about it. This is a technology that could be employed in offices and factories all over the country.
Employers could easily monitor “real-time position data for each employee,” as well as “precise info on acceleration, speed, routes and distance” as employees move throughout the day. An RFID-enabled wearable could tell accident investigators if an employee was running when he slipped and fell down the stairs, as well as how many rotations he took as he progressed to the bottom. The tag could determine that an employee was idle in the break room at the time she claimed to be straining her back on the loading dock. And biometric sensors added to the RFID wearable could actually cross reference stress levels and physiological indicators to the time and location of the accident, giving a clearer view of events than ever before possible.
It is just like data used from airplane black boxes to reconstruct what actually happened to cause an accident. I am telling you, this technology could be a tremendous boon for risk managers and accident investigators everywhere. But why should they have all the fun?
Safety professionals could leverage the same technology to prevent accidents in the first place. Restaurant servers would no longer have to yell “corner” or “door” when traversing areas with visual limitations. Their RFID-enabled monitors would send real time location updates of other employees in the vicinity to heads-up displays located within employees’ Google Glass. The system would issue potential collision warnings similar to those in today’s aviation industry. I’m telling you, Big Brother really may have all the answers after all.
Unless, of course, all the employees were watching internet porn on their Google Glass heads-up displays, and no work would get done anywhere. On the plus side, biometric sensors should pick up signs of unauthorized porn viewing, so it may be controllable after all.
The remaining challenge will be the design and implementation of the RFID biometric wearable devices. Will they be embedded in the work clothes or uniforms, in bracelets, necklaces or other accessories or simply implanted in our skulls? For the record, I do not recommend the skull implant method. My wife tells me my skull is so thick, the signal could never get out. Also, multiple sensors may need to be deployed on every employee, such as in shoes and on the head. This would be helpful for a truly accurate rotation count on those extended fall injuries.
In the end, we may all be wired to the hilt, with no more need to verbally communicate in the workplace. But we will have our personal black boxes. We’ll all end up as fat people in our little floaty chairs. But if we over-sensored tubbos have a collision, our wearable technology will give investigators a much clearer idea of what went tragically wrong.
Even though the idea is somewhat creepy, and I am largely joking, I think we may actually have something here: black box wearables. Coming soon to a workplace near you.
For the past several years, up to three of the top five concerns expressed by respondents to CFMA's Construction Industry Annual Financial Survey have been insurance-related. And, contractors continue to seek how to leverage their investment in safety and risk management.
The traditional view of safety has been as a line item expense calculated within administrative overhead or as a cost center. Construction Financial Managers use a variety of techniques to evaluate the cost effectiveness of recommended safety and risk reduction investments. These include: ROI, ROE, and/or ROC calculations; cost benefit analyses; and breakeven analyses.
However, some forward-thinking contractors have gone beyond seeing the direct link of profitability from safety and risk management to establishing safety as a profit center. A select few have captured even greater value by making safety part of their brand image.
Either way, a program that measures safety — and risk-related leading indicators, loss analysis rates, and indirect costs can provide contractors with a competitive advantage that goes far beyond lower insurance rates.
Some companies understand that the fixed cost of insurance, the premium, is the smallest piece of the insurance pie. They recognize that true savings more often result from decreasing the variable costs of their insurance program — the loss dollars from claims.
These companies have learned that proactive safety and risk management programs increase profitability — they reduce risk, prevent claims, and contain costs through aggressive claims management.
What is their secret? Through the ongoing measurement of risk indicators, these contractors establish goals for improvement and continuously monitor their company's performance. Some traditional measures include such frequency and severity incidence rates as:
Total OSHA recordable cases
Total lost workday cases
Total lost workdays
Number of fatalities1
Called lagging indicators, these measures are passive metrics of prior results without consideration of the activities that influence the results. Also called downstream measures or trailing indicators, lagging indicators provide feedback on data collected and analyzed “after-the-fact.” These metrics are diagnostic and sometimes prescriptive; they reveal past performance and highlight improvement opportunities.
In contrast, current and leading indicators provide different views of safety and risk performance. Designed to influence real-time outcomes, current indicators provide almost immediate feedback on present activities. Current indicators include a supervisor's same-day completion of an incident report or the number of job safety observations completed on a project each day vs. an established goal.
Leading indicators are proactive measures of focused activities to prevent incidents of a general or specific nature. Also called upstream measures, these metrics are “beforethe-fact”2 and can predict future performance.
For example, a high number of safety orientations should help decrease the frequency and severity of onsite accidents. (The first table below compares lagging, current, and leading indicators for safety performance. The second table lists examples of emerging leading indicators for productivity, quality control, and risk management.)
Lagging, Current & Leading Indicators
Workers' Comp Experience Rating Modifier
OSHA recordable rate
Total lost workdays
Average cost per claim
Daily record of incidents
End-of-shift record of incidents
Daily job safety observations
The number of safety orientations conducted
The percentage of project pre-plans completed
The number of safety meetings held
Emerging Leading Indicators
Measured by the Number of:
Measured by the Number of:
Measured by the Number of:
Field supervisors with laptops or hand-held technology
Independent third-party expert reviews on prototypical designs or materials
Pre-bid constructability, scope, and schedule reviews completed
Administrative staff trained on automated functions
Architect and engineer approvals for changes to specified materials or design specifications
Pre-qualified or pre-approved subcontractors on the eligible bidding list
Open trade/craft employee positions filled compared to percentage needed
Quality assurance inspections completed
Subcontracts signed before starting work
Days with no idle equipment
Detected defects corrected
Project sites properly planned and laid-out for logistics, traffic control, and work zones
Projects with proper sequencing of trades
Project files with digital photos of conformance to specifications
Project sites inspected for compliance to safety and risk controls
Projects completed on time
Completed projects with no open punch list items
Projects that had a post-mortem review of project risk performance
While many contractors know their basic loss picture, fewer understand the factors that cause or contribute to accidents and claims. To leverage safety and risk management, contractors need to identify where to invest time, staff, and other resources. An analysis of historical claims and loss experience provides an excellent starting point.
There are many methods of analyzing claim and loss data, but it's important to conduct both macro- and micro-level analyses, which provide the clearest perspective on what types of accidents are loss leaders, in addition to clues about necessary prevention activities. Trend, type, causal, and lost workday case analyses are four basic and reliable methods.
A trend analysis determines the number of claims and the total incurred losses (the dollars paid plus the dollars reserved to pay for the future cost development of the claims) for each line of insurance coverage over a period of time. This provides a quick “big picture” view of claim count and loss experience by policy year.
A type analysis summarizes the frequency of claims and the resulting incurred claim costs by type of loss. This method uncovers the leading types of loss for your company. For example, you may learn that two or three leading types of loss account for greater than 70% of your loss dollars.
By highlighting the areas that have the greatest impact on risk management performance, this analysis helps focus prevention efforts.
A causal analysis determines the reasons for accidents and resulting claims by evaluating various causal factors for each leading type of claim. It indicates areas for possible incident prevention activities and safety management controls.
Ideally, you'll be able to determine the job classification with the greatest number of claims and highest claim costs. For example, you might learn that “falls” are your company's leading type of workers' comp claim, making up 20% of your total claim count and 65% of your total incurred losses.
By evaluating the causes of your company's losses, you may discover that 60% of the falls were the result of a fall from an elevated surface — with 40% resulting from slips, trips, and falls on the same level. You might also learn that 10% of the total falls from elevation claims occurred from a scaffold or ladder, but that the other 90% resulted from getting into or out of vehicles or heavy equipment.
The safety and risk management controls for each of these causes are different. Depending upon the findings in the causal analysis, additional drill-downs should provide even better clues.
The success of this analysis hinges on the depth of your company's accident reporting and investigation process, as well as the quality of the claim coding information. Some of the best factors to evaluate include:
Day of week
Time of day
Date of loss vs. the date of hire
Objects and materials involved in the loss
Lost Workday Case Analysis
Why focus on lost workday cases? After fatalities, lost workday cases are among the most serious type of workers' comp claims.
Greater than a third of all workplace injuries result in lost workdays. According to the National Safety Council, the average cost of lost workday cases across all industries in 2005 was $38,000, an increase from $28,000 in the year 2000.3
The average for the construction industry is not calculated separately. However, the construction industry figure should be significantly higher for three reasons:
The median number of days for each lost workday case is higher for construction than across all industries. The Bureau of Labor Statistics (BLS) reports seven days as the median number of lost workdays per case for all private industries in 2005.
In contrast, the median is eight days on average for specialty trade contractors, nine days for general building contractors, and 11 days for heavy and civil contractors.
The construction industry has some of the highest average labor wage costs among major industry groups.
Modified or restricted duty assignments in formal return-to-work programs appear to be increasing throughout the construction industry.
Yet, pockets of resistance still exist among some employers, employees, labor groups, and medical practitioners — even though such resistance results in longer absences and higher costs per case.
A lost workday case analysis determines the number, type, and severity of lost workday cases by occupation and body part. The most important portion of this analysis is the comparison of minor and major lost time cases.
“Runaway claims” can be identified by comparing the average length of cases greater than nine days (the overall median for the construction industry) vs. the average for cases less than nine days.
The distribution of lost workday cases by duration metric helps underscore the need to evaluate policies, procedures, and administrative controls to improve accident prevention and claim management.
Here's how it works: The chart below summarizes one contractor's average duration of lost workday cases. The contractor's totals were benchmarked against the average Bureau of Labor Statistics totals for the construction industry. In this case, 54% of lost workday cases exceeded 31 days of lost time, slightly more than double the construction industry average.
Further analysis revealed that the median number of lost workdays for each case was 37 days (four times higher than the figure for the construction industry). The average length of cases less than nine days was only three days each; however, the average for cases longer than nine days was 90 days.
This meant that, on average, this contractor incurred a “runaway” claim after the fourth day of lost time for every injured worker. In effect, excessive days of lost work time unnecessarily increased this contractor's total loss costs.
From the contractor's point of view, this analysis helped demonstrate the importance of injury prevention. Severity reduction of lost workdays was identified as the goal and the contractor decided to partner aggressively with the claim service team on:
prompt reporting and thorough investigation of all injuries;
coordinated identification of modified duty assignments; and
better nurse case management to help injured employees return to work sooner.
Indirect Cost Assessments
New, sophisticated tools are now available to help contractors measure, monitor, and align safety and risk goals with overall financial performance.
As already mentioned, risk performance metrics provide useful information about the following key performance indicators:
leading types of losses,
their causal factors, and
possible corrective actions.
The next factor plays to the Construction Financial Manager's expertise: demonstrating the financial impact of insurance claims.
Not only does this metric show the financial benefits of safety, but it also creates a compelling business case for proactive safety and risk management.
Direct vs. Indirect Costs
Like other areas of construction financial management, insurance claims have both direct and indirect costs. For our purposes, the insured loss costs are considered direct costs, and the uninsured loss costs are indirect costs.
The indirect costs are the “hidden” costs and share three key characteristics:
They act as a multiplier upon direct (insured) costs that increases the total cost of insurance claims.
They are often not captured or calculated and, therefore, are not consistently charged-back or recovered in job costing systems.
The net effect of factors one and two is a drain on contractor profitability.
There are many different estimates used by safety and risk management professionals for calculating the impact of indirect costs. Safety industry sources indicate an average ratio of indirect to direct accident costs from 2:1 to 4:1.
One conservative method is available at the OSHA Web site, where a sliding scale multiplier is provided that depends on the total direct cost. Note that the indirect cost multiplier decreases as direct costs increase. To calculate your company's ratio using this method, go to www.osha.gov/Region7/fallprotection/safetypays.html.
Required Revenue Replacement
Achieving buy-in for safety and risk management programs from other construction executives and operational managers can be a challenge. However, the revenue replacement tool is a convincing way to show the additional sales needed to offset the cost of insurance claims.
This number varies based upon total cost of losses and the company's profit margin expressed as a percentage:
Annual Losses (in dollars) ÷ Company's Profit Margin
With this metric, it's simple to see the total additional sales required to offset the cost of claims. Once upper management appreciates how substantial claim costs can be, it's much easier to obtain buy-in for proactive safety and risk management practices.
The most important outcome of risk performance metrics is the focus on continuous risk improvement initiatives. Incident prevention and claim management initiatives can significantly improve a contractor's jobsite productivity, quality control, risk management, and safety programs.
The net effect of this investment is a potentially significant increase in profitability, not to mention a bidding advantage for contractors.
You may have heard the saying “Show me your friends and I’ll show you your future.” Then consider this one: “Show me your safety culture and I’ll show you your company’s future.” Here is an outline of what we will cover in this article:
Go Big — Safety as a Culture not as a Program
Measuring Your Progress
Refining Your Process
Go Big — Safety As A Culture Not As A Program
The safety umbrella is broadly defined. For some, safety is a specific program. For others, it is a way of life. Let me submit to you that safety is a mindset, a culture, an attitude. Safety is all encompassing. Its presence or absence will have a profound impact on your organization. Safety should not be merely an isolated component of your company’s overall strategy but more of a culture of process-mindedness.
As mentioned, some companies approach safety as an isolated program (e.g. like marketing, research and development, etc.). Companies that adopt this “silo” approach to safety — as is typical of other business processes — may find the mark being missed. I have found that the most successful organizations have adopted a culture of safety. In these companies, safety is not a silo but rather the bedrock and foundation for all the other business processes.
Whether your company is a recent start-up or well underway, here are some things to consider. Do not consider this list as a recipe but more as ideas for key ingredients that will help define your safety culture. This list is not all inclusive and you don’t need to limit yourself to the items shown:
A culture of safety must be adopted by you, your leadership team, and your entire organization.
Adopt safety as your most important core value.
Decide your desired metric for safety. Is your goal to only have 5 accidents per year? 3 accidents per year? Of course not, we can all identify the ridiculousness of such a metric. Shouldn’t the ultimate goal be to have ZERO accidents and injuries? Let’s be idealistic rather than realistic!
Implement your company’s safety process:
Indoctrinate new hires into your safety culture.
For construction or “active” companies, consider identifying requisite safety gear (e.g. eye protection, gloves, ear plugs, etc.). Make sure everyone has the items and audit employees on the job for proper use.
Establish new hire drug screens, DMV, and background checks.
Incentivize executives and employees based upon safety performance.
“Catch” employees doing the right things and working safely and reward them.
Create guidelines for a safe work area or work site, etc.
If you do have an accident/incident, immediately debrief the matter and consider adopting a mitigating correction to prevent the incident from recurring.
Have regular (should we say, weekly?) safety meetings.
Put everyone on the “Safety Committee” such that hazards are identified and corrected by employees performing their normal duties before things happen. A culture of safety not only allows — but encourages and empowers — employees to genesis ideas for improving safety policies and/or eliminating unsafe or risky practices.
Create safety “billboards” that indicate your company’s safety track record.
Again, the above are ideas, and the list can be augmented and improved upon.
Measuring Your Progress
As you embark upon your journey and define your safety culture, it is very important to establish metrics to measure your success. I recommend tracking your progress and emphasizing positive developments; however, actual accidents/incidents should not be overlooked or hidden but analyzed.
Following are some positive metrics: create a checklist to ensure each new employee is given a new hire safety orientation, track “safe days” (e.g. no accidents/injuries since …), publish new ideas submitted and implemented by employees, have safety drawings for a safe month, etc., compare your safety record for the current quarter to the prior quarter and the prior year’s quarter, reward employees when you “catch” them working safely, etc.
An important side note is that your annual insurance renewals are a litmus test for how your culture of safety is working for you. Is your worker’s comp experience mod going down, are your claims less in frequency and in size, is your liability policy premium lower? Think of your insurance renewal process as a report card of how you are doing.
Refining Your Process
Can you think of a great company that wasn’t safe? We can all recount some past incidents that may have happened to some great companies. The great ones don’t run from their challenges — they face them, live up to them, and get better from them. I believe we should strive for perfection — as elusive as that is; however, if and when something unforeseen happens, it is important to debrief the situation and identify how to prevent that item from happening in the future.
I want to encourage you to create a culture of safety within your organization. I believe that by doing this, you will help establish a process-mindedness that can spill over into the other business disciplines: lead generation, sales, shipping, etc. Everything you do is borne out of your safety culture.
Over my career, I have audited, worked for, and consulted with a multitude of companies. Those that do well seem to have had the safety issue figured out — and as a result — had the rest of their ducks in a row.
As flour is to cake so is safety to your company. Safety is the basis (and core building block) for the success of your company. The key is to go “all in” on your safety culture and to keep an attitude of continuous improvement in all you do. Keep up the great work!