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Posted by: Christy Gibson on Mar 14, 2012

Norma Shirk

Owner/Manager

Corporate Compliance Risk Advisor, LLC

 

Insurance – How Boring!

 

Insurance generally ranks as one of the most boring subjects on the planet. Insurance policies have terms and conditions that go on for pages full of confusing terminology, everything that could go wrong seems to be excluded and the definitions make no sense. Try talking about insurance to your co-workers and you’ll clear the room faster than a tornado blowing through the break room. 

But this is your chance to shine in front of senior management because insurance is an integral part of any corporate compliance program. Understand how insurance can help your company save money and you’ll become indispensable. Let’s face it, corporate compliance boils down to recognizing your company’s risks, creating internal controls to lower the chances of a loss from those risks and finding methods to mitigate the losses that inevitably occur. That’s where insurance fits in. It covers the inevitable losses and so can save the company money.

Insurance is organized into two broad categories. One category is property and casualty (P&C) insurance which covers physical damage to property or people.  An example of property damage coverage is a commercial general liability (CGL, or premises liability) policy which protects the landlord and any third parties from physical damage.  Workers compensation coverage is another example and is required of all employers with more than 5 employees. 

P&C also covers non-physical damage to people and property. Some examples are errors & omissions (E&O) insurance which covers wrongful acts by managers or other employees against third parties.  In addition to E&O insurance, your company may have directors’ and officers’ liability (D&O) insurance to protect the board of directors and the senior managers from shareholder complaints.  Your company may also have invested in an employment practices liability (EPL) policy to protect the corporation when managers are accused of wrongdoing by employees. 

The key to understanding your company’s P&C coverage is to remember that coverage does not overlap. A loss covered under one type of policy will be excluded from coverage under a different policy. For example, a D&O policy will cover losses incurred by third parties due to the wrongful or negligent acts of an officer. But if that officer is also a manager who harasses a subordinate, the loss would be excluded under the D&O policy and covered under an EPL policy. 

The second category of insurance is accident, health and life insurance. Accident and health policies are basically medical insurance. Most of us notice this category of insurance only when we enroll or re-enroll in our employer’s group health plan. Group health plan benefits are usually offered to employees with a package of additional benefits, called ancillary benefits, such as long term care, short term care, dental coverage, and life insurance. Life insurance may also be purchased by a company to cover senior managers who are critical to the functioning of the company; this is known as “key man” insurance.

The point of insurance is that it is designed to cover known risks and reasonably foreseeable risks and by so doing, to limit the financial loss to the company. So think of insurance coverage as a giant jigsaw puzzle. Fit the different policies together to address the known risks and reasonably foreseeable risks of your company. 

Then do a cost/benefit analysis. Your company may never have sufficient funds to buy all the insurance coverage that is available. You can shine in front of your bosses by explaining which risks could cause the most harm to the company’s finances and reputation and need to be covered by insurance.

Insurance – not so boring!

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Norma Shirk, an attorney licensed in Tennessee, Texas, and Colorado, isthe Owner/Manager ofCorporate Compliance Risk Advisor, LLC was formed to educate smaller companies and individuals about the regulatory compliance issues that affect employee benefits programs and corporate insurance risk programs. For smaller employers, our goal is to level the playing field for smaller employers by giving them access to compliance resources available to their larger competitors but without the high cost of replicating an in-house compliance staff. norma.shirk@complianceriskadvisor.com

 

 

Federal District Court Strikes Down

A Significant Aspect Of The Board’s 2011 Posting Requirements

Joshua M. Henderson

In what may be the first of many judicial setbacks for the National Labor Relations Board, on March 2, 2012, the United States District Court for the District of Columbia, Judge Amy Berman Jackson, an Obama nominee, struck down a significant aspect of the Board’s 2011 rulemaking.  It is no secret that the Board has been pursuing an administrative agenda that heavily favors the interests of organized labor.  In pursuit of this agenda, the Board and its General Counsel, in many cases, have changed decades of established rules and policies.  Employers and other legal groups have challenged many of these changes in the courts, and these legal challenges are slowly wending their way through the litigation process.     

This particular case involved the Board’s promulgation of a new rule in August 2011, with one member dissenting, requiring employers to post a notice enumerating the rights of employees under section 7 of the National Labor Relations Act, including the right to organize and to engage in other concerted activity.  The Board prescribed the content, size, and typeface of the notice.  The rule contained an enforcement provision as well.  Failure to post the notice was deemed an unfair labor practice.  In addition, the rule effectively tolled the six-month statute of limitations for filing an unfair labor practice charge against an employer that failed to post the notice.

Employers quickly filed suit in the United States District Court for the District of Columbia to block implementation of the notice rule.  The employers argued primarily that the Board lacked the statutory authority to promulgate the rule.

In her decision, Judge Jackson issued a mixed ruling, granting the employers’ summary judgment motion in part and denying it in part.  The court ruled that the Board was within its authority to promulgate Part A of the rule – the notice requirement.  The court observed that the NLRA authorizes the Board to issue rules “to carry out the terms” of the NLRA itself.  And, it was reasonable, according to the court, for the Board to require posting of a notice to raise employees’ awareness of their rights.

Judge Jackson also held, however, that Part B of the rule — making the failure to post an unfair labor practice and tolling the statute of limitations for unfair labor practices when an employer fails to post — is invalid.  Under the NLRA, “Congress specifically defined and limited the conduct that could constitute an unfair labor practice.” (Opinion, p. 27)  In opposing the employers’ motions, the Board argued that failing to post “interfered” with the employees’ exercise of their section 7 rights.  The court rejected that argument, observing that the rule punished employers simply for not facilitating the employees’ exercise of their rights by failing to post information publicizing those rights.  The Board exceeded its authority in doing so, according to the court.  Similarly, the tolling provision was invalid because it “substantially amends the statute of limitations that Congress expressly set out in the statute.”  (Opinion, p. 37) 

The court did leave open the prospect that the Board could find an employer’s failure to post the notice was an unfair labor practice charge if it was intended to interfere with section 7 rights.  To do so, “the Board must make a specific finding based on the facts and circumstances in the individual case before it that the failure to post interfered with the employee’s exercise of his or her rights.”  (Opinion, p. 31)  Consequently, the Board may still make mischief with this rule in the future.

The court also rejected the employers’ contention that posting the notice was “compelled speech” in violation of the First Amendment.  The Court contrasted recent Supreme Court decisions in which a violation was found because a speaker, such as a religious organization, had its own message materially affected by the government’s requirement.  (It remains to be seen whether some religious organizations may avoid the notice requirement.  As an example, the Seventh-day Adventists have an historic teaching that Church organizations cannot recognize unions.)  Here, the District Court held that the NLRA rights notice was not suggesting that employers favor collective bargaining, or restricts what they may say about the NLRA or unions: “[N]othing in the regulation restricts what an employer may say about the Board’s policies” (Opinion pp. 39-40).  It is possible, though not entirely clear from the ruling, that an employer might be able to post a written comment next to the poster.  Under the NLRA, however, an employer cannot engage in threatening or coercive conduct in this regard.

The District Court’s decision may be appealed.  Moreover, there is a separate lawsuit challenging the notice posting rule which is pending in the United States District Court for South Carolina.  Accordingly, employers can expect further developments in this area.  Nonetheless, this is the strongest indication yet that employers covered by the NLRA will need to post a required employee rights notice as of April 30, 2012.

The notice rule was seen by many to be a transparent attempt by the Obama Board to make itself more relevant, particularly in light of the demise in Congress of the Employee Free Choice Act.  Indeed, in its explanation of the enforcement provision of the notice rule, the Board made clear that the possible effect of this new rule would be to increase unionization efforts: “The Board has determined that employees must be aware of their NLRA rights in order to exercise those rights effectively.”  Although the notice rule was couched in terms of merely informing employees of their rights, Judge Jackson concluded that the notice rule was, in part, an invalid arrogation of power by the Board.  The requirement to post the notice stands for now, but with little teeth in terms of enforcement.

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Josh Henderson is Counsel in the Labor and Employment practice group in the San Francisco office of Seyfarth Shaw LLP.  He began his practice over fifteen years ago in Seyfarth's Chicago office.

Mr. Henderson has a considerable range of experience as trial and appellate counsel for management in complex employment litigation matters, including retaliation and whistleblowing claims, sexual harassment and discrimination, and wage and hour class actions.  Through his OSHA practice, he has advised clients on a myriad of workplace safety standards and rules, and represented employers in administrative litigation before OSHA and Cal/OSHA.  Mr. Henderson also serves as labor-relations counsel for management in connection with collective bargaining, unfair labor practice litigation before the NLRB, strikes and secondary boycotts, and labor arbitrations.  He provides advice and counsel to California and national employers on a broad spectrum of employment issues, including contracts, terminations, leaves of absence (FMLA/ADA), compliance with local employment laws (including the San Francisco Health Care Security Ordinance and Paid Sick Leave laws), independent contractors, and social media policies.

A prolific legal writer and sought-after public speaker, Mr. Henderson also is a classically trained musician and baritone.  He has sung with organizations throughout the San Francisco Bay Area.  He is a former judicial law clerk for the Honorable Saundra Brown Armstrong, United States District Court for the Northern District of California.