Employment Update: The California New Parent Leave Act

As of January 1, 2018, California’s small employers—those who employ 20 to 49 employees within a 75-mile radius—must provide job-protected unpaid leave for new parents to bond with a newborn child. This law is significant because it increases the number of employers who must provide parental leave. Employees of larger companies are entitled to job-protected leave under federal law.

Insurance Companies Owe Certain Duties to Policyholders

An insurance policy is supposed to provide the insured policyholder with peace of mind: the policyholder and the insurance company have a contract stating that in exchange for premium, the insurance company will pay medical bills and provide other compensation in the event of an injury to the policyholder. Insurance is the only product that a consumer purchases which she hopes she never has to use. Unfortunately, however, when a claim is ultimately made, insurance companies do not always hold up their end of the bargain.  When that occurs,  a policyholder should consult a lawyer for assistance.

When Insurance Companies Don’t Act in Their Clients’ Best Interests

Insurance companies and policyholders agree to a number of terms in an insurance contract. For example, a company might agree to insure a business’s manufacturing plant in the event of a disaster such as a flood, in exchange for the corporation paying monthly premiums to the insurance company.

What’s more, every insurance policy in California is deemed by law to contain an “implied covenant of good faith and fair dealing.” This means the insurance company is supposed to treat policyholders fairly. Unfortunately, this does not always happen.

How Do Insurance Companies Adjust Workers Comp Premiums?

Insurance companies adjust workers’ compensation premiums based on a company’s actual losses compared with the “expected” losses of all other similarly sized companies in the same industry. This adjustment, or experience modification, is expressed as a percentage. A company with an experience modification of more than 100% has had a greater-than-expected number of claims (a worse-than-average experience), while a company with an experience modification of less than 100% percent has had a fewer-than-expected number of claims (a better-than-average experience).

How Are Workers Comp Premiums Calculated?

Insurance companies typically calculate workers’ compensation premiums based on the size of a company’s payroll and the type of work the company performs. Most companies’ premiums are also adjusted by applying an experience modification, which is expressed as a percentage. This modification adjusts the premium up or down depending on the company’s workers’ compensation claims history and is part of a merit-based system designed to provide employers a financial incentive to reduce work-related accidents.

Workers Comp 101

Workers’ compensation insurance is required of all California employers—even those who only employ one person, part-time. The policy serves as a social safety net to provide compensation for employees who become injured on the job and also limits the liability of employers if an employee sues over workplace-related injuries.

Workers’ compensation insurance premiums are collected initially as an estimate. An audit following the end of the policy term corrects any projections that were wrong during the policy term. Premiums are calculated based on employer’s industry “classification code” and the employer’s “payroll”.

What Happens When You Owe Money After a Workers Comp Audit?

All businesses in California must carry workers’ compensation insurance in the event anyone who performs work for a company is injured while working. Unlike other types of insurance, workers’ compensation policy premiums are collected as an estimate during the policy term. Once the policy term ends, an auditor checks the premium amounts by conducting an audit. The audit reveals any real-time changes, such as departing workers who would reduce a company’s payroll (and thus affect the premium amounts) during the insurance policy term.