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Since 2017, the market has been in one of the hardest cycles in recent history. The decade leading up to 2017 experienced an influx of capital into the insurance market, which increased competition, drove down rates, and encouraged poor underwriting standards as carriers ‘bought’ their way into the marketplace. It was a fantastic buyer’s market for many years. However, the insurance market, as with every other free market, ebbs and flows. In 2017, the HIM losses (Hurricanes Harvey, Irma, and Maria) changed the capital markets perspective of insurance as a diversification hedge and subsequently exited the “insurance investment class” en masse, resulting in the supply-demand curve to shift drastically in the opposite direction and kick-off this current hard market cycle. Finally, in early 2022, we witnessed a plateauing in the market and a glowing light for insurance buyers started to show at the end of the tunnel…that was short-lived. How Hurricane Ian Is Impacting the Market Early estimates from Hurricane Ian damage surveys indicate it was one of the costliest storms in U.S. history, with insured losses of $53 billion to $74 billion. To put it into context, Katrina reached $85B when adjusted for current inflation. Possibly more importantly, the cost and frequency of extreme-weather disasters have increased substantially in recent years and the frequency of billion-dollar weather disasters is now about one event every 18 days, compared to one event every 82 days between such disasters in the 1980s. This turmoil continues to exacerbate the hard property market cycle and the event frequency and severity continue to wreak havoc on reinsurance balance sheets and profitability. We anticipate seeing multiple small to mid-sized carriers with exposures in Florida going out of business in the coming quarters, and have already seen other regional carriers close their doors in the past several months due to poor profitability and inability to navigate the ever-changing and very costly treaty reinsurance marketplace. Why This Matters for Insureds As of mid-year, rate increases on non-CAT desirable classes of business started to plateau with single-digit rate increases, and in some cases rate decreases, while tougher classes of business had still experienced significant rate increases. With the ongoing Derechos (what we have started to define as an inland hurricane) and increasing frequency and severity of catastrophic-related events, the reinsurance marketplace is in chaos, incurring a significant amount of unexpected losses. We anticipate these dynamics to further deepen and lengthen the current hard market cycle, which will equate to more pain for many buyers of property insurance in the coming quarters. You may ask: “I don’t have exposure in Florida, or Wildfires in California (etc), or Midwest hurricanes… so why does this affect my property insurance?” Great question…it does indirectly because the reinsurance that the carriers bought to insure their portfolios of risk (called a reinsurance treaty) may be the same reinsurers that insure your carriers’ book. In short, the market is highly correlated at the top of the food chain (capital markets and reinsurance) so this pain will continue for the foreseeable future. What to Be On the Lookout For Many standard markets are tightening their underwriter guidelines, some due to executive action, and others due to their treaty reinsurance terms. Through October and November 2022, carriers are submitting their expected losses from Hurricane Ian. Analysts will be closely scrutinizing these figures and playing a large role in establishing what rate increases the reinsurance marketplace will seek in January when most of the reinsurance treaties renew. Throughout mid/late Q4, we should start to have a stronger pulse on the general direction of rate increases, but until then there is an apparent ‘quiet before the storm’ feeling, and frankly, we’re already seeing the storm coming faster than expected. To help our insureds remain proactive and less beholden to the market changes, here are several fundamentals to prepare for: Ensure valuation adequacy within your Statement of Values (SOV) – this is one of the most important topics that underwriters are scrutinizing harder than ever before and a primary focal point when they open a submission. Obtain and act upon loss control reports in advance – third-party or carrier engineering and loss control reports are immensely helpful in elevating your submission to the “top of the pile”. While assisting our insureds with this, we have found that many loss control firms are backlogged so we recommend planning in advance. Scrutinize terms and conditions – we are seeing many carriers trying to restrict critically important terms and conditions on short notice; it is imperative that price not be the only focal point when negotiating the renewal. Analyze alternative program structures – the limits that many incumbent standards and E&S carriers can provide at renewal may be severely limited; we believe in building backup options and “courting” other carriers throughout the policy term to ensure sound contingency capacity. The above is a brief snapshot and overview. We would be happy to talk in greater detail about the strategies we’ve successfully developed to help navigate this hard market and ease the pain. We remain committed to answering any questions that may arise and we will stay in touch as we monitor the marketplace.

What is Builder's Risk and Why is it Important? Builder's risk insurance is a specialized type of property insurance that is intended to protect buildings and structures that are under construction. Builder's risk typically covers property damage of “work in progress” occurring from fire, lightning, hail, explosions, theft, vandalism, and acts of God (such as hurricanes). This coverage protects project owners, general contractors, and subcontractors. Additionally, builder's risk policies can be written to include coverage for loss of income and additional expenses. This would apply if the completion of a project is delayed due to property damage caused by a covered loss. It is important to note that there is no standard form of builders risk insurance, meaning the policies can vary between insurance companies. These coverage terms can be negotiated. Builder's risk is critical to contractors, as it protects you from detrimental property losses during a project. Market Forecast As mentioned, builder's risk is a specialized type of property insurance. The property market has been in one of the hardest (increasing rates) cycles in recent history. After the events of Hurricane Ian, damage surveys indicate it is one of the costliest storms in U. S. history, with increased insured losses of $53 billion to $74 billion. In recent years, the frequency and cost of extreme-weather disasters is now about one event every 18 days, compared to one event every 82 days between such disasters in the 1980s. Another challenge to consider with these property losses are inflation pressures when rebuild time comes into play. Costs of materials continue to be on the rise into 2023. As a result of poor losses arising from difficult types of projects, especially frame and CAT-prone construction projects, market conditions are declining which means rates are expected to further increase for all construction types. Generally speaking, rates fluctuate depending on the exposures of the project and job site (construction type, location, construction hard/soft cost, etc.). We anticipate these dynamics to further deepen and lengthen the current hard market cycle, which will equate to more pain for many buyers of property insurance in the coming quarters. You may ask: “I don’t have exposure in Florida, or Wildfires in California (etc), or Midwest hurricanes… so why does this affect my builder’s risk/property insurance?” Great question…it does indirectly because the reinsurance that the carriers bought to insure their portfolios of risk (called a reinsurance treaty) may be the same reinsurers that insure your carriers’ book. In short, the market is highly correlated at the top of the food chain (capital markets and reinsurance) so this pain will continue for the foreseeable future. To help you drive the best Builder's Risk outcome, follow the below suggestions: If you have a Master Builder’s Risk policy, do not use the rates from that policy if your project will exceed the maximum value provided by the policy. Rather, contact your agent who should provide you with rate indications that you can use for bidding. Keep your agent/broker in the loop, both during the bidding process (to obtain rate indications) and when you know you will need a policy placed. Prior to securing builder's risk coverage, complete a detailed inventory of all potential exposures that may arise during a project. Be prepared to gather more information to secure a builder’s risk quote. With tight underwriting standards come requests for more information than has been required in the past. Keep in mind the following list of insurance items typically needed for any sizeable project: Completed application Construction budget: if your project has phases it may be more cost-effective to break out policies by phase, so please provide hard and soft costs broken out by phase. Statement of Values split out for all the buildings of every phase (if applicable) Gantt chart. Project drawings/architectural renderings & the name of the firm that provided the services Site plans. Site photos. Geotech reports. In Conclusion The 2023 Insurance Market Forecast for builder's risk is anticipated to further harden. Considering the unique characteristics of the policy and project is necessary. There is no standard builder's risk policy, so it is important to know what is covered in your policy. We recommend partnering with an insurance broker who understands the construction industry – allowing you to maximize your understanding of the coverage and complete projects with a piece of mind. For any additional information or questions please contact your Cottingham and Butler representative.

On Jan. 9, 2024, the U.S. Department of Labor (DOL) announced a final rule, effective March 11, 2024, revising the Department’s guidance on how to analyze who is an employee or independent contractor under the Fair Labor Standards Act (FLSA). This final rule rescinds the Independent Contractor Status Under the Fair Labor Standards Act rule, which was published on Jan. 7, 2021, and replaces it with an analysis for determining employee or independent contractor status that is more consistent with the FLSA as interpreted by long-standing judicial precedent. The misclassification of employees as independent contractors may deny workers minimum wage, overtime pay, and other protections. This final rule aims to reduce the risk of employees being misclassified as independent contractors while providing a consistent approach for businesses that engage with individuals who are in business for themselves. General FAQS 1. What is the Employee or Independent Contractor Classification Under the Fair Labor Standards Act Final Rule? This final rule, announced on January 9, 2024, revises the Department’s guidance on how to analyze who is an employee or independent contractor under the Fair Labor Standards Act (FLSA). Specifically, the final rule rescinds the 2021 Independent Contractor Rule that was published on January 7, 2021, and replaces it with guidance for how to analyze employee or independent contractor classification that is more consistent with the FLSA as interpreted by long-standing judicial precedent. The Department believes that this final rule will reduce the risk of employees being misclassified as independent contractors while at the same time providing greater consistency for businesses that engage (or wish to engage) with individuals who are in business for themselves. 2. When is this rule effective? This final rule is effective on March 11, 2024. 3. Why is the Department replacing the guidance it issued in the 2021 Independent Contractor Rule? The Department believes that the 2021 Independent Contractor Rule does not fully comport with the text and purpose of the FLSA as interpreted by courts. Specifically, the 2021 Independent Contractor Rule includes provisions that are in tension with long-standing case law and the Department’s prior guidance on independent contractor status, such as: Its designation of two “core factors”—control and opportunity for profit or loss—which are given greater predetermined weight in the analysis; Its consideration of a worker’s investments and initiative only as part of the opportunity for profit or loss factor; and Its prohibition against considering whether the work performed is central or important to the potential employer’s business. These and other provisions in the 2021 Independent Contractor Rule narrowed the economic reality test by limiting the facts that may be considered as part of the test—facts that the Department believes are relevant in determining whether a worker is economically dependent on the employer for work (i.e., an employee under the FLSA) or is in business for themself (i.e., an independent contractor). The Department further believes that leaving the 2021 Independent Contractor Rule in place would have a confusing and disruptive effect on workers and businesses alike due to its departure from decades of case law describing and applying the multi-factor economic reality test as a totality-of-the-circumstances test. 4. How will this final rule help workers and businesses understand their rights and responsibilities under the FLSA? The final rule provides detailed guidance on employee or independent contractor status that is not only consistent with the FLSA and the decades of case law interpreting it, but more robust than the Department’s earlier subregulatory guidance on the topic. The final rule’s analysis may be applied to workers in any industry and will be easily accessible in the Code of Federal Regulations (CFR). For these reasons, the final rule will provide helpful guidance for workers and businesses alike. 5. Does this final rule adopt an “ABC” test? No. The final rule does not adopt an “ABC” test, which permits an independent contractor relationship only if all three factors in a three-factor test are satisfied. Under the final rule, the Department will instead rely on the long-standing multifactor “economic reality” test used by courts to determine whether a worker is an employee or independent contractor. This test relies on the totality of the circumstances where no one factor is determinative. 6. Does this final rule affect the analysis for determining worker classification under other laws? No. The final rule only revises the Department’s interpretation under the FLSA. It has no effect on other laws—federal, state, or local—that use different standards for employee classification. For example, the Internal Revenue Code and the National Labor Relations Act have different statutory language and judicial precedents governing the distinction between employees and independent contractors, and those laws are interpreted and enforced by different federal agencies. Similarly, this rule has no effect on those state wage-and-hour laws that use an “ABC” test, such as California or New Jersey. The FLSA does not preempt any other laws that protect workers, so businesses must comply with all federal, state, and local laws that apply and ensure that they are meeting whichever standard provides workers with the greatest protection. See 29 U.S.C. 218. Substance of the Final Rule 7. What analysis guides whether a worker is an employee or independent contractor under this final rule? This final rule continues to affirm that a worker is not an independent contractor if they are, as a matter of economic reality, economically dependent on an employer for work. Consistent with judicial precedent and the Department’s interpretive guidance prior to 2021, the final rule applies the following six factors to analyze employee or independent contractor status under the FLSA: Opportunity for profit or loss depending on managerial skill; Investments by the worker and the potential employer; Degree of permanence of the work relationship; Nature and degree of control; Extent to which the work performed is an integral part of the potential employer’s business; and Skill and initiative. The final rule provides detailed guidance regarding the application of each of these six factors. No factor or set of factors among this list of six has a predetermined weight, and additional factors may be relevant if such factors in some way indicate whether the worker is in business for themself (i.e., an independent contractor), as opposed to being economically dependent on the employer for work (i.e., an employee under the FLSA). 8. Can a worker voluntarily waive employee status and choose to be classified as an independent contractor? No. Under the FLSA, a worker is an employee and not an independent contractor if they are, as a matter of economic reality, economically dependent on the employer for work. While businesses are certainly able to organize their businesses as they prefer consistent with applicable laws, and workers are free to choose which work opportunities are most suitable for them, if a worker is an employee under the FLSA, they cannot waive FLSA-protected rights (such as minimum wage or overtime pay). The Supreme Court has explained that permitting employees to waive their FLSA rights would harm other employees and undermine the Act’s goal of eliminating unfair methods of competition in commerce. 9. How is this final rule similar to the Department’s 2021 Independent Contractor Rule? This final rule has several similarities to the 2021 Independent Contractor Rule. For example, both rules advise that independent contractors are workers who, as a matter of economic reality, are in business for themselves, whereas FLSAcovered employees are workers who are, as a matter of economic reality, economically dependent on the employer for work. Both rules identify economic dependence as the “ultimate inquiry” of the analysis; both rules provide a nonexhaustive list of factors to assess economic dependence, and both rules caution that no single factor is determinative. Both rules also clarify that economic dependence does not focus on the amount of income the worker earns or whether the worker has other sources of income. 10. How does the final rule differ from the Department’s 2021 Independent Contractor Rule? This final rule differs from the guidance provided in the 2021 Independent Contractor Rule in several important ways. Specifically, consistent with the approach taken by federal courts, this final rule: Returns to a totality-of-the-circumstances economic reality test, where no single factor or group of factors is assigned any predetermined weight; Considers six factors (instead of five), including the investments made by the worker and the potential employer; Provides additional analysis of the control factor, including a detailed discussion of how scheduling, supervision, price-setting, and the ability to work for others should be considered when analyzing the nature and degree of control over a worker; Returns to the Department’s long-standing consideration of whether the work is integral to the employer’s business (rather than whether it is exclusively part of an “integrated unit of production”); Provides additional context to some factors, including a discussion of exclusivity in the context of the permanency factor and initiative in the context of the skill factor; and Omits a provision from the 2021 Independent Contractor Rule, which minimized the relevance of an employer’s reserved but unexercised rights to control a worker. With these features, the final rule’s guidance aligns with the analysis currently applied by courts, providing greater consistency for workers and businesses alike. 11. How does the final rule differ from the Notice of Proposed Rulemaking (NPRM) published on October 13, 2022 (87 FR 62218)? The Department received approximately 55,400 comments in response to the NPRM from a diverse array of stakeholders, including employees, self-identified independent contractors, businesses, trade associations, labor unions, advocacy groups, law firms, members of Congress, state and local government officials, and other interested members of the public. The Department carefully considered those comments and consequently made several adjustments to the analysis that was proposed in the NPRM, including revisions regarding the control factor and the investment factor. For example, the final rule states that actions taken by the potential employer for the sole purpose of complying with specific, applicable federal, state, tribal, or local law or regulation would not indicate “control.” The final rule also advises that costs to a worker that are unilaterally imposed by a potential employer are not “investments” indicative of independent contractor status. 12. Are any of the economic reality factors adopted in this rule more important than others when evaluating a worker’s employment status? No. Different factors might be more or less important in different cases depending on the facts of each individual case. For example, a factor leaning strongly towards one classification outcome (employee or independent contractor status) could be more relevant in the overall analysis for a particular worker than a different factor, which might be a closer call. However, this final rule does not categorically weigh certain factors more than others in every case like the 2021 Independent Contractor Rule. 13. How does the final rule explain “opportunity for profit or loss depending on managerial skill?” This factor considers whether the worker has opportunities for profit or loss based on managerial skills (including initiative, business acumen or judgment) that affect the worker’s economic success or failure in performing the work. The following facts, among others, can be relevant: whether the worker determines or can meaningfully negotiate the charge or pay for the work provided; whether the worker accepts or declines jobs or chooses the order and/or time in which the jobs are performed; whether the worker engages in marketing, advertising, or other efforts to expand their business or secure more work; and whether the worker makes decisions to hire others, purchase materials and equipment, and/or rent space. If a worker has no opportunity for a profit or loss, then this factor suggests that the worker is an employee. Some decisions by a worker that can affect the amount of pay that a worker receives, such as the decision to work more hours or take more jobs when paid a fixed rate per hour or per job, generally do not reflect the exercise of managerial skill indicating independent contractor status under this factor. 14. How does the final rule explain “investments by the worker and the employer?” This factor considers whether any investments by a worker are capital or entrepreneurial in nature. Costs to a worker of tools and equipment to perform a specific job, costs of workers’ labor, and costs that the potential employer imposes unilaterally on the worker, for example, are not evidence of capital or entrepreneurial investment and indicate employee status. Investments that are capital or entrepreneurial in nature and thus indicate independent contractor status generally support an independent business and serve a business-like function, such as increasing the worker’s ability to do different types of or more work, reducing costs, or extending market reach. Additionally, the worker’s investments should be considered on a relative basis with the potential employer’s investments in its overall business. The worker’s investments do not have to be equal to the potential employer’s investments and should not be compared only in terms of the dollar values of investments or the sizes of the worker and the potential employer. Instead, the focus should be on comparing the investments to determine whether the worker is making similar types of investments as the potential employer (even if on a smaller scale) to suggest that the worker is operating independently, which would indicate independent contractor status. 15. How does the final rule explain “degree of permanence of the work relationship?” This factor weighs in favor of the worker being an employee when the work relationship is indefinite in duration, continuous, or exclusive of work for other employers. This factor weighs in favor of the worker being an independent contractor when the work relationship is definite in duration, non-exclusive, project-based, or sporadic based on the worker being in business for themself and marketing their services or labor to multiple entities. This may include regularly occurring fixed periods of work, although the seasonal or temporary nature of work by itself would not necessarily indicate independent contractor classification. Where a lack of permanence is due to operational characteristics that are unique or intrinsic to particular businesses or industries and the workers they employ, this factor is not necessarily indicative of independent contractor status unless the worker is exercising their own independent business initiative. 16. How does the final rule explain “nature and degree of control?” This factor considers the potential employer’s control, including reserved control, over the performance of the work and the economic aspects of the working relationship. Facts relevant to the potential employer’s control over the worker include whether the potential employer sets the worker’s schedule, supervises the performance of the work, or explicitly limits the worker’s ability to work for others. Additionally, facts relevant to the potential employer’s control over the worker include whether the potential employer uses technological means to supervise the performance of the work (such as by means of a device or electronically), reserves the right to supervise or discipline workers, or places demands or restrictions on workers that do not allow them to work for others or work when they choose. Whether the potential employer controls economic aspects of the working relationship should also be considered, including control over prices or rates for services and the marketing of the services or products provided by the worker. Actions taken by the potential employer for the sole purpose of complying with a specific, applicable federal, state, tribal, or local law or regulation are not indicative of control. As examples of such compliance actions that are not indicative of control, the final rule identifies a publication’s requirement that a writer comply with libel law and a home care agency’s requirement that all individuals with patient contact undergo background checks in compliance with a specific Medicaid regulation. Actions taken by the potential employer that go beyond compliance with a specific, applicable federal, state, tribal, or local law or regulation and instead serve the potential employer’s own compliance methods, safety, quality control, or contractual or customer service standards may be indicative of control. For example, a home care agency’s imposition of extensive provider qualifications, such as fulfilling comprehensive training requirements (beyond training required for relevant licenses), may be probative of control. More control by the potential employer favors employee status; more control by the worker favors independent contractor status. 17. How does the final rule explain “extent to which the work performed is an integral part of the employer’s business?” This factor considers whether the work performed is an integral part of the potential employer’s business. This factor does not depend on whether any individual worker, in particular, is an integral part of the business, but rather whether the function they perform is an integral part of the business. This factor weighs in favor of the worker being an employee when the work they perform is critical, necessary, or central to the potential employer’s principal business. This factor weighs in favor of the worker being an independent contractor when the work they perform is not critical, necessary, or central to the potential employer’s principal business. 18. How does the final rule explain “skill and initiative?” This factor considers whether the worker uses specialized skills to perform the work and whether those skills contribute to the business-like initiative. This factor indicates employee status where the worker does not use specialized skills in performing the work or where the worker is dependent on training from the potential employer to perform the work. Where the worker brings specialized skills to the work relationship, this fact is not itself indicative of independent contractor status because both employees and independent contractors may be skilled workers. It is the worker’s use of those specialized skills in connection with business-like initiatives that indicate that the worker is an independent contractor. 19. When might “additional factors” matter in determining a worker’s employment status? Under the final rule, additional factors may be relevant in determining whether the worker is an employee or independent contractor for purposes of the FLSA, if the factors in some way indicate whether the worker is in business for themself, as opposed to being economically dependent on the potential employer for work. This guidance is identical to guidance provided in the 2021 Independent Contractor Rule and is consistent with judicial precedent. 20. Under the final rule, does a worker have to satisfy all the economic reality factors to qualify as an independent contractor? No. Under the economic reality test, no single factor (or set of factors) automatically determines a worker’s status as either an employee or an independent contractor. Instead, the economic reality factors are all weighed to assess whether a worker is economically dependent on a potential employer for work, according to the totality of the circumstances. 21. I have questions about this rule and/or worker classification. Who should I contact? For questions about this final rule, you may call the Wage and Hour Division’s (WHD) Division of Regulations, Legislation, and Interpretation (DRLI) at (202) 693-0406. For questions about the employment classification of a particular worker or group of workers, please contact your nearest WHD District Office, as displayed at https://www.dol.gov/agencies/whd/contact/local-offices.

The last months of the year are a great time for HR professionals to ensure they’re prepared for everything that needs to be done. It’s also an opportunity to evaluate which HR processes organizations want to take forward into the new year and which to leave behind. While certain HR compliance activities must be completed by the end of the year, HR professionals can also use this time of preparation to focus on tasks that will set their organizations on the right course for next year. This article provides an overview of general, compliance-related, and employee compensation and benefits activities HR may need to tackle at the end of each year. The activities outlined in this article are not exhaustive. Because an organization’s failure to comply with certain year-end requirements can result in significant legal and financial consequences, employers are encouraged to seek legal counsel to discuss any specific issues. General Activities The end of the year is usually a busy time for HR professionals. They must accomplish a lot in a relatively short period to close out the year and prepare for the upcoming one. These tasks may include: Completing annual performance reviews Asking employees to update their personal and contact information Backing up HR data and personnel files Establishing an annual budget and allocating resources Reviewing recruiting and hiring processes Creating plans for new hires HR can also create and update succession plans and job descriptions. The following tasks are general activities HR professionals should consider completing at the end of the year. HR Metrics Development The year’s end is an opportunity to review the year, analyzing what went well and where improvements can be made. This provides HR a chance to develop meaningful metrics for the upcoming year. These metrics may measure: Employee engagement and satisfaction Employee productivity Turnover rate, including new hire turnover HR growth compared to revenue Average time to fill open positions Offer acceptance rate Promotion rate Time to hire HR-to-employee ratio By aligning HR metrics to long-term organizational goals, HR can positively impact an organization’s growth and facilitate strategic decision-making. Workforce Analysis Workforce planning is a common year-end HR task. Such planning allows organizations to forecast staffing needs for the upcoming year. This also provides HR with an opportunity to review and analyze an organization’s workforce strengths. By engaging with leaders and managers, HR can help identify outstanding talent and ways to develop their capabilities. This allows an organization to maximize the full potential of its workforce. Value Alignment HR is generally responsible for an organization’s values. HR can have a positive impact on an organization by helping employees understand the significance of their contributions and how they align with the organization’s values. The year’s end is a great opportunity to review an organization’s core values and define employee engagement initiatives. HR can help engage and align employees with the organization’s purpose and values, which can positively impact an organization’s attraction and retention efforts. Employee Feedback The end of the year can be an opportunity to identify areas of improvement. Employee engagement surveys can give organizations meaningful feedback from employees about what is working and what isn’t. By soliciting employee feedback, organizations can gather insights to improve employee engagement and morale, boost productivity, strengthen retention, refine internal processes and meet organizational goals. With a better understanding of existing issues, HR professionals can not only identify areas of improvement but also implement changes that can positively impact the organization in the upcoming year. Employee Communications HR tends to receive an influx of employee questions at the year’s end regarding benefits, holiday schedules and tax information. Clear and frequent communication is essential to keep employees informed of year-end information and responsibilities. Communications can address topics such as required training or W-2 distribution. HR can even hold office hours to allow employees to ask questions. Compliance Activities Year-end is an excellent time to review how well an organization is complying with current laws and regulations. To ensure organizations follow all applicable laws and regulations, HR can conduct a compliance audit. Common items reviewed during a compliance audit include the following: Employee classification Personnel files Employee handbook Employment policies Employment and labor law posters As part of its audit, HR can review employee documents, such as tax forms or beneficiary designations, to ensure they’re completed properly and signed, if necessary. HR can also confirm employees have completed all required trainings and move terminated employee personnel files to storage. If HR uncovers issues during its audit, it can ensure they’re corrected before the start of the new year. For example, if HR discovers the organization’s employment and labor law posters are out of date, it can order updated posters. Many organizations are legally required to submit year-end reports or notices, such as an EEO-1 Component 1 data collection report, Medicare Part D notice or annual reporting under the Affordable Care Act for qualifying employers. Despite all that must be done at year’s end, HR must ensure these reports and compliance notices are prepared and submitted in a timely manner to avoid penalties and fines. These professionals must also update organizational documentation and policies yearly. Document and Policy Updates A full review of an organization’s policies and procedures may be necessary at the end of the year, as policies can quickly become outdated or need to be updated to address any legal or organizational changes. This allows adjustments to be made and processes to be improved so they run smoother in the new year. HR can verify that the most recent workplace policies are up to date and make any necessary revisions. This may include confirming employees have signed employee handbooks and forms for the code of ethics or conflicts of interest. In addition, each year brings new regulations and compliance standards that organizations need to follow. HR can help organizations prepare for these changes by researching new laws and regulations and implementing all applicable changes. Employee Compensation and Benefits Activities Organizations often review employee compensation and benefits at the year’s end. HR can compare employee salaries to the market average and consider making cost-of-living adjustments to stay competitive. It can also do the same for its benefits offerings. By conducting employee benefits surveys, organizations can learn what benefits employees want and value most and then update or tailor benefits packages to enhance their attraction and retention efforts. HR professionals should consider completing following year-end compensation and benefits activities. Employee Bonuses and Payroll To avoid potential payment issues, HR can review employee wage, tax and withholding information at the end of the year to ensure it’s accurate for the upcoming year. HR can also establish next year’s payroll schedule and prepare for the first payroll run of the new year. Many organizations distribute employee bonuses at the end of the year. HR needs to ensure that employees receiving bonuses have satisfied all requirements and that the payment amounts and information are accurate. Time-off Calendar and Balances Verifying employee time-off balances that will carry over to the upcoming year is a critical year-end HR activity. Carryover balances should be reviewed for accuracy to ensure time-off eligibility and carryover rules are applied correctly and employees are provided with accurate information. Any unused time off that can be paid out will need to be reviewed and added to the payroll. HR can also ensure next year’s calendar includes the correct dates for company holidays. This is a simple task that can prevent headaches in the upcoming year. Summary Year-end activities can seem limitless, which may leave HR professionals feeling overwhelmed, and some tasks can be easily overlooked. By preparing early, HR can wrap up this year properly and set their organizations up for success next year. For more HR-related resources, contact your Cottingham & Butler representative today. These above insights are not intended to be exhaustive nor should any discussion or opinions be construed as professional advice.

Cyber incidents—including data breaches, ransomware attacks, and social engineering scams—have become increasingly prevalent, impacting organizations of all sizes and industries. Such incidents have largely been brought on by additional cyber threat vectors and growing attacker sophistication. As these incidents continue to rise in both cost and frequency, organizations must take steps to address their cyber exposures and bolster their digital security defenses. Doing so not only helps organizations prevent cyber incidents and associated insurance claims from happening, but can also help them secure adequate cyber coverage in the first place. After all, the heightened severity of cyber incidents has motivated most cyber insurers to increase their premiums and be more selective regarding which organizations they will insure and the types of losses they will cover. As such, many underwriters have begun leveraging organizations’ documented cybersecurity practices to determine whether they qualify for coverage —whether it’s a new policy or a renewal—as well as how expensive their premiums will be. With this in mind, here are 10 essential cybersecurity controls that organizations can implement to help manage their cyber exposures. Multifactor Authentication (MFA) While complex passwords can help deter cybercriminals, they can still be cracked. To help prevent cybercriminals from gaining access to employees’ accounts and using such access to launch potential attacks, MFA is key. MFA is a layered approach to securing data and applications where a system requires a user to present a combination of two or more credentials to verify their identity for login. Through MFA, employees must confirm their identities by providing extra information (e.g., a phone number or unique security code) in addition to their passwords when attempting to access corporate applications, networks, and servers. This additional login hurdle means that cybercriminals won’t be able to easily unlock accounts, even if they have employees’ passwords in hand. It’s best practice for organizations to enable MFA for remote access to their networks, the administrative functions within their networks, and any enterprise-level cloud applications. Endpoint Detection and Response (EDR) Solutions EDR solutions continuously monitor security-related threat information to detect and respond to ransomware and other kinds of malware. They provide visibility into security incidents occurring on various endpoints—such as smartphones, desktop computers, laptops, servers, tablets, and other devices that communicate back and forth with the networks in which they are connected—to help prevent digital damage and minimize future attacks. Specifically, EDR solutions offer advanced threat detection, investigation, and response capabilities—including incident data search and investigation triage, suspicious activity validation, threat hunting, and malicious activity detection and containment—by constantly analyzing events from endpoints to identify suspicious activity. Further, these solutions provide continuous and comprehensive visibility into what is happening in real-time by recording activities and events taking place on all endpoints and workloads. Upon receiving alerts regarding possible threats, organizations and their IT departments can then uncover, investigate and remediate related issues. As a whole, implementing EDR solutions is a critical step in helping organizations enhance their network visibility, conduct more efficient cybersecurity investigations, leverage automated remediation amid potential incidents and promote more contextualized threat hunting through ongoing endpoint data analysis. Patch Management Patches modify operating systems and software to enhance security, fix bugs and improve performance. They are created by vendors and address key vulnerabilities cybercriminals may target. Patch management refers to the process of acquiring and applying software updates to a variety of endpoints. The patch management process can be carried out by organizations’ IT departments, automated patch management tools, or a combination of both. Steps in the patch management process include identifying IT assets and their locations, assessing critical systems and vulnerabilities, testing and applying patches, tracking progress, and maintaining records of such progress. Patch management is necessary to ensure overall system security, maintain compliance with applicable software standards set by regulatory bodies and government agencies, leverage system features and functionality improvements that may become available over time, and decrease downtime that could result from outdated, inefficient software. From a cybersecurity standpoint, a consistent approach to patching and updating software and operating systems helps limit exposure to cyber threats. Accordingly, organizations should establish patch management plans that include frameworks for prioritizing, testing, and deploying software updates. Network Segmentation and Segregation When organizations’ networks lack sufficient access restrictions and are closely interconnected, cybercriminals can easily hack into such networks and cause more widespread operational disruptions and damage. That’s where network segmentation and segregation can help. Network segmentation refers to dividing larger networks into smaller segments (also called subnetworks) through the use of switches and routers, therefore permitting organizations to better monitor and control the flow of traffic between these segments. Such segmentation may also boost network performance and help organizations localize technical issues and security threats. Network segregation, on the other hand, entails isolating crucial networks (i.e., those containing sensitive data and resources) from external networks, such as the internet. Such segregation allows organizations to leverage additional security protocols and access restrictions within their most critical networks, making it more difficult for cybercriminals to penetrate these networks laterally. Both network segmentation and segregation allow organizations to take a granular approach to cybersecurity, limiting the risk of cybercriminals gaining expansive access to their IT infrastructures (and the vital assets within them) and causing significant losses. When implementing network segmentation and segregation, organizations must uphold the principle of least privilege—only allowing employees access to the networks they need to perform their job duties—and separate hosts from networks based on critical business functions to ensure maximum infrastructure visibility. End-of-Life (EOL) Software Management At some point, all software will reach the end of its life. This means manufacturers will no longer develop or service these products, discontinuing technical support, upgrades, bug fixes, and security improvements. As a result, EOL software will have vulnerabilities that cybercriminals can easily exploit. Organizations may be hesitant to transition away from EOL software for a number of reasons, such as limited resources, a lack of critical features among new software or migration challenges. This is especially true when EOL systems are still functioning. However, continuing to use EOL software also comes with many risks, including heightened cybersecurity exposures, technology incompatibilities, reduced system performance levels, elevated operating costs and additional data compliance concerns. As such, it’s clear that proactive EOL software management is necessary to prevent unwelcome surprises and maintain organizational cybersecurity. In particular, organizations should adopt life cycle management plans that outline ways to introduce new software and provide methods for phasing out unsupported software; utilize device management tools to push software updates, certifications and other necessary upgrades to numerous devices simultaneously; and review the EOL status of new software before selecting it for current use to avoid any confusion regarding when it will no longer be supported and plan for replacements as needed. Remote Desk Protocol (RDP) Safeguards RDP—a network communications protocol developed by Microsoft—consists of a digital interface that allows users to connect remotely to other servers or devices. Through RDP ports, users can easily access and operate these servers or devices from any location. RDP has become an increasingly useful business tool—permitting employees to retrieve files and applications stored on their organizations’ networks while working from home, as well as giving IT departments the ability to identify and fix employees’ technical problems remotely. Unfortunately, RDP ports are also frequently leveraged as a vector for launching ransomware attacks, particularly when these ports are left exposed to the internet. In fact, a recent report from Kaspersky found that nearly 1.3 million RDP-based cyber events occur each day, with RDP reigning as the top attack vector for ransomware incidents. To safeguard their RDP ports, it’s important for organizations to keep these ports turned off whenever they aren’t in use, ensure such ports aren’t left open to the internet and promote overall interface security through the use of a virtual private connection (VPN) and MFA. Email Authentication Technology/Sender Policy Framework (SPF) Many ransomware attacks and social engineering scams start with employees receiving deceiving emails, such as those from fraudulent senders claiming to be trustworthy parties and providing malicious attachments or asking for sensitive information. To protect against potentially harmful emails, it’s paramount that organizations utilize email authentication technology. This technology monitors incoming emails and determines the validity of these messages based on specific sender verification standards that organizations have in place. Organizations can choose from several different verification standards, but the most common is SPF—which focuses on verifying senders’ IP addresses and domains. Upon authenticating emails, this technology permits them to pass through organizations’ IT infrastructures and into employees’ inboxes. When emails can’t be authenticated, they will either appear as flagged in employees’ inboxes or get blocked from reaching inboxes altogether. With SPF, unauthenticated emails may even be filtered directly into employees’ spam folders. Ultimately, email authentication technology can make all the difference in keeping dangerous emails out of employees’ inboxes and putting a stop to cybercriminals’ tactics before they can begin. Secure Data Backups One of the best ways for organizations to protect their sensitive information and data from cybercriminals is by conducting frequent and secure backups. First and foremost, organizations should determine safe locations to store critical data, whether within cloud-based applications, on-site hard drives or external data centers. From there, organizations should establish concrete schedules for backing up this information and outline data recovery procedures to ensure swift restoration amid possible cyber events. Incident Response Planning Cyber incident response plans can help organizations establish protocols for detecting and containing digital threats, remaining operational and mitigating losses in a timely manner amid cyber events. Successful incident response plans should outline potential attack scenarios, ways to identify signs of such scenarios, methods for maintaining or restoring key functions during these scenarios and the individuals responsible for doing so. These plans should be routinely reviewed through various activities, such as penetration testing and tabletop exercises, to ensure effectiveness and identify ongoing security gaps. Penetration testing refers to the simulation of actual attacks that target specific workplace technology or digital assets (e.g., websites, applications and software) to analyze organizations’ cybersecurity strengths and weaknesses. In contrast, tabletop exercises are drills that allow organizations to utilize mock scenarios to walk through and test the efficiency of their cyber incident response plans. Based on the results of these activities, organizations should adjust their response plans when necessary. Employee Training Employees are widely considered organizations’ first line of defense against cyber incidents, especially since all it takes is one staff mistake to compromise and wreak havoc on an entire workplace system. In light of this, it’s crucial for organizations to offer cybersecurity training. This training should center around helping employees properly identify and respond to common cyber threats. Additional training topics may also include organizations’ specific cybersecurity policies and methods for reporting suspicious activities. Because digital risks are everchanging, this training shouldn’t be a standalone occurrence. Rather, organizations should provide cybersecurity training regularly and update this training when needed to reflect the latest threats, attack trends and workplace changes. Conclusion In today’s evolving digital risk landscape, it’s vital for organizations to take cybersecurity seriously and utilize effective measures to decrease their exposures. By leveraging proper cybersecurity controls, organizations can help safeguard their operations from a wide range of losses and reduce the likelihood of related insurance claims. Furthermore, documenting these controls can allow organizations to demonstrate to cyber insurers that they consider cybersecurity a top priority, potentially increasing their ability to secure coverage. For more risk management guidance, contact your Cottingham & Butler representative today.

Consider the following scenario: A customer asks your company to manufacture a part according to certain specifications, which were outlined in a contract. He needs to add the part to his product and ship it to his customers by a set deadline. Your company creates the part, but due to an error that occurs during the production process, the part isn’t made to the customer’s specifications. He receives the part, realizes he can’t use it in his final product, and requests that the part be remade. The delay in production causes him to miss the deadline to ship the final product to his customers, so he files a lawsuit against your company for the financial loss. This scenario could expose your business to significant liability if you don’t carry the right insurance policy. Exclusions in General Liability Insurance You might assume that your Commercial General Liability (CGL) policy would cover claims such as the one in the above example. However, in many cases, it will not. Most CGL policies contain “damage to impaired property” and “property not physically injured” exclusions. That means that unless the manufacturing error results in bodily injury or property damage, the CGL policy will not cover the loss. The customer’s financial loss in the scenario described above would not fall into either of these two categories, so it would not be covered under a typical CGL or product liability policy. To protect your business from a product failure resulting in a third-party financial loss without bodily injury or property damage, you will need to add manufacturer errors and omissions (E&O) coverage. Manufacturers E&O Insurance Manufacturers E&O is professional liability insurance that covers a manufacturing mistake or negligent service that results in a third-party financial loss without bodily injury or property damage. E&O insurance covers damages that result from the following: Poor, incorrect, or faulty products that are manufactured, handled, sold, or distributed Errors and omissions caused by material defects, including property damage to the product, property damage to the work and property damage to impaired property Negligence or failure to deliver promised services If customers allege that your product failed or that you were negligent in performing services outlined in a contract, they will likely seek to recoup their financial losses through litigation. You could be saddled with significant legal costs, as well as potential damages if the case is lost. Even if the customer’s lawsuit is found to be frivolous, you could still incur the cost of defending yourself. That’s where Manufacturers E&O insurance can provide significant financial risk mitigation. Manufacturers E&O insurance will cover both the customer’s financial loss and your legal costs. Most E&O policies are “claims-made policies,” which means that in order for the claim to be covered, both the work in question must be performed and the claim must be made during the policy period. E&O premiums vary based on the type of product or service you need coverage for, your company’s financial stability, and the policy’s limits. Contact Cottingham & Butler at 563-583-7301 to learn more about adding this important coverage to your risk management portfolio.

At Cottingham & Butler, our success is defined by the remarkable individuals who bring their talent, dedication, and innovative spirit to our organization. Two individuals particularly stand out not only for their professional achievements but for their passion to make a tangible difference in the community. By founding the C&B Better initiative, Cris Houlihan and Lauren Czeshinski have spearheaded an initiative that embodies the company's ethos of continuous improvement and giving back. Finding C&B For Cris Houlihan, his journey with C&B began in 2011 when he stepped into the role of a summer sales intern. Drawn by the company's reputation and opportunities, he found himself immersed in a culture that fosters growth and development. Through mentorship and unwavering support, he transitioned into a full-time sales executive role, navigating the complexities of the transportation industry with unwavering drive. Lauren Czeshinski's path to C&B was just as serendipitous. Growing up in Dubuque, Lauren heard about the company, but it wasn't until she participated in a mock interview competition during her freshman year at Loras College that she discovered the potential of a career at C&B. Starting as a benefit sales intern, she swiftly made her way through the ranks to become a Senior Market Consultant, leveraging her expertise to drive impactful solutions for clients. Cultivating Growth and Innovation At C&B, the spirit of innovation thrives, empowering employees to explore new ideas and initiatives. Both Cris and Lauren found themselves at the forefront of this ethos through the concept of the C&B Better initiative. Inspired by a shared passion for community, they worked together to create a program that would channel the collective generosity of C&B employees towards meaningful causes. “I thought it would be exciting to actually hear from the non-profits on where they needed support and how the money would be utilized,” said Chris. “Our people are exceptional and I knew they would want to come together in C&B fashion to give back to non-profits doing incredible work, whether it be bettering brain health, combating hunger, improving access to education, or addressing homelessness. I sent out an email to some employees I was close with and nearly everyone supported the idea.” The genesis of C&B Better stemmed from a desire to make a difference, especially during challenging times like the onset of the COVID-19 pandemic. “He called me with this big idea of trying to create something that would bring C&B together to financially impact the communities that we work, play, and live in,” said Lauren. “It was like Christmas morning for me. We tossed around quite a few ideas and quickly realized this could be something very special and truly change the way we give back to the greater Dubuque community.” Through collaborative efforts and unwavering determination, Cris and Lauren transformed their vision into a formal program and grant, rallying their colleagues to contribute $100 per quarter. What started as a simple idea blossomed into a fully-fledged program, with over $130,000 donated to 14 different non-profit organizations to date. Lessons Learned and Future Horizons The journey of building C&B Better has been a transformative experience for both Cris and Lauren. Not only has it opened their eyes to the myriad of challenges facing the Dubuque community, but it’s underscored the profound impact that collective action can achieve. Through their involvement, they've witnessed firsthand the generosity and commitment of their fellow colleagues, reaffirming C&B's ethos of making a positive difference. “There are so many hardworking, passionate people in our community coming up with creative and innovative ideas on how to solve real problems,” reflected Lauren. “It’s incredible being able to give these organizations a platform to share the work they do and have a small financial part in moving them toward addressing the needs in our community.” Looking ahead, Cris and Lauren envision an even brighter future for C&B Better. With a steadfast commitment to growth and expansion, they aim to surpass the $200,000 mark and extend their reach beyond Dubuque, amplifying their impact across diverse communities. Their unwavering dedication serves as a testament to the transformative power of compassion and collective action.

The Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) requires parity between a group health plan’s medical and surgical benefits and its mental health or substance use disorder (MH/SUD) benefits. In general, if a health plan provides MH/SUD benefits, MHPAEA requires the plan to: Offer the same access to care and patient costs for MH/SUD benefits as those that apply to medical/surgical benefits; Treat MH/SUD coverage and medical/surgical coverage equally in terms of out-of-pocket costs, benefit limits and practices such as prior authorization and utilization review; and Contain a single combined deductible for MH/SUD coverage and medical/surgical coverage. Parity Requirements The financial requirements applicable to MH/SUD benefits can be no more restrictive than the predominant financial requirements applied to substantially all medical and surgical benefits. A plan’s treatment limits for MH/SUD benefits must also comply with MHPAEA’s parity requirements. Aggregate lifetime and dollar limits must be the same. Action Items Talk with your Cottingham & Butler service team to help you understand: Your TPA/PBM’s role in assisting your plan meet its mental health parity obligations. Risks associated with your current plan design. Potential consequences for failure to comply. MHPAEA – General Compliance FAQs is a brief FAQ about how self-funded plans can maintain compliance and be prepared in the event of a Department of Labor (DOL) audit.

Regardless of company size or industry, employers are struggling to attract and retain quality workers. With the construction industry expected to continue to grow in 2022 and beyond, construction companies and contractors face a labor shortage and struggle to find workers to meet industry demands. This article highlights new employment research, outlines factors contributing to today’s worker shortage, and offers tips to help employers attract and retain skilled workers. Labor Market Factors The first contributing factor to today’s employment challenges is anticipated industry growth. Of note, the recently signed $1.2 trillion Infrastructure Investment and Jobs Act will likely contribute to this growth as roads, bridges, and other infrastructure will be updated countrywide. Although industry demand is promising, companies need skilled workers to meet the booming demand. Consider the following statistics regarding industry growth and demand: Construction job growth is projected at 7% from 2020 to 2030, according to the Bureau of Labor and Statistics (BLS). The construction industry needs 650,000 workers above its current pace of hiring to meet 2022 demand, according to Associated Builders and Contractors (ABC). The industry gains 3,900 jobs for every $1 billion in additional construction spending, according to ABC. Another factor in today’s labor shortage is the high number of workers in the industry reaching retirement age. An overwhelming number of construction workers are expected to retire over the next decade; according to the National Center for Construction Education and Research, 41% of the current construction workforce will retire by 2031. Fewer young workers are joining or staying in this workforce, as there has been more focus on higher education than the trades in recent decades. Furthermore, many of those industry veteran workers have management roles. In addition to finding employees, employers will also need to address leadership gaps to keep their operations running smoothly and retain institutional knowledge. Like many other industries, the construction industry competes for today’s workers amid high turnover rates. Regardless of industry, the pandemic caused many employees to reconsider their line of work and try different roles or industries entirely. This employment shift is especially difficult for construction companies and contractors, as the candidate pool for construction is significantly narrowed since they depend on workers who have acquired specialized skills. New Research In early 2022, employers across the country were surveyed about various employee attraction and retention topics, and more than 150 employers of all sizes and industries responded. Notably, the construction industry had a high participation rate in Zywave’s 2022 Attraction and Retention Employer Pulse Survey. Consider the following key research findings from respondents in the construction industry: Over 90% of organizations somewhat have some difficulty attracting new employees. 58% of organizations at least somewhat have difficulty retaining current employees. 81% of employers consider employee attraction and retention a top-five business challenge and expect the trend to continue. Employee attraction and retention come with general hurdles, but construction leaders say they are working most to combat these specific challenges: Increasing compensation to meet current demands Addressing current and future skills gaps Addressing increased benefits demands Meeting desires for flexible work arrangements (i.e., remote, hybrid, flexible hours) Such challenges significantly impact talent strategies. Similarly, surveyed organizations reported that the top priorities of today’s workers include competitive compensation, competitive benefits, and flexible schedules. While those components are what today’s construction workers are looking for, employers have their own wish lists for ideal candidates and employees. Experience, reliability, and professionalism are the top desired traits of construction workers. Knowledge and technical skills were top traits for roughly a quarter of respondents, suggesting that employers would instead hire for personal attributes and soft skills, potentially supporting new hires with technical training on the job. Worker Attraction and Retention Tips Bringing in and keeping workers will continue to be a top challenge for construction companies and contractors. The construction industry is struggling to find skilled workers to meet the current and upcoming work demands—and there are no quick fixes for many of the reasons this is happening. As workers retire, take other construction jobs, or leave the industry altogether, employers will need to get creative with employee attraction and retention strategies. Consider the below general tips. Expand Recruitment Tactics Employers can consider the best methods for reaching suitable candidates and growing their candidate pool. As the construction industry looks to recruit a new generation—specifically millennials and Generation Z—new recruitment tactics can be successful. In addition, construction employers can consider ways to grow their applicant pipeline by considering underrepresented groups in the industry. According to the BLS, women make up around 10% of workers in the construction industry, trailing most other key sectors. However, this creates an opportunity to increase talent pools in this expanding industry. There’s no single approach, but employers could try using social media, attending job fairs, or presenting at high schools, trade or technical schools, and universities to target key and new talent markets. Recruitment tactics that worked in the past likely won’t be as impactful in today’s market. Invest in Training Opportunities Employers can provide learning and development opportunities to both long-term and new employees to address looming skill gaps left behind by retired workers. After all, the construction industry requires workers to have specialized skills, and the work comes with a variety of safety hazards. Learning opportunities may be a way to recruit young employees and help them build a career in the construction industry. Here are a few examples of learning and development opportunities: Employee training can focus on specialized skills, new technology, or safety-related topics. It’s essential to identify any skills gaps left by retirement. The rework rate is a major concern for construction projects, and proper training can help businesses avoid such costly circumstances. Hands-on training can be the most engaging since employees actively participate and may remember their experience better. As soon as new technology is available or used on a site, employers could allow all workers to interact with and practice using it. This will also help supervisors understand if there’s a learning gap with devices or software so they can pivot to correct mistakes before they happen on-site. Virtual training can help employees learn about health and safety regulations quickly and safely. Safety is critical in the construction industry. On-demand virtual training allows employees to test their skills and knowledge and retake lessons as needed to become familiar and comfortable with safety rules and standards. Simulated training, including augmented reality (AR) and virtual reality (VR), can provide hands-on training without endangering workers. Employees can use VR to learn how to operate remote-controlled heavy equipment without damaging equipment and other materials or worker injuries. Additionally, employers could use AR to allow teams to learn how to repair equipment or other critical mechanical components. Mentoring plans can prepare newer employees for future leadership roles and support the transfer of institutional knowledge from seasoned employees. Leadership development programs can also help prepare employees for management roles. The transition to supervising can be a significant change for many. The internal promotion of skilled trade positions to managerial roles can also strengthen employee morale and provide clear career paths. Many managers who have or will be retiring may have started in an entry-level or junior position. Such employees understand the work and what it takes to be successful on the job—and they often can be great managers and leaders for the business. Besides offering such opportunities, it’s equally important to promote them during recruitment and leverage them as a selling point to workers. Review Compensation and Benefits Strategies Regardless of the line of work, employees are looking for competitive salaries and benefits. If raises or sign-on bonuses aren’t feasible, a benefits package could help seal the deal for some workers. Disability and life insurance can go a long way in showing that companies care about construction employees’ health and well-being. To assist with employee retention, employers could consider ways—such as health and wellness programs—to help employees in their work and personal lives. Provide Autonomy Work autonomy means giving employees the freedom to work in a way that suits them. As such, employees get to decide how and when their work should be done. This type of workplace flexibility can go a long way with workers as the construction industry is generally very rigid and comes with high levels of problem-solving. As feasible, construction employers could look for ways to minimize micromanagement and focus on policies instead of processes. Job autonomy builds trust with employees because it gives them the freedom to manage their work and helps them find purpose in their day-to-day work. Furthermore, autonomy could help encourage mastery as well. Workers who are newer to the industry may feel like a master of their work sooner, which bolsters confidence and accountability. In today’s labor market, accountability and autonomy can be a winning combination to attract and retain skilled workers. Summary Attracting and retaining construction workers has never been easy. Still, the problem has only worsened during the pandemic because of factors such as highly-skilled workers retiring or reconsidering their line of work. As industry growth outpaces talent availability, employers will need to get creative with their efforts to compete in today’s tight labor market. Reach out to your Cottingham & Butler representative today for more attraction and retention guidance.

Employment-related lawsuits are a growing concern for employers of all sizes. As costs for litigation and damage awards climb, experts predict that employment liability will only become more complex. As a result, it is critical for employers to understand their exposures and options to manage the risk. Strategies to Reduce Your Company’s Exposure Two effective risk management strategies include solid human resources practices and employment practices liability (EPL) insurance coverage, a policy used to cover your risk due to the ever-changing legal and employment environment. There are three common employment-related lawsuits today: Wrongful termination: The discharge of an employee for invalid reasons. Discrimination: The denial of equal treatment of workers who are members of a protected class. Sexual Harassment: When a worker is subject to unwelcome sexual advances, obscene or offensive remarks, or the failure to stop such behavior. Employment Practices liability (EPL) insurance works hand-in-hand with your internal employment practices to provide the necessary resources to defend your company against a suit or to pay a claim. To best understand how to cover your EPL risk, it’s important to know the potential sources: Recruitment practices Employment applications Employment offers Employee orientation Annual conduct reviews Enforcing performance policies Termination Improper documentation of the above items To limit your exposure, engaging in solid human resources practices is an important strategy in reducing your company’s liability. To verify your HR policies and best practices, conduct a thorough HR audit: Verify that the Employee Handbook outlines all policies and terms of employment in clear and concise language Require employees to sign an acknowledgment form for receipt of the Handbook. Develop training for supervisors including interview skills, performance reviews, and a “zero-tolerance” policy. Employment law is often complex and varies depending on the jurisdiction. Well-organized and credible documents can demonstrate fair treatment, deter litigation, ensure employee honesty, and—should litigation occur—demonstrate the employer’s actions. In addition to having the appropriate employment policies and HR best practices in place, EPL insurance coverage is another useful risk management tool used to defend against a suit or pay a claim. In fact, evidence of desirable practices and policies will be required to obtain EPL coverage. Typically, the insurance underwriter will require a copy of your employee handbook, which should cover the following policies: Sexual harassment Discrimination Equal opportunity Disabled employees and accommodations Grievances Employee discipline Termination Performance evaluations Internet usage/employee privacy Pregnancy leave Internal job postings Hiring and interviewing Alternative dispute Resolution/arbitration Employment-at-will Employment application form In addition, you are usually required to provide the most recent annual report or SEC 10-K, the list of entities proposed for the coverage, and the most recent EEO-1 reports. EPL insurance works hand-in-hand with your internal employment practices to provide the necessary resources to defend your company against a suit or to pay a claim. As with all of your risk-management needs, Cottingham & Butler is committed to assisting you in assessing your employment-related policies and helping you to develop best-practice solutions. Call us today to learn more about our effective risk management services.

Following the Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization, some employers are interested in providing some level of travel and lodging reimbursement for employees and family members who may need to travel out of their state to obtain a legal abortion. There are a variety of ways that these benefits could be offered. Some of the most common ways employers are seeking to support their employees include: Group medical plan HRA integrated with the group medical plan Excepted benefit HRA Employee assistance program (EAP) Health FSA or HSA reimbursement Lifestyle account Travel reimbursement program There is some uncertainty about how various benefit compliance requirements may apply. While providing the coverage under the employer’s group medical plan or an integrated HRA appears to be the most popular method as of right now, the safest approach may be to simply provide a broader travel reimbursement arrangement on a taxable basis, not even tied specifically to abortion-related travel and lodging, and to limit any documentation required to receive reimbursement. However, we appreciate that employers may prefer to handle it differently until further clarification is provided as to what is permitted. Depending upon how the coverage or reimbursement is offered, the employer will be wise to consider the following compliance questions: Can the reimbursement be handled on a tax-favored basis? Under §213(d), qualifying medical expenses include travel and lodging expenses incurred primarily for and essential to medical care. To cover or reimburse such expenses on a tax-favored basis, they generally need to be run through a group health plan (e.g., group medical plan, HRA, health FSA, EAP) or HSA. TRAVEL: There isn’t a specific cap, but the expenses must be reasonable (e.g., not first-class flights). They could include gas, car rental, bus ticket, airplane ticket, etc. Medically-related travel is reimbursable on a tax-favored basis at the actual cost of travel or using the mileage reimbursement rate; either is acceptable. LODGING: Lodging expenses are reimbursable on a tax-favored basis only up to $50/night per individual ($100/night if a travel companion is required). Travel or lodging reimbursement beyond what is permitted under§213(d) should be taxable to the employee. For further clarification these taxation rules, see IRS Pub. 502. How do state laws apply? If the coverage is provided through a fully insured group medical plan, the state laws of the state in which the policy is issued will apply. Therefore, if the plan is issued in a state with restrictive abortion laws, the carrier may not offer a plan providing such reimbursement. In this case, the employer may have to consider other options for providing the reimbursement, such as through an HRA. If the coverage is provided through a self-funded group medical plan, assuming the arrangement is subject to ERISA, the employer has more flexibility with plan design due to ERISA preemption and would not be required to follow any state insurance coverage requirements or restrictions. However, the employer must still consider any very restrictive state laws imposing civil or criminal penalties for individuals or entities who “aid or abet” abortions (e.g., Oklahoma and Texas). Providing coverage or reimbursement related to an abortion could put the employer at risk of such penalties, so employers with employees residing in such states should definitely work with counsel before implementing such coverage or reimbursement. Is the arrangement subject to ERISA (e.g., plan documentation, SPD distribution, Form 5500 filings)? The group medical plan, HRA, health FSA, and EAP are generally subject to ERISA. Travel benefits that are run through such arrangements will then be subject to ERISA. This may provide some protection under any state law prohibiting or restricting coverage because the plan would qualify for ERISA preemption if self-funded. A more general travel reimbursement program that is not run through the above listed arrangements, and perhaps available more broadly than just for medically-related travel, would likely not be subject to ERISA. If the benefit is not run through the employer’s group medical plan, does the arrangement create a stand-alone group health plan and interfere with Affordable Care Act (ACA) compliance (e.g., preventive coverage, annual/lifetime limits)? An HRA must generally be integrated with the group medical plan to comply with ACA requirements. This would limit the offering to only those who have also enrolled in the employer’s group medical plan or the group medical plan of another employer (e.g., a spouse’s employer). However, an excepted benefit HRA (EBHRA), allowed to be funded up to $1,950 in 2023, can be offered to all who are eligible for the group medical plan rather than only to those who are enrolled in the group medical plan. There is some argument that an EAP reimbursing solely travel and lodging, and not the actual medical procedure, might not provide “significant medical benefits,” in which case it would qualify for excepted benefit status and not have to comply with the ACA. We need further guidance from the agencies on what is considered “significant medical benefits.” If it cannot be argued that the EAP is an excepted benefit, there is a risk in not integrating the EAP with the group medical plan (i.e., limiting access only to those who actually enrolled in the group medical plan). How does the coverage affect HSA eligibility for those enrolled in a qualifying High Deductible Health Plan (HDHP)? If coverage is provided via a group medical plan or an HRA, participants must meet the minimum HDHP deductible before having such expenses reimbursed to maintain HSA eligibility. For the EAP, if it can be argued that the EAP is not providing “significant medical benefits,” it may be okay to provide reimbursement right away (before meeting the minimum HDHP deductible) without interfering with HSA eligibility. Is the arrangement subject to mental health parity rules? If coverage is provided via a group medical plan or an HRA, it may be necessary to reimburse travel and lodging more broadly (including for mental/behavioral health as well as for medical/surgical) to avoid violating mental health parity rules. Do HIPAA privacy and security rules apply? How about any other privacy considerations? A group medical plan, health FSA, HRA and many EAPs will be subject to HIPAA privacy and security rules, which will greatly limit how any information collected via the plan can be disclosed without the participant’s permission. This may be of some comfort to participants. The employer should also contemplate the Pregnancy Discrimination Act (PDA) and other privacy and nondiscrimination requirements that may limit the employer’s ability to collect or share information, or to act upon such collected information. Employers reimbursing outside of a health plan should carefully consider how to handle requests and make determinations. And, if there is a desire to require specific documentation, consider how best to review and maintain that information to ensure complete confidentiality.

The past year has seen a rapidly hardening cyber insurance market as cyberattacks have surged in both cost and frequency. This increase in attacks has, in turn, resulted in a rise in cyber insurance claims and subsequent underwriting losses. Amid these market conditions, most policyholders experienced higher cyber insurance rates at their 2022 renewals, with many insureds seeing double-digit rate increases. In fact, industry data shows that rates rose by as much as 50%- 100% during the first quarter of the year, depending on policyholders’ specific exposures, loss history, and risk management measures. Insureds have also begun encountering coverage restrictions, further scrutiny from underwriters regarding cybersecurity practices, and exclusions for losses stemming from certain types of cyber incidents—namely, acts of cyberwarfare related to international conflicts and other increasingly prevalent cyberattack methods (e.g., ransomware). Looking ahead, policyholders who fail to adopt proper cybersecurity protocols or experience a rise in cyber-related losses may continue to face rate increases and coverage limitations for the foreseeable future. Developments & Trends to Watch Increased nation-state threats and coverage exclusions Nation-state cyberattacks have become a growing concern over the past year, especially as the ongoing Russia-Ukraine conflict contributes to global cyberwarfare worries. In March 2022, the White House issued a statement warning U.S. organizations that nation-state cybersecurity exposures stemming from Russian attackers would likely increase in the coming months. The federal government also introduced new initiatives to harden the nation’s cyber defenses against foreign threats and urged businesses to follow suit. Apart from elevating their cyber defenses, some insureds have sought coverage for emerging cyber warfare risks. But, these policyholders have likely faced challenges obtaining such coverage, primarily due to war exclusions, which generally state that damages from “hostile or warlike actions” by a nation-state or its agents won’t receive coverage. Cyber insurance policies are not immune to war exclusions. However, recent court cases and insurance industry shifts have both broadened and narrowed aspects of the scope of war exclusions as they pertain to cyber warfare, creating confusion and posing potential insurance gaps among policyholders. Elevated ransomware concerns Ransomware attacks have skyrocketed in recent years, affecting many businesses but especially small- and medium-sized establishments. Yet, according to industry data, ransomware activity decreased by 20% in the first quarter of 2022 compared to the fourth quarter of 2021. This is likely due to international law enforcement operations disrupting several high-profile ransomware groups since the beginning of the year. Nevertheless, industry data confirmed that ransomware attacks still contributed to 32% of overall cyber-related losses in the first quarter of 2022. Further, costs stemming from ransomware attacks remain on the rise. According to data from cybersecurity company Palo Alto Networks, the average ransom payment reached $925,162 in the first five months of 2022—up 71% from last year. Heightened business email compromise (BEC) risks BEC scams entail a cybercriminal impersonating a legitimate source within an organization to trick their victim into wiring money, sharing sensitive data, or engaging in other compromising activities. These scams are among the most expensive types of social engineering losses, and they have emerged as a major threat. According to the FBI, BEC scams caused more than $43 billion in losses since 2016, with such losses increasing by 65% between 2019 and 2021 alone. Tips for Insurance Buyers Work with trusted insurance professionals to secure cyber coverage that meets your unique needs. Start the cyber insurance renewal process as early as possible and be prepared to complete supplemental applications regarding your cybersecurity practices. Take advantage of loss control services offered by insurance carriers to strengthen cybersecurity measures. Focus on employee training to prevent cybercrime from affecting your operations. Establish an effective, documented cyber incident response plan to minimize damages amid a cyberattack.