Must An Agency Pay Its Employees If Its Offices are Closed?-Corrected

I have discovered that my post earlier this week on the above topic contained some incorrect information about the payment of exempt employees when an agency’s offices are closed.  Please see the corrected post below.  I regret the misinformation and hope that it did not cause anyone any problems.

Although most of the metro Atlanta area escaped the snow predicted for last weekend and thankfully, the icy conditions we did experience were not as bad as they could have been, I thought it a good time to make my annual post on the above question.  Some areas of North Georgia did get some significant snow and the school systems of many counties are still closed due to icy road conditions.  That creates some difficult child care decisions for employees of agencies in those areas; stay home with the kids or find someone to watch them so mom or dad can go to work.

As noted in my past posts on this topic, the answer to the above question depends for the most part on whether an employee is classified as an exempt or nonexempt employee for purposes of the Fair Labor Standards Act.  An exempt employee is one who does not have to be paid extra if they work more than 40 hours in any one work week.   A nonexempt employee is one that must be paid at a higher rate for any time worked in excess of 40 hours in any one work week.  I have addressed how to decide whether a particular employee is a nonexempt or exempt employee in posts last year about the proposed new overtime rule that has now been stayed.  Even though the new rule was stayed, it is still essential for classification as an exempt employee that the employee be paid on a salary basis in an amount that equals at least $455.00 per week.  Payment on a salary basis means the amount of an employee’s pay cannot be reduced based on the quality or quantity of the work performed by the employee during any one work week. The other requirements that must be met to be an exempt employee are explained in my earlier posts.  Nonexempt employees must be paid at least the minimum wage, but only for the time they actually perform services on behalf of the employer.

Thus, if an agency’s offices are closed for any reason and a nonexempt employee does not perform any services for the agency from home, such an employee need not be paid for the time period the offices are closed.  The same rule applies if the agency’s offices are open and a nonexempt employee does not come in or do any work from home.  This is true regardless of whether the nonexempt employee is being paid a salary or on an hourly basis by the agency. As noted above, if a nonexempt employee performs any work from home on a day when the agency’s offices are closed, they must be paid for the time they actually worked.

Whether an exempt employee’s salary may be reduced depends on whether the agency’s office were open or if closed, how long they remain closed.  An exempt employee’s salary may only be reduced if the agency’s offices are open, but the exempt employee does not come in due to any reason other than sickness or do any work from home.  Therefore, if an exempt employee decides to stay home to take care of children who are not in school or due to severe weather decides they just can’t get to work, their next paycheck may be reduced by an amount equal to the number of full days they did not perform any services for the agency, if the agency’s office was open for business during that time period.  If the agency’s offices were not open for business for less than a full workweek and an exempt employee performs any work during that workweek whether in the office or from home, they are entitled to be paid their full salary for that week.  But the agency can require such an employee to use any accrued vacation or other leave time for the time when its offices were closed.  The key is that an exempt employee must be paid their full salary for any week during which they performed any work, no matter how little.

Do You Know What a QSEHRA Is?

If you don’t know the answer to the above question, you should for it can be a benefit to both your agency and your small commercial lines customers.  QSEHRA stands for “Qualified Small Employer Health Reimbursement Arrangements”, which were created by the 21st Century Cures Act that was signed by President Obama just over three weeks ago.  Many of you may be familiar with Health Reimbursement Accounts (“HRA”), which permitted employers to give money tax-free to their employees for use in paying health care related expenses, including, but not limited to, premiums for health insurance.  Unlike Section 125 flexible spending accounts, any money left over in a HRA at the end of the year could be rolled over for use in later years.

Before the Affordable Care Act (“ACA”) was passed, HRAs were popular with employers who could not afford to provide group health insurance coverage to their employees, but wanted to offer some help with the payment of medical expenses.  With the passage of the ACA, contributions to a HRA could no longer be used to pay for health insurance premiums and the rules regarding for what such contributions could be used became so complex that HRAs fell out of favor.

Under the new law, HRAs that allow for the use of funds contributed to them to pay for health insurance premiums and other health care related expenses of employees are now permitted for some employers with added restrictions.  The first part of QSEHRA tells you who those employers are, Qualified Small Employers.  These are employers who are not subject to the mandates of the ACA (i.e., those with less than 50 full-time equivalent employees) and who do not offer group health insurance coverage to their employees.  As with HRAs, the employer must fund an account on the same terms and conditions for each eligible employee (anyone who has been employed for at least 90 days).  Also. like HRAs if the funds are used for covered health care related expenses, they are tax free to the employee, but now only if the employee has minimum essential health insurance coverage as defined by the ACA.  If not, any amounts paid out of the QSEHRA are taxable income to the employee.

Each employee must be given an annual notice informing them of the above fact and that if the employee applies for health insurance coverage on a federal or state exchange, they must disclose the amount of the benefit available to them under the QSEHRA, which amount will reduce the amount of any premium tax credit for which the employee may be eligible.  The annual notice must also state the amount of money the employer will make available for the employee’s use.  That amount is capped at $4,950 a year for the employee, but can go up to $10,000 if the employee can use the funds to pay for health care related expenses for family members.  These caps are subject to annual increases if the cost of living index used increases. (Click here for the presentation slides of a webinar that contain more detailed information on QSEHRAs.)

Many of you may be thinking why should I explore setting up a QSEHRA program if the ACA is going to be repealed by the incoming Congress.  That will most likely happen, but no one knows when that repeal will actually be effective and what parts of the ACA will be affected by it.  In the meantime, the existence of such a benefit would be helpful in keeping current employees and attracting qualified new ones.  Whenever ACA repeal actually occurs, an employer who has set up a QSEHRA program should be able to easily convert it to a pre-ACA HRA, as the requirements for the former are more restrictive than for the latter.

 

Do You RTFP?

I first heard about the above acronym when listening to Bill Wilson’s farewell webinar earlier this month.  For those of my readers who don’t know, Mr. Wilson was one of the founders of the IIABA’s Virtual University and has been largely responsible for its growth into one of the premier educational tools for independent insurance agents since its beginning around the turn of the century.  He is retiring from IIABA at the end of this year and for his last webinar, chose to speak about the six worst things to happen in the insurance industry during his almost 50 year involvement with it.  Mr Wilson has many interesting and thought provoking things to say about that and other subjects in his webinar, which lasts a little over an hour.  For those of you who don’t have the time for that, Mr. Wilson also wrote an article in the current IA Magazine that summarizes his thoughts about the main topic of his webinar.

The acronym RTFP recurs in many of Mr. Wilson’s observations as a cure for the bad things he sees happening in the insurance industry.  They range from the increasing belief that insurance is a commodity to the rise of disruptors who claim to have a better way to provide insurance to what he refers to as the “dumbing down” of the industry.  A response to these trends is to remind the consumer that what they are buying for their premium payment is not what appears on a TV ad or smart phone app, but what is contained in the language of the insurance policy itself.  With respect to the Farmer’s Insurance TV ad about dogs swimming in a flooded living room that was caused by a pet, Mr. Wilson made the point that after actually reading its basic homeowner’s policy, he could not find anything in the policy that would provide coverage for such an event.

By now, you have probably guessed what RTFP stands for, if you did not already know. Although it could be “Read the Fine Print”, that does not pertain specifically to the insurance industry.  The industry specific meaning is “Read the F***king Policy”, or for those who prefer a less vulgar interpretation, “Read the Freaking Policy.”  By doing so, both an agent and the consumer will realize that every insurance company’s policy is different in some way.  They may well find out that the policies of the so-called disruptors provide much less coverage than those of the established insurance companies.  What better way for an agent to convince a customer to buy a policy through him or her than to point that out and how that lack of coverage can come back to haunt the customer if the unexpected happens.

Discovering the differences in the coverage provided by both the policies that an agent sells and those of his or her competitors is at the heart of providing the “added value” that distinguishes the services of an independent insurance agent.  Providing all the coverage needed by a particular potential customer can only be done if the agent knows what coverages are provided by the policies offered by the companies he or she represents, which requires the agent to RTFP.  Being able to explain why such policies are better than those of a competitor or a disruptor also requires the agent to RTFP of those entities. (For those who would like a reminder of this essential fact, an agent in Missouri sells t-shirts with this logo here.)

BEST WISHES FOR A HAPPY AND PROSPEROUS NEW YEAR FOR ALL MY READERS.

 

Seasons Greetings (Do You RTFP?)

It’s almost Christmas and my plan to have a post up earlier this week that would not get lost in the holiday rush did not work out.  So, I decided to just say to all my readers BEST WISHES FOR A SAFE AND ENJOYABLE HOLIDAY SEASON FOR YOU AND YOUR FAMILIES and give you a heads up on the topic I was hoping to address earlier this week.  To find out what RTFP means and how it applies to insurance, stay tuned for my next post, which I hope to have up by the middle of next week.  Until then, enjoy time with your family and friends and try to experience the true spirit of the season for at least a little while.

Privacy Notices No Longer Required (in some cases)

On November 28, 2016, the Georgia Insurance Commissioner’s Office issued a Bulletin, 16-EX-2, that clarified the duty of insurance agencies in Georgia to give annual notices to their customers of their data sharing and privacy policies.  In that Bulletin, the Insurance Commissioner’s Office confirmed that it would adopt a change that had been made to the Gramm-Leach-Bliley Act (the “GLBA”) by Congress at the end of 2015. This change created an exemption from the requirement imposed by that Act for certain “financial institutions”, which include insurance agencies, to give their customers an annual notice of their policies on the sharing with other entities of nonpublic personal information they collected about their customers.  These notices are commonly referred to as privacy notices.

The giving of privacy notices under GLBA was a very hot topic back around the turn of the century when that law was first enacted.  I gave many seminars on who had to give those notices and what they had to contain, but since then I have not heard much about those notices from my clients.  Apparently, it has not been something the Insurance Commissioner’s Office and the federal regulatory agencies involved have been that concerned about.  I have sometimes wondered how many of my clients were actually giving the required notices every year.

In any event, there is now an exemption from the requirement for the giving of privacy notices.  That exemption applies to any insurance agency that only shares the nonpublic personal information they collect about their customers in ways that are explicitly permitted by the GLBA and that have not changed their data sharing policies since their “most recent disclosure sent to consumers in accordance with” the GLBA.  An agency that satisfies these two requirements is relieved of the obligation to provide annual privacy notices to their customers until they no longer meet both requirements, i.e., they begin to share nonpublic personal information about their customers in ways that are not explicitly permitted by the GLBA or they otherwise change their data sharing policies from what was said in the last notice sent to their customers.

The list of ways in which nonpublic personal information is explicitly permitted to be shared under the GLBA is a long one, but the permitted sharing of such information that is most relevant to insurance agencies involves three main areas:  marketing, the use of such information to perform the services requested by the customer, and the disclosure of such information to insurance rate advisory organizations or other state or federal regulatory bodies and the agency’s attorneys, accountants, and auditors.  Disclosing such information to consumer reporting agencies and in connection with the sale, merger, or other transfer of the ownership of all or a portion of an agency’s business is also permitted.  Of course, any such disclosure to which the customer consents is permitted.

The most likely situation where an insurance agency may step over the line, so to speak, and thus, be required to give a privacy notice is in connection with its marketing activities.  Under the GLBA, an agency can disclose the nonpublic personal information of its customers to parties affiliated with it and to a non-affiliated third party to perform marketing activities for its products or services, if the agency fully discloses that it is doing so to its customers and enters into a contract with the non-affiliated third party that requires the third party to maintain the confidentiality of the information provided to it.  If the full disclosure of such information sharing has previously been made by an agency to its customers in a privacy notice, it is no longer required to continue to give such notices every year, unless and until its data sharing practices in this regard or in other ways change.

 

 

 

FLSA Issues That All Agencies Should Be Aware Of

It has been over a week since a federal District Court Judge issued an injunction staying the implementation of the new overtime rule (click here for more information on the injunction), and it does not appear that the U.S. Department of Labor is going to try to have the injunction overturned on appeal, at least anytime soon.  So employers will not have to comply with the new overtime rule that was set to go into effect tomorrow, December 1.  However, that only relieves employers from having to pay their employees who they want to treat as exempt from the overtime pay requirements of the Fair Labor Standards Act (“FLSA”) under the administrative, executive, or professional exemptions a minimum salary of $913 a week, or $47,476 a year.  Employers will still have to pay their employees overtime for any hours they work in excess of 40 in any one work week, unless they qualify for one of the exemptions referred to above or another exemption. (Click here for a post that discusses those exemptions and others as they may apply to employees of insurance agencies.)

In determining whether the 40 hour threshold has been exceeded in any one work week, agency owners need to be aware of what is work time that must be included in making that determination.  The FLSA does not require an employer to give an employee any time off during the workday for any reason, even to eat.  It only requires that an employee be paid at least the minimum wage for all the time they are working and overtime pay if they work more than 40 hours in any one work week.  If an employer decides to give its employees a break from work, that break must be at least 30 minutes long and the employee must not be required to do any work during the break period before that time can be excluded from work time for which the employee must be paid.  With respect to breaks given so an employee may eat a meal, what this means is that an employee must not be on call or perform any other work related duties during the break.  If they do, they must be paid for that time, too.

For agency employees who are licensed or have another certification that they must have to perform their duties, any time taken by such an employee for the purpose of attending a class, a webinar, or any other event to obtain or keep their license or other certification is considered work time for which they must be paid.  The same thing is true for any class or other event an employee attends at the request of the agency.  If the agency owner does not want to have to pay overtime to a nonexempt employee in this situation, any such class or other event should be attended during the employee’s normal working hours.

If an employee attends such a class or other event outside of their normal working hours, the agency owner must also be aware of the FLSA’s rules regarding payment for time spent traveling by employees.  These rules are complex, but a good explanation of the basics, as well as other situations that may require payment, can be found here.

While the pressure is off for now on compliance with the new overtime rule, the existing rules still apply and can create problems for an agency that is not aware of what those rules require.

Court Stays Implementation of New Overtime Rule

Yesterday, a judge on the U.S. District Court for the Eastern District of Texas entered a preliminary injunction staying the enforcement of the new overtime rule that was to take effect on December 1, 2016. (Click here for an explanation of the rule.)  The judge found that rule to be unlawful because it imposed a minimum salary requirement for employees who would otherwise qualify as exempt under the administrative, executive, and professional duties exemptions from the overtime pay requirements of the Fair Labor Standards Act (“FLSA”).  Apparently, in the judge’s opinion only Congress can impose such a salary requirement.  However, a minimum salary requirement has been a part of the requirements for employees to qualify for those exemptions for many years, so it’s anybody’s guess what the final outcome will be.  

For now, employers do not have to worry about satisfying the new minimum salary requirement for an employee to be exempt from the overtime pay requirements of the FLSA under the above three exemptions.  However, that could change upon an appeal to the U.S. 5th Circuit Court of Appeals, which could be made before December 1.  So stay tuned for further developments.

In the meantime, remember that an agency’s producers and other employees will have to be paid overtime for any hours they work in excess of 40 in any one workweek, unless they qualify for one of the exemptions referred to above or another exemption. That fact is not affected by this court ruling, (Click here for a post that discusses those exemptions and others as they may apply to employees of insurance agencies.)

BEST WISHES FOR A SAFE AND ENJOYABLE THANKSGIVING HOLIDAY.

Can An Extra Fee Be Charged for Premium Payment by Credit Card?

I was recently asked the above question by a caller to the Free Legal Service program that I run for the members of the Independent Insurance Agents of Georgia.  It is one that I had addressed before in other such calls, so I thought it would be a good topic for a blog post. 

Unlike the issue of charging a fee to an insured for obtaining an insurance policy (click here for a post on that issue), this question deals with recovering the charge imposed on any business that accepts payment by credit card for the services it renders or the products it sells.  As most of my readers probably know, there is a cost paid by such businesses for processing a credit card payment.  Depending on the credit card company involved that cost can be as high as 2 or 2.5 percent of the total amount charged.  Over time that cost can add up to a significant number.

If permitted by the agreement an agency has with its credit card processing company, I think a good argument can be made it is permissible to charge a fee for a premium that is paid using a credit card, if the insured has a choice in how the premium can be paid and there is a payment option available to the insured that would not result in any extra fee being assessed against the insured. If the insured has such a choice, I don’t think the prohibition in O.C.G.A. Section 33-6-5(6)(B) on collecting “as premium or charge for insurance” any sum in excess of the premium or charge for that insurance which was specified in the policy in question would be violated. Where such a choice exists, the agent would be providing a service in excess of the service associated with obtaining the insurance policy by allowing payment of the premium by credit card.

As long as the insured can pay the premium or other charge for insurance in a way that does not result in the payment of an extra fee, providing another more convenient method of payment would be an extra service for which the agency could charge a fee. To be safe, I suggest that the fee charged be no more than the amount the agency would have to pay its credit card processing company. I don’t think an agency would be able to get away with charging more than that amount for very long for competitive reasons, and it would not look good to the Insurance Commissioner’s Office for an agency to be making a profit by charging such a fee. I would also recommend that the insured be informed in writing of the fact that an extra fee would be imposed if a particular method of payment for a premium was used, the amount of that fee, and the other available payment method(s) that would not result in the imposition of such a fee.  This written notice should be given sufficiently in advance of the premium due date to give the insured a realistic opportunity to use a payment method that would not result in the charging of an extra fee.

However, if the insured has no premium payment method available to him or her that would not result in the imposition of a transaction fee on an agency, I don’t think it could validly pass along that fee to its insured, as it would then be in technical violation of O.C.G.A. Section 33-6-5(6)(B).   Of course, just because it’s probably legal to charge a fee for payment by credit card does not mean it’s a good idea to do so, especially if an agency’s competitors were not charging such a fee.

IIAG Fall Conference – What You Missed

IIAG had its annual Fall Conference a couple of weeks ago.  This year it was held at a conference center in Augusta that was adjacent to Riverwalk Augusta, which is a beautiful park that runs next to, and in some places along the top of, the levee that separates downtown Augusta from the Savannah River.  If you have not already done it, I highly recommend a walk through the park and along the river.

While at the conference, I was able to attend three informative presentations on E&O loss control, processes and technologies that can help an agency or agent grow their business, and how to transform an agency into an exceptional customer service provider.  The part of the E&O presentation I attended focused on how to properly document interactions with customers.  The three C’s of all documentation are that it be clear, concise, and consistent.  It is also important that it contain only the facts of what happened and when and who was involved.  It should not contain any opinions, especially on the validity of a customer’s claim or whether the proper coverage was in place.  If there is a possibility that an E&O claim may be made, set up a separate file for all information related to the defense of such a claim.  The speaker favored electronic documentation over paper, but recommended against communicating with the customer using social media or texts due to the difficulty in capturing and storing such communications in the agency’s management system.  Such documentation should include reminders upon the first issuance and every renewal that the customer read their policy to make sure it provides the coverage they want and include disclaimers about possible coverage limitations, e.g., policy does not cover flood damage.  Should use proposals to highlight all such limitations.

The part of the agency growth presentation I attended focused on how to select a target market and common mistakes in doing so.  The first thing an agency or agent should do is review the products available from the companies by which they are appointed.  This will give them a good idea of what their target market should be, as it would be a waste of time to go after a particular type of customer if they could not satisfy all the coverage needs of such a customer.  Once a target market is chosen, be careful not to waste time on potential customers who do not fit the profile in all important respects or the time to cultivate whom will not be worth the amount of commission that can realistically expect to receive.  Be persistent with the target market; one touch with a potential customer is not enough, but need to be creative in how they are touched.  Social media can be monitored for life or other important events involving customers or potential customers, which are then followed up with an appropriate card containing a handwritten note.  Can also use social media to highlight customers by reporting on any newsworthy events involving them or for commercial customers describe and recommend the services they offer.  The mantra for an agency or agent should be “And Then Some.”  Always strive to do what’s expected “And Then Some.”

The most interesting piece of information I learned at the exceptional customer service   presentation was that underwriters grade the agencies and agents with whom they work.  This is usually done on a quarterly basis and will govern the level of service and cooperation with handling unusual risks provided to an agency or agent in the future.  The speaker recommended asking the underwriters about the grade given and how it can be improved.  One sure way to do so is to treat underwriters and other company representatives as if they were customers.

 

Fee Payment Arrangements – A Trap for the Unwary

While attending the IIAG’s Fall Conference a couple of weeks ago (I will cover what you missed in later posts), I had an interesting conversation with some agents about the duties owed their customers by insurance agents.  I pointed out that under Georgia law, an insurance agent is considered a mere “order taker” as far as their duties to the customer are concerned, unless and until the agent does or says something that creates a duty on their part to the customer beyond just providing the customer with the insurance coverage they request.  I have written a few blog posts on how this can happen.

The question was then asked if accepting the payment of a fee from the customer would change the relationship between agent and customer.  My response was that it would change the relationship.  In fact, it would change the relationship significantly, as by doing so, the agent would then owe a duty to the customer to perform the services for which the payment was made in accordance with the current industry standards for the performance of those services.  In addition, if the agent had touted their experience or expertise in performing those services to convince the customer to pay a fee for them, the agent would be held to an even higher standard in his or her performance of them.

If the agent’s only compensation for the performance of the services in question came from the customer, the traditional relationship between the agent and customer would be reversed.  Instead of an “order taker”, the agent would become the customer’s adviser and may in some instances owe a fiduciary duty to the customer to protect their interests above all others.  Such a duty is the highest possible under the law.

Although the above seems obvious when you think about it, it was something that I had never considered before.  That may be true of some agents.  The Georgia Insurance Code requires an agent to have a counselor’s license before they can receive any compensation from their customer and that the agent/counselor get the customer’s advance approval for their performance of services that are specified in writing.  This requirement presents a great opportunity for the agent/counselor to carefully define what they will do and how they will do it, thereby limiting their exposure to claims by the customer to just those services and their performance as described.   Any limitations on what will be done or how it will be done should be set forth in a written agreement with the customer, and that agreement should include a description of what the customer must do to enable the agent/counselor to properly perform their specified services.  At a minimum, this should include the provision of complete and accurate information about the subject of those services.

Every agent/counselor should take advantage of this opportunity to mange the expectations of their customer about the final outcome of the services to be performed.  As noted in earlier posts, there should be no promises of “complete coverage for all risks” or satisfaction guaranteed.