Kate

The Californian 2020 Q1 – DO YOUR FINANCIALS PROVE YOUR COMPANY’S WORTH IN A SALE TRANSACTION?

DO YOUR FINANCIALS PROVE YOUR COMPANY’S WORTH IN A SALE TRANSACTION?

Robert Perry, Robert H. Perry & Associates, Incorporated

There have been several very large manned guarding companies sold to Private Equity Groups (PEG’s) over the past few years at multiples between 9 – 12 times the seller’s earnings before interest, taxes, depreciation and amortization (EBITDA), with nominal adjustments.

But the smaller companies, making up the majority of the roughly 8,000 companies in the US manned guarding market are not valued on the seller’s EBITDA when being sold to one of the seller’s larger competitors – usually the most generous of the buyers in the marketplace. 

The acquisition of these smaller companies are a good source of growth for the larger PEG owned companies; in fact, the investors are demanding a series of acquisitions as a way to add shareholder value.  Collectively, the very few PEG’s that have invested in the contract security industry over the past 10 years have bought over 200 privately held companies; providing the sellers the opportunity to retire and receive a well-earned reward for their many years of hard work.   When these large PEG’s grow through acquisitions of smaller companies, they  pay a multiple of their (the buyer’s) pro forma profit; which is usually much higher than what the seller was making before the acquisition since the buyer, in building the pro forma acquisition model, will consider the elimination of redundant costs of the combined companies after the sale.

The problem for many of these “would-be” sellers is that their companies do not have the financial systems in place to help the buyer in preparing a credible pro forma profit computation and the expenses that can be eliminated through combining the companies.  These owners view the financial system only as a mechanism to file the year end taxes and not as an operating tool and especially not from the viewpoint of proving the real worth of the company when the time comes to sell.

We’re not necessarily talking about the owner needing audited year-end statements – although an audit certainly adds to the credibility of the financials.  We’re talking about the owners having a series of ancillary reports and financials that correctly present the financial position of the company, which requires the proper recording of revenue and expenses.   These financials will go much further than just reporting the net profits of the company; they will prove the real worth of the company by showing the specific elements of revenue and cost; important to the buyer  in evaluating the merits of the acquisition.  Sellers not being properly represented in the process, or trying to sell the company without any representation, usually don’t know how to present the financials; thus will sell the company for much less than it’s really worth.  The company may have a very attractive gross profit, but it’s up to the seller to prove it; and proving it involves a lot more than just handing the buyer billing invoices and payroll registers for a couple of periods.  The proof lies in the underlying financials that will confirm that the profit will remain at a certain sustainable level over time.

This is where we come in ….. our many years of managing transactions for seller/clients have enabled us to know exactly what the buyers are looking for and how to best present the financial information in order for our clients to receive top dollar in a sale transaction.  This is how many of our seller/clients have received very attractive prices for companies that, based on historical financials, have been losing money or have been only marginally profitable.

We’ll guide the seller in presenting a meaningful gross profit line – a very important aspect of proving the worth of the company.

Although the operating expenses of the acquisition targets are scrutinized closely by the buyers, it’s the gross profit line that primarily drives the valuation.  The buyer can improve on the general operating expenses through eliminating redundant costs after the acquisition, but there’s not much the buyer can do to improve on the profit at the customer site level.  It can’t raise billing rates, and it can’t reduce the security officer pay and benefits without jeopardizing the relationship with the customers.

Sellers, in presenting the gross profit, should make sure all direct cost ( and only  the direct cost ) relating to providing service to the customer is included in the gross profit section of the income statement, which will include:  gross billing, all compensation to the site security officers (billable and non-billable), and other relates costs such as – payroll taxes, general and workers compensation insurance, uniforms, equipment furnished at the site, union dues, site supplies, hiring and employee processing expenses.   If there are a lot of “cold start” accounts, the cost for some or all of the roving non-billable supervisors should also be included in the computation of gross profit.

We’ll advise on other financial statement adjustments and reports that are summarized and used to prove the worth of the company and become a part of the presentation to the buyer prospect:

  • Customer Profit Report – This report will show every customer, by site, with the hours worked, gross billing, gross payroll, and any special costs that apply to the customer; such as dedicated site vehicles, special insurance, etc.  A more advanced report will further show the billable and non-billable hours (vacation, holidays, training, etc.) with the associated billing and pay, as well as the overtime premium for both payroll and billings.  Very important note:  this initial information is used to prepare summary “gross profit statistics” only, and is not shown in detail for the presentation to the buyer prospects.
  • Year-end and Interim Statements – Prepared on the accrual basis.  Year-end financials prepared by an outside independent accounting firm adds credibility to the information.  It’s also good to have interim statements, although not as important that the interim statements be prepared by the outside accounting firm.  In order to help the buyer understand the financial picture, the statements should follow these guidelines:
    • Sources of revenue and related costs should be identified to help a buyer verify the profit at the sites level, the statements will also identify the revenue according to source (i.e.; permanent accounts separate from temporary accounts, regular straight-time billing separate from overtime premium billing, and patrol and any other non-guarding service would also be a separate line item).  The labor and other costs for the various sources of revenue will also be separated so the buyer can readily determine the profit by category of service (i.e.; how much it’s making on the permanent work vs. the temporary work, and how much its making on the patrol service, etc.).
    • Proper cut-off of billing and expenses:  A common mistake many companies make is not having a proper cut-off of billing and expenses.  This especially true where a company has several billing periods available for the clients (i.e.; some on weekly, others on semi-monthly or monthly, etc.) that do not match the payroll period.  When this is the case, the company should have a procedure in place to book the revenue that has been performed, but not billed, in order to get the billing in the same period as the recording of the labor for the respective service.
    • Another common mistake is not properly recording advanced billings.  This is more common for patrol customers than for guard customers, but in either case, if the invoice has been prepared and entered in the financial system before the service is actually rendered, the billing should be booked as advanced billings then recognized when the service is actually performed.
    • Expenses below the gross profit line should be detailed since the buyer will be scrutinizing these costs.  The buyer is looking for possible other costs that may be important to running the site, but may have been left out of the site level profit computation.
        • Insurance – insurance expense should be separated to show the amounts for workers compensation, general liability, employee hospitalization and health, etc.
        • Class of Compensation – compensation should be separated to show the amounts for non-billable roving supervisors, executives, clerical personnel, dispatch personnel and any other class of labor.  The more detail, the better it will help the buyer understand what it takes to run the business.
        • Vehicle Cost – to the extent it can be easily identified, vehicle cost should be separated by roving supervisors and executives.

For over 25 years we have successfully completed over 250 sell-side engagements for security companies located in 8 countries and having revenues between $2M – $200M.

The information in this article does not render legal, accounting or tax advice. Neither Robert H. Perry & Associates, Incorporated nor its employee, offer such services, and accordingly assume no liability whatsoever in connection with the use of the information contained herein. If legal, accounting, or tax advice is required, the services of a competent professional should be obtained.

© All rights reserved.  May not be reproduced without permission.

/by
Kate

The Californian 2020 Q1 – 2020 MARKET FORECAST

2020 MARKET FORECAST

Shaun Kelly, Tolman & Wiker, CALSAGA Preferred Broker

Now that we are in a new year, it is good to reflect on the past year and look at what to anticipate for the year(s) to come. Insurance rates and premiums are based on historical loss data, trends, economic conditions and many other factors. We are going to share some 2019 overall industry results, how they will affect 2020 and influence premiums and limit coverage. Then we will review the Security Industry, which is insured primarily through “Program Underwriters”. Many may be influenced by the overall industry results, but more often they beat to their own drum when it comes to premium and coverage changes based on their own experience.

2019 Industry Results

  • Premium pricing across all-sized accounts increased moderately at 6.2% in Q3 2019, marking the eighth consecutive quarter of rate increases. Large accounts were impacted the most by the hardening market, recording an average premium increase of 7.6%, compared to 5.6% in Q2 2019.
  • With the exception of Workers’ Compensation, signs of market hardening were seen across all commercial lines of business, which experienced slight-to-moderate pricing increases in Q3 2019. Umbrella and Commercial Auto were hit hardest in Q3, with average price increases of 9.8% and 9.1%, respectively. The average premium increase across all major lines was 5.9%, in comparison to 4.6% in Q2 2019 and 3.4% in Q1 2019.

Source: The Counsel of Insurance Agents and Brokers. Chart prepared by Barclays Research

Driving these rate increases have been losses in the property, auto and umbrella lines of business, coupled with low interest rates. Property losses, auto losses and low interest rates can be explained rather easily, however the claims that are piercing the umbrella coverage are becoming more frequent and much more costly than they have been in years prior. The introduction of “Nuclear verdict” and “Social inflation” have the industry concerned about the correct pricing that is required to cover future losses. 

A “Nuclear verdict” can be defined as a settlement greater than would be expected based upon the facts of the claim and the nature of the injuries. Typically, settlements greater than $10 million.

“Social inflation” is more complicated and influences the nuclear verdict. Factors driving social inflation include litigation funding, the erosion of tort reform, negative public sentiment toward larger businesses and corporations, plaintiff friendly legal decisions and larger jury awards.

Media and plaintiff attorneys have done a good job of painting the picture of big bad corporations operating their business unethically, taking advantage of employees and reaping huge profits. Aggressive plaintiff attorneys are activating the emotional side of jurors and suggesting that corporations must be punished and pay for their wrong doing. Large nuclear verdicts are occurring more often and no end in sight.

Security Industry 2020 Forecast

The Security Industry (Program underwriters) does not always follow the information provided above, however there are similarities on certain lines of business. An advantage to having insurance in Industry Programs, based my 29 years of experience in the Security Industry, is that Programs respond slower to a hard market (Increase in pricing) and faster to enter a soft market (Decrease in pricing).

Except for Workers Compensation, premiums are firming up for the other lines of coverage for 2020. Lines of coverage that will be affected the most in 2020 will be Auto, General Liability, Employment Practices Liability and possibly Umbrella (If you have a large fleet of autos).

Auto insurance has been a loss leader for all Program Underwriters for many years and rates have been increasing each year. The only way Auto can be written, is when a complimentary line of insurance (General Liability or Workers Compensation) is written in addition to the Auto. Premiums for Auto written on a stand-alone basis are normally much higher. Expect premiums to increase significantly, or we may see insurance carriers discontinue writing Auto.

*Please note, if you have a large fleet of autos, you may experience increased Workers Compensation and Umbrella premium. With the frequency and severity of Auto losses, injuries to employees occur which result in Workers Compensation claims. Also, with more Autos, there is a higher probability of having a large Auto loss that could pierce the Umbrella coverage.

Rate variances on General Liability  may be -5% to +5% in 2020, depending on your loss experience and operations. However, General Liability policies are changing and restricting coverage for certain types of operations. You need to review your policy to determine if you have any exclusions/limitations. For example:

  • Low income housing
  • Cannabis operations
  • Liquor establishments
  • Special events
  • Schools
  • Fast food restaurants
  • Religious establishments
  • Other

These exclusions/limitations are another way for an insurance carrier to reduce claim activity and not have to increase pricing. This way they can stay competitive, so please ask about coverage not just pricing. 

Employment Practices Liability is a difficult conversation. If you have not had a PAGA or Wage & Hour claim you are lucky! And I would say, “If you have not had one yet”, watch out you probably will at some point in time. Premiums are increasing and expect increases each year going forward unless something changes dramatically. Premium increases vary based on coverage and deductibles/retentions and range from 5% to 15% with no claim activity. 

Umbrella premiums will be affected by the Auto fleet and loss history. Limits up to $10 million are available at reasonable premiums, limits above $10 million may have coverage limitations and premiums vary.

In summary, except for Auto and Employment Practices Liability, expect minimal premium changes in 2020. Auto premiums are going to experience increases and they could influence premiums in other lines of coverage based on fleet size and loss history. I did not mention Property Insurance because this is not a significant line of coverage for the majority of our security clients. You may hear some horror stories regarding increases in Property Insurance premiums, the stories are true. Property premiums are skyrocketing for large property risks. 

 Thank you for your time.  

Shaun Kelly joined Tolman & Wiker Insurance Services in 2005.  He specializes in all lines of property and casualty insurance for industries including contract security firms, agriculture, construction, oil and gas. Shaun received a BS in Business Administration with a major in Finance from California State University in Fresno, California. He is an active member of several industry associations, including the Association CALSAGA, the Kern County Builders Exchange and the Independent Insurance Agents of Kern County. Shaun can be reached at 661-616-4700 or skelly@tolmanandwiker.com. 

 

/by
Kate

The Californian 2019 Q4 – YOUR KPIs MAY BE TOO LATE

,

YOUR KPIs MAY BE TOO LATE

Tony Unfriend, CSA 360

Traditional KPIs (Key Performance Indicator) present themselves too far into the reporting process to real-time relevant or even helpful in the Physical Security Industry. Unfortunately, by the time they receive critical data, the incident is over, and someone could be injured, which could lead to the termination of the contract.

It’s flawed to look backward at compliance and completion analysis, passively waiting to see if you performed an inspection, completed all site visits and post orders, security analysis, or penetration testing efficiently.

You may be accustomed to the wait for results, receiving during a Quarterly Business Review (QBR) when stakeholders are meeting and going over stats and data. But that’s too late to be acting on data.

There is a vast difference between knowing something in your business, and knowing the data that drives that thing. As the champion of your organization, you shouldn’t wait for lag metrics to evaluate tasks and efficiencies; you need real-time information. It would be best if you saw what is happening while it’s happening, as it’s happening. Security is a real-time industry, and for maximized safety and results, you need real-time evaluation and real-time data so that the focus can be on the process and the people. It’s much easier to intervene and course correct in the earliest stages of an incident than it is to go back in time.

The argument has become that many lead measures give insight on measuring the effectiveness of your team, however, the speed at which they are delivered to those charged with the task of managing and decision making, it’s a game of adjustment and reactivity. Real-time information allows a well-trained team to meet an incident where it’s at and deescalate, mitigating risk.

If there is anything that experience in this industry will teach you, it’s that you need to evaluate the shifts and hours that your employees are scheduled for, not what they are working, and you need to see discrepancies in real-time. And wouldn’t it be great to have smart scheduling software that will alert you when an employee is approaching overtime?

Most security companies don’t get reimbursed for unplanned overtime, and that payroll money has to come from somewhere. The most efficient method to reduce overtime is being able to look at your scheduling on a Monday to see where each employee will be with hours on Thursday- not waiting until Thursday to see who is still available and who is approaching the pay period billable hour limits.

It’s fair to assume that the first responder on the scene should find the resolution to the problem. Instant resolution and incident de-escalation are essential to you and your clients. Do you know how many issues or incidents are resolved with the initial responder on the first attempt? Real-time data visualization will assist in the achievement of identifying a new view of actual time spent, responder intervention level, and labor associated with incidents. Ideally, there will be one officer on each incident, but we all know there are situations that call for additional resources, and that’s understandable. When you get to the point where you have multiple officers on every report as the norm, it becomes necessary to start examining where the breakdown is occurring.

Do you have a low-confidence officer who needs backup on every call? Do you need to step in and re-administer training? Software exists to assist in finding the root issues rather than waiting for the outcomes.

Here is a tip from my experience: e-Learning is near the high end of the list of importance and is a critical employee-based KPI, and here’s why. If an incident that one of your employees responded to has gone under the microscope for whatever reason, you can provide instant documentation of training and certification with exact scores, dates, and times of completion. You have to be able to show critical stakeholders upfront the skill, strength, and growth investment that you have in your employed talent. That brings peace of mind to your client. Don’t wait to prove your value.

Tony Unfried holds a master’s degree in Public Affairs and Criminal Justice from Indiana University, where he graduated with honors. While enrolled in his master’s program, Tony worked for The TJX Companies, Inc., leading the region in loss prevention and moving the company toward technology use in Security. Tony went on to join the most significant security company in Indiana, managing more than 500 employees and 50 sites, including the Indiana Convention Center, Bankers Life Fieldhouse, and Ruoff Home Mortgage Music Center. Seeing a noticeable gap in technology use in the physical security sector, Tony created his first security software application, launched at the Super Bowl in 2012, and recognized twice for Excellence in Mobile Technology by Techpoint. Tony has also spoken on Tech in Physical Security on panels with ASIS and IAVM.

Continue reading the 2019 Q4 edition of The Californian

/by
Kate

The Californian 2019 Q4 – USING TECHNOLOGY TO MAKE THE INVISIBLE VISIBLE

,

USING TECHNOLOGY TO MAKE THE INVISIBLE VISIBLE

Chris Anderson, Silvertrac Software

We sat down with Lawrence Borgens – founder of Delta Protective Services – to ask him about the process of switching his security company from paper reporting to Silvertrac. Delta Protective Services (DPS) was founded 26 years ago in 1993 on a mission to “create safe communities.” They have since grown to an operation of 85 officers, including standing guards and mobile patrol. Lawrence is focused on growth and making it easier for people to become customers.

Information Can Make or Break an Operation

Like every security company before the rise of computer technology and the internet, Delta Protective Services handled reporting through paper DARs. It didn’t take much for DPS to be fed up with paper reporting. After only a few years they “had pieces of paper coming out of [their] ears and [they] were running out of space to store [reports].” Getting paper reports to clients was a disaster. Information was incomplete or incorrect. DPS knew they needed a better solution. They first looked to Deggy wand and buttons, but quickly found that they “were very cumbersome. It was electronic, but also pretty primitive.”

The Desperate Need for Change

Lawrence was determined to find the best solution for his company. He couldn’t go back to paper reports, but the Deggy wand and button were not getting the job done. After talking to another local security company owner, DPS implemented an early version of Silvertrac – called Real-Time DAR – in addition to the Deggy system.Once Silvertrac was released, they started using it at a few of their locations in addition to Deggy and Real-Time DAR.

Delta Protective Services had quickly gotten into a mess. They were running three separate electronic reporting systems between all of their locations. “I came to a point in my company and in my business where I knew I just needed to land on something. My indecisiveness about selecting a reporting tool was making my staff indecisive also.” Supervisors and account managers couldn’t work together on three different systems. It was clear to Lawrence that software on its own wasn’t the solution. He needed the right solution for his entire operation.

Searching for the Right Solution

After numerous conferences, conversations with other owners and multiple product demos, Lawrence found that “there were pros and cons to every solution.” But at the end of the day, Lawrence chose Silvertrac.

“Let’s just say, for the sake of argument, that all the technologies were equal. Here’s what caused me to make my decision. Silvertrac absolutely cares about, thinks about and produces good quality tools for security business owners to help them improve their business. [They] come from the industry. [It’s] not a bunch of software people that decided, ‘Hey, here’s a niche we can get into.’ No, it’s a bunch of security guys that saw a problem and worked [hard] become software people so that they could fill this gap and provide this service that we need in our industry. What’s important to Silvertrac is that their customers win.”

Delta Protective Services Today

Two years after moving away from paper reporting, Lawrence Borgens found the right solution for his company. Immediately he saw a big difference in two areas.

Accurate Reporting

“Silvertrac makes what’s invisible visible.” Lawrence would not let this go. He and his management team have been able to increase quality control. He has gained full transparency over every part of his operation; from the officers to management to customers, everything is out in the open. “If I have a good officer, you see it. If I have a bad officer, you see it. I can’t hide anything from my clients and that’s OK with me. What makes us different than our competitors is how we deal with our mistakes, not that we don’t make them because everybody makes them.”

As a result, Lawrence can make current and potential customers believe in his services. It is pretty much an expectation today that a security company has a guard security guard management software. But it’s not the software that sets Delta Protective Services apart. Lawrence has been empowered to provide his customers with the information they need to trust him. “If you’ve got a client that’s awake at 2:00 AM looking at the computer, they can log in and watch the officer do rounds while they’re doing it and see the pictures and see everything that’s going on.”

Increased ROI

Delta Protective Services used to have cabinets at every job site. These cabinets had – on top of mountains of paperwork – radios, phones and cords. Many of you can see where this is going. Lost paper reports meant no information for clients or for management. Lawrence couldn’t improve the decision making for his operation. Company-owned technology was breaking regularly. Not only did DPS have to pay for the fixes, but managers, field supervisors, and sometimes even Lawrence himself had to show up to a job site to replace chargers, phones, and radios that were either broken or forgotten. All of this resulted in wasted time, money, and resources.

Luckily Lawrence came up with a solution that worked for him. He purchased Silvertrac licenses for his officers’ to use on their personal cell phones. Learn more about his decision-making process in this awesome podcast.

*Note, there are specific policies and compliances that a physical security company must abide by when moving to a BYOD (Bring Your Own Device) model. Additional resources on BYOD policies can be found on  Silvertrac Extra and on Sherman Law Corporation’s blog.  

“I got rid of all my cell phones. It allowed me to also get rid of two-way radios. It also allowed me to get rid of the paper DARs and all the documents that go with it. Therefore, I also get rid of the cabinets that we were keeping at the job sites.”

Get the Results You’ve Always Wanted

Lawrence found amazing success once he figured out how to simplify his operation and prove the value of his services to customers. You can find success just like he did. Our mission is not to sell you a product. At Silvertrac, we win when our customers win. We want you to win more contracts, hire better employees, and meet the goals you’ve always wanted to achieve.  Schedule a demo today to find out how you can simplify your operation and prove your company’s value.

 

Chris is the Founder of Silvertrac Software and has been working in the security industry for more than 25 years. He enjoys working with our clients everyday to help them grow their businesses and really enjoy what they are doing. Chris currently lives and works in Seal Beach, CA.

Continue reading the 2019 Q4 edition of The Californian

/by
Kate

The Californian 2019 Q4 – NEW REQUIREMENTS FOR REPORTING SERIOUS INJURY OR ILLNESS AND DEATH

, ,

NEW REQUIREMENTS FOR REPORTING SERIOUS INJURY OR ILLNESS AND DEATH

Jaimee K. Wellerstein, Esq. & Gregory B. Wilbur, Esq., Bradley & Gmelich LLP

A site supervisor at one of your security company’s posts calls into your dispatch center and reports that there was an altercation at a client site. Two of your guards had been asked by the client to remove a trespasser, but a scuffle broke out and the trespasser sucker-punched one of the guards. The other guard gave chase to the assailant briefly, then returned to her partner to render aid. The guard appeared fine but the punch opened a cut on his upper cheek, requiring a brief trip to the hospital for stitches. Is this a reportable event to Cal-OSHA under Labor Code section 6409.1, which requires reporting of serious injuries, illnesses, or deaths in the workplace?

At this moment, it is not, for at least two reasons. The definition of “serious injury or illness” included hospitalizations only of 24 hours or more, so a brief ER visit didn’t trigger a reporting obligation if the incident wasn’t reportable for another reason. And the definition also excluded injuries of any level of severity caused by commission of a Penal Code offense, excusing reporting for injuries suffered as a result of assault, battery, and other crimes. In our hypothetical above, both the duration of the hospital stay and the criminal conduct causing the injury would have made the above scenario one that did not have to be reported to Cal-OSHA.

But not for long. The definition of “serious injury or illness” was significantly amended earlier this year by Assembly Bill 1805, which takes effect January 1, 2020, and for the most part the effect has been to broaden the scope of the Cal-OSHA reporting requirements. The 24-hour minimum for hospital stays is gone: all hospitalizations, except those for medical observation or diagnostic testing, now trigger the requirement. The Penal Code exclusion was repealed as well, meaning criminal conduct no longer excuses reporting what would otherwise be a serious injury or illness. Another exclusion, for accidents on public streets or highways, remains in the statute, but has been narrowed not to include accidents occurring in construction zones. And the statute added amputation or the loss of an eye to the list of injuries requiring reporting, replacing language requiring the “loss of any member of the body.”

Returning to our hypothetical and applying the new law, an event that is not reportable in 2019 will be in 2020. The hospitalization for stitches makes the guard’s injury a serious one under the statute. Furthermore, the criminal conduct that would have excluded the incident from the reporting requirement before no longer does, as the Penal Code exclusion has been removed from the law.

EMPLOYER TAKEAWAYS

To make sure your safety and injury reporting program is in compliance with the new amendments, employers should first be aware of the up-to-date and complete list of triggers for mandatory reporting:

  • Incident that requires inpatient hospitalization other than for medical observation or diagnostic testing, OR
  • Incident that results in an amputation, loss of an eye, or any serious degree of permanent disfigurement

The most important changes to PPOs and other security providers are likely to be those highlighted above: mandatory reporting for any hospitalization other than for observation and testing, and the elimination of the exclusion for incidents resulting from crimes. Employers must make sure supervisors, human resources staff, and safety coordinators are all aware of these changes and the newest standards for mandatory reporting to Cal-OSHA.

Additionally, employers should be on the lookout for an announcement from Cal-OSHA regarding the establishment of an online portal for reporting serious injuries, illnesses, or deaths. Under another new law, Assembly Bill 1804, the agency is directed to establish the online portal to replace immediate email reporting of serious incidents as currently required. Employers may still report serious incidents by phone or email until the portal is established, after which they will be required to report by either phone or the portal. More information on incident reporting can be found here.

Jaimee K. Wellerstein is a Partner at Bradley & Gmelich LLP, and the Head of the firm’s Employment Department. Jaimee concentrates her practice in representing employers in all aspects of employment law, including defense of wage and hour class actions, PAGA claims, discrimination, retaliation, harassment, wrongful discharge, misclassification, and other employment related lawsuits. She also provides employment counseling and training in all of these areas.

Jaimee routinely represents employers in federal and state courts and in arbitration proceedings throughout the state, as well as at administrative proceedings before the Equal Employment Opportunity Commission, the California Department of Labor Standards Enforcement, the United States Department of Labor, and other federal and state agencies. Jaimee assists as a Legal Advisor to CALSAGA, and is a member of ASIS International. She is rated AV-Preeminent by Martindale Hubbell, the highest peer rating available. jwellerstein@bglawyers.com / 818-243-5200.

 

 

 

 

 

Gregory B. Wilbur is a member of Bradley & Gmelich LLP’s Employment Department, where he provides aggressive and cost-effective representation to employer clients in a wide variety of proceedings in state and federal court and before administrative agencies. He has extensive experience litigating wage and hour class actions, PAGA representative actions, and discrimination, harassment, and retaliation lawsuits under various equal employment and whistleblower statutes. He has also represented clients in appeals of Cal/OSHA and Labor Commissioner penalty assessments, including seeking judicial review of administrative decisions.

In addition to his active litigation practice, Greg also provides advice and counsel to employers to prevent costly disputes from arising, with a focus on high-risk areas such as wage and hour compliance, reasonable accommodation and the interactive process, and employee leaves of absence. He also helps clients manage their employment law exposure by advising them on the use of arbitration agreements with class action waivers, and drafting such agreements to ensure they remain enforceable in a rapidly changing legal landscape. gwilbur@bglawyers.com / 818-243-5200.

                                          Continue reading the 2019 Q4 edition of The Californian

/by
Kate

The Californian 2019 Q4 – SIX COMPLIANCE TRENDS TO FOLLOW RIGHT NOW

,

SIX COMPLIANCE TRENDS TO FOLLOW RIGHT NOW

Keep yourself informed and your business in compliance.

Team Software

The landscape for labor, tax and payroll compliance is always shifting. At TEAM, we keep our eye on these topics because we know how challenging it can be to stay informed. We understand how important (and challenging) it is for janitorial and security contractors to stay in compliance. And, we know how costly noncompliance can be. That’s why we’re bringing you an updated list of compliance trends for you to follow.

Workplace Regulations for Nursing Mothers

What’s going on?

In 2018, both California and New York City provided additional legislation at the state and city level to support the needs of nursing mothers. The intent of the state and local mandate is to augment the Fair Labor Standards Act (FLSA) legislation that was enacted in 2010.

This legislation focuses on offering the amount of time and breaks needed by nursing mothers as well as the physical space that must be available to pump breast milk. The trend is that a lactation space must be a private room and not a bathroom. Legislation also covers the duration of the right to pump, which can be up to three years following the birth of her child.

What does this mean for you?

Many companies are using staff scheduling to support the lactation mandate along with meal and rest breaks. Most jobs in service-related industries, especially in security companies, can’t be un-staffed, so businesses have started scheduling lunches and breaks to ensure they can cover the breaks and work area. Scheduling and time and attendance software can help manage the staffing challenges that come along with these labor mandates, from ensuring coverage through smart scheduling practices to providing meal and rest break notifications and audit trails.

 

Legal Medical Marijuana Use

What’s going on?

While all recreational and medical marijuana use is still illegal under federal law, many states are facing a new discussion around how to handle medical marijuana use in relation to employment law. Medical marijuana is not covered under the Americans with Disabilities Act (ADA) or Family Medical Leave Act (FMLA) – yet. However, many state employment laws are changing to accommodate the legal use of medical marijuana. The most recent state changes are coming from California, Nevada, New Mexico and Oklahoma. The key component to most of these laws is whether reasonable accommodations can be provided without jeopardizing the ability of the employer to maintain a safe and productive workplace.

 

What does this mean for you?

From an employer’s perspective, the most significant change to the law may be the addition of explicit permissions to take medical marijuana use into consideration when the applicant or employee holds, or will hold, a position with safety-sensitive job duties. We recommend reviewing your company’s drug testing policy on an ongoing basis to be prepared for future legislation in your state, especially if you operate in one of the 46 states where some form of medical marijuana has already been legalized.

This article highlights two of the U.S. labor, tax and payroll compliance updates we’re watching right now. For the other four, download our free Compliance eBook.

TEAM Software is dedicated to ensuring our software solutions meet the ever-changing compliance needs of our customers. While we’re committed to keeping you informed, it’s important to do your own research, and consult your own legal and tax advisors when necessary, too. Continue to use industry resources such as the Society for Human Resource Management (SHRM) and the American Payroll Association (APA) to stay informed on all compliance updates.

Continue reading the 2019 Q4 edition of The Californian

/by
Kate

The Californian 2019 Q4 – LESS RISK, COMPLIANCE, A GOOD NIGHT’S SLEEP: HOW TO GET ALL THREE

,

LESS RISK, COMPLIANCE, A GOOD NIGHT’S SLEEP: HOW TO GET ALL THREE

Mark Folmer and Jon Druker, TrackTik

Just back from a fantastic few days at CALSAGA in the desert of California and if there was one takeaway for us it is that compliance is on everyone’s mind.

A good night’s sleep is a precious commodity these days. It is even more precious in the security industry, where everyone needs to be alert – from the frontline security providers to the back office teams to the management groups. As a security business owner you are often focused on your client’s risk, but what about the risks that your business faces? Being risk-aware in your own business is a constantly moving target, especially when it comes to compliance.

The Financial Cost of Not Being Risk Aware

There have been many news stories about companies being sued and having to pay settlements in the millions of dollars for not having complied with break legislation for their employees. The pain can be financial but also reputational.

California isn’t the only state that has break rules for specific categories of employees. In the USA alone there are 21 states that have passed wage orders, statutes and regulations regarding meal and rest breaks. But in California, it hits home, as a General Counsel for a national service provider mentioned to me while at CALSAGA’s conference: “It’s not if you will get hit by a class-action lawsuit, it’s when, so be ready!”

The Personnel Cost of Not Being Risk Aware

Beyond the risks associated with non-compliance, and the potential financial costs, there’s an indirect, yet tangible, personnel and performance cost as well. These rules are in place to support security personnel and to also help them perform better. For example, by specifying break types and their duration, this allows security personnel to be more alert, have a more structured workday, be more focused and ultimately deliver better service.

Speaking of performance, there are other workforce risks to be aware of. According to the U.S. Department of Labor, workers are staying at their jobs for shorter periods of time. Tight labor markets, as well as the ability to join the “gig” economy, means you could lose the people who do good work for you. This leads to issues like employee retention and talent management, both of which are critical for security companies. Hiring and keeping good talent is a costly and time-consuming task in any market.

Risk Awareness & Compliance: 3 Parts to Success

It’s almost impossible to know how any new legislation might impact your security services business, and whether that will impact you financially. To deal with this, here’s a three-part recommendation: People. Process. Technology.

1. People

Make sure the people in your company– at all levels – are aware of what changes impact them, regardless of their position. Companies have internal messaging, mobile devices, emails, newsletters — leverage all of them. When you make it transparent, it makes it harder for people to say “I didn’t know.”

2. Process

Think of risk awareness like taking stock. Once you know what you have, what you don’t have, and what you need, you will gain transparency and clarity to make better judgments, and in turn, take preemptive actions. In security parlance, we all typically refer to this as “mitigating measures”. Ask yourself, what can you put in place to mitigate your risk?  Every company in this space should have a plan and process to regularly review existing legislation. Being proactive about legislation will save you time and effort down the road.

3. Technology

As a direct link to the process, your workforce management technology has to be flexible enough to handle these kinds of changes, and document them as well. Having a solution that readily extracts information will save time and money. The software to manage your workforce is a tool that enables the process to be documented, and the people to stay aware of the risk.

Ultimately, these 3 components give you traceability and accountability in your workforce systems and can mean the difference between passing an audit, saving time when gathering records, or having to pay a fine.

Being aware of business risks, managing them and ensuring compliance means you’re lowering your own risk. The upside of all this – it gives key stakeholders in your company, at all levels, more peace of mind so you can focus on your business and hopefully even get a good night’s sleep!

To read more on this topic, go to our blog.

Named to IFSEC’s Global Influencers list 2018 for Security Thought Leadership, Mark is a business school graduate, CPP and Member of The Security Institute (MSyI). Mark’s background is in security services, corporate security, consulting and workforce software. A graduate of Concordia University in HR Management and International Business, he progressed to several senior management roles responsible for security business units across Canada, including serving as the Senior Manager for Corporate Security at Canada’s largest telecommunications company. He launched a consulting business focused on physical security for corporate clients, and has been teaching part-time at the Université de Montréal since 2016. Currently, Mark is the Vice-President, Security and Industry, in the software scaleup TrackTik, and volunteers as SRVP Region 6, Chair of the Security Services Council, the Private Security Officer Standard Technical Committee, and the Private Security Company (PSC.1) working group

 

 

 

 

 

Jon Druker has been in software product development for 20 years. He started in translation and moved into various roles in communications and product development. He’s worked for small, medium and large corporations developing and helping to market solutions to meet complex problems in different industries, such as telecommunications, mobile and retail. Recently he’s been involved in marketing efforts to explain and position software solutions in AI and now he’s working at TrackTik in the Go To Market team.  

Continue reading the 2019 Q4 edition of The Californian

/by
Kate

The Californian 2019 Q4 – WORKPLACE VIOLENT ACT – ACTIVE SHOOTER AND VIOLENT ACT COVERAGE

, , ,

WORKPLACE VIOLENT ACT – ACTIVE SHOOTER AND VIOLENT ACT COVERAGE

Shaun Kelly, Tolman & Wiker, CALSAGA Preferred Broker

Personally, I want to say, “Thank you”, to the CALSAGA Team for putting on another wonderful conference! It is always great to see everyone and meet the new Members and guests. The Security Industry is continuing to change and CALSAGA does an excellent job keeping the Members updated on those changes that affect our businesses.

Did you know that workplace violence is the second leading cause of workplace fatalities?  With incidents increasing within the last three years, it has sadly become a sign of the times. Do you and your clients know that Active Shooter and Violent Act Insurance Coverage is available to assist in mitigating potential revenue loss and liability?

As the threat of violence emerges, business owners are reviewing their general liability insurance policies and finding that bodily injury or property damage caused by an active shooter may or may not be covered.

Standard coverage may not apply to the crisis management as a result of the event. Personal attacks against customers or other third parties may not be covered by general liability insurance. Additionally, if law enforcement determines your business should remain closed after an incident, your policy may not cover loss of business income.

This policy includes coverage for Business Interruption, Third Party Bodily Injury Liability, Property Damage and Incident Response Expenses.  While most people feel that GL covers some of this exposure, be aware of the following:

  • Intent – Current General Liability (GL) applications do not ask questions regarding this exposure and therefore are not underwriting for it.  The original intent of GL does not include coverage for this type of exposure.
  • Foreseeability – GL can exclude/deny coverage for events the Insured reasonably could have foreseen.  This can include losses where employees have a history of violent behavior and no action was taken to prevent an event, or security measures that could have been taken that were not, etc.
  • Crisis Response – GL will only respond if there is a lawsuit filed and NOT offer proactive crisis management services.  The Workplace Violent Act policy offers Incident Response Expenses (IREs) that include crisis response and extra expense as well as assistance and guidance during a crisis event to help mitigate and/or prevent demands and lawsuits after the crisis.
  • Terrorism – While GL policies offer TRIA to be purchased, there is still no coverage for uncertified violent act or terror events.

Policy definitions and coverage triggers:

Incident means Workplace Violent Act Event, Workplace Violent Act Threat Event, Workplace Violent Act Against

Offsite Employee Event or Stalking Event. Multiple Incidents involving the same Violent Actor(s) will be considered one Incident. In order for Workplace Violent Threat Event(s) or Stalking Event(s) to be considered for coverage, they must be reported to the appropriate government authorities as soon as practicable.

Workplace Violent Act Event means the use of a Deadly Weapon to cause Bodily Injury at a Covered Location.

Deadly Weapon means any firearm, vehicle or other device, instrument, material, or substance that, from the manner in which it is used or is intended to be used, is calculated to or likely to produce death or physical injury.

Active Shooter and Violent Act Insurance coverage may be something that you or your clients may be interested in reviewing. Specifically, if they are a school, religious establishment, airport, hospital, shopping center……anywhere. Click here to view information on the coverage. An application is included, if you would like to obtain a quote.

Please let us know if you have any questions or if we can be of assistance.

Shaun Kelly joined Tolman & Wiker Insurance Services in 2005.  He specializes in all lines of property and casualty insurance for industries including contract security firms, agriculture, construction, oil and gas. Shaun received a BS in Business Administration with a major in Finance from California State University in Fresno, California. He is an active member of several industry associations, including the Association CALSAGA, the Kern County Builders Exchange and the Independent Insurance Agents of Kern County. Shaun can be reached at 661-616-4700 or skelly@tolmanandwiker.com.

Continue reading the 2019 Q4 edition of The Californian

/by
Kate

The Californian 2019 Q3 – EMPLOYERS: IS YOUR GROOMING POLICY DISCRIMINATORY?

,

EMPLOYERS: IS YOUR GROOMING POLICY DISCRIMINATORY?

Jaimee K. Wellerstein, Esq. & Annette M. Barber, Esq., Bradley & Gmelich LLP

On July 3, 2019, California became the first state to ban discrimination against natural hair, including afros, braids, twists, and dreadlocks. Introduced by Sen. Holly J. Mitchell, Senate Bill 188 (SB 188) aims to “Create a Respectful and Open Workplace for Natural Hair” (the CROWN Act) by clarifying that traits historically associated with race, such as hair texture and hairstyle, be protected from discrimination in the workplace and schools. Governor Gavin Newsom signed Senate Bill 188 (SB 188), thereby amending the California Fair Employment and Housing Act (FEHA) and the California Education Code. The new law becomes effective January 1, 2020.

SB 188 will ensure protection against discrimination in the workplace based on hairstyles by prohibiting employers from enforcing grooming policies that disproportionately impact persons of color.  SB 188 is more far-reaching than prior protections. While anti-discrimination laws presently protect an employee’s choice to wear an afro, afros are not the only presentation of natural Black hair.

LESSON LEARNED:

California employers should review their grooming policies to determine if they are racially neutral, or if changes need to be made to ensure that racially associated hairstyles such as afros, braids, locks (dreadlocks) and twists, are not prohibited.  Also, employers should ensure that managers and supervisors, especially those involved in the hiring process, are trained to comply with this new requirement.

Taking adverse employment action against an applicant or an employee based on a racially associated hairstyle could subject employers to liability for race discrimination.  Client preference will not be a feasible defense to prohibiting these soon-to-be protected natural hairstyles. Employers are advised to start planning now to ensure their policies and practices are in place by the January 1, 2020 implementation date.

Contact us to assist in reviewing your anti-discrimination, grooming, or any other employment policies or procedures.  (Once you’re sued for race discrimination, changing your policies won’t help.)

 

Jaimee K. Wellerstein is a Partner at Bradley & Gmelich LLP, and the Head of the firm’s Employment Department. Jaimee concentrates her practice in representing employers in all aspects of employment law, including defense of wage and hour class actions, PAGA claims, discrimination, retaliation, harassment, wrongful discharge, misclassification, and other employment related lawsuits. She also provides employment counseling and training in all of these areas.

Jaimee routinely represents employers in federal and state courts and in arbitration proceedings throughout the state, as well as at administrative proceedings before the Equal Employment Opportunity Commission, the California Department of Labor Standards Enforcement, the United States Department of Labor, and other federal and state agencies. Jaimee assists as a Legal Advisor to CALSAGA, and is a member of ASIS International. She is rated AV-Preeminent by Martindale Hubbell, the highest peer rating available. jwellerstein@bglawyers.com / 818-243-5200.

 

Annette M. Barber is Special Counsel on Bradley & Gmelich LLP’s Employment Team.  She represents clients providing employment advice and counsel in all aspects of hiring, performance management, training, compensation, and termination. Annette spent the past 17 years working with a global security company of 100,000 U.S. employees as an employment law attorney and then as Corporate Vice President directing HR Compliance nationwide for all 50 states, Puerto Rico and Guam.

Annette drafts and revises policies, handbooks, and extensive training materials for the firm’s clients. She provides workplace trainings, as well as workplace investigations. She is a member of the Association of Workplace Investigators, numerous bar associations and employment law sections.  abarber@bglawyers.com / 818-243-5200.

/by
Kate

The Californian 2019 Q3 – PREPARING FOR YOUR INSURANCE AUDIT

,

PREPARING FOR YOUR INSURANCE AUDIT

Nick Langer, Turner Surety & Insurance Brokerage, Inc.

While workers compensation rates continue to decrease, one thing remains the same; final audits at the end of your policy term can be arduous. Fortunately, they do not have to be. Navigating and fully understanding the workers compensation system in California is difficult and most businesses do not have the time or resources to invest in having an in-house expert. With tight margins and ever-increasing competition, Private Patrol Operators simply cannot afford to be misinformed.

The first step in preparing for your final audit starts with having a better understanding of the law, your obligations as a California employer and rules set forth by the Workers Compensation Insurance Rating Bureau (WCIRB). Included below are 5 facts about workers compensation that every California employer should know.

Workers Compensation – The Facts:

  • Under California Labor Code Section 3700, all employers with one or more employee must provide workers’ compensation benefits to their employees.
  • California Corporate Officers & Managing Members of an LLC can be excluded if they own at least ten percent (10%) of the issued and outstanding stock.
  • Worker’s Compensation premiums are based upon “annual remuneration” of all employees. Annual remuneration is not exclusive to payroll. Annual remuneration includes:

Gross wages                     Salaries                                  Commissions

All bonuses                                  Most profit sharing   Vacation pay

Holiday & sick pay                     Automobile allowances                   

Overtime (“straight time” portion only)

  • The Workers Compensation Insurance Rating Bureau develops and maintains the Standard Classification System. (Class Codes)
  • The workers’ compensation experience rating system is a merit rating system intended to provide employers a direct financial incentive to reduce work-related accidents. The California Workers’ Compensation Rating Insurance Bureau (WCIRB) calculates an Experience Modification Rate (EMR) for every qualifying employer.
    • High EMR’s (over a 1.00) will increase your workers’ compensation premiums
    • Low EMR’s (below a 1.00) will decrease your worker’s compensation premiums

 

Preparing For Your Final Audit

Workers’ Compensation policies are written with premiums based upon your company’s payroll (remuneration) estimate at the beginning of each policy period. At the end of the policy period, your insurer will audit your payroll records to obtain your actual payroll numbers. This procedure is required for 2 reasons:

  1. To compare your actual payroll with your estimated payroll. Your premium is then adjusted accordingly.
  2. To submit your actual payroll data along with your actual losses during the policy term to the WCIRB. This allows the rating bureau to then calculate your experience modification rate (EMR).

Your insurer has the right to audit payroll records at any time. Failure to comply with an insurance company’s audit can lead to the cancellation or non-renewal of your policy, and insurers can use all legal means at their disposal to collect outstanding premiums.  In addition, the WCIRB can promulgate (calculate) your experience modification rate using reported loss data and excluding unaudited payroll, resulting in an increased experience modification rate. It is important to be aware that the deliberate under-reporting of payroll or misclassification of payroll is considered insurance fraud and can be prosecuted to the fullest extent of the law.

Here is the type of information you may be asked to provide:

  • Accounting ledger.
  • Tax forms – Specifically, Form 941 and 944, Employers Federal Tax Return, and State Payroll Tax records (EDD – DE9/DE9).
  • Records of cash disbursements.
  • Payments for services provided by independent contractors. The auditor needs to verify that these workers are not your employees.
  • Payments for services provided by subcontractors.
  • Certificates of insurance for each subcontractor you hired
  • W-2 and 1099 forms.
  • Job description for each worker. Make sure the description accurately describes the workers’ duties.
  • Description of your business operations.
  • Payroll records by classification and access to your payroll system, employee time cards and all electronic time keeping systems for the term of the policy. The auditor needs to verify all sources of remuneration provided to each worker (salary, bonuses, etc.).
  • Certificates of insurance for every OCIP or CCIP you were enrolled in during your policy term.

Understanding what is expected of you will help to expedite the process and minimize confusion at the time of your final audit. Coordinating with your Insurance Broker and CPA prior to your final audit can help to eliminate costly mistakes.

Nick Langer is a Senior Risk Advisor at TSIB with more than 15 years of property & casualty broker experience. He specializes in the Construction, Energy and Security Industries. Nick enjoys the challenge of finding solutions to his client’s unique needs and is committed to learning the intricacies of each client’s business operations.

Prior to joining TSIB Nick had his own insurance agency that specialized in both personal and commercial lines of insurance. After 7 successful years of growing his property and casualty agency he joined Tolman & Wiker Insurance Services, LLC.

Nick regularly presents at trade associations on risk management topics including: Workers’ Compensation, Claims Management, Risk Management, Contractual Risk Transfer and Employment Practices Liability.

Nick is committed to improving the lives and success of his clients for the benefit of the community through his various roles and leadership positions. He has served as the Insurance Advisor to the Board of Directors of The California Association of Licensed Security Agencies, Guards and Associates (CALSAGA). He is President of The Bakersfield Young Professionals in Energy (YPE), a member of the Associated Builders & Contractors (ABC), and the former Government Affairs Committee Chair for the Central California chapter. Nick is a member of the Associated General Contractors (AGC) and the American Society of Safety Engineers (ASSE).

Nick has Bachelor of Science in Business Economics from University of California, Santa Barbara. Nick and his wife have three children and three rescue dogs. In his spare time, Nick is an avid fisherman and enjoys golfing, hiking and fitness training.

/by