Meeting #3

Post date: May 25, 2016 4:49:18 PM

Meeting Notes from the Folk Project Workers Comp Commission

May 24, 2016 (8:00 to 9:15); 25 Center Avenue, Morristown, New Jersey

Present (Committee Members): Lori Falco, Elizabeth Lachowicz, George Otto, Chris Riemer (Scribe), Barrett Wilson (Chair)

Present (Guests): Mike Agranoff

Introduction

Barrett thanked everyone for coming and kicked off our usual reporting round robin.

Competing Legal Opinions

Mike took the floor first, to recap some recent email. After Barrett sent the board an invitation to an online straw poll, Mike let everyone know he was willing to cover the cost of a legal opinion in the event it went against us. (That is, in the event a new attorney said we did need Workers Comp.)

Mark Schaffer replied to Mike's email believing that a second opinion was unnecessary, and the document he had already obtained form his own legal contacts is sufficient for this purpose. Mark believes this document will convince Liberty Mutual that we don't need the coverage, and thereby let us off the hook once and for all. The issue, though, is that the Schaffer Brief only addresses the fact that the performers are contractors, and does not say they are contractors who are exempt from Workers Comp coverage. Several of those present were also skeptical that any insurance company would tell you not to get insurance. That would put them right in the crosshairs for a lawsuit.

George mentioned that we already have an informal opinion from Jay Wilensky that we don't need the coverage, based on some "admittedly superficial" research. Jay is not a WC expert, but he has reached out to some of his contacts to form this opinion. The next step should be to formalize it in a way that will demonstrate due diligence. Chris agreed, noting that the annual audit form we submit to Liberty Mutual includes a section on contractors. It is on that data that they base our premiums. So their forms are designed with employee and contractor provisions built right in. His conversations with folks at the state Workers Comp office were similarly muddy. "That's a grey area," was the best answer he could get from Trenton.

Lori reminded the group that our 2009 advice from the ProBono Partnership did come from Workers Comp experts, and was certainly not equivocal. They felt we needed the coverage. Her own feeling is that a lawsuit could go either way, and given the potentially severe nature of fines and penalties, she thinks it might be safer to keep it.

Mike wondered if we should submit the Schaffer Brief to Liberty Mutual as Mark has suggested. If they don't buy its argument, then we could pay for a professional legal opinion. In Chris's view, that undermines our credibility.

George felt we needed a clear, unambiguous statement such as one he earlier circulated in an email, from someone who is willing to "do battle" for us. ("You, the Folk Project, do not need to pay Workmen's Compensation for your performers, and I will defend you in court against anyone who says different.") His point, which he has made before, is that the laws don't enforce themselves. We need the opinion of someone who knows the law, as well as how it is being interpreted currently in the courts.He thinks there is a "near zero" risk involved, but we definitely need a legal justification if we decide to drop it.

Self Insurance Options

Lori had offered to look into self-insurance, in which The Folk Project would underwrite the costs directly. On the surface, this seems reasonable, since Mike's research found no other venue in the northeast that had ever had a claim. In fact, no other venue carries Workers Comp unless it has actual employees other than the performers.

Unfortunately, this does not appear to be a viable solution. Applying for the right to self-insure is itself expensive, and it would cost us $1,000 a year to renew our self-insurance priviliges with the state. So given the cost and the administrative overhead, it would be better to just stick with Liberty Mutual.

More from the ProBono Partnership

Barrett has fought his way past an administrative gatekeeper armed with much red tape, and finally connected to ProBono's executive director.

She has reviewed the 2009 documents, and found nothing that would alter the original opinion: that we do need WC coverage for our performers. So Barrett thinks we need to be cautious and move slowly, because he's also learned that the state of New Jersey is predisposed to require coverage. That is, the state tends to come down on the side of those who have lost wages, not on the side of the employers. Lori wondered if the legal landscape has changed any since 2009, and Barrett felt that if anything, it's gotten worse from the employer's perspective.

Calcuating Lost Wages

Mike's understanding from his conversations with Liberty Mutual is that the lost wages would only be a portion of what the theoretically injured performer had been paid by The Folk Project. That would be a pittance, so we could just cover lost wages out of general funds. However, both Chris and Lori questioned the logic there. If a performer we hire for one night is injured, and can't work for three months, the "lost wages' has to be seen in a broader context -- perhaps calculated based on their existing gig schedule or average annual income. Mike is pretty sure he's correct on this, but he will follow up and try to get something in writing.

Directors & Officers Insurance

Elizabeth has finished some of her other homework tasks, having her name removed from the WC policy and having Barrett's added. She has not yet looked into the possibility of adding a rider to our K&K liability policy, which would include (rather than exclude) paid performers. Either way, that would only address medical costs, not lost wages, so it's not really in scope for the WC discussion.

She has also looked into Directors & Officers (D&O) coverage, and has some handouts to share. (See attachments below.) Read them at your leisure. Barrett added that his ProBono contact felt we should definitely add this to our insurance portfolio, and said she would never sit on a board that didn't have it.

Lori mentioned an earlier conversation with Pat Rolston, who is on the board for a Mount Tabor Community organization, as well as Mike Del Vecchio, who is also on the board for a railroad club. Both those organizations have D&O coverage. The caveat here is that this insurance only protects Directors from legal costs. If a suit goes to trial and the organization loses, the board or individual directors would still be subject to possible fines, penalties or other judgments.

Next Steps

The committee voted 4-to-1 in favor of recommending to the board that we engage our own Workers' Comp expert, at a likely cost of $500, with the provision that Mike will cover the expense if the advice leads us to keep the coverage. The feeling is that the committee can't commit to that kind of an expense without board approval, even with Mike's no-financial-risk guarantee.

Chris will write up something that Barrett can send out in advance of the meeting, in a (possibly futile) attempt to keep the discussion from going off the rails.

We may still need another WCC meeting. But if the board decides against hiring outside counsel, that leaves only the Schaffer Brief as a way forward. To the committee, that seems a long shot, so tonight may be the last actual meeting of this group.

Action Items

• Mike will follow up with Liberty Mutual and see if he can get something more definitive regarding how a performer's lost wages would be calculated in the event of a claim.

• Elizabeth will follow up with K&K to see if we can amend the policy in a way that would cover our paid performers.

• Chris will write up a proposed motion through which the board could authorize us to engage an outside attorney.