The Evolving Workers’ Compensation Landscape with State Fund CEO Vern Steiner

Rancho Mesa President and CEO Dave Garcia speaks with California State Fund CEO Vern Steiner about the current state of California’s workers’ compensation market. They discuss key industry trends, cost drivers impacting employers, and offer considerations for the future of the workers’ compensation system in California.

Dave Garcia: Hi everybody, you're listening to Rancho Mesa’s studio and podcast, where each week we break down complex insurance and safety topics to help your businesses thrive. I'm your host, Dave Garcia, and my guest today is Vern Steiner, the CEO of the California State Fund. Vern, welcome to StudioOne™. We're super pleased and excited to have you join us today.

Vern Steiner: Thanks for having me, Dave.

DG: Sure. All right. Let's just jump into it. So, Vern, you've built an impressive career spanning more than 30 years, in workers’ compensation in the insurance industry, starting in claims and now becoming the CEO of the State Fund. Looking back on that journey, what experience has had the biggest impacts on your leadership philosophies and how do you approach the industry today?

VS: Well, Dave, I think it my leadership philosophy probably started being shaped even before I got into insurance. And it's all a set of experiences with people. There's, you put it leadership. Right. And there's leadership and there's management right. And there's technical and there's inspirational things. And I think leadership is more about motivation, alignment, mission, communication, all those kinds of things.

And frankly, I learned a lot from various leaders I had along the way. Some things I learned what to do and some things I learned who I don't ever want to do that. And more than anything else, I reached the conclusion at some point in my journey that the most effective thing you can do is build an environment that people enjoy being a part of, and they feel like they can trust you and that they're trusted, and that that unleashes the best that they have to offer, right?

And so that's my focus has been for the 12 years I've been at State Fund, my focus has been, let's build a culture that really sets us apart, that values the mission of the organization, which is we're a not for profit organization that were created to help make the workers compensation system work in California and draws people into it, that that mission will give them the day to day rewards and positive feeling about what they're doing.

And I think that cultural part of things. I remember years ago studying, you know, strategy, whether you're thinking about corporate strategy or sometimes it was political strategies, five year plans, ten year plans. And today the world moves so fast that a five-year plan is insane. A three-year plan is insane; you know? But you still have to have a strategy.

And I think the strategy then has to be, how do you get really good at change? And that again boils down to culture boils down to trust that enables that change agility. So I won't name names for who was a particularly great influence or who was a particularly negative influence. You may know a few of them, but it's really just about every interaction I've had along the way with people I've worked with, people I worked for, interactions I had as a leader, lessons I learned of what not to do early on.

And I remember thinking at the beginning of my journey, our experience is overrated. And now I think, wow, experience is really valuable. I don't know if I think that just because I have it now and I want to protect my position, or if it's if it's something you can only really understand after having gone through the journey.

DG: I think you're right. Boy, you hit on so many great topics. I mean, we could spend, you know, forget the insurance world for a second. We could just talk about your philosophy and leadership and culture, because I do. I've had similar experience, both good and bad, from different leaders that I've worked for or been around. Just experience with them.

But what I, what really touched me is I'm big on culture as well, is I do believe there's a difference between employee satisfaction and employee engagement. And I think what you're hitting on is really the engagement side. People can be satisfied, you know, they make a good wage. You know, they don't hate their job, that sort of thing. They have nice benefits.

But how do you get them engaged? And I think the engagement piece is what I've watched you build over those 12 years at the State Fund, because I think it cascades out from the top down. If the leaders are engaged, then then they're going to send that message out. And I just want to commend you on that.

I've witnessed that personally with the people that work with us here at the agency level. So bravo to that. And for those of you that listening, really think about that. Think about in your organizations, you know, the difference between just satisfaction and engagement. And it really focuses on the culture that you're providing. So thanks for sharing that piece. That's a great takeaway for me.

VS: Thank you. And I appreciate the feedback and just adding one more thing to it. I think that engagement, if it comes from how you feel emotionally, your emotional connection with the people you work with, with the way the organization treats you, and it is different than satisfaction.

DG: Yeah, there's there, you know, and I learned that from somebody much smarter than me. They sat me down and said, yeah, do you understand the difference between employee satisfaction and employee engagement? And at that point I'm like, they're the same. And then they explain to me through examples and, you know, different things. No they're not. And so the goal here at Rancho Mesa is obviously employee satisfaction.

But more importantly, we should be accomplished that if you're engaged, you will be satisfied, right? If you're satisfied, you may not be engaged. That’s the reality.

Okay, let's shift gears and let's talk about, you know, the current state of workers’ compensation here in California. You know, how would you describe the current state in California's marketplace and what are the biggest challenges you think employers are should be paying attention to right now?

VS: Well, it's an interesting time. Yeah, it is a loaded question. Yeah. And it's an interesting time in kind of the history of California workers’ comp, at least in my 30 plus year career. We're coming off and maybe still in a period where the market has been stable for a very, very long, the longest time I've ever experienced. Prices had generally come down and cost have generally come down.

So pretty much employers, insurers and even injured workers have benefited from this period. I think there is a school of thought that the injured workers benefited from the last reform, which was pushed through, I think in 2013 initially, and now they fallen behind. But I said we're coming off of it, you know, it's gone on for the last dozen years.

And now there are signs that, you know, the patient's running a fever, right? You know, maybe it's a low grade fever. Yeah. But under underlying all that, it's still we still have a very healthy patient because we've had ten years to condition ourselves. And I think what comes next depends on how high this fever gets and how long the fever lasts and what other, you know, comorbidities we have.

You know, if, if the underlying health is what it appears to be, I think the system still has some stability left in it. But if there's been more deterioration than is obvious on the surface in the last couple of years, because for the last 2 or 3 years, combined ratios for California have been over 100, which means from an underwriting basis, insurers are losing money, and yet they haven't really done anything to address that. Prices have stayed pretty stable.

It depends on how far they're dipping into their savings, for how long that can continue. And I don't know what the answer to that is. We know the numbers, the big numbers that the shares. But those are industry wide numbers. Some carriers could be extremely healthy and some maybe not so much healthy, if that's what's going on, you know, the market will continue to be relatively stable, but if it's an increase the board fever, then we could be heading for a little bit of disruption.

And I think that's against a backdrop of we have a new governor. We don't know who the new governor will be, but a new governor next year. And in my career, with the exception of Governor Newsom, every governor has presided over some sort of significant change.

We'll call it reform, although reform sometimes lower costs and sometimes increases costs to the workers’ comp system. And I think that's overdue. And I'm not saying that I think we need it, although I think there are some symptoms now, particularly the CT issue that maybe demands some attention. But I think the system being reformed is kind of the cycle has gone long enough that it's likely to happen again in the next 2 or 3 years.

DG: Yeah, let's get a tune up. Right? Yeah. And I think, you know, well, I think CT is something we're going to touch on here in a couple of minutes. But in the interim, just like hot off the news just last Friday, current commissioner Laura who will also be we will also have a new insurance commissioner. So the WCIRB had recommended a 10.4 average rate increase several months ago.

He finally got his private actuaries and concluded that there should be an increase. But he's recommending or advising a 6.6% increase. So that marks the second year in a row that we've kind of seen mid, you know, between 5 and 10% projected increase need. So where do you see. And this is where CT’s going to come into play.

But in your view what's driving these increases and how do you think this might actually trickle down to the employer. Do you think we'll see, again some people have rate decreases, we know I mean in terms of their premiums? But you think if you were an employer in California would you be budgeting, you know, for decrease, increase or flat in most cases?

How do you see that, Vern, with this recommendation?

VS: All right. So I'll take the last question first. And I think if for years we've seen whatever the commissioner or the WCIRB has recommended, we've seen the average charged rates by carriers go down. But last year it didn't go down. It didn't really go up either. It kind of held flat. I don't know if it'll hold flat next year in spite of these industry trends or if it will start to adjust up.

I do know that over a long enough period of time, if the trends continue the way they are, rates have to go up, right? But whether that's going to happen this year or not, I think that a lot of different factors could enter into individual carriers’ decision making for how they approach this. I think the underlying factors, if I remember the first part of the question, which is really what's driving this increase, that that also is multiple things and some, some odd, unusual type of things that we're still having I think a bit of a reaction to COVID in here, not COVID itself, but the way that the world changed in COVID and remote work started to become more of a factor. And one of the things that happened with that was the courts started operating remotely as well.

DG: Correct.

VS: California is really not one consistent system up and down the state. You know, San Diego is a little bit different than Orange County, different than LA, much different than the Bay area and way different from, you know, the extreme north or the Sierras. And one of the things that's happened, and it relates to the growth of the continuous or cumulative trauma claims is now that the courts have become virtual, law firms, applicant law firms from Los Angeles are able to represent people up and down the state.

And this cumulative trauma behavior was far more prevalent in LA. And now it's being exported to other areas as well. So there is a growth overall in in cumulative traumas in California. And cumulative traumas are more complicated, almost always more expensive. And another factor that I don't think has been fully accounted for by the WCIRB or the commissioners, actuaries, or anyone else who's studying it, is cumulative trauma claims are usually paid later, and the full exposure is recognized later, because there's a lot of investigation that has to go on at the front end of them that are often not accepted, and a claims person has to do their best to estimate what this is going to cost without nearly enough information.

DG: Right.

VS: I suspect that most of the forecasts that we're working with today are understating what the ultimate liabilities are going to be for the growth of the cumulative trauma claims, because they just develop later.

DG: Yeah.

VS: So those are the things the trauma, this remote work.

There's also this period of the post-last reform was, the last reform was so effective in driving down costs that for a number of years it not only erased medical inflation, it created medical deflation. Now that is over. And so medical inflation is going to take hold again. And it is. But that's a pretty severe shift in the trend from cost being naturally or unnaturally lowered by the impact of the reform offsetting other natural increases, inflationary increases in the system.

So now there's no offset. And in fact medical costs are going up and contributing to the inflation in the system. And that's I think that's a pretty significant driver. The last thing that I think is worth talking about is both a change to the way that regulation decided we had to pay for medical legal exams for years and years and years there was no increase in medical legal reimbursement to doctors.

And when the state took a look at that a few years back, the avenue, they chose to address that. And I think it needed to be addressed. I think it was one of the worst avenues they could have chosen. And they decided, well, we're going to pay doctors a dollar per page that they have to review and medical records.

Yeah, well, that's just rife with all kinds of abuse problems and, and so medical legal costs have exploded. And throughout our, throughout my history in this comp system, there have been ways that people that really try to abuse the system find loopholes in, in the regulation that is supposed to make the costs predictable. That had really slowed down for a long time.

But now we're seeing this kind of activity in pain management and I think long-term, kind of severe care, brain trauma, where the actual procedures being provided, provided or not listed in the fee schedule and the providers get to charge pretty much whatever they want. And we're seeing that being used more and more often.

DG: Wow.

VS: Maybe, maybe it's appropriate for a small percentage of claims, but there's a larger and larger percentage of claims where that activity is going on. And so that is also driving some of the cost increase.

DG: Yeah. It's everything you touched on are things that we see daily. You know, when we're doing our claim meetings with our clients and we're looking at the loss information, we see this, you know, put preponderance of cumulative trauma where five years ago we didn't see it. Now we're seeing it regularly. I think I may be misstating it, but I think the total number of average percentage, 27% of indemnity claims California now cumulative trauma obviously that number used to be in the low teens.

So there are some, you know, forces at work that have looked at how to manipulate possibly the system a little bit for their own gain, not necessarily for the injured worker necessarily, but just for their own game. So, you know, that's a that's a cause. And it probably has to do with I've been in the insurance industry about 40 years now, and when I see things like this, I get frustrated because it's just wrong.

You know, it's just, you know, there are, you know, cumulative trauma cases that need to be taken care of. Nobody's arguing that. But two times that number and the cost and the drivers is just too much. So I think you've mentioned several great things that to me, the answer is going to be some form of legislative reform.

Doubtful it's going to happen in 2026. Too much going on. Do you, is there anything that you think is reasonable to believe? Maybe in the ‘27 cycle, maybe we could see some differences here?

And I'm not naive enough to know that if some of these things were to change, you know, that you mentioned like proximity attorneys where they can't do they have to appear, not appear cumulative trauma is 1%, you know, should it be 51?

I mean, some of this stuff is really not complicated, but you're going to have to give something up in order to get that through. So how do you see that balancing out legislation or without, you know, with given your position, I know you'd be sensitive to what you can, you know, share. But do you see that? Is there hope out there that we could see some reform to try to alleviate some of these cost drivers in the next few cycles?

VS: Yeah, I do think there's hope and I don't know anything in particular given my position. We're, you know, we're a quasi-state agency, but I'm not on the inside of any discussions about what's happening from a, you know, potential reform or what any party is going to support. But what I, what I am aware of is there is this pressure building up to it's been years since the last reform, 2013/14, since there's been any kind of increase in the rate that an injured worker’s paid for permanent disability.

And, you know, after 12, 13 years, yeah, there's a belief that what's being paid now is inadequate given the rates of inflation we've all experienced. So that is a, you know, a motivating factor for, I think, labor to start to address that issue. And I, traditionally employers, business has negotiated over that issue. Okay, we're going to raise costs in the system in this way. Where can we recapture some costs?

And cumulative trauma has been an issue that we've all been aware of for many, many years. But it is now exploding. And it just there's no way to say that, okay, it's gone from the teens, as you said, to the mid-20s now and it's over. It could continue to explode. So I think that that is definitely one of the cards to be played to try to offset the increases in benefit rates.

There's also been a long term attempt by, you know, the doctors lobby, the applicants’ attorneys lobby to undo the medical networks, the medical provider networks and/or utilization review and IMR. And I think both are very effective ways to make sure that medical care is appropriate. Particularly UR an IMR. And if these things are attacked or unwound, it's impossible to really estimate what the impact on the system will be.

But my estimate would be without these controls, medical care will go wild and costs will escalate rapidly. So that's, I think, something we have to be very careful about as the next round of discussions take place. And, and these discussions generally take place between key stakeholders, which labor and employers.

DG: Right.

VS: You know, insurers are maybe invited to a third table, but it's this is really a bargain between labor and employers and, and the effectiveness of the people negotiating on both sides of that table in the next year or the year after, I think will determine where we end up.

DG: Yeah, I think that's great. I know that, you know, from a grassroots perspective, you know, we've drafted letters to the committee chairs that would deal with something like this, both the senator and the committee chair, and just trying to raise the level of awareness and try to get we know it's going to come from, as you said, employers.

So we need to raise that like they feel the people that we've spoken with just on the CT issue in particular, they just feel helpless, you know, they don't know how to prevent it. You know, what can you know, they've asked this a hundred times. What can we do as an employer to try to mitigate this exposure? And there are certain things they can do. Their hiring practices, how they treat their employees, if they're going to lay somebody off, have a really good process to do that. All of those things. And many people say, yep, and we're doing all of those things, but we still have a lot of these claims. So they're really looking, I really think the employer is looking for legislative reform to answer some of this question.

It sounds like, you know, you're talking about everybody's talking about it. At some point it's going to be addressed. And I think the giveback everybody's in favor of, You know, raising some of that permanent disability. Think nobody's going to argue that, you know, and that goes actually to who? The injured worker, not to a third party that's kind of feeding off the system.

So sorry, I'm letting my 40 years of, you know, fighting for the advocacy of, you know, clients and business owners. But anyway, so I'll get off that soapbox.

All right. We'll wrap it up here pretty quickly. So, Vern, here you go. This I always like this question at the end. If you had one minute to speak directly to every California employer listening, what message would you want them to hear relative to workers’ compensation for the next year?

VS: Well, I think you've set that up pretty well in that when we're at one of those forks in the road in the workers’ compensation system, the last one was 2013. The one before that was probably 2003. The one before that was around 1995. Where decisions are going to be made that will change the system. And the people making those decisions do not always get it right, and they do, generally do not understand what the total impact of those decisions are going to be, particularly when you start changing the not the amount of benefits, but what determines whether you're eligible for a benefit.

And those things drive behavioral changes that are really hard to quantify when you go to actuaries and say what's, they get it wrong every time. This last time, they wildly understated the impact of things like independent medical review. This next time. Yeah. The more that we tweak that part of the system, the more volatility we're going to introduce to it. Maybe on the upside, maybe on the downside.

But get involved.

DG: Yeah.

VS: This is one of those forks in the road. I mean if you make sure your voice is heard go to your Chamber of Commerce. You figure out how to make sure that your legislator knows where you stand on these issues, because it is likely that in the next year to three years, we're going to take another path, with workers’ compensation.

And it could be another path that isn't so different than the one we've been on, or could be one that is wildly disruptive. And we're already at a stage now where the health of the system, which had been accumulated and been very healthy for a ten-year period, is starting to deteriorate. You know, as I said earlier, the analogy, the patient definitely has a fever now.

Maybe it's just a little cold. Maybe it's going to turn into something else. Well, we don't want to turn into is a whole new disease that we don't understand. And that's why involvement in this political process, the voices that matter most in this, are the voices of California employers and the folks who represent labor.

DG: Perfect. Well, listen, I can't thank you enough for joining me today. Your candid insights, your leadership, and, you know, the impact you've just made throughout your career is second to none. So thank you for spending time with us, sharing your expertise with our audience. Really appreciate you jumping into StudioOne. Love to have you back at some point in the future.

So Vern, thank you for your time today.

VS: My pleasure Dave, it's been fun talking to you.

DG: Great. Everyone, thank you for tuning in to our latest episode produced by StudioOne. If you enjoyed what you heard, please share the episode and subscribe. For more insights like this, visit us at ranch and or subscribe to our weekly newsletter. Until next time, thank you. Goodbye.

Education, Leadership and Impact: A Conversation with Francis Parkers CFO Mike Rinehart

Author, Daniel Frazee, Executive Vice President, Rancho Mesa Insurance Services, Inc.

I recently sat down with Francis Parker School (FPS)’s Head of Operations/CFO Mike Rinehart to learn more about his background growing up in San Diego, the many facets to his impressive career in finance, and what is now his second “chapter” back at Francis Parker. We discussed the partnership between Rancho Mesa and Francis Parker, a long-time client and regarded by many as San Diego’s premier traditional independent college-preparatory school.

Mike was fortunate enough to spend some of his early years in the Netherlands where his father was working on a research team. There, Mike attended an all Dutch speaking school before his family moved back to San Diego. Raised in the suburb of Del Cerro, Mike was all things sports all the time. Attending Patrick Henry High School, he narrowed that focus to football and baseball. Sports helped shape him in many ways and he continued that competitive spirit in college where he played football for San Diego State University (SDSU).

After graduating from SDSU, Mike embarked on an eclectic background initially as a financial analyst for a defense contractor. He then worked for 7 years at a Fortune 50 mainframe computer company that provided exposure to many roles in cities across the country, ending in Silicon Valley. He then became a controller at a Telecommunications company that later was spun off into a new entity. Mike was then given the opportunity to run the Asia Pacific sales team, broadening his expertise.

Mike was originally introduced to FPS through former parent and Board Member, Bill Ingram. Mike’s first stint as Chief Financial Officer at FPS ran from 2011-2016. He was then offered a once in a lifetime opportunity to join a company started by Bill Ingram in Seattle, WA that was attempting an initial public offering. Mike took that opportunity, leaving FPS in 2016 and was a critical piece to quadrupling revenues and successfully taking that firm public. Returning to San Diego in 2023, FPS called him back again where he assumed a new role as the Head of Operations/CFO.

Throughout our discussion, Mike shared just how important his family is to him, celebrating 40 years of marriage, and his two children and two grandchildren. He also shared specifics of his role at FPS, the many challenges he faces in managing risk and how Rancho Mesa has remained a trusted partner in that process.

Improving Hiring Practices in a Tight Labor Market

Author, Jadyn Brandt, Client Communications Coordinator, Rancho Mesa Insurance Services, Inc.

Hiring practices are an overlooked aspect of an organization’s safety culture. Who you choose to employ can play an important role in the success of your business. Poor hiring practices can lead to a higher risk of injuries or claims from inexperience workers, damaged equipment and vehicles, and costly lawsuits which can negatively affect an employer’s bottom line. Even in a tight labor market, there are steps employers can take to improve hiring practices.

Attracting Qualified Candidates

Building a strong talent pool to hire from increases the likelihood of adding successful, long-term employees to your organization. Clear job descriptions, targeted recruiting efforts, and a positive employer reputation can attract candidates whose skills and experience best align with the role.

Selecting Fairly and Effectively

Once you have built a pool of qualified talent to choose from, a fair and effective selection process is the next step in hiring the right candidate for the role. Using an assessment structure and evaluation criteria that are consistent among all candidates, and remaining objective throughout the hiring process can improve hiring decisions.

Creating a Strong Candidate Experience

When searching for the best fit for your organization, remember that you are also working to uphold the company’s reputation. Keeping candidates engaged through clear and timely communication and respectful interactions can make candidates feel valued throughout the process. Positive experiences can increase offer acceptance rates and maintain interest for future opportunities.

Retaining Talent Post‑Hire

Strong hiring practices don’t end when a candidate accepts an offer. Efficient onboarding, opportunities for career growth, and employee support systems help retain talent and build stability within your team. Focusing on post-hire retention can reduce costs associated with employee turnover.

Staying Compliant

Continuous compliance with employment laws and regulations is a necessity to protect your organization from legal risks. Ensure your business’ hiring practices promote transparency and fairness for all candidates. Staying compliant can help avoid hiring delays and can build trust in your organization.

Resources

Rancho Mesa’s RM365 HRAdvantage™ portal, provides clients with access to a number of tools and trainings that can be used to improve hiring practices. Some of the tools and trainings include:

Tools

• Job description Builder

• Salary Comparison Tool

• Cost Per Hire Calculator

• Employee Turnover Calculator

• Smart Employee Handbook

Trainings

• Evaluating Your Onboarding Process

• Interviewing Skills for Managers: Conducting an Interview

• Legal Aspects of Interviewing and Hiring

• Employment Discrimination: Maintaining a Fair Workplace (US)

• Reasonable Accommodations

• Americans with Disabilities Act

Strong hiring practices are more than just a human resource function, they are a critical component of a strong safety culture and best practice of successful companies. By investing in effective hiring, onboarding, and retention strategies, employers can reduce risk while strengthening their organization’s long-term health. Utilizing Rancho Mesa’s resources can help employers make informed hiring decisions that positively affect both the employee and the company.

Contact your client technology team to learn more about using the HR portal to support hiring practices.

Hiring as a Risk Strategy: Controlling Insurance Costs in Construction

Author, Kyle Dunlap, Account Executive, Rancho Mesa Insurance Services, Inc.

Best-in-class construction contractors treat hiring as a strategic function. When scaling quickly after winning large contracts, these employers use structured recruiting, safety-focused screening, and disciplined onboarding to reduce risk, protect their workforce, and control workers’ compensation costs and their experience modification rate (EMR).

Proactive hiring is critical when scaling for large projects. Contractors that win large projects often face immediate pressure to rapidly scale their workforce, which can expose weaknesses in their hiring process. For example, an electrical contractor awarded a major multifamily or public works job may need to hire 20 to 30 electricians within weeks to meet schedule demands. A reactive approach, hiring whoever is available, typically leads to unverified, underqualified workers entering the field.

In contrast, best-in-class companies prepare in advance by maintaining active recruiting pipelines, pre-qualified candidate pools, and strong referral networks. Allowing the company to scale quickly without sacrificing quality. This matters because rapid, unstructured hiring directly leads to increased jobsite risk, reduced productivity, and higher error rates, all of which compound over the life of the project. The solution is preparation. Contractors should align hiring strategy with backlog forecasting, ensuring they can scale intentionally rather than reactively when opportunities arise.

Like Benjamin Franklin one said, "By failing to prepare, you are preparing to fail."

Lowering your hiring and onboarding standards can negatively impact a company’s workers’ compensation EMR and increase insurance costs. Inexperienced or improperly trained employees are significantly more likely to contribute to injuries, near-misses, and unsafe behaviors, resulting in increased claims frequency. Industry benchmarks show that most workers’ compensation claims occur within the first 6 months of employment, so strong hiring and onboarding practices are essential.

EMRs are one of the most important financial metrics tied to risk performance. A shift from a favorable modifier (i.e.,0.85) to an unfavorable one (i.e., 1.10) can increase workers’ compensation costs considerably across multiple policy years. A commitment by the management team to use disciplined hiring and onboarding practices that prioritizes skill validation and safety-mindset screening, ensures that every new hire strengthens rather than weakens the company’s risk profile.

Best-in-class employers align hiring with long term workforce and risk strategy. Top performing contractors integrate hiring into a broader risk management and operational strategy, using data and structure to guide decisions. They track key metrics such as time to fill, retention rates, and injury frequency among new hires, allowing leadership to identify trends and improve outcomes over time.

At the same time, these companies build clear career pathways from apprentice to leadership to retain talent and reduce turnover, which is a major driver of workforce attrition and risk exposure. This matters because stable, experienced teams consistently deliver better safety performance, lower claims frequency, and more predictable insurance outcomes. The solution is alignment.

Leadership should treat hiring as a core business function tied directly to safety, profitability, and insurance performance, while brokers and advisors can help connect workforce strategy to EMR trends and long-term cost control.

Winning large projects creates opportunity but also brings risk if hiring is not managed strategically. Contractors who scale with discipline, focusing on quality and safety, will protect their workforce, maintain strong EMR performance, and sustain long term profitability.

If you are interested in managing this process with our proprietary Workers’ Compensation KPI and to learn how Rancho Mesa can help you proactively manage and control your company’s EMR through data, and safety strategy, contact me at (619) 798-2822 or kdunlap@ranchomesa.com.

PAGA: The Scariest Four-Letter Word for California Employers

Account Executive Raysan Benito sits down with employment law attorney Bob King and breaks down how PAGA works, why it has become one of the most feared compliance challenges for home care agencies, and the practical steps business owners can take to reduce their exposure and protect their organizations.

Raysan Benito: You're listening to Rancho Mesa StudioOne™ podcast, where each week we break down complex insurance and safety topics to help your business thrive. I'm your host today, Raysan Benito, account executive with the Human Services Group. My guest today is Bob King, someone who has spent over 20 years in the trenches of employment law, helping agencies avoid very expensive mistakes. From Georgetown to the University of Chicago to founding Legally Nanny, Bob has built a career defending agencies against wage and hour claims, audits, and of course, PAGA. If there's a compliance issue that can take a business down, he's probably seen it and fixed it. Bob, welcome to the show.

Bob King: Well, Raysan, thank you very much. Beautiful day for a podcast. I am elated to be here. I got the presentation that we're going to talk about, and I am excited to be with you. And let me just start by giving my little introduction to Raysan. This man, he puts the Energizer Bunny to shame. He's relentless, absolutely relentless in the best way possible. I got to know Raysan because he kept messaging me, and he just wouldn't stop. And he was really nice about it, though. And I just had to meet with this guy. And I did. I will say to you, in all honesty, you are one of the most optimistic people. Not only optimistic, but just downright, you sort of have this warmth about you. And you're one of the most kind-hearted souls I think I've met in this business in almost three decades of doing this. So it's my pleasure to be with you. And I'm glad I responded to your messages. And I appreciate what I will call the professional persistence. So thank you very much.

RB: I am also elated to be connecting with you and to be talking about a four-letter word, as you put it. So this was your title. It was the four-letter word that scares businesses. So let's talk about even just the title alone. So what I'd love to do is just break down first. We're going to be talking about PAGA. That's the depth of our conversation here. But as we're talking about PAGA, I'd love to learn a little bit more about it and then why you wanted to call this podcast the scary four-letter word. So let's break down PAGA and then why you decided to name it that.

BK: Sure, yeah. I mean, it is. It's truly the scariest four-letter word or four-letter acronym, I suppose, that a California business is ever going to encounter. And why? Because in the state of California, if you do one thing wrong, Raysan, you've done 10 things wrong. And if you've done one thing wrong, you've probably done it wrong for all of your employees across your entire company. And so when you do that, you have a $10 mistake that becomes a $50,000 mistake. And by the way, that's chump change compared to what most PAGA claims are.

So to answer your question, PAGA is the California Private Attorneys General Act, PAGA. What does it mean? It means if a plaintiff's employer, I'm sorry, plaintiff's lawyer can find one of your employees, just one, where you've done something wrong, then that employee can represent all of your employees and they can sue you on behalf of all of your employees. So that's what you're looking at. And that's why it's scary because it's not a one-off. It's a company-wide problem.

RB: Okay, so I understand now why this four-letter acronym is a scary word because it is one of those where, by my understanding, these employees can represent the state of California or they act, almost deputize is some words that I've heard with regard to that. And so what you're saying is let's talk about an agency, right? So let's say that these agencies, they have over 50 caregivers, let's call it on the roster. So just one of those can represent all 50 of them. And if I'm understanding you correctly, that 50 would be a multiplier. So just the one $10 becomes exponential from that.

BK: You got it. And the way California works is they stack penalties. So here's my best example. Say you pay an employee multiple rates of pay in the same work week. You're supposed to do a blended rate of those two to figure out what the overtime is and what the paid sick leave is. Well, if you don't do that, then you may have underpaid that employee, okay? And even if the damages are $1.12, here's what else you've done. The pay stub is wrong. OK, and by the way, because the pay stub has the running total for the rest of the year, it'll be wrong for the rest of the year. And there's a per pay stub penalty. OK, so that's four thousand dollars. OK, just in pay stub penalties. And wait, if that employee is no longer with you, you have to pay. Well, first of all, when you when an employee ends their employment, you have to pay them all wages. owed at the time of the termination. Well, guess what? You underpaid that employee by $1.12. So technically, you didn't pay that employee all the wages owed. So that means you owe the waiting time penalty of 30 days of pay.

And I once had a home care agency owner say, oh my gosh, you mean I owe a month's pay? And I'm like, oh my gosh, it's worse than that. You owe 30 days of pay, right? So take whatever they earned in a day and multiply it by 30 plus the pay stub penalties, plus the actual damages, plus the PAGA penalties, okay, which is $100 for the first infraction, $200 for all subsequent infractions, plus 10% interest on whatever's owed, and the kicker, just for good measure, plaintiff's attorney's fees. So there you have it. So, and that's for one. Now multiply that by everybody this happened to. Okay. And go back a year. Oh and go back a year that's the other thing see race on it used to be that you used to have a class action which would scare the living daylights out of people but a class action is a very formalized sort of proceeding that you have to go through a variety of court hearings and meet a number of measures to do that etc. etc. They still exist classes I defend classes all the time but a PAGA is sort of like a lazy man's class action because all you need to do for PAGA is send a letter to the state and wait. You wait 65 days and then you can file a lawsuit because the state's not going to investigate. And that lawsuit says, hi, I represent everybody going back one year. Here are all my claims. Boom.

RB: OK, so now I'm actually going to go off script just a little bit here because I really want to understand this. I want to understand this because when, yeah, I had, well, I did send you the flow beforehand and I just went, okay, this is kind of it. But as you're talking, I'm going, okay, I'm making all these different connections because when I think about how the time that you've spent, these decades of time that you've spent working with agencies around PAGA I'm curious to know, let's talk about almost PAGA at its inception and your initial understanding of it when you were just a brand new bright-eyed bushy-tailed attorney and then when and then sort of the rise of it and where we're at now and I you know bonus points as well if you could maybe even speak to COVID because I'm sure that that had a factor in it as well. But kind of walk me through the life cycle because then it's 2004 is when it is when it…

BK: Yeah early 2000s I’ve been practicing a lot longer than PAGA’s been around I’ll have you know but…

RB: Oh wow okay, I didn’t mean to date you, so let's talk about that when it was first enacted your initial impression of it and then this rise and then sort of where we're at today with it.

BK: Sure, so when it was first enacted, I don't really think most people paid attention because you always had class action lawsuits. But then to defeat that, you would have employers roll out arbitration agreements. And so if you're an employee and you have an arbitration agreement and you say, ha, I'm going to sue you and I'm suing you with a class action, I would stuff that arbitration agreement back in your face and say, mm-mm, you can't represent everybody. You can represent you in arbitration. And it stops the class action, right? And now, sure, they can do serial arbitrations one after the other, but that's a lot of work. Plaintiff's lawyers aren't interested in that. But then along comes PAGA. And arbitration agreements aren't that helpful against PAGA. That's the God's honest truth because now you can have something what's known as a headless PAGA claim where the employee simply just doesn't have any individual claims but represents all of your employees anyway. It's crazy. And arbitration agreements are not as effective against that. You can't stop that. PAGA became the plaintiff's bar solution to arbitration agreements stopping class actions. That's the issue you have, right? And that's why it became so lethal. And it's much easier. As I said, there's all these requirements to a class action. You have to prove that your representative is typical, that there is enough members of the class, all of these criteria that don't exist in PAGA. PAGA is, you know what you need for PAGA? An envelope and a stamp. And you mail that letter to the state. And once you've done that, you count 65 days and you can file a lawsuit. And that's all you need.

RB: Let's go to the letter and the envelope. One of the slides that you had was you've got mail or you got mail. So walk me through what that means exactly, I suppose, from the plaintiff's side and then your experience and best practices as it pertains to this letter and how to prepare for it.

BK: Sure. So listen, home care agency owners, you get a lot of mail. Totally get it. But I'll tell you, you've seen ostriches and they put their heads in the sand. Ostriches get eaten when they do that, okay? If you think that the best course of action is you get a letter and you ignore it, that's not good. OK, because now with the reforms with PAGA, you can do a PAGA audit when you get notice of a lawsuit. In fact, you can do that PAGA audit even before the lawsuit, which is even better. We'll talk about that. But in a worst case scenario, if you get a letter that says you're being sued or they're going to file a PAGA claim, the first thing you should do is do a PAGA audit to figure out what the problems are and correct them if you can. And that will substantially decrease the penalties. But you've only got. 60 days. 60 days to do that audit. So I beg of you, if you get something in the mail, the first thing you want to do is call your insurance broker to see if you have coverage for this.

If you don't, the second thing you want to do is call a lawyer so you can get started on a PAGA audit. And then that lawyer can oftentimes call the plaintiff's counsel and see if we can work out a deal before they actually file the lawsuit. So that interim time is absolutely critical. Sometimes you can make PAGA cases go away entirely. If you've already been sued and somebody files suit, you can make that second one go away when you call the plaintiff's counsel and explain what's going on. Or sometimes you can just call the plaintiff's counsel and say, we have a tiny company and no money. There's no merit to this. Can we talk about an individual settlement? If you can short circuit this before they actually file that lawsuit, Hallelujah. Because once they file it, the only way it's getting dismissed is with the court's approval. And that's a process. So that's why it's imperative.

And sometimes you won't even get the PAGA letter Raysan. You'll just get a letter that says, I want documents from this employee. Every plaintiff's lawyer says this. I want their personnel file, their time and payroll records, yada yada. You have 21 days. 21 days for the time and payroll records. You have 30 days for the personnel file. Here's the deal. If you don't provide that, that in and of itself is liability. And it's a clear signal to plaintiff's counsel that you're either scared or disorganized or both. So if you get mail, open it, respond to it, deal with it. That's the best way to go.

RB: There's two, well, there's three routes I want to take now after hearing this.

BK: Talking to me is like drinking out of a fire hose.

RB: Oh, I'm here for it. I'm totally here for it. And I'm just going, all right, okay. So because now my brain is going on all these different directions. So what I want to hear then is a couple of aspects of it. So one, I want to step into agency owner's shoes. Ask you, okay, well, what if they say that we're fine and there's no issues, we feel like we're compliant. And then I almost want to segue because we had talked about going into this PAGA audit, what that is, what it looks like. So what would you say to the business owner that goes, we're fine, pretty sure we're up to date, we're compliant with regard to these wage and hours, I feel like everything's buttoned up. How would you respond to an agency owner that feels that they're confident in that place?

BK: This is an agency owner who's done the PAGA audit or who hasn't done the PAGA audit?

RB: Has not.

BK: Okay. So I am not a gambling man. I work too hard for my money to try and bet it away. But if I were, I would tell you, I would bet the farm that if you haven't done a PAGA audit, you are not in compliance. There's almost no way. And I'll tell you because California law is just so Byzantine.

Like, here's my best example, okay? And I know we're going to get into the depths of the subject matter, but I just have to give you this example because it's so classic. In California, we have paid sick leave. Everybody understands that. Raysan, if you make $20 an hour and you call out sick, you would expect to be paid $20 an hour. And in most cases, you would be. But if during that work week, you were paid different rates of pay, or maybe you got a bonus because you took a last minute shift. Well, those things need to go into a blended rate. And so if you worked one shift for maybe four hours. and you were paid $21.17 for that shift, right? Or not 17, but say $21 for that shift for just four hours. You worked 36 hours at 20 bucks. Cool, cool, right? And you call out sick and you should get 20 bucks? No, because the law says those four hours, you have to blend that $21 rate with that $20 rate. And so your paid sick leave wage might be $20.68 or whatever the math works out to be. You're not going to know that. you're going to just pay; the normal person would pay whatever you would normally earn. But that's not what the law requires. And if you didn't do that, it's wrong. And you got a problem, right? And that's a classic example of, or I will say the word split shift penalty, and it'll be like a deer in headlights. Half the people in the audience won't know what that is. And that's fine. Why would you? It's preposterously complicated. But it's another thing that trips agencies.

Or here's some fun ones. The current mileage reimbursement rate is 72.5 cents per mile. 72.5. Not 72, not 75, okay? Not 67 as it was in years past. It's 72.5. Again, I had a client just the other day that, oh, we were just reimbursing at last year's rate. Never changed it. Or reimbursing at 72 cents. Close enough is not the law. It's not correct. You got a problem.

RB: 72.5. I want to just reiterate that for mileage reimbursement.

BK: For 2026, yes. 72.5 in 2026.

RB: Make note of that, please, agency owners.

Okay, so let's go to the audit. Yes. The PAGA audit. Yep. What does it entail and why is it important?

BK: Sure. So the PAGA audit is going to go through all your payroll practices. Okay. And by the way, you don't have to use me. There's lots of people who can walk you through a PAGA audit, but it is, and there's no set format necessarily. What I did was I looked back on all my years of defending home care agencies and PAGA cases. I looked at all the claims and then I created a checklist. It's a Word document. And it simply says, okay. Item one, minimum wage. The current California minimum wage is $16.90. Take a survey of 10 to 20% of your employees in the last one year. Verify that you're paying at least minimum wage, $16.90. Unless you're in one of these 20 some odd, 30 some odd jurisdictions that are local and have their own minimum wages. Here's the list. Verify that you're paying the local minimum wage, right? And that's how you go. And you start going there. It covers a wide variety of issues from minimum wage, overtime, the personal attendant exemption, travel time, meal and rest periods, you name it, final pay, what your pay stub looks like. It's a multi-page checklist. And you're going to take that 10 to 20% sample going back one year, and you're going to verify each of these items for each of these employees in the sample.

And then once you're done, okay, and by the way, you do all this. I don't do this. There's no reason to pay me to do this. I will review your findings with you, okay? And we'll see if there are problems or not. And if there are, do you want to correct them or not? Like, how do you deal with employees who no longer work for you? Do you want to open up that Pandora's box by sending them a check for $6.47? Maybe you do. Maybe you don't. I don't know. Is it one employee? Is it 100? I don't know. So we walk through your findings and determine, can we correct these things? Because the more things you can correct, the fewer bases they have to sue you for. But some people don't want to correct. They only want to do it on a going forward basis. Cool. I always say to people, I'm your lawyer. I'm not your priest. I'm not your rabbi. I don't judge. I just tell you what the law is, and I tell you what I would do.

That's another problem with most lawyers. They will just tell you what the law is. I'm not a law professor, okay? I stand in the home care agency owner's shoes. I will always tell you what I would do if it were my agency. And by the way, I am frugal as all get out, and I expect the same in my clients. So I look at a dollar reason for what we're doing, okay? But that's the PAGA Audit.

So you go through it, you work with somebody to verify your findings, and then you decide if you're going to correct or not. And once you've done that, and if you correct and you get everybody, okay, then you can considerably lower your penalties. If you decide not to correct, then at least you know what your liability is going into the lawsuit.

RB: So there's a self-assessment. And as they have that self-assessment, go through that checklist. They'll review it with you. And then you'll share with them based on the findings, perhaps some coaching or thumbs up, you're doing just fine.

BK: Yeah. I mean, after we review the findings, the first question is, is there anything wrong? If there is, do we correct it? Do we correct it previously? And then how do we correct it on a going forward basis? Okay. And then if we have problems, that also allows us to say, okay, this is what this case looks like. Like maybe it's not all of our employees. Maybe it's just a subset who worked overtime. OK, well, that's cool. At least I can then pick up the phone and say to plaintiff's counsel, hey, you know, this 500-person company, you actually have a PAGA class of 43 employees because most of them don't work overtime. So that's so it's a much smaller case. So can we talk about a settlement of this much smaller case that probably isn't as interesting to you? Right. And then you give them all the data to show what you're doing. And you see.

RB: I want to talk about pay. Because when I think about agencies, there's a broad stroke that I'll make when I think of a team with an agency. You obviously have the owner. You'll typically have marketers, so business development people. You'll obviously have caregivers, and then you'll have admin and staff. I remember when you had done a talk previously, you were talking about salary versus hourly and then you were talking about the benefits of salary can you speak to that a little bit as it pertains to pay rate of pay?

BK: Sure so look here's the deal, by default every single employee is non-exempt meaning they're hourly they only qualify to be exempt meaning salaried if they meet certain criteria both in their job duties as well as in their pay OK. So it's not like you can just decide, oh, you know what? You want to be hourly? Cool. You, caregiver can be hourly. No, you can't, because as a matter of law, their job duties don't qualify to be salaried. Their caregivers are always, always non-exempt.

Your office employees like they'll often say, well. Sally's my head of HR. She's really great. And, you know, she's exempt. We pay her $50,000 a year. And I have to break to him that Sally's not exempt because that's not the required salary. The required salary is take whatever the state minimum wage is, double it, multiply it by 40, multiply it by 52. You're north of 70grand. OK, that's what you're that is what the required salary is. And by the way, you can't just say, OK, fine, we're going to pay salary, we're going to pay Sally 75 grand. Therefore, she's. No, we have to look at what Sally does, okay? And there are two buckets to qualify for the exemption in the home care world, okay?

The first is the executive exemption. You have to supervise two or more employees. They have to actually be employees. They're not independent contractors, okay? Authority to hire and fire or your recommendation is giving great weight to hire and fire. You're doing primarily exempt duties, okay? And you're exercising discretion and independent judgment, okay? That's the first one. That's executive exemption, okay?

The second one is the administrative exemption, and that's where you're a specialist in a certain area, okay? So you might be a specialist in HR or accounting or whatever, but you can have care managers because they have a siloed set of skills. You're a specialist with specialized training and knowledge who works under only general supervision. Okay. So that's a lot of like the care managers, the client intake people, you can, they can be exempt depending on how you structure their role.

But here's where you lose the exemption. You have to be primarily engaged in exempt duties. Okay. So if all of a sudden you've got somebody who works half time in the office and half time as a caregiver, that person is never going to be exempt because you're blowing it. Okay. So please, I know we all like to mix and match. Everybody does. Don't do it. Do not because you're going to lose that exemption it's going to be the worst of all worlds so if you have somebody who's exempt please keep them exempt and I, the last thing the and what you're referencing is on call if PAGA is the scariest four-letter acronym “on call” is the scariest phrase for a home care agency owner please if you can staff exempt employees on call. Because trying to deal with hourly employees on call with their hours and the meal and rest periods and the overtime and everything else is a disaster. If you can staff an exempt employee on call, you're paying them for all the hours they have in the day and night. So don't worry about it. Just staff them if you can.

RB: It's helpful. Just to reiterate, exempt employees on call, that would be the best practice. If possible.

I want to talk about fear and the scariness of PAGA. When I think about fear, I think about there's three sort of responses that I've heard. There's the fight, there's the flight, and freeze. When people talk about PAGA and the fear around it. So when I think about the action that needs to be taken for agency owners, call it three helpful takeaways that they should do right now after listening to this podcast that would be most helpful.

What I heard you say was the audit, really important. I would also say assess the nature of work of your exempt and non-exempt employees. And I'd also say that open your mail. That sounds very, very simple. Those are some helpful takeaways for me. But what would you say? For someone who just sees this phrase and they go, I don't know what to do, almost paralyzed with fear or, oh my gosh, I want to jump all over this. How would you respond?

BK: Sure. So, well, I want to throw a softball back to you. Another thing every agency owner should think about is their insurance coverage. I'm serious on this, right? I mean, here's the thing. Employee Practices Liability Insurance, EPLI. is something every agency owner should consider. I'm not saying it's right for everybody, but I am saying you ought to look at it. But the other thing is, if you look at EPLI, you also should consider whether you're just getting insurance for the basics, like retaliation, harassment, discrimination, wrongful termination, or do you want to purchase a wage an hour rider, which would cover you for the stuff we're talking about.

I had a client just last week said, oh, I have EPLI coverage. Well, it was just the basics. It didn't cover wage an hour. And that was a problem. Now, EPLI coverage is expensive. OK, so you have to weigh the risks versus the reward. I don't care where you come out on that, but I do want you to think about it. So that's the first thing.

The second is there is you're right. It is a fight or flight sort of reflex. I will have some agency owners that are absolutely furious and they will. They're not going to talk to me. They're going to pick the phone up and call plaintiff's counsel directly and give them a piece of their mind. Nothing good can come of that. Nothing. Because all you're doing is you're giving them free discovery. They're going to ask you questions. You're going to come off like a lunatic. And if you irritate them, a lot of this is personal. If they don't like you, they're going to go after you harder. And that's the thing. I read an interesting blog post the other day, and it was an attorney saying, my clients get so mad because I'm friendly with opposing counsel. Guess what? Being friendly with opposing counsel, or at least being professional with opposing counsel, as opposed to being this belligerent jerk, it gets you so much farther down the road. Why? Because these cases don't go to trial. They're too expensive. They're too risky. They settle. Who do you want to settle with? Who do you want to work with? Somebody who treats you with respect, even if they disagree with you? I'll take a smart plaintiff's lawyer every day of the week than a dumb, stubborn lawyer, okay? Being aggressive is not being effective necessarily, okay? I am aggressive, but not in a disrespectful way. You have to be able to cut a deal.

And look, I play on the heartstrings of these plaintiff's lawyers. That's a hard thing to do, okay? They are not the most charitable people necessarily, okay? But I always like to explain, look, You're not suing Google or Amazon, okay? You're suing literally a mom and pop business or a one franchisee office who helps seniors and disabled people stay at home, okay? We have a limited ability to raise rates. These people do good work. Can we reach some sort of an accommodation here? Okay? Sometimes it works, sometimes it doesn't. If they've had a parent or a grandparent who's gone through home care, sometimes it works, right? But the point is, you can't be all fire and brimstone with people because it's not going to be helpful in what you're doing. Aggressive, sure. Like, I always pick up the phone at the beginning and call a planner's counsel and say, these are the areas where I think you're right. They damn near fall out of their chair when I say that, okay? But it's true. And why do I do that? Because If we have liability, it establishes my credibility, okay? And it also gives them a little bit to hook onto. Like, if you shut the door and tell them you're going away with nothing, that's a harder sell than, look, I think 90% of your claims are bunk, but you got us on the mileage reimbursement. So can we reach some sort of deal on that?

Because here's the deal. These firms are sharks. They want the massive cases. They want the eight-figure settlements. So if I'm talking about a settlement that's ten thousand dollars, they don't want to deal with that. They'll take the ten and move on. Right. So if I can show them why it's only ten, you can go a long way with that.

RB: That's helpful. A couple more questions as I'm looking to land the plane. One is it's personal when I think about this, because as I speak with agency owners as well. You know, we've been talking about some scary stuff, candidly, but I think about a conversation I had with an agency owner that said, I am not sure if I want to continue this, continue in my agency with all of this PAGA and lawsuits and class actions. What encouragement would you give to the agency owner that just is nervous or scared of these types of lawsuits?

BK: I would say, okay, look, I'm a brass tacks sort of guy. So I would look at it from, sure, there's risks, but there's also rewards, right? Anybody who's been anywhere near home care has heard about the silver tsunami and the baby boomers are getting older and the market's there. There's a massive need, right? If you develop an agency that works and you and your people care, there's great money to be made.

But there are risks. OK, there are risks. So how do you mitigate the risks? Well, you work with an attorney and I'm not a shill for attorneys. I really want to specify that. But you work with an attorney. It's like you do it once, do it right. And then don't worry about it again. So set up your agency correctly. Make sure you're in compliance with the laws. Make sure all the settings on your payroll software are correct. OK, I hand to God, that's at least five to 10 percent of the errors are because somebody checked the wrong box on a payroll software. It's not the software's fault you just checked the wrong box well that's a problem. So what I would say to you is mitigate the risks make sure you're setting it up correctly, do an audit at least every couple years just to make sure because it's amazing I have agency owners all the time say I don't understand we changed payroll companies and something changed and now all of a sudden we're not doing this right. So just please do an audit every at least couple years to make sure things are still going correctly. Consider insurance. And the last thing is, and I know it sounds ridiculous, but it is the absolute truth. Treat your employees well. Happy employees don't sue. They just don't. They don't.

And oh, one more thing I'll tell you. You talked about fear. I use this example all the time. It's a morbid example, but. It's, in my experience, absolutely the best example I can give. Getting sued in a class action or a PAGA case is like getting diagnosed with cancer. It just is. It can be fatal. You could die. Your agency could go out of business. More often than not, you pay attention to it, you're diligent, you get on it, you deal with it, and it goes away. And it's in your rearview mirror. I have been a lawyer for 28 years. I've had one, literally one, agency go out of business who got sued in that entire time. They also had

embezzlement and a whole bunch of other wacky things going on. So they were one foot in the grave anyway. But other than that, every single client who's been sued lives to fight another day. So I can give you that hope as well, that if I were a betting man, I would tell you that just because you're sued, it's fine. By the way, it's sort of like getting some contagious disease. Once you're sued, you're highly unlikely to be sued again because you've got liability going back. And then until when the court approves it. So in that time, if you don't correct the errors that got you sued in the first place, shame on you. Chances are you have. And once you have and you've been sued, by the way, if you've been sued with PAGA, here's the thing. People don't sue you again because the presumption either is that there's no merit or there's no money left. So they leave you alone. Not always, but usually it's a good indicator.

RB: I knew this conversation would not disappoint. And you certainly delivered, Bob King. So as I'm looking to land the plane, I love to add, this is something I thoroughly enjoy doing, is just adding a human element to this. You're going to be speaking at CAHSAH as we're recording this podcast. And then you'll be also HCAOA, is that right? Is that what the acronym is?

BK: Home Care Association of America. I speak there most years and I speak at their California events too. I'm on podcasts. I spend no money on marketing and advertising. I just speak and write about home care legal issues constantly. And that's another thing, too. I don't write newsletters. I don't have time to write them. You don't have time to read them. You want to get all the legal updates, follow us on our social media, okay? Like, literally, just this week, we posted July 1st. Coming up, minimum wages, local minimum wage. State minimum wage goes up January 1. July 1, half a dozen municipalities have minimum wages that go up, plus health care minimum wage goes up. Check it. We've got the stats for you right there on our socials.

RB: Love it. So being the premier attorney for agencies, I want to add a human element to it. So I have a sort of an off the cuff question, but I love to add it just to learn a little bit more about you. But what is one hobby or interest that your professional network would be surprised by?

BK: I don't know if it's a surprise because we actually, I always post about personal stuff on our business pages. It humanizes it, right? Like my son went to home care agency conferences, my daughter went to nanny agency conferences, and they've seen them grow up through the years, and it's kind of cool.

Here's my passion outside of work. I'm a points and miles hobbyist. I travel, but I refer to myself as destination agnostic. I don't know where I'm going. I go where the deals are. OK, so here's my pro tip for everybody out there who's interested in travel. OK, go to Google Flights. If you don't know what Google Flights is, go to Google Flights. It's a free service. And here's what I do. I say, LAX, leave the destination blank. Fill in all the filters. I want no more than one stop. I want business class. I want no more than this budget. You know, I want to lay over no more than four hours, whatever. Leave it blank. It will then give you the globe, okay? And it will show you where the deals are, right? Maybe you want to go to Casablanca. Maybe you want to go to Seoul. Who knows, right? But we've had some of the most outstanding trips because I sort of went where the deals were. And that's what I would encourage you to do. And also be flexible on your dates. But I love travel. I learned so much from it and you know but you and I’ve talked about this my father passed away when I was young and you never know how long you got so you got to make the most of it. And we always travel with our you know as a family or sometimes like one of us will take a kid somewhere and that's fun too just a one-on-one sort of parent kid thing and my kids are adults now and they remember all this stuff and they remembered a heck of a lot more than like whatever was under the Christmas tree they like the experiences and they travel now too which is really kind of cool. And they're taking after the old man and they're using points and miles. So, you know, I actually do that for Christmas sometimes. I give them a stash of points and miles and say, make the most of it. And, you know, we'll see where they go. So it's great.

RB: Love it. Always the educator. How can people get a hold of you, Bob?

BK: Sure. It's just it's Legally Nanny. And we started because 23 years ago we hired a nanny for my daughter and I was determined to do it legally. And I couldn't find anybody who knew all the ins and outs of taxes and law and home care. And then we started having people call us and saying, I don't need a nanny, I need a caregiver. And now we represent literally thousands of home care agencies nationwide, nanny agencies, and family employers. We're LegallyNanny.com. Find us Facebook, LinkedIn, Twitter, X, whatever. But it's just Legally Nanny.

And listen, I'll say this. I always close with this because I'm serious. I love what I do. Most lawyers are grumpy. I'm in a good mood. I'm an evangelist, right? And I'm in a good mood because here's the thing. Home care agencies do noble work. They help people maintain their independence and their dignity. And that's a really, really gratifying thing. And I get to be a tiny part of that. But I get to be a part of that. And that motivates me on a daily basis. And it's fun.

And you're good at what you do because you care. And you can tell it. And I guess that's how I'd leave it. Like recognizes like, I guess. And I'm honored to be with you today. And I'm grateful that you decided to have me on your podcast.

And if we can help you or your clients, I'd be glad to do it.

RB: What a gift. Thank you, Bob King. I appreciate it.

Thank you for tuning in to our latest episode produced by StudioOne. If you enjoyed what you heard, please share this episode and subscribe. For more insights like this, visit us at RanchoMesa.com and subscribe to our weekly newsletter.

Near Misses Are Often Missed Opportunities

Author, Sam Clayton, Vice President, Construction Group, Rancho Mesa Insurance Services, Inc.

General engineering contractors deal with a myriad of risks on a daily basis. Even though these risks are typically few in frequency, they are high in severity. This means the claim is going to be significant and could ultimately impact your company’s financial and reputational standing within the industry. Too many times I have seen contractors only focus on the claim after it happens, which is reactive. I recommend taking a proactive approach and have your foreman and project managers focus on the near misses.

OSHA defines a near miss as a potential hazard or incident in which no property was damaged, and no personal injury was sustained, but where, given a slight shift in time or position, damage or injury easily could have occurred.

Common examples of a near misses include:

1. Two pieces of heavy equipment almost collide at a blind corner.

2. A trench wall shifting or beginning to collapse while workers are inside.

3. Equipment, such as a backhoe, nearly making contact with an unmarked underground utility line.

Addressing near misses before they become a claim is important for the following reasons:

1. Your work has high-severity risk exposure.

2. Site conditions are constantly changing.

3. It helps prevent “repeat hazards.”

4. It builds a proactive safety culture.

Through Rancho Mesa’s SafetyOne™ platform, contractors can leverage these near miss incidents and create corrective action plans to mitigate future hazards. Within the mobile app, reports of near misses can alert the company’s safety manager to conduct an on-site safety observation where they can then assign the responsibility for corrective actions to the appropriate person within the company.

General engineering contractors who treat near misses seriously can prevent catastrophic claims, improve project safety, and protect the company’s financial and reputational risk.

To learn more about how SafetyOne can help your company track near misses, contact me at sclayton@ranchomesa.com or (619) 937-0167.

Navigating Today’s Nonprofit Challenges with Arnulfo Manriquez

Author, Sam Brown, Vice President, Human Services Group, Rancho Mesa Insurance Services, Inc.

Human Services Group Vice President Sam Brown interviews Arnulfo Manriquez of the Manriquez Group to explore the evolving challenges facing nonprofit leaders, from funding pressures and board governance to leadership transitions. With his decades of experience in the nonprofit world, Arnulfo shares practical insights on adaptability, strategic decision-making, and how nonprofits can position themselves for long-term sustainability in a changing environment.

Sam Brown: Hello, everybody. You're listening to Rancho Mesa's StudioOne™ podcast, where each week we break down complex insurance and safety topics to help your business thrive. I'm your host today, Sam Brown, Vice President of the Human Services Group at Rancho Mesa.

Today, I am joined by Arnulfo Manriquez of Manriquez Group. I'm really excited about our guest today. So, Arnulfo, welcome to Rancho Mesa and StudioOne.

Arnulfo Manriquez: Good morning, and thank you for having me here to join you in this conversation.

SB: Of course. Yeah, long overdue. You're a guest that we've wanted to invite in for many years, so I'm glad we're able to make it happen.

I really thought it would be timely to have you in today because our nonprofit clients and all of, say, San Diego's nonprofit leaders are facing a changing environment. I don't know if it's unique or not. I'm sure there are some differences and some unique characteristics, but someone of your experience, I feel like could speak to past lessons, maybe the role that the board could play in assisting leaders today or what that relationship should look like between C-suite and the board.

And as well as, hey, what are the skills that today's nonprofit leaders need to really sharpen, to adjust to decisions that they need to be making, perhaps some tough ones. So first of all, again, welcome. And hey, what's going on? What's new with you, Manriquez Group, and your personal life?

AM: Well, so the Manriquez Group is new. I've been working with nonprofit organizations for over 33 years. Actually, June was when I graduated from college, and my very first day at work was with a nonprofit.

SB: Nice.

AM: And so it is timely being able to then go off on my own, but really more focused on the reasons why you just talked about why I wanted to do this work. So from a personal perspective, it was the right timing for me as I have three children. All three children are out of the house for the most part. My oldest is in Scotland on their last year of veterinary school. My middle daughter lives in Long Beach Works in Disneyland as a hairstylist with the characters and also with the wigs out there, getting everybody ready out there. And my son has just completed his second year at UC Davis. And so when you look at what's been going on in my own personal life and the shifts, it was really timely for me to be able to go off on an adventure like this.

So in my own personal world the last couple of years I've taken a big interest and learning about wines. Not just going out and drinking them but really learning about the history of the wines the regions understanding where they come from why they taste the way they do and so I've been taking a lot of classes on there and so ultimately my passion has become a little bit more than just a passion. And Tonight, I'll be taking my level three certification for the Wine and Spirits Education Trust, WSET. So I'm a little excited, nervous for the exam. It's going to be a difficult one.

SB: Yeah. So just so everybody knows, I offered Arnulfo coffee and he said, no, he had to keep his palate clean today. So that's how serious this exam is. And I respect it. Nothing but water until this exam, probably. So that's exciting. And you've said that previously you've done some of your studying south of the border. In Mexico's wine region. So what have you learned there?

AM: Well, I've learned one is that I got enamored with the Valle de Guadalupe, with the overall region just by itself. Just going out there and enjoying the environment, the rustic and the rural feel of it, right? It's not fully developed. And then just enjoying meeting the winemakers and the wines. So for me has been, the last 11 years have been, it's the reason why I got so involved with the actual studies of my wines. And from all my classes were done in Spanish. This most recent exam is the only one I've taken in English. But what excited me is and what I've learned about is that Mexico is a very young winemaking region up here in the northern part. And when you compare them to those in France and Italy where they've been making wine for over a thousand years, it is something new and different. And I do actually think that all my lessons and classes and certifications are going to help me have an impact in the winemaking industry and out here as well, because that's the vision I have out here.

SB: Right. Well, that's exciting. I mean, love to see people fall on their passions, whether they be new or ones that have remained dormant for many years. So kudos to you. I wish you the best of luck on the exam today. I'm sure you'll crush it.

AM: Thank you.

SB: So regarding the environment that nonprofit leaders are facing today, what are some things that you feel like maybe are presenting some new challenges? And then maybe what are some challenges that you're seeing that maybe have always been there?

AM: I think the funding crisis that we're seeing right now, and I think crisis is the right word to use. It didn't just happen today. This has been in the building for the last couple of years. When you started looking at what was happening with the state of California budgets, and you started looking at the situations of the city of San Diego, the impacts of these funds, and then some of the referendums that they had on elections that they didn't pass. And so we knew that some of these things were happening. I was seeing them happen within the industry while I was there. It shouldn't be new for most nonprofit leaders, right? But it is.

People are treating it as if it just happened upon us. And so people do need to have, you know, all these government pressures that, you know, we've been feeling it, and they play a big role with the rest of the funding that's coming along, as well as the, with the federal changes that we've had. And we always know when a new administration comes on, we're going to see some changes, sometimes favorable to the nonprofit world, sometimes unfavorable. But we're in that latter part that we have seen a lot of flat funding in the funding sources. And we have seen where there are opportunities to pull back that's being pulled back. And so these are things that we needed to be prepared for, right? We had seen what happened back in 2016 in that administration. And so I kept thinking, that was the practice. And then this time around, it's going to be when the influences do happen and make bigger changes there. And so it's happening.

SB: I find that there's a phrase that has been used called mission creep. And that would be sort of a practice where an organization may venture away from its original roots to pursue maybe programs that are in need in the community or some funding that has become available and is sort of riding a wave of popularity. What would you say to an organization that wants to broaden its revenue streams, but also maybe not put itself in peril by doing a poor job if it's accepting new contracts?

AM: That's a great example because I see it often. It's that mission creep is what we know. Sometimes we call it, we're chasing the money.

SB: Yes.

AM: We're chasing where the money is so that we can make that next payroll for the next year or two. And really what an organization has to be doing right now is, normally, organizations only look at one year to year for the next year of their budgets. But ultimately, we should always be looking at three to five years. We should be planning out where these contracts that we have are going to go, how the fundraising and what changes in the government we might be seeing that might impact us. And so really focus on doing at least a three-year projection of your budgets.

And pay attention to that mission creep, the chasing the money, because it's what gets us in trouble sometimes, right? When we get cuts in certain areas, sometimes we can get a temporary fix by doing some fundraising until we re-stabilize again. But there's a phrase that people use that say, stick to your knitting, like really stay good, you know, focus on what you're good at. If you're going to venture out, it needs to be a strategic venture out it needs to be focused on this was part of our plan this was part of our strategic plan this is where we wanted to go and grow and if it's not there stay away from it.

There are moments right now where in this current environment that we are receiving cuts organizations are receiving their cuts and sometimes it's to the point where you're not getting cut fully but you're getting 60% of what you got in previous years. And pay close attention to what that's going to do with your operations, right? We are not going to fundraise our way out of this. This is not just going to be an anomaly for this year. And so if you can operate at that 60%, if you can pull back and operate it, then do that and begin to look at how you diversify your funding, not chase it. But you also might need to make a decision of saying, Can I do a good job with this 60%? Am I going to chase my tail trying to do the fundraising to keep the rest of the staff that we had going? And we are in an environment where you're going to have to focus somewhere. And if you start going out there and saying, we're going to increase what we are already fundraising to keep this program going, this year and next year might be the time where you say, this is not a viable program for us. And we need to pull back.

And have conversations with your peers, right? If there's another organization that's operating the same program and they also got cut 60%, figure out how you can do this work. It might just be where they've been doing a much better job. You can pull back, maybe they can get that funding or you can subcontract some of the work to them so that you're not having to do that fundraising for now. So there are maybe some temporary solutions that might be two, three years, but don't try to make, this is not the year to try to make it all work because there's more coming.

AM: Yeah, I think that's sage advice. And I've seen where clients and other organizational leaders in town are having to make tough decisions about which of their contracts are financially viable to say, well, if this contract has been a loss leader, then is that maybe first on the chopping block or maybe you don't pursue the renewal or participate in the RFP when it comes up for renewal.

But speaking of RFPs and given the financial crisis or funding crisis, as you mentioned, do you feel like this is going to become a more competitive environment for these various contracts or RFPs that maybe organizations have always felt like they sort of owned the contract without much competition previously?

AM: Yes. And they will, it's always been competitive, right? We've always had the, even if it's the contract that organizations have had for decades, it's always been a competitive process. But I think it's going to be a different type of competitive process. There are bodies of government that are shifting their strength, where they can make and vote decisions where they couldn't before. You've got the county that's been looking at how they're going to subcontract a lot of their programs, but they're also receiving cuts from the state and the federal government. So sometimes it may feel like we're just getting all these county contracts, but they're really tied into the overall picture. And so those are the places where you need to be paying attention to.

And it's a time where you have new leadership there. And they may be saying, you know what, maybe it's time for a change. If there's an organization that's been doing that work for 20, 30, 40 years, and there have been, that there are other organizations that can look at it in a different perspective and look at our current environment and that can adapt a lot quicker than organizations that have some. calcification in them.

SB: Okay. So I think you and I talked about this yesterday a little bit. Sounds like with those changing government bodies, you have new representatives in those roles. Maybe those longstanding relationships that were once very strong are getting a little bit of a shakeup as well. And so the new governmental leaders may be bringing a new perspective and saying, well, you know, what does this other organization have to offer? And maybe taking a closer look at other entrants into the RFP process.

AM: Yes. And we all belong to a certain generation, right? You know, I'm Generation X. We've got the Boomers. We have the Millennials. Gen Z is playing a big role in what's happening in the overall environment, right? In the political environment, but also in they're beginning to fill a lot of these roles. And you are seeing some of these stepping into, like, let's start our own nonprofit. Let's start doing this work and think in a very different way. It's not a bad thing that these changes are coming or that these changes may come, right? But it does behoove us to take a step back and say, okay, we are, you know, if you're a leader that has been doing this for many years, are you listening to your staff, are you listening to the different conversations that are coming up of to what they're seeing out in the community what they're facing day in and day out and how they're looking at the overall environment because um Sometimes we get stuck in our ways and this is something, it happens every generation and happens every time. When you talk about, we used to have real music back when, right? I don't know that I've ever really used that phrase because I am stuck in my own music and I've tried to go find new music to listen to. But that's what leaders have to do. They have to go in and understand out there, how this generation is perceiving their realities, right? And what are some of the ideas that they have to be able to shift? I think that's going to be important to stay competitive in this process.

SB: Okay. So the board of any nonprofit organization should play a role in some of these tough decisions. But what should the process look like whereby the C-suite, the CEO, the chief operating officer, the CFO are informing the board to a degree where everybody, board member, finance committee, governance committee, C-suite can make some of these tough decisions?

Because I imagine I would bet you that not all board members feel informed, which that should be a concerning feeling if that is true. So how does an organization avoid that?

AM: Well, it is a two-way street, right? You join a board because you're passionate about it. You care about it. You care about the work. You care about the community that it serves. And you want to make sure that first that you attend the board meetings. That you read the information ahead of time, that you participate in the committees because that's where the biggest work happens. And if you feel as a board member that you're not fully informed, you have the ability to ask all these questions and over ask sometimes, right? But do understand your role as governance, right? You're asking governance questions. You're not asking about how are we doing the intake on these forms when the participants walk in, right?

SB: Right.

AM: And so stay at the level of governance for the organization. And do be prepared to have the conversations about we just received a 60% cut on these funds. How is it that we want to work this through? And the board can provide that direction generally about saying, you know what, maybe it is time that we pull back from this program. It's not going to kill the organization. It is going to shift. You may have to do some layoffs, but you are looking at the long-term viability of the organization, right?  Sometimes these temporary fixes can pull you away from that overall vision.

And so board members need to be prepared to have those conversations. And when they come to the board, right, I think that's important when the CEO and leadership staff are having this conversation with the board, be thoughtful and understand that they have gone through several iterations, right? So when an opportunity comes up and says, I think we need to pull back, it's not an easy thing for any executive to say that, right? So it comes with a lot of difficult process to get there. Nobody really wants to do that. So be thoughtful of that and then plan out how you're going to be communicating this.

SB: Right. When you've been the leader of previous organizations, was it a priority of yours to make sure that You had board members that had previous board experience with other organizations so they could bring those experiences into the room and decision-making process?

AM: Well, not necessarily. It's not always the case, right? Because there has to be a first time for somebody to step into a role. And the organizations that I've led more recently are complicated. Complex organizations. Multiple programs, federal funds, different roles that the boards have to do and approve and move forward. And many times they are technical decisions that they are approving that they don't necessarily understand, right? Real estate transactions and surveys with the participants of the child care programs or the preschool programs and so forth.

But it is important that we also build board leaders. Future board members that may be able to also go and sit on other boards. And I am a big proponent of organizations and people and individuals that care about their communities, that they get involved in their own boards. And so while I've been executive and I've had board members and I've reported to boards, for the last 32 years, I have sat on boards. Not the same board, but there are term limits in many of these organizations, but I've consistently sat on different boards that I care about of the work that they do, making sure there is no conflict of interest with the work that I'm doing.

But all of that experience has taught me governance, right? Understanding how my board works with me and understanding how I can work better with the executive as a board member. And I've had the role of board chair on multiple occasions. And these have been local organizations, regional, statewide boards and national boards. So to me, it is that experience matters and it's important. If you're interested in being a board member, you don't necessarily have to start out at the biggest organization or the one where everybody wants to be a board member. Go find the ones that you care about and you start then connected and understanding the roles. But be present, right? Be there and always ask the questions.

SB: Right. Yeah. Be present. Be active. Probably the worst term we could ever use is “sitting” on the board. We don't want sitters. We want doers.

AM: Perfect word.

SB: So in your role then as interim CEO, are there any commonalities regarding the various challenges that you've accepted? Or do you think that there's a certain maybe set of circumstances that makes an organization ripe for bringing in an interim CEO?

AM: Well, there's two things. One, when there is an existing CEO, I think it is important to start looking at kind of collaborating and sharing some of this work with other organizations, right? We talked about mergers of organizations, but merger is not always the answer, right? Sometimes it is, you're going to have a shared CFO, you're going to have a shared grant writer, you might have a shared compliance officer or HR that are going to help the organizations. But when boards are beginning to look at a transition and when they're looking at whether it's their decision to exit the CEO or the CEO has given notice and they're going to be leaving. On some occasions they're going to be left without a CEO and then they may promote an internal person to the CEO role or as an interim role. But the boards need to be strategic about what's going to happen with that role. You don't want somebody that's going to sit there or maybe, you know, we used the word sitting right now but yeah there's going to be able to sit there and kind of like do status quo and keep the operations until the new permanent person comes on board.

I think it's the moment of opportunity for boards to be able to bring in an experienced CEO that is not interested in being there for the long term, but that someone that can come in day one and start not just keeping the organization stable, but looking at all the places that need to be addressed, that need to be fixed, that need to be shifted or restructured. And every organization will have it.

Successful organizations with successful CEOs that are on their way out. The boards are still going to have some form of limited information because it's what they get. But it's always great to have that third party come in and they can give them and paint the picture of what exactly is in front of them so that when they hire the new individual coming in, that new individual is not going to come back two, three, four months later and say, I discovered this, I found this out, and we have to make these decisions or we didn't do X, Y, Z. And it happens a lot more often than you think. So if you sat on a board and you've had transition, you know what I'm talking about. So be very intentional, right? Interim roles are not somebody that's going to come and step in and keep just normal operations. You want to make sure that they're going to come in and they're going to be able to understand the structure and they can share with the board. So then the board will know exactly who they need to go out and hire.

SB: No, that's interesting. So it sounds like there could be a very intentional decision to when there's a CEO transition rather than going from, say, a long tenured CEO to the next hire, the next permanent, quote unquote, permanent CEO to say, hey, let's bring in an interim CEO who may uncover some things or look at it from an impartial perspective and educate the board as well as other stakeholders.

When it is time to actually get that new, hopefully long tenured CEO in place, maybe a maybe a middle step to say, OK, maybe we're not ready for that, quote unquote, permanent hire. So let's get there with maybe a different perspective first.

AM: Yes. And it does really it will make it easier for the board to make a decision of who that individual is once they know exactly what they have in front of them, right? If there's a problem and the fix is going to be long-term, they will understand that they're going to need to bring somebody with those strengths that can move that organization, right? You don't want the interim providing the vision of how the organization is going to move forward. They are going to bring a vision, but it's a short-term vision, right? This is the time that I'm going to be here, and this is what I plan and can do with this timeframe that I have. But I do feel it will make it a lot easier for board members to identify that next leader. And it may be a leader that has not been an executive director before, but because they know what's in front of them and they know how they can put the guardrails to help this new person coming in, they can now provide opportunities and open doors to people that normally would not have been looked at before.

SB: That makes sense. So given what you've seen, the various organizations that you've sort of ushered into a changing landscape, or as you're paying attention to headlines and talking to leadership, both at the state level and local; what are some skills that you feel like today's nonprofit CEOs ought to at least have or be working on to ensure their success today and then in the future?

AM: Well, you're going to, you know, leaders now, they have to be okay with bringing difficult decisions forward, right, for the board members if it needs a board decision. And being able to implement them themselves, right? So it is always important to be present it is important to be, to communicate it, right? Don't dismiss when questions come up from difficult decisions that you've made and it is a moment of adaptability those that are going to succeed those that are going to be able to keep their organization strong it may not be as big as the organization as they were operating a year ago but those that are able to adapt and make those shifts are preparing themselves for the long-term success. So adaptability is important. And being prepared to look at a merger. I think that right now, the opportunities are more ripe for a merger. And this is something, you know, mergers have, conversations have happened over the past many years. Funders sometimes will say, why don't you guys just go together because you're all asking me for the same type of money. And so there was a time and a place when it was right, when it wasn't right. We're at a moment right now where it does make that important strength for that organization.

You look at the corporate world out there and you see some of the stronger corporations out there are the ones that have merged, that have bought other corporations and so forth. Not that it's a model that is aligned for non-profit organizations but they do it because it strengthens them moving forward and when you look at it from that perspective boards need to be paying attention to where it matters, right? And so from the leadership of the board, boards should not be rubber stamp boards, right? That they follow whatever the CEO says, that they do need to pay attention. They do need their own separate time. They do need their own closed sessions. And they need to be having some of these conversations because boards have a lot of power. Not many boards use that power. And I'm not saying go out and use it every day because then it's going to be crazy for the executives there that are reporting to those boards. But boards do have the ability to influence and to make these decisions. And so have the thoughtful conversations, have the data that you need to be able to make those decisions. So leadership at a board level is ultra-important right now because they may bring over the change that the CEO may not be thinking about or may not want to be doing.

SB: Okay. So we've talked a lot about the current environment. We've talked about how some challenges that maybe have always been there, maybe some challenges that folks would consider new, although they may have been in the building for a couple of years now. So we've talked about the role of the board, as well as how maybe an interim CEO could influence in a positive way the path of the organization. And then as well as some skills that existing leadership should either work on or hone and maybe a future path and maybe some opportunities.

So we've talked a lot about some really important subjects that I know I'm talking with my clients about. Sometimes we might be talking about insurance on the same conversation. Other times they may be giving me a call and saying, hey, we're thinking about going in this direction. So this has been a helpful conversation for me. And I know our audience will gain a lot from it as well.

Going to a lighter side, I don't know if you've ever seen the movie City Slickers, but there's a scene where they're sitting around the campfire and there's two characters who are supposed to be sort of the Ben and Jerry's Ice Cream founders. They don't use those words. I think it's Ira and Barry. If I'm not, I think it's Ira and Barry. And they're sitting around the campfire and Billy Crystal's character says, “All right, I'm going to give you a meal and you need to tell me what ice cream. I should consider on that meal.” And it's a pretty funny scene.

So coming from somebody who is not a connoisseur of fine wines, these might be softball questions for you. And you might be wrong and none of us would know, but I'm going to ask you anyway. So, okay, I'm sitting around, I'm going to have a filet mignon, heavy on the pepper, with maybe grilled asparagus and maybe some, and a baked potato. Let's go real simple here. Just a baked potato. Yes. What would be the glass of wine of choice for you?

AM: Well, that's a big heavy cut of meat and with the peppers out there, with the spices. So you don't want a wine that is going to get lost, right? Because that flavor can take away a lot of the flavors of the wine. So you want to bring in a wine that is going to pair up and have a couple rounds against that steak that you're looking at. So my own personal favorite and my go-to would be a 2020 or older Barolo. And because it has the right amount of tannins, it has the right amount of acidity and the fruit that is going to be able to really pull out and enhance the flavors of that steak out there. It's not everybody's wine, but you can have a Pinot, a nice Pinot Noir that's going to be if you're looking for a little bit lighter. But I think the average of what most people will be going to is getting a Bordeaux blend. That Bordeaux blend is going to be very, it's a lot more palatable to a lot of people. I personally like the stringency of the Barolos. A nice Bordeaux blend is going to be doing great with that state.

SB: Okay. I like that answer. Thank you. Good explanation too. All right. One more for you. So I'm going to, let's see, I'm going to grill up some swordfish and maybe some scallops as well. My vegetable would probably be some green beans that I would probably just throw some lemon juice on there and some sea salt. And then let's say we have some air fried sweet potatoes with a little bit of cinnamon on there. What would be a glass that you might or a bottle you might reach for?

AM: Oh, right. Well, you're going to be looking for a white. You're going to be looking for acidity, right, to match that acidity of some of the citric and some of the seasoning that you'll be using, and that swordfish and the scallops there. So there's a couple ways that you can start, right, depending on how many people are going to be there eating, right? If you only have a glass of wine or a bottle of wine that you're going to go have for this dinner, I would go with a Sauvignon Blanc, a Sancerre from France or a Sauvignon Blanc from New Zealand. It's going to, that crispness, that the acidity is, if you're going to be looking at Sauvignon Blanc from New Zealand, you're going to be looking at a little bit more fruit forward, a little bit riper grapes out there. If you want to look at more of the mineral, style of the Sauvignon Blanc, then you can go with the Sancerre from France.

SB: Well, those are, I do like a good Sauvignon Blanc. I really do. So I'm glad you said that. So if my wife's listening to this, maybe we can make that happen.

AM: Thanks.

SB: Well, I've enjoyed this conversation. I know that you come from such a broad background, leading different organizations. You and I had the pleasure of working together in your last role for, shoot, I don't know, maybe 12 years or so before you decided to found the Manriquez Group. So I know that the future is bright. I know your future clients and current clients will benefit greatly from the knowledge and expertise that you bring, as well as your ability to communicate.

So this is a good opportunity for me to say from all of Rancho Mesa, thank you for entrusting us as the insurance agent at your last role. But then also, if there's anything that we can do to support you moving forward, we'd be happy to do so and really appreciate you coming in today.

AM: Great. Thank you so much. And, you know, I do want to, and I did want to add that there are ways that you can go raise money. There are go, you know, ways that you can kind of structure some things. But insurance can play a big role in savings, in being able to manage your organization.

And I want to use the example that you and I experienced when we had to go in and look at our insurance brokers for the workers' comp situation of the organization. Insurance can be one of those where organizations are not paying attention to. It is something that we just all have to pay and we go in and day out. But if your insurance broker is not spending time with you. If they're not keeping you up to speed of the changes that are going out there, they're not consistently coming up with you and saying, we need to do this training with staff because in the long run, this is going to save you money, right? Because you know the industry, you know what's happening moving forward.

So if that's not happening, you need to then switch to a broker that is doing that, that is paying that attention because the experience that you and I had at MAAC where we looked at the workers comp many years ago where we consistently save money every single year we started really having those efforts that then evolve into the rest of the insurance world out there. So I want to one is that pay attention to that I want to do the appreciation and thank you because that played a big role in the budget planning for us as an organization and so listen to Sam because he knows what he's talking about.

SB: I appreciate that. That was a great partnership was formed when MAAC selected Rancho Mesa. And we took that very seriously. We felt very prepared to take on the role of insurance agent and advisor for MAAC. And we were correct. I think both parties were correct.

AM: Yes, absolutely.

SB: No, I appreciate you bringing that up. And the successful partnership continues. Really want to appreciate or send words of appreciation to Arnulfo for spending time with us today. And if anybody has any questions or concerns or would like further information about the content here, I can be reached at sbrown@ranchomesa.com or 619-937-0175.

And Arnulfo, what's the best way to get in touch with you?

AM: Best way to get a hold of me is themanriquezgroup.com. And my phone number is 619-726-4441. You can get out there. And my email is arnulfo@tmgleads.com.

SB: Excellent. Well, this has been fun. Thanks, Arnulfo. And thanks, everybody. Thanks for tuning in to our latest episode produced by StudioOne. If you enjoyed what you heard, please share this episode and subscribe. For more insights like this, visit us at ranchomesa.com and subscribe to our weekly newsletter.

Supplement Electronic Visit Verification Data with SafetyOne™

Author, Jadyn Brandt, Client Communications Coordinator, Rancho Mesa Insurance Services, Inc.

Federal law mandates Medicaid-funded personal care services and home health service companies use the Electronic Visit Verification (EVV) system to ensure patients actually received the care they need. However, companies providing these service may want to collect additional information above and beyond the minimum that is required.

The 21st Century Cures Act requires caregivers to digitally clock in and out of a home visit and collect and verify six pieces of information from each visit. The information can be collected via GPs-enabled mobile applications, interactive voice response or telephonic systems, or in-home devices. Then, the data must be submitted to the state’s designated EVV system.

In California, employers can use CalEVV or an alternate EVV system. Each state manages EVV differently, so be sure to check your state’s requirements to ensure compliance.

The employee conducting the visit is required to document the following data:

• Type of service performed

• Who is receiving the service

• Date of the service

• Location of the service

• The individual providing the service

• The time the service begins and ends

Use SafetyOne™ to Supplement EVV Data

Rancho Mesa’s SafetyOne Platform allows clients to easily collect supplemental data about in-home visits.

Using custom mobile forms, Rancho Mesa clients create patient-specific QR codes that are placed at a patients’ residence, room, or bedside. Caregivers scan the patient-specific QR code using a mobile device to record supplemental information like cognitive condition, diet, incidents, mobility, mood, vital signs, or any other data that is needed.

Using these QR codes, employers can verify that the caregiver is awake throughout the shift automatic date and time-stamped reports.

Built-in user security ensures only authorized users have access to patient data on the platform once data is submitted.

Any caregiver can scan the patient-specific QR code and complete the check-in data without being a platform user, eliminating the need to manage a flexible workforce. 

Contact your client technology team to learn more about using the mobile forms in SafetyOne to document supplemental patient visit data.

The Real Reason Sureties Require Fund Control (And Why It Matters)

Author, Josh Hill, Surety Account Executive, Rancho Mesa Insurance Services, Inc.

When a surety company issues a bond, the main goal is simple, to make sure the job gets finished and no one loses money. Even if a company has deep experience and strong finances, that does not always mean project money will be handled the right way. Because of this, a surety may ask for fund control when there is more risk.

One major reason projects run into trouble is poor cash flow management. Contractors often work on several jobs at once and must pay for labor, materials, and everyday business expenses. Without controls, money from one job may be used on another. This can leave a project short of cash and cause delays or failure. Fund control helps prevent the comingling of funds by ensuring that  funds are only used exclusively for their designated project.

Another concern a surety wants to avoid is money being used in the wrong way, especially on private jobs where there is much less oversight than on a public project. Fund control helps by placing money into a special account, requiring proof before payments are made, and making sure work is done before money is released. This helps ensure funds go toward the right things, like workers and materials.

Sometimes there is no lender or outside party tracking how money is spent. In these cases, fund control acts like a financial checkpoint. It tracks spending, requires documentation, and adds structure. This helps everyone stay organized and reduces mistakes.

Sureties also use fund control to support higher-risk companies, such as newer contractors, companies with less cash, or businesses taking on bigger jobs. Instead of turning the work down, the surety can approve the bond with controls in place. This gives companies a chance to grow while lowering risk.

Even though fund control may seem strict, it can help the business. It keeps finances organized, helps ensure subcontractors get paid on time, reduces disputes, and can make it easier to get bonds in the future.

Fund control is not meant to make things harder. It helps projects succeed by making sure money is used the right way at the right time. In the end, it protects the surety, supports the contractor, and helps the job get done successfully.

Rancho Mesa is happy to assist you with any questions regarding your bonding needs. Please content me with your questions at jhill@ranchomesa.com or (619) 798-2819.

Safety First: Protecting New Employees from Day One

Author, Jadyn Brandt, Client Communications Coordinator, Rancho Mesa Insurance Services, Inc.

As high schools and colleges let out for the summer months, your organization may be looking to hire young workers as interns or full-time employees. For many of these individuals, it may be their first job, or first time working in a professional setting. So, it will be necessary to ensure they understand the potential hazards they may face, their rights in the workplace, and how to address safety concerns that may arise.

Proper Training and Education

Young workers entering a jobsite or office environment for the first time will not have experienced most of the training and preparation seasoned employees may take for granted. Employers should ensure thorough training is provided to new employees before they face any potential hazards.

For example, in California all employees, no matter the industry, must be trained in Sexual Harassment Prevention and Workplace Violence Prevention.

In addition, Cal/OSHA also requires employers to provide training on job-specific hazards to all employees.

Industry-specific safety trainings can be assigned to both new and seasoned employees through the SafetyOne™ platform’s Learning Management System. And, weekly toolbox talks can be used to reinforce proper safety practices.

Rights in the Workplace

Employers are required to notify employees of their rights in the workplace, often through a combination of written notices and posters displayed in the workplace.

State-specific recruiting and new hire toolkits are available through the RM365 HRAdvantage™ portal. These toolkits include payroll documents, benefits notices, discrimination and accommodation notices, leave notices, and more.

Federal law also requires employers to report basic new-hire information within 20 days of hire, although some states require it sooner. New hire reporting resources are also available through the HR portal.

Addressing Safety Concerns

New employees should understand the process your organization has in place for reporting unsafe conditions. New employees should be encouraged to report any hazards they may see on the job without fear of retaliation.

Employees can use the SafetyOne’s QR Code-enabled forms to report issues.

Proper training, notification of workplace rights, and a well-established reporting process are three key pieces of a strong workplace safety culture. Employers should prioritize establishing and communicating the importance of safety to new employees at the start of employment to get them up to speed. Regular training and reminders should then be implemented following initial trainings to ensure all employees stay safe on the job.

The Hidden Shift in Workers’ Compensation Pricing

Author, Raysan Benito, Account Executive, Rancho Mesa Insurance Services, Inc.

The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) recently proposed a pure premium rate increase of about 17% for non-profit and human services organizations, which is higher than the overall state-wide average of 10.4%.

If approved by California Insurance Commissioner Ricardo Lara, these changes will go to take effect starting September 1, 2026.

Rising claim severity, wage inflation, and higher medical costs are causing carriers to adjust pricing and eligibility requirements.

Affects to Your Organization

While some class codes will see increases of only 1%, others could feel a 28% jump in the premium base rate. With the expected higher base rates, renewal pricing will likely increase with little advanced notice if you are not working with an advisor who specializes in your industry.

With the increase in pricing, credits, dividends, or discounts may be reduced or eliminated completely. And, coverage terms may become more restrictive.

The chart below outlines the increases for each classification code.

Class Code	Industry	Pure Premium Rate Increase
9085	Residential Care for Developmentally Delayed	28%
8868	Day Services for Developmentally Delayed	27%
8868	Private Schools	27%
8875	Charter Schools	27%
9015	Building Operations Including Janitorial	25%
9011	Apart/Condo Complex Operations	16%
8804	Shelters/Recovery	13%
9059	Child Care	13%
8823	Residential Care for Children (Group Homes)	11%
9070	Residential Care for Adults	8%
8834	Physicians & Clinic	6%
8839	Dentistry	5%
8827	Hospice & Home Care	1%

Act Now

Many organizations will not know about the change in pure premium until it is too late to prepare. Early action gives you more options, more control, and better outcomes. Waiting could mean higher premiums and fewer choices.

Schedule a quick 15-minute workers’ compensation checkup with me at (619) 798-2823 or rbenito@ranchomesa.com.

Time Off from Work: Principles for Structuring PTO Policies

Author, Jadyn Brandt, Client Communications Coordinator, Rancho Mesa Insurance Services, Inc.

Paid time off (PTO) policies play an important role in how employers structure and support time away from work. Clear and well-documented PTO policies are a necessity for organizations to stay compliant, avoid employee confusion, and ensure proper use of leave time.

In California, the Department of Industrial Relations maintains that there is no legal requirement for an employer to provide PTO to employees (i.e., vacation time), not to be confused with California’s required paid sick leave. However, if an employer chooses to provide PTO, they must adhere to certain restrictions including: PTO accrues as it is earned, and “cannot be forfeited, even upon termination of employment, regardless of the reason for the termination.”

Employers can place a “reasonable cap” on PTO benefits and, “unless otherwise stipulated by a collective bargaining agreement, upon termination of employment all earned and unused vacation must be paid to the employee at his or her final rate of pay.”

Additional California exceptions to PTO:

• Employers can prevent employees from earning PTO during a specific period of time at the start of employment.

• Employers can exclude certain classes of employees including part-time, seasonal, or probationary workers.

• Employers can control the amount of PTO taken at a particular time.

• Employers can pay out employees for all PTO not taken at the end of each year.

Additional California restrictions to PTO:

• Employers cannot enforce “use it or lose it” policies in regards to PTO, the unused balance must either be paid out or rolled over into the following year. However, employers may limit PTO accrual once an employee has hit the established cap.

• Employers cannot deduct “advanced” vacation from an employee’s final paycheck if they quit/are terminated before that vacation is accrued.

Rancho Mesa’s RM365 HRAdvantage™ portal provides PTO resources for businesses across all states. Sample policies are available to be customized to your organization’s protocols and state regulations. Individual states may have additional requirements, so consult an HR expert or attorney who is knowledgeable about your state’s laws.

Fleet Safety is Evolving: How Telematics and AI Are Changing Fleet Risk

Author, Rory Anderson, Partner, Account Executive, Rancho Mesa Insurance Services, Inc.

Fleet safety technology is rapidly shifting from reactive to proactive. Modern telematics and artificial intelligence (AI) tools now give companies real-time visibility into driver behavior, helping identify and correct risky habits before they turn into accidents.

I recently attended a webinar titled Telematics, AI & the Future of Fleet Risk hosted by the Insurance Journal, and one of the biggest takeaways was that many companies are seeing immediate value from these tools through reduced claims, improved driver performance, and better operational efficiency which all lead to greater returns on revenue-generating assets like the company’s fleet of vehicles.

Interestingly, many organizations initially implement telematics for safety reasons, but quickly discover benefits across multiple areas of the business. In addition to improving fleet safety, which ultimately leads to fewer out-of-service vehicles, companies often report:

• Reduced fuel costs

• Improved maintenance tracking

• Better workflow efficiency

• Greater asset (vehicle) utilization

One analogy from the webinar stood out to me. The speaker compared drivers to professional athletes reviewing game film. Just as athletes use video to improve performance, drivers can now use dash cameras and AI insights to improve driving habits through more personalized coaching.

Of course, implementation is not without challenges. Employee buy-in is often the biggest hurdle, particularly when drivers feel the technology creates a “big brother” environment. Transparency is critical. Companies that clearly explain what the system tracks, how the data is used, and why it is being implemented typically see much stronger adoption.

Another challenge is information overload. Many organizations are surprised by the amount of data available when they first launch a telematics platform. A gradual rollout focused on a few key metrics at a time often leads to the best results.

There was also strong discussion around the impact telematics and AI are having on claims and litigation. Dash camera footage and telematics data can help piece together accidents more accurately, improve claim investigations, and provide objective evidence during litigation. In many cases, these tools help reduce the total cost of risk while improving defensibility.

Fleet technology continues to evolve quickly, and while telematics is not a replacement for a strong safety culture, it is becoming an increasingly valuable tool for contractors looking to improve safety, reduce losses, operate more efficiently, and improve return on assets.

To learn more about how telematics and AI tools can help your company manage risk, contact me at randerson@ranchomesa.com or (619) 486-6437.

Frontline Safety: Working in Wildfire Conditions

Author, Jadyn Brandt, Client Communications Coordinator, Rancho Mesa Insurance Services, Inc.

Rising temperatures in the summer months bring a greater risk of wildfires across the country. California in particular is especially vulnerable to high heat and dry conditions, making wildfire preparedness a necessity for employers who work outdoors.

Working in areas where wildfires are burning exposes employees to unhealthy air conditions including smoke containing harmful chemical or fine particles. Even after a wildfire has been extinguished, workers can still be exposed to electrical hazards caused by power outages.

Proper training and identification of harmful exposures along with providing employees with the correct personal protective equipment (PPE) when necessary can help reduce injury and illness in the case of a wildfire.

Cal/OSHA requires employers to implement protections for their workers if the current Air Quality Index is greater than 151, or if employees are expected to be exposed to wildfire smoke. This includes creating and administering a system for hazard communication, providing adequate training, implementing engineering controls, and providing proper respiratory protection equipment. Specific training and PPE guidelines can be found on the DIR website.

Employers with indoor workers may also be required to adhere to specific ventilation requirements. Maintaining HVAC systems is an important but often overlooked part of protecting workers from wildfire smoke.

Wildfire safety regulations may differ by region, so be sure to check individual state guidelines for clarification. For additional safety information, register for Rancho Mesa’s Wildfire Prevention and Wildfire Smoke Regulations webinar.

CA Workers’ Compensation Market Faces Increased Pressure Beneath Stable Surface

Author, Jeremy Hoolihan, Partner, Rancho Mesa Insurance Services, Inc.

Recently, the Workers’ Compensation Insurance Rating Bureau (WCIRB) of California released its Quarterly Experience Report that offers insight into the state of the California workers’ compensation market. While at a glance, the market may seem stable, there are evolving claim patterns that are creating challenges for insurers and employers alike.

Premiums Hold Steady as Rates Bottom Out

Since the pandemic, written premium in California has remained steady while average rates have reached historically low levels. However, recent data suggests this decline may be slowing. Modest rate changes over the past two years and the upcoming proposed increases signal that pricing may have reached a breaking point and insurers will be responding with higher rates.

Profitability Under Strain

Combined ratios, which are a key measure of underwriting performance, rose again in 2025, hitting its highest level in over 20 years at 129%. For the fifth consecutive year, combined ratios have exceeded 110%, indicating that insurers are paying out significantly more in claims and expenses than they are collecting in premium.

Cumulative Trauma Claims Reshape the Landscape

A major driver behind many of these trends is the rise in cumulative trauma (CT) claims. Since 2021, CT indemnity claim frequency has increased from 15.7% to 23.7%, clearly making these claims a significant threat to the health of the industry. CT claims typically involve repeated stress or wear and tear injuries rather than single incidents. They are often more complex, slower to resolve, and more likely to involve litigation. As a result, they contribute to longer claim durations and increased administrative and legal costs.

Looking Ahead

The WCIRB report highlights a workers’ compensation system at a critical juncture. On the surface, stable premiums and low rates may suggest a healthy market. But beneath that stability, rising claim frequency, increasing litigation, and escalating medical and legal costs are putting sustained pressure on the system.

As we look to the future, we should expect insurance companies to focus on rate adequacy, cost containment, and claims management strategies. We should also expect legislative changes relating to the increased frequency and costs associated with CT claims. Rancho Mesa has taken a leadership position in pushing for legislative reform from our state representatives to help prevent the growing abuse of the system. 

Without pricing and legislative changes, the California workers’ compensation market is a ticking time bomb. If you would like to know how you can get involved to push CT claim reform, please feel free to reach out to me at (619) 937-0174 or jhoolihan@ranchomesa.com.

California’s Workers’ Comp Rates Poised to Increase Again: What the 10.4% Proposal Means for Landscape Employers

Author, Greg Garcia, Account Executive, Rancho Mesa Insurance Services, Inc.

The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) recently released a proposed pure premium rate increase of 10.4% across all class codes. As a reminder, the proposed increase does not mean every class code will see a 10.4% increase on their specific class code, rather that is the blended average increase across all class codes. These proposed rate increases will be reviewed by California’s Insurance Commissioner Ricardo Lara sometime in mid-July for the new rates to go into effect September 1, 2026.

Last year, the WCIRB proposed an 11.2% pure premium increase, but Lara ultimately adopted a lower increase of 8.7% in July. We will learn more about the Commissioner’s decision on this year’s proposal in the coming months.

Looking specifically at the 0042 class code, the proposed pure premium rates are recommended to increase from $5.30 to $5.77, which is a 9% increase. For context, last year, the 0042 class code had an 8% increase on the pure premium rates. If this increase is approved again this year, it will mark the fifth consecutive year that the 0042 class code has seen an increase on the pure premium rates. These trends point toward a continuing hardening workers’ compensation market, which could result in higher annual workers’ compensation premiums for employers.

So, why has the 0042 class code pure premium rates continue to increase? Many factors go into this increase, including surging medical costs, high litigation rates, and a rise in costly cumulative trauma claims to name a few.

To help combat these potential increases, I encourage all landscape companies to really hone in on their current safety program. Invest in technologies, safety certification, trainings, stretch and flex programs, anything that can create a safer environment for your employees and thus lowering the chances of worker’s compensation claims. Additionally, implementing quarterly claim reviews with your broker, claims advocate advisor, and workers’ compensation carrier adjuster is a critical step in managing claim outcomes that helps to control your Experience Modification Rate.

Ultimately, staying proactive through strong safety practices and disciplined claims management will be the most effective way for landscape companies to help mitigate the potential increases to the 0042 pure premium rates.

Reach out to me should you have further questions on the pure premium rate increases and/or an interest in refreshing your approach to safety. I can be reached at ggarcia@ranchomesa.com.

Employee Health Insurance Benefit Protections under the Family and Medical Leave Act

Author, Jadyn Brandt, Client Communications Coordinator, Rancho Mesa Insurance Services, Inc.

When an employee takes leave provided to them by the Family Medical Leave Act (FMLA), an employer may be left with a number of questions concerning what protections they are required to give to said employee. ‍

The FMLA allows employees to take up to 12 weeks of leave from work for personal or family medical reasons, and return to the same job or an “equivalent job” when their leave ends. An equivalent job is a role where the pay, benefits, employment terms, and often schedule and location are identical to the employee’s original job.

FMLA leave is unpaid leave, but employee health insurance benefits can continue while the employee is on leave, so long as the employee continues to make regular contributions to insurance premiums.

The U.S. Department of Labor states these contributions can be made by the employee in a number of ways. Most commonly, these payments are made through payroll deductions when an employee has elected to take paid leave along with FMLA leave. If an employer does not require an employee take paid leave and the employee opts to take only FMLA leave, an employer may make payments on the employee’s behalf that the employee will then need to repay upon returning to work.

The terms under which an employee receives health insurance coverage through an employer must also remain the same while on FMLA leave. For example:

• Employees who have family member coverage must continue to receive family member coverage.

• All forms of benefit coverage including medical care, surgical care, hospital care, dental care, eye care, mental health counseling, and substance abuse treatment must adhere to pre-FMLA leave terms.

• Employees must be notified and given the opportunity to make changes to plans or benefits.

An employee can also elect not to continue coverage through an employer’s group health plan. However, upon returning to work the employee has the right to return to the same coverage levels as before and, “no qualifying periods or physical examinations may be required, and no exclusions based on pre-existing conditions may be applied.”

An employee returning from FMLA leave must also be allowed to resume receiving benefits at the same level and manner as before the FMLA leave began including: life insurance, disability insurance, sick leave, vacation, educational benefits, pensions, and retirement or 401(k) benefits.

For more information on FMLA leave requirements, login to the RM365 HRAdvantage™ portal or visit the U.S. Department of Labor website. Individual states may have additional requirements, so consult an HR expert or attorney who is knowledgeable about your state’s laws.

For a list of Rancho Mesa FMLA resources, read or listen to FMLA Made Easier: Tools and Resources for Employers Navigating Leave Laws.

Update on California Workers’ Compensation Reform Efforts: APCIA Launches Public Awareness Campaign

Author, David Garcia, President & CEO, Rancho Mesa Insurance Services, Inc.

As part of Rancho Mesa’s ongoing efforts to support meaningful reform around cumulative trauma claims, I want to share an important update on recent developments within the California workers’ compensation system.

The American Property Casualty Insurance Association (APCIA), in collaboration with a broad coalition of business organizations, has launched a new public awareness campaign: “Fix CA Workers’ Comp Now.” This initiative includes a dedicated website, media outreach, and targeted digital advertising across social media, streaming services, and connected TV platforms.

What this means for California businesses:

1. The coalition is advocating for practical reforms aimed at improving the stability, fairness, and long-term sustainability of California’s workers’ compensation system.

2. The current campaign is focused on building awareness and support, and is not yet tied to a specific piece of legislation.

3. More detailed updates on potential legislative proposals and timelines will be shared as the effort progresses.

You can learn more and share the initiative at the Fix CA Workers' Comp Now website.

We will continue to closely monitor these developments and keep our clients informed as additional details emerge. If you have questions or would like to discuss how this may impact your organization, please reach out to Rancho Mesa at any time.

2026 National Safety Month: Protecting People, Preventing Risks

Author, Jadyn Brandt, Client Communications Coordinator, Rancho Mesa Insurance Services, Inc.

Since 1996, June has been recognized by the National Safety Council (NSC) as National Safety Month.

National Safety Month is a reminder that workplace injuries and fatalities are often preventable. In 2024, preventable injuries were the third leading cause of death in the United States, with falls and motor vehicle accidents showing some of the highest concentrations among the most frequent and deadly incidents.

June is an opportunity for employers and employees to address common causes of preventable injuries at work. The NSC offers free safety resources through the month of June that can be used independently or alongside regular weekly safety trainings.

Week 1 (June 1-6): Moving Safety Forward

Advance a culture of safety with forward-thinking strategies and tools.

Rancho Mesa provides our clients with the necessary resources to be proactive rather than reactive when it comes to addressing jobsite risk. Conducting proper safety training using the RM365 HRAdvantage™ portal and SafetyOne™ platform.

Week 2 (June 7-13): Staying Safe on the Roads

Help reduce crashes with practical guidance for drivers, pedestrians and fleets.

A strong fleet safety program is one of the best ways to protect employees from motor vehicle accidents. This can include regular trainings, updated policies, and data collected from telematics. Rancho Mesa’s library of 52 driver-specific toolbox talk topics can be used for weekly training. For an in-depth overview on building a fleet safety program using Rancho Mesa’s tools and resources, watch our latest webinar.

Week 3 (June 14-20): Promoting Holistic Worker Health

Support total worker wellbeing with insights on mental, physical and emotional health.

Worker health encompasses more than just safe practices on the jobsite. Mental health resources are available through the RM365 HRAdvantage™ portal, including Q&As and ways to support employees’ mental health. Listen to our Mental Health Awareness Month podcast episode for more ways to support overall wellness in your organization.

Week 4 (June 21-20): Preventing Slips, Trips, and Fall

Reduce common workplace and home hazards with targeted prevention resources.

Slips, trips, and falls are one of the most common causes of workplace injury. But the good news is, they are often preventable. Fall prevention and protection toolbox talks are available through the SafetyOne™ platform. Rancho Mesa’s Ladder Safety workshop also address common causes of ladder-related falls and how to prevent them.

In addition to the resources offered by Rancho Mesa, the NSC offers free safety tools and resources including:

• Campaign Poster & Participant Guide

• Weekly Fact Sheets & 5-Minute Safety Talks

• Weekly Curated Videos, Articles and Research

• Go Green for Safety Sign

• SafeAtWork Pledge

• Member Exclusive Webinars

From RFI to Payment: Navigating the Full Change Order Lifecycle

Author, Anne Wright, Surety Relationship Executive, Rancho Mesa Insurance Services, Inc.

I recently had the pleasure of interviewing Luke Thompson, Esq. who is uniquely qualified to help us understand the nuances of change orders. Based on our conversation, I’ve put together an overview of what all subcontractors should know about change orders.

First, it is important to know what is in the general contract, whether it is a public or a private job, and whether it is a design-build or design-bid-build project.

Most subcontractors understand the basics of a change order, but often times they fail to fully understand how they affect the job’s contract.

A change order is an amendment to an original construction contract or a subcontract that alters a given project’s scope, cost, materials, design, or schedule. These changes are sometimes also called contract modifications or contract supplements. There are subtle differences, but for the purposes of this discussion, “change order” is sufficient.

For most subcontractors, they may only use the change order process when they are seeking additional money for work that was not in the original scope (i.e. scope changes). But, there is a lot more that can and should be done when there is a change order.

The Change Order Process

First, it is important to document all change orders for the entire project. Sometimes, the change request comes from the owner; sometimes, it comes from the general contractor; and sometimes, it is the subcontractor who initiates the change order process. Regardless, there are specific contractual and sub contractual processes that must be followed.

In a typical fixed price, fixed scope project, the owner/agency is usually responsible for the design. Any changes to the original scope, design, or schedule of the project need to be approved by both the design team and the owner (who is typically responsible for the costs related to the change order). However, if the change is the result of the prime or general contractor’s actions (e.g. scope gap in the general contractor’s bid or delays not caused by the owner/agency), then, the general contractor might be responsible for any resulting costs.

In a design-build arrangement, the prime or general contractor is often responsible for the costs if the change is initiated by the owner or agency.

There are budget allocations, contingencies, and many other factors that can affect who is paying for the change. It is critical that the subcontractor understands who is paying for the change order and what other impacts the change will have on the scope, design, or schedule. In the end, the subcontractor ultimately needs to sell the change order to the general contractor, even the zero-dollar ones. And, if the general contractor needs to sell the change order to the project owner, it can be a recipe for delaying payment or even having the change order rejected. While a subcontractor may be able to pursue a claim for the change order, this is often a costly and time-consuming process.

In general, when a subcontractor submits a change order, it goes to the general contractor for initial review. Because the general contractor has to submit the change order request (COR) to the design team and get approval from the owner/agency, a poorly drafted COR will need to be redrafted by the general contractor, something that invites scrutiny and often skepticism. It is much more efficient to have the COR properly formatted and supported than go through the revision process.

If the general contractor accepts the COR, that does NOT mean it is approved. The general contractor must then submit it to the owner/agency for approval. Typically, a general contractor will need to pitch the COR to the owner and design team. A properly structured and supported COR makes this process much easier. Once the owner/agency approves the COR, they issue a change order to the general contractor, often times that change order is bundled with other CORs that were approved. Then, the general contractor issues a change order to the subcontractor. Until that subcontract change order is executed by both parties, there is no official change to the subcontract. That is why a subcontractor cannot bill against a change order until the cycle is complete.

The whole cycle rarely takes less than a month, and often takes much longer to complete. In the meantime, the subcontractor is likely to have been directed to perform and may have already completed the work. Since most subcontracts require subcontractors to perform when directed, a subcontractor needs to be mindful that payment for the subcontract change order may take 30, 60, or 90 days, or longer. The labor costs alone (assuming a subcontractor is holding off on paying vendors until it gets paid) can be crippling.

Change Order Procedures

Perhaps the single biggest mistake subcontractors make when dealing with change orders is that they drag their feet in issuing CORs. The failure to timely submit a COR can result in a rejection of the COR outright, even if the work has been completed. Most contracts and subcontracts have strict timelines (often 5 days or less) when notice and the COR itself must be submitted. Few project managers are aware of these timelines. In most cases, it ends up not being a major problem, especially when it is clearly additional work. But sometimes, particularly with respect to disputed issues involving significant schedule impacts, this can create an enormous problem for everyone.

Read the subcontract carefully. Talk to the on-site foreman daily. And, send notice as soon as the issue is known. When the costs cannot yet be determined, send an email anyway letting the general contractor know that a changed condition has been discovered and that the cost and schedule impact are being investigated. The best way to send notice is typically through a carefully designed request for information (RFI). The RFI is what primes the pump for most change orders and many subcontractors fail to take the opportunity to draft their RFIs in a way that compels the general contractor, owner/agency, and design team to acknowledge that a change order is inescapable.

The Full Potential of a Change Order

The change order does much more than simply capture additional costs for the subcontractor. It can be used to capture additional time, scope changes that favor the subcontractor’s installation, or even credits (i.e. deductive change orders) that might advantage the subcontractor.

While not every change warrants a change order (sometimes it is cheaper to just roll with the change), every change does warrant analysis. Many times, subcontractors are only capturing the direct costs of the changed condition but fail to properly assess the impact on the schedule or the subcontractor’s overall performance. Of course, being overbroad in a COR can get a lot of pushback and skepticism, leaving money or time on the table should never be an option.

What A Proper Change Order Request Should Capture

A proper COR should have all material, equipment, and labor hours involved, obviously. It should also include the schedule impact, which is almost always more than just the time to complete the work. A COR should also include, when allowable, supervision, delivery costs/fees, cleanup, planning, and project management. In addition, a subcontractor should include the allowable overhead and profit.

It is also important to consider that when the frequency or size of the change orders begin to stack up (e.g. more than 10% of the original subcontract value), it is time to meet with the general contractor and discuss inefficiencies. There is a meaningful difference between a project that was bid at $1M and one that is $1.5M, for example. If additional time is provided and the impact is minimal, then there may not be the need to push the issue, but subcontractors should not allow general contractor s to force them into performing subcontracts that are materially different in size or scope without expecting someone to pay for the impact on the subcontractors operations.

CA New Change Order Law

Civil Code 8850 or the Private Works Change Order Fair Payment Act (Senate Bill 440) is designed to establish clear deadlines for change order reviews to prevent contractors and subcontractors from financing disputed extra work. The law requires (in part) that:

1. The owner must provide a written response within 30 days, identifying approved and disputed items.

2. Undisputed amounts must be paid within 60 days of the owner’s response.

3. If the owner fails to respond within 30 days, the contractor or subcontractor may have the right to suspend work without penalty.

This law does require that the claim for extra work be submitted via registered or certified mail, which is an uncommon practice in the digital age but subcontractors should be aware of this requirement.

The full impact of the law on industry practices is yet to be determined. But, if a subcontractor is having a difficult time getting change orders approved, it might be worth evaluating whether or not this law can be used to get the owner to timely respond, approve, and ultimately pay the subcontractor’s change order.

In California, the construction industry has moved, in recent years, to some very specific standards when it comes to change orders. It is critical that subcontractors read their subcontracts and the prime contract carefully to understand the change order requirements. Most subcontracts have very stringent requirements for notices like what can be included and allowable markup. Sadly, in many situations these restrictions make it difficult, if not impossible, to capture all the true costs involved for a subcontractor. In most cases, subcontractors are probably losing money on change orders. The earlier that a subcontractor can submit a properly supported change order request, the greater likelihood of getting it approved as submitted.

This makes it all the more important to try and get ahead of the curve and use the RFI and COR process to your advantage. Set your general contractor up for success by carefully articulating why the COR includes all the costs and impacts it does and then provide as much supporting documentation as possible. Then follow up with friendly phone calls and emails, building relationships and trust. Good luck out there.