DAILY MEMO: CONSTRUCTION:

Worker safety, economic forces at odds

Fines provide little incentive for companies to enforce safety requirements, but research shows their own bottom lines might

Friday, Sept. 5, 2008 | 2 a.m.

Put aside morals for a moment. Put aside the basic value of human life.

In economic terms, what encourages construction contractors to create safe work sites?

The question is important in Las Vegas, where a string of construction fatalities on the Strip has shaken the industry and drawn accusations from workers and union leaders that contractors are cutting corners on safety in the rush to finish.

Contractors are under significant financial pressure to complete projects on time. CityCenter general contractor Perini Building Co., for example, could face penalties of $50,000 for every day the Cosmopolitan is delayed, according to Engineering News Record, a construction trade publication.

At the same time, financial penalties for overlooking safety requirements are relatively small.

After deaths on the Strip, the state’s Occupational Safety and Health Administration imposed fines on contractors of no more than $18,000 each. Workers and union leaders joke that fines like those are less than what a big construction company spends on Gatorade.

Also shielding employers from financial exposure is a state court’s interpretation of workers’ compensation laws. The courts don’t allow injured workers to sue employers over unsafe practices that contribute to accidents unless the worker can prove the acts are intentional, lawyers say.

Another factor here is an absence of contractor accountability to insurance companies on some large construction sites.

This is complicated: It’s standard in the industry that the amount a contractor pays for workers’ compensation insurance is based in part on a safety rating calculated by the history of injuries and deaths at the contractor’s work sites — much as drivers’ accident histories are factors in determining their insurance rates.

But in 1999 the Nevada Legislature passed a law allowing very large construction projects to wrap their insurance into one policy, controlled by the owner of the project.

When a project owner carries the insurance, accidents on work sites are not factored into a contractor’s safety ratings, which play a role in determining insurance rates.

Some contractors found that problematic. Marie Holt, chief of the property and casualty section of the state’s Insurance Division, said contractors with good safety records pushed for the change because they thought the law was unfair.

“There’s no dollar incentive for safety,” said Steve Holloway, vice president of Las Vegas Associated General Contractors. “It’s not going to affect your bottom line.”

As complaints about that system grew, the state responded.

The Legislature passed a law requiring that for construction projects begun after July 1, 2007, injuries will affect safety ratings on all contractors’ work sites — even those on which the owner controls the insurance.

CityCenter, Cosmopolitan and most other large Las Vegas projects are exempt, however, because work on them began before July 1, 2007.

Construction safety experts argue that even without those insurance ratings, contractors have economic incentives to work safely. In fact, safety and speed go hand in hand, they say. Greg Thomas, vice president and general counsel of Fisk Electric, a CityCenter subcontractor, said, “Safety means that you’re planning and executing your work efficiently.”

Experts say research shows companies save money if they invest in safety supervisors, worker training programs, accident investigations and other measures to reduce injuries.

A 2000 study of large construction companies by University of Florida professor Jimmie Hinze found that indirect costs of injuries can be considerable, including the loss of production by injured workers and their co-workers, and the cost of materials damaged in accidents.

Hinze found that workers’ compensation adjustments based on safety records were also important. Companies that put more money into safety programs save 5 percent on labor costs from workers’ compensation adjustments, he found.

Discussion: 3 comments so far…

By chomp13

9/5/08 at 2:46 p.m.

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If you are going to report on the lack of accountability to insurance companies, you have to dig into what the unions do to fight many of the safety initiatives insurance companies would like to have implemented on-site. Union leaders are unwilling to except anything that might possibly increase costs to their constituents whether a safer job site is the result or not. Bottom line is that it's just cheaper to pay a $15K fine than to hire and train a competent safety staff. If that's what we want so be it, but please stop pretending that the Owners and GCs are the only ones accountable. Union leaders need to step up as well.
By Richard_Thomas

9/8/08 at 7:53 a.m.

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Insurance underwriters encourage project owners to provide financial incentives to contractors and their employees for workplace safety, particularly when deadlines with financial penalties are set. Underwriters also prefer to have losses from injuries be reflected on the safety ratings of individual contractors even when owners provide the insurance on a project basis. Everyone must share in the responsibility for a safe work environment.
By angryfamily

9/10/08 at 11:29 a.m.

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My argument is this: If the state set a law for accountability, whether it be workmans comp, safety violations and so forth, they set the minimum they will accept. What these contractors, sub-contractors and possibly even unions are doing is falling below those standards. They are set as a minimum. If all involved would put the safety of the workers ahead of the dollar and raise those standards above the minimum(instead of just staying within the law)than safety would become a practice. The problem is that one party gets greedy and fall back on that minimum. Las Vegas was built on money and attracts greed. As a family member of a worker killed doing what he was instructed to do by his superiors, I have a clear view of the price paid by these practices. I say the OSHA fines should be so outrageous the companies wouldn't dare take a short cut because of the cost. Hit them in the pocket and deter bad habits. I cannot believe how many side with the contractors and blame the union. There is no one person at fault here. And remember, these men have to fight to keep their jobs most of the time. It's tough for the workers. They are caught in the middle of the struggle. The Union representatives are there to fight for their workers. If they are not being effective than get rid of them. Start new and elect a representative with a strong back who is willing to go the distance. There is no room in negotiations for spinelessness. Leave the weak backs at home.