Before the coronavirus took hold of our lives, heading to the office every day was something that could be taken for granted. Now, with health and safety taking top priority, there are numerous considerations that firms and organizations have to keep top of mind when deciding if they are going to allow employees to leave their homes and come back to the company’s physical location. To explore the questions that organizations need to answer before going back to business as usual, we met with Stan Sterna, vice president for Aon Insurance Services.
By: Bill Hayes, Pennsylvania CPA Journal Managing Editor
As part of the response to the COVID-19 pandemic, many firms were forced to close their doors and send employees to their homes to work on an off-site basis to keep business afloat. However, with Governor Tom Wolf beginning to loosen some of the restrictions on the Pennsylvania economy, many firms are contemplating sending employees back to the office and considering what that would look like. To discuss the preventative measures that would need to be in place as well as legal considerations for responsible reopening, today we are talking with Stan Sterna, vice president for Aon Insurance Services.
Are you advising specific preventative measures to be in place prior to employees returning to the firm?
[Sterna] It's hard to give a definitive plan for return to work issues. Obviously, you have the uncertainty of the pandemic, and laws, regulations, and governmental guidance come in various sources and, each jurisdiction, their guidance may vary. And, of course, accounting firm offices are located in different cities, counties, and states. So it makes it difficult to provide one definitive plan.
Each firm has to adapt, but there are some things that I think firms should consider. Number one, I'm telling firms, don't think of it as a return to work planning type of thing. You should consider it as workplace safety planning. The reason I suggest that is because, return to work planning has a short-term connotation. People are in, and then you don't have to worry about workplace safety.
Obviously, that is not the way it's going to be. You're going to have to continually think about workplace safety, just like you did in the pre-COVID-19 era. Next, I advise firms to identify common obstacles to workplace safety planning. I think the most common obstacle that a lot of firms experience are complaints about a lack of transparency. Employees, sometimes even managers and partners, don't know really what the planning strategy is or the procedures that are going to be followed.
You should communicate those plans in a uniform cadence and consider multiple modes of communication to the folks at the firm. It could be email, webinars, postcards, texts. It doesn't matter. As long as you're leveraging the best communication process that works for your firm and for your employees. Another thing I suggest is designating a representative or even a group of representatives. I would prefer maybe one individual to manage the process and ensure compliance by both management and employees. That's going to do a couple things. That's going to limit the span of oversight, which is good in order to avoid confusion and miscommunication about the new norm.
The designated person should be somebody like the chief risk officer or chief human resources officer, somebody that has a holistic idea or understanding of the firm culture, risk management culture, and people culture. I think it's important to put the right person in there. Then, from there, and again we're talking about more or less just initially establishing the work-safety program. From there, I suggest you got to do a situation analysis of the firm and the types of services that your employees provide. Are they going out to offices? Are they traveling? You have to consider things that go beyond just what's going on in the office because you have to establish some sort of objectives for what you want to achieve and why. You can't just go into this, obviously, without a plan in place. Then, training is important. Obviously, not only the communication aspect, but you need to establish formal and uniform and measured training on a new workplace safety program. You have to understand you might have to modify that training depending on the role of the employee, like if they're a manager and essential and non-essential employee, etc.
Then, I think this is important, sometimes it can get overlooked when you're opening or you're considering reopening your office because you're concentrating on employee safety and you're concentrating obviously on continuing to provide services to your clients. But at the same time you should leverage and implement any emotional or financial well-beings for the program or for the employees. You can work with your designated individual at human resources, your legal counsel, etc., to help you manage the process as well.
But I think it's important to provide employees a sense of emotional and even financial support, financial support in the context of whether you had to bring back furloughed employees or people are coming back with maybe cut salaries or something of that nature, might even be a new type of job that they're doing that was different from the pre-COVID-19 days. Those are the things that I like firms to at least consider before diving into all the nuances of what kind of personal protective equipment you might have to provide or when you can reopen. A lot of that's going to be state-specific or even county-specific things. But things I mentioned are tried-and-true things that can help you establish a plan.
What sort of policy updates will be needed to be made, and have to be circulated to best help firms reopen their businesses?
[Sterna] I think the big key on that is making sure that your workplace safety plan is relevant and up to date. A lot of information is out there. There's a lot of recommendations from national and local authorities. They change from time to time, as we all see. All you have to do is read the news and see that. So drafting a workplace safety plan can be really daunting for anyone that's trying to develop one, especially post-COVID-19, but fortunately there's a lot of information and resources out there that can help you understand these items I'll give you a few that our listeners could maybe go to as a resource.
First is OSHA. OSHA is the federal agency that is responsible for setting and enforcing standards to ensure safety and a healthy environment for employees and their work conditions. OSHA applies to professional service firms such as CPA firms, and it applies to both the office and work-from-home environments. OSHA has guidance on comparing workplaces for COVID-19 at the OSHA website. I would encourage folks to go there because it's a great resource of information and it can really help you establish a plan from the beginning.
Another great governmental source is the EOC. The EOC enforces workplace anti-discrimination laws, including the Americans with Disabilities Act and the Rehabilitation Act. The EOC has developed their own compliance guidance specific to COVID-19 that applies to both home and office workplaces. Again, it's important whenever you're developing these types of things, these types of programs, obviously there may be a direct or indirect impact on employment law issues and employment practice issues. For example, some employees may feel it's unfair for them to be brought back into the workplace when they don't feel they're comfortable with its safety. That triggers a lot of these EOC concerns.
So it's always good, not only to consult obviously with your employment practices attorney, but also referenced to EOC resources as well. Obviously, another great governmental source, is the CDC. The CDC has issued interim guidance for businesses and employers to plan and respond to the COVID-19 or coronavirus disease. So, you can go to the CDC as well, a great resource to provide information as to how to maintain a safe work environment. And then, one other governmental source I'd like to alert our readers to is the U.S. Department of Labor's Office of Disability Employment Policy. They have a return to work toolkit, which is applicable to employees that have been out of work due to illness or injury. You might need to also consider that as well as your bringing workers back, especially if they unfortunately contracted the illness.
There's also several prominent national law firms that have a presence in Pennsylvania that I believe, just from reviewing the materials, really provide a nice guidance for workplace safety planning. One is Ogletree Deakins. They have great guidance on workplace safety planning. Another two law firms, Ford & Harrison and Jackson Lewis, which is a nationally recognized labor law and employment practices firm. And I'd be remiss not to mention that we here at Aon provide risk consulting services as well to CPA firms. That's basically what I do exclusively. We've developed a return to work toolkit that provides guidance for companies to help with workplace planning.
Can you explain the implications of employees’ statuses under the Patient Protection and Affordable Care Act and how that applies to this?
[Sterna] I think sometimes when you're furloughing workers or you're cutting hours, sometimes firms will forget that there is the potential impact of the Affordable Care Act, or the ACA. Under the ACA, firms with an average of at least 50, what is quoted as, full-time employees or defined as full-time employees, and that's essentially someone who works at least 30 hours a week. Those firms may be subject to an excise tax or employer-shared responsibility payment if they don't offer health insurance to at least 95% of their full-time employees. That's what the ACA provides. So, in my opinion, large to midsize firms that fail to offer coverage to either furloughed workers or one, two hours have been cut, they're at risk of being hit with an assessable payment under the ACA.
I think many firms are taking the approach, “Well, I'll offer COBRA if I have a furloughed full-time employee. I'll offer COBRA, that'll satisfy the obligation under the ACA to provide health insurance coverage to full-time employees.” But I think what they often overlook is, when you offer COBRA, usually that's 100% premium payment is made by the employee, not the employer, a lot of times. And in situations like that, you may be satisfying the ACA requirements for providing health insurance coverage to a full-time employee that you furloughed or you instantly cut hours for, but is it affordable? Remember: it's the Affordable Care Act. If you're not subsidizing the premium or you're not offering to subsidize the premiums, you're susceptible to potential penalties if the employee cannot pay or it makes the COBRA coverage just not affordable to the individual.
It's something to be considered when you're dealing with a situation where you have to either lay people off or furlough them, or do anything drastic in terms of their hours. I would suggest that, if you have a situation where you're going to be laying off people or furloughing people, make sure you discuss the situation with your HR lead, your outside legal counsel as well, and make sure you understand the potential impact of the ACA on any action you may take with an employee.
I wonder if you know about anything Pennsylvania-specific, as far as legal considerations for responsible reopening. Is there anything out there that people should be aware of?
[Sterna] There's a lot out there. As you probably know, back on May 7th, Governor Wolf extended the Pennsylvania stay-at-home order for counties that are in the “red phase.” Red phase is basically defined as allowing all the life-sustaining businesses to be open. The yellow phase is a more relaxed phase, where it requires telecommuting if it's feasible. It says that offices can reopen provided that they have adequate safety precautions in place. Now, as of today, about 49 counties in Pennsylvania have gone from red to the yellow phase. I do believe that Philadelphia County, which is the largest county in terms of population in the state, remains in that red phase that I talked about.
I think Pennsylvania, like a lot of other states, shows you how this can be very granular and can be very county-specific, but there's a lot of information out there. I think the first resource I would go to if I was trying to determine whether or not … where my county is or what the state’s position is currently on reopening would be the Pennsylvania Department of Health. The Department of Health has issued extensive guidance compliance with the statewide stay-at-home order and the phase reopening plan for the state. Again, it varies by county.
So the Pennsylvania Department of Health, main coronavirus page is located at www.health.pa.gov. You can navigate your way to that specific guidance. Also very helpful is the frequently asked questions, summary, which is also on that particular website. I encourage folks to go there first to check out what the current status is. Governor Wolf's office also has information at www.governor.pa.gov. That's a lot of useful information on there as well. And then we should alert our listeners that there are specific county COVID-19 pages. Allegheny County has one. Bucks County, Delaware County, Erie County, Philadelphia County. They all have their own individual county coronavirus pages.
I want to encourage our listeners to go to those pages. We can provide sites if your listeners request after the broadcast, but it's pretty easy to navigate on the county page. Anybody that has access to Google and the internet could look at their various county’s position on this. Again, I can't understate this enough: You should really go and consult with legal counsel regarding the local laws and their application for your workplace reopening. That's important, because things are in such a state of flux. There are so many things out there. You really should have counsel on board to help you and assist you in this process because there's going to be potential issues with, whether it's health and safety, whether it's liability issues that may be impacted by the process you undertake to reopen your office.
Speaking of health and safety issues, right, this is a pretty tricky one: How should firms decide what information to share with employees regarding other employees’ health situations? What's the decision-making process there?
[Sterna] You stole the words out of my mouth. It's a very tricky question. Obviously, there's privacy concerns with personal identifiable information, health information, firms that do work with health care institutions could be subject to HIPAA confidentiality requirements. There's a lot to be considered when you're deciding what information to provide. The thing is when you're creating a workplace safety program for reopening, and when you're creating a fit-for-work screening process, you're going to have to log medical information. I know some firms are defining a process for employees to follow if they are exhibiting any symptoms of COVID-19. Those calls are routed to a designated representative at a firm, who then registers the call, and then will document the symptoms that the employee is experiencing, a way to track that employee to make sure that employees seeking medical care are not coming into the office.
Then, individuals that were exposed, or were working with an employer, or where physical contact with an employer or employee or close proximity are being alerted. Obviously, it's something that you're going to have to consider. Now, the Americans with Disabilities Act and the Family and Medical Leave Act, they both have rules that limit what employers may request in terms of medical information, and how they may react once aware of an employee's medical information as related to COVID-19. Firms who revealed too much about a person with the illness could run into liability issues such as employees claiming invasion of privacy or infliction of emotional distress. So what do you do? Obviously, you need to maintain an adequate control over confidentiality of this information. You should do employee training regarding confidentiality obligations under various laws, like the ones I mentioned.
I would suggest developing a repository system for such information and limit that access. Don't allow everybody who doesn't need reasonable access to that information an opportunity to review that information. Of course, you've got to ensure that the process is consistent across the board. You can't have variations because that's going to lead to some potential exposure with regard to discriminatory practices or unfair treatment. Obviously, consult with your legal counsel before implementation. But, in some cases, you're going to have to identify, for safety reasons, someone that has COVID-19 to the other employees that are in contact with them. You need to do this in order to show workplace safety. So, what do you do? I just mentioned keep confidentiality, but what happens if you have to reveal the individual?
What I would suggest is don't reveal any more information than is necessary to protect the other employees’ health and safety. While maybe important to notify employees when a coworker has been exposed to COVID-19 or contracted the virus, if you don't have to identify them in the communication, the individual who has the illness, then don't. Consider whether it's possible to communicate with employees and others who have been in contact with that ill person without providing any identifying information about the individual or their position with the firm. This may not be the case every time, and what I would suggest, if you have to reveal the identity, you should talk to an attorney prior to communicating with employees, because, like I said, this is continuing to evolve. There's even some information out there that Congress is considering maybe some sort of safe harbor in certain situations.
Just some stuff that right now is being thrown about, don't know where it's going to go. But I would suggest at this time, if you consult with your attorney and you've concluded, okay, the employee who has been in close contact with an ill person that has COVID-19 has to know for safety reasons that person's name, you and your attorney should work out a system where you ask permission from the person to disclose their identity and related health information, and obtain the written authorization for these disclosures.
I think most folks on a situation where they've contracted the illness, honestly, are going to feel at least magnanimous to the point where they're going to want to provide information to maintain the safety and the health of their coworkers. But some folks may feel that it might be some sort of scarlet letter or they'll be identified in a negative way or adverse way. So you really have to take the necessary precautions. If you need to put it in writing and have him sign it to get disclosure, I think that's highly advisable.
As we close down here, are there any other recommendations for important areas of concern related to accounting firms here, whether it be how it applies to employee benefits, deadline changes for taxes, anything like that?
[Sterna] There's myriad issues. When I hear that question, the thing I think about as a risk adviser, and I've been a risk adviser and involved in accounts professionally and building claims for over 20 years, the first thing I think of is long-term impact. There's going to be some short-term impact before we get through the crisis and then develop a new normal, but long-term impact that I'm concerned with is the impact it's going to have on professional liability claims against accounts. COVID-19 has obviously had a dramatic effect on the economy.
Historically when the economy is in a downturn, it can adversely impact both accounts claim frequency and severity. When I'm talking about severity, I mean the amount of money you're paying to indemnify somebody because of some alleged error and omission to the performance of professional services or expenses in defending a claim that's alleging those. So long-term, some things that I'd suggest in terms of some of the risks and how to mitigate them, in the audit world, auditors are going to now have to consider the impact of COVID-19 and the economic downturn at client's financials.
They may have to do additional disclosure, such as issuing a going concern or risks or uncertainties, that may be necessary. Rethinking the audit conclusions based upon what's happening now is important. In tax, there's been a myriad of tax filings that have been extended because of COVID-19, but not all of them. So I think it's important for a tax broker to know what deadlines have been extended for that individual taxpayer and what deadlines have not, because the result right now is a complex calendar of future filing dates that seem to me in a constant state of flux. Taxpayers need to be mindful of due dates that have changed. Anyone that doesn't have an adequate docket system to do that, in my opinion, is going to be particularly at risk for claims.
A lot of firms obviously are delving into the consulting world. The economic downturn is going to have an impact on consulting projects. Some of them are going to be modified, postponed, or even terminated altogether because clients are going to want to conserve cash. If it's a project that maybe they're taking on because they're expand their businesses, that all may be put on hold until the economic situation is resolved. Firms that are doing consulting engagements, they're going to need to address the status of these engagements and update engagement letters or other written communications with the client regarding any modifications in scope. A lot of claims, especially in the consulting world, come from engagement creep or scope issues. I thought you were going to do this and you didn't do it, and, as a result, somehow I was damaged.
It's always important to have engagement letters clearly define the scope and consulting engagements, because consulting engagements can morph into other things, and what's going on right now even adds more importance to doing that. Long-term, with the economic turnover, what we've seen in the past, we may see again in the future. We've seen disgruntled clients who experienced investment or business losses, they're going to point the finger. At the economy? Can't sue the economy. They don't like to point the finger at themselves. Sometimes, they point the finger at their financial professionals, i.e. CPAs. Something to be concerned of. Usually in economic downturns, fraudsters will take advantage of the financial chaos. So we see more embezzlements and more Ponzi schemes.
Clients will unfortunately go bankrupt or default on loans resulting in the client or third-party lenders of the client, alleging that they rely upon the firm’s work to their detriment and lending that money or guaranteeing the work. Something to be concerned about. So what can a firm do? I'd suggest that now might be a good time to review your client list, to identify those clients that you may consider maybe litigious or have cashflow problems, or just maybe with a client that you held on to for a number of years that maybe now's the time to terminate the engagement. There's nothing wrong with disengaging if you have a client that you think increases your risk exposure and is not a good fit for your firm. As I noted earlier, make sure the engagement letters are up to date and clearly define the scope of the services and, importantly, the roles and responsibilities of the parties, meaning the firm and the client.
I think this is important, to consider including loss-limitation language, or damage-cap provisions in your engagement letter, basically saying, if there's a dispute, damages will be capped at some sort of multiplier of the fees that are unexpended by your firm. Obviously, documentation is always key to mitigate risk in any engagements. So, document and date, because, as I said, these law changes, everything's in a state of flux right now, deadlines, everything. Document and date all client discussions during the engagement and follow up with acknowledgement emails or confirming emails that detail the information required and the next steps for both the client and your firm. I think clarifying any advice or recommendations that are made, based upon information that is available at a specific time is important, in terms of dating the advice as I mentioned earlier. Laws, like I said, are evolving.
So what's good advice now may not be good advice tomorrow. I'm working on myriad issues right now, the impact of COVID-19 on accounting firms. One important issue that we've been addressing is this issue, the long-term effect on professional liability claims against accountants due to COVID-19. We actually published an article back in April for the Journal of Accountancy that deals with the indirect impacts of COVID-19 at CPA firms. It goes through a lot of the things that I've just discussed about the long-term impact and how you can mitigate the risks. That's one of the concerns I have, is the impact it's going to have on just professional liability claims.