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Workers' Comp Crisis Worsens The end result is that California's workers' comp system is saddled with most of the same problems it faced 10 years ago, but now with less competition, higher rates and a flimsier safety net for injured workers. "The financial chickens have come home to roost," said Robert Hartwig, chief economist for the New York-based Insurance Information Institute. The fallout has been particularly painful for California's industrial and construction trades, higher-risk sectors where premiums have soared. Some roofing firms are paying rates in excess of $99 for each $100 of payroll on their least experienced workers, said Doug Hoffner, executive director of the Roofing Contractors Assn. of California. Hoffner says that has led some less reputable firms to game the system. Some are paying workers under the table to trim their payrolls, and thus their premiums. Others are dropping all coverage, an illegal tactic known as going bare. Businesses that are playing by the rules say that's making it tough for them to compete. San Francisco roofing company owner Rich Lawson says he can't begin to count the jobs he has lost to low-cost competitors he suspects are cheating on their workers' comp obligations, while premiums for his 100-worker firm have quintupled since 1998 to more than $1 million annually. "Something is wrong when they're undercutting me by 40% or more," said Lawson, senior vice president of Lawson Roofing Co. "Our industry is in chaos." The crisis is taking a toll on workers as well. Calabasas painting contractor Shirley Lee said she has lost so much business to the underground economy that she has laid off half of her 12 painters and required those who remain to pay a bigger portion of their own medical coverage. Jane McFeely, who operates a catering business in Burlingame, has frozen the wages of her five employees and cut vacation benefits in half. "I feel horrible, because these folks are like my family," said McFeely, owner of Servers Standing By Catering. "But it's either that or close the doors." The nonprofit sector has been doubly squeezed as workers' comp expenses have soared at a time when contributions are falling. As part of Arc Ventura County's recent cutbacks, case manager Ann Contreras has seen her hours and pay reduced 20%, but not her caseload of 50 developmentally disabled adults. She now struggles to cram five days of work into four, as lines form outside her door. "There are days when I can't wait to get home and take a nap," Contreras said. "But the really sad thing is that my clients aren't getting the services they need." Rate relief may not be soon in coming. California's budget woes continue to dominate discussions in Sacramento. Legislation introduced so far addresses the workers' comp problems in a piecemeal fashion. And special interests, including attorneys, insurers, medical providers, employers and labor unions, already are butting heads over the direction of reform. Greif decided not to stake the future of his company on the outcome. On the factory floor of Coast Converters, which has been operating in Los Angeles for almost 40 years, bag-making equipment is being repainted and packed for the move to Las Vegas. About 60 employees have committed to relocating with the plant. A small sales and administrative office will remain in Los Angeles, but little else.
"Pretty soon you won't hear any of this," Greif said amid the din of humming machines. "The sound of products being made, of people earning a paycheck and being able to pay their bills and mortgage and taxes, it's all going to Nevada I hate to leave. But I
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