Departments - July/August 2017

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OSHA Guideline, Fiduciary Rule Could Affect Incentive Programs

By Deborah L. Vence

A new "fiduciary" rule expected to be implemented by January 2018 could have some implications for companies offering travel incentives, while a new guideline that was put into effect in December of last year might have adverse effects on companies offering safety incentives.

The "fiduciary" rule, issued by the U.S. Department of Labor (DOL) in 2016, could have an impact on financial advisers being awarded travel incentives for their efforts in selling investment products. As suggested by the Incentive Federation Inc. (IFI), an organization that promotes, protects and researches the optimal use of incentives, rewards and related promotions in business, the rule could have "significant implications for companies that offer incentive travel and awards programs to the financial marketplace."

The first stages of the regulation became effective on June 9, 2017, even though the Trump administration has ordered the DOL to review the rule and recommend revisions. The rule is being revisited by the administration and Congress, and the overall impact on incentive travel programs is unclear.

Steve Slagle, managing director of the IFI, and past president and CEO of Promotional Products Association International (PPAI), said "… There were questions and concerns about advisers, salespeople for different mutual funds… being compensated in ways that might have given them a reason to try to make a sale," and not being concerned about the client's best interest.

"Without someone looking at it more closely, my interpretation is that it has affected the travel industry some, already, and their prediction's that it will have a significant adverse impact on international incentive travel and domestic programs," he said.

In the IFI's June Bulletin, it was indicated that the rule is "under further scrutiny and legislative challenges." And, "While not readily apparent in the wording of the new fiduciary rule, which is an amendment to the Employee Retirement Income Security Act, part of the rule does suggest that incentive trips and other forms of rewards or incentives may no longer be acceptable if they present conflicts of interest."

So, until there is more clarity on the new rule, some financial institutions might be "leery of using incentive or award programs to motivate and/or compensate their employees, while others are restructuring their programs to place a greater emphasis on general recognition and education, for example, instead of providing sales-based incentives."

George Delta, the IFI's legal counsel, had explained in his bi-monthly legal update, that unless the current administration changes the course of the new rule, it might "make incentive programs a thing of the past for those selling financial products to the public."

OSHA Guideline

Another issue that has come about in recent months involves a new guideline that was implemented in December 2016 by the Occupational Safety and Health Administration (OSHA), a federal agency that regulates workplace safety and health.

OSHA put the new guideline into effect that defines any outcome-based incentive criteria as being a rule violation. The guideline creates a presumption of a violation, thus, making a challenge much more difficult and more costly.

However, the guideline actually is a "voluntary guideline" and is "not a law or regulation," Slagle noted. But, the adverse effect of it has to do with companies stopping their safety incentive programs or reducing them. OSHA's contention is that the rewards from safety incentive programs "might cause people to underreport accidents, just so they can get a prize"—although no evidence has been found on this; only that there is a suspicion that it might occur, he said.

OSHA's assertion is that "there are better ways to encourage safe work practices, such as incentives that promote worker participation in safety-related activities, such as identifying hazards or participating in investigations of injuries, incidents or 'near misses,' which the agency had referenced from a 2012 memorandum of the guidelines that addresses what OSHA perceives as "incentive and disincentive practices" of safety programs.

Moreover, the Draft Guidelines state in a note that, "Incentive programs for workers or managers that tie performance evaluations, compensation, or rewards to low injury and illness rates can discourage injury and illness reporting. Point systems that penalize workers for reporting injuries, illnesses, or other safety or health concerns have the same effect, as can mandatory drug testing after reporting injuries. Effective safety and health programs recognize positive safety and health activities, such as reporting hazardous conditions or suggesting safer work procedures."

OSHA's VPP (Voluntary Protection Programs) Guidance materials refer to a number of positive incentives that include providing T-shirts to workers who serve on safety and health committees; offering modest rewards for suggesting ways to strengthen safety and health; or even throwing a recognition party at the successful completion of company-wide safety and health training.

Since the guideline was first implemented last year, the IFI has written to OSHA to express opposition to its criticism of safety incentive programs. The Federation plans to continue to monitor OSHA's guidelines and represent the industry's position that incentive programs do work to help foster a productive and safe workplace, according to information from