Worker safety, economic forces at odds

By Alexandra Berzon

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.