CERRITOS, Calif.—Both Santa Fe Rubber Products Inc., in Santa Fe Springs, and Vip Rubber Co Inc., in La Habra, are keenly tuned into issues that affect small manufacturers. Both singled out workers compensation costs as one of the top hurdles for small firms in California.
William Krames, Santa Fe owner, president and CEO, said he used to be upset when paying $60,000 in annual premiums. Last year it was $194,000 for the 50-person company.
“California is the most business unfriendly state there is by a lot of definitions,” Krames said. “I thought once about moving the business, but when they wanted $1.9 million to rig it out and re-establish it, I decided it was an emotional decision that I probably didn't want to make.”
Howard Vipperman, president of Vip Rubber, said his firm has been especially unlucky with regards to workers comp and other issues. He said one employee that had been laid off and then sued the firm for unauthorized discharge. “What you end up doing in management is, if it's going to cost $20,000 to defend, then you offer them $10,000 to go way, and usually they do that,” he said.
In other case about five years ago, there was an accident at the plant where a worker was injured. When Cal-OSHA came out to investigate, the inspector couldn't find anything wrong with the machine. The firm instead was fined $5,000 because it didn't report the incident until the next day, rather than within the eight-hour limit. “Then the guy walks in, there was a guy without a seatbelt on a fork lift,” Vipperman said. “That was $2,500. … Our premiums are through the roof. They're double from what they were three or four years ago.”
Krames said the fees and permit Santa Fe has to pay keeps creeping higher, things that similar firms elsewhere don't have to pay. For example, he said a rubber company similar to his would pay just $34,000 in annual workers comp premiums in Alabama.
“So when I go up against a company that is not offering medical—which is $29,000 a month now—or less workers comp premiums, those are the things that put you at a tremendous competitive disadvantage,” he said.
The Santa Fe Rubber owner added it's often the same clinics and attorneys representing workers that are filing workers comp claims not long after being laid off. “You know they're bogus,” Krames said. “We put in a camera system, and we've really gotten them down. We had one the insurance company refused to settle on. It was a claim of a back injury. We went back to the day he said he had the injury, and he never had it. We provided the film, so we're beginning to counter some of those things.”
But Krames doesn't want to give the impression that small rubber firms can't succeed in the state. “We've demonstrated that,” he said. “You just have to be a little move clever and a little more insightful in understanding what your costs are and how they relate, and try to develop a capability that sets you apart from the masses.”
This came from an industry roundtable that Rubber & Plastics News hosted at R.D. Abbott Co. Inc.'s headquarters in Cerritos, Calif. To see complete coverage, including more videos, stories, exclusive online content and a photo gallery, go to www.rubbernews.com/California.