Employment Practices Liability Insurance (EPLI) has become an important insurance component for all types of businesses

Company Size is Irrelevant

Nearly 75% of all legal complaints against businesses are over employment related disputes. Think about that; not over contract disputes or debt collection… but lawsuits related to the myriad of rules employers must follow. Over 40% of these suits are against businesses that have less than one hundred employees.

Why EPLI is critical

• Since 1998, employment related lawsuits have increased over four hundred percent.
• Basic general liability insurance does not cover employment related risks
• The EEOC division of the Department of Labor files more than 90,000 charges each year and the plaintiffs win 70% of jury trials.
• The average lawsuit settlement is around $200,000 and the cost to defend the claim is nearly $150,000.
• Businesses with 15-250 employees are sued more often than larger businesses.

EPLI should be considered to protect your company from the crippling costs of employment related lawsuits.

How a PEO can help

Many PEOs offer EPLI coverage as part of their insurance related suit of services to their clients. Some PEOs may include the cost of EPLI in their standard plan pricing while others offer it on an a la carte basis. In addition hiring a PEO brings an HR expert on to your company team that will help your company implement HR / employment practices that make your company a great place to work and also mitigate employment related risks. Have a question about EPLI offerings in the PEO marketplace? Call us, we will talk you through it.

About that employee handbook

Part of the value of joining a PEO is that they are continually monitoring the changing regulatory landscape to determining the best practices and language that should be in an employee handbook so that the risk of running afoul of employment laws is reduced and hopefully eliminated. The foundational document in every company should be their employee handbook. The employee handbook is the basis of the do’s and don’ts for each company employee. Once created and published, it should be standard practice in your hiring process to deliver the handbook and obtain a written acknowledgement from the employee that they have read and understand the contents of the handbook. Believe it or not, that’s the easy part. The bigger questions is: What are the rules for employees identified in the handbook? For employers this can be a tricky area. As you might expect, federal and state governments have their own set of regulations for employers about what rules employers can establish in the workplace. The NLRB has new expectations (2015) about employee handbooks and their expectations of employers. Some PEOs consult with labor lawyers for this advice, while others have their own in-house legal teams. When a company joins a PEO creating a tailored employee handbook is part of the process.

Best to follow your PEOs advice

So your company signed on with a PEO, implemented your employee handbook and went on about your business, but your company still has some responsibilities.   When a business joins a PEO, the PEO will help the business construct an employee handbook that meets that company’s needs and meets the regulations at the time it was implemented. But as time goes by and regulations change, that handbook may become out of date and possibly even illegal. A responsible PEO will reach out to their clients and advise them on the changes or updates that need to be made.

Listen to your PEO

Most PEOs have hundreds or thousands of small business clients. When your PEO contacts you and advises your company to make a change…. It’s best to heed their advice. Why? Well obviously you want to follow the rules, and by doing so, prevent legal troubles for your company. But another good reason is that in the event there is a complaint filed against your company, the PEO may be able to argue that your company ignored their guidance and therefore they are not liable for the damages or fines. Recently our staff attended a meeting with executives at one of the nation’s leading PEOs. When we asked what actions they were taking to inform their clients about the new NLRA title VII rulings, they indicated that they had reached out to all of their clients to provide guidance on the topic. They executives noted with some frustration that many of the clients never responded to their outreach. When our staff (at StaffMarket) asked if that created a liability for their PEO, they said that they were protected due to language in their Client Services Agreement (CSA).

Always read the fine print

Rest assured that your PEO wants your company to be compliant with all employment related regulations. However, the Client Service Agreement signed by your company and the PEO is the final say on who is responsible in the event of a problem with regulators. It is the key document that all PEO customers need to read carefully and understand. Just because your company joins a PEO does not mean you don’t share some of the burdens of ensuring regulatory compliance.

Image courtesy of Janelle Ward at Flikr

Just when employers thought the mine field of Human Resources rules were not dangerous enough, along comes a proposed expansion on Title VII rules for employers from the US Department of Labor. The new proposed rules address a range of areas including equal opportunity and fair pay for women in the workplace, discriminatory wage practices, sexual harassment, workplace accommodations for pregnancy, sex stereotyping, gender identity protections and family care giving discrimination.

Regarding “sex stereotyping”, the Office of Federal Contract Compliance Programs (“OFCCP”) proposed rules offer the following examples:

• Failure to promote a woman, or otherwise subjecting her to adverse employment treatment, based on sex stereotypes about dress, including wearing jewelry, makeup or high heels.
• Harassing a man because he is considered insufficiently masculine.
• Adverse treatment of an employee because he or she does not conform to sex-role expectations by being in a relationship with a person of the same sex.
• Adverse treatment of an employee or applicant because of his or her actual or perceived gender identity or transgender status.Adverse treatment of an employee or applicant based on sex-based stereotypes about caregiver responsibilities.
• Denial of opportunities to mothers of children based on the sex-stereotyped belief that women with children should not or will not work long hours, regardless of whether the contractor thinks it is acting in the employee’s or children’s best interest.

According to Connie Bertram writing for jdsupra:

“To comply with the new requirements, contractors should audit their existing policies, training and practices to comport with them. Most significantly, contractors should ensure that their policies and training clarify that managers may not make employment decisions based on (or make statement concerning) sexual stereotypes, such as perceptions about how women and men should act and dress, who should care for children and perceived limitations of family responsibilities. In addition, many contractors will need to update their ADA accommodation policies to afford accommodations to pregnant employees consistent with the proposed regulations.”

Total Insanity

How does a business owner or manager accused of violating these “rules” begin to defend themselves? Not noted in the “rules” are any penalties or repercussions for those who falsely accuse a manager of a violation.

At StaffMarket our company has a male staff member with hair down to the middle of his back. No biggie…. But If someone in the office says his hair looks “pretty”, I suppose that is questioning his masculinity and is grounds for a discrimination lawsuit.   TOTALLY INSANE!!!!

We wonder why new business formation is near an all-time low in the USA? With these kinds of insane workplace rules foisted on the private sector by the well intentioned but economically illiterate and politically motivated bureaucrats, who would want to start a business and become and employer? For now these proposed rules would only apply to government contractors, but as is often the case, they have a way of making their way in to the general private sector. If the USA ever wants to regain a robust and prosperous economy these kinds litigation landmines and business killers need to be struck down. In lieu of that occurring, PEOs become valuable partners dedicated to knowing the HR rules, training staff, documenting actions and sharing the risks associated with being an employer. For small businesses joining a PEO is a viable regulatory compliance and risk shifting strategy.

Defending your company from employment related litigation is not only expensive; it can be a huge distraction from running a business. While employers can’t change the laws, they can put themselves in a position to defend themselves and make sure that events that occurred can be articulated forcefully and accurately. While facts will be different in each case, there are some common documents are critical in almost every employment related legal dispute.

Critical Employment Related Documents

• Employment Application
• Employee Handbooks
• Job Descriptions
• Performance Evaluations
• Disciplinary Warnings
• Response to Administrative Claims.

According to D. Albert Brannen at Labor Lawyers, these six documents “are almost always included among the documents requested and produced in employment litigation”. While not the only areas of risk, without these documents and employer is defenseless in employment litigation.

Creating Base Line Employment Documents
For a starting point, employers must create these documents for their company and also make sure the documents themselves are legal. Rules for what employers can and cannot do or ask are changing all the time and it is critical to update them as required. For example on the employment application there are new rules (2014) about asking applications about prior arrests. Employee handbooks now need to have rules for social media policies that do not violate and encroach on “protected activities” and the Department of Labor. Simply finding a form on the internet and using that as a template for your companies documents could be an expensive mistake. Written job descriptions are critical when conducting performance evaluations.

Document Maintenance
Next on the list is ensuring that each document is complete and accurate for each employee. This requires a consistent ongoing effort. Just creating the forms is worthless in a litigation defense if they were never completed and filed. In addition employers need to track and obtain acknowledgments from the employee that they have been provided, read and understand the information in the documents.

Consistent Treatment Among Employees
It is also key to ensure that your documents maintenance is consistent among employees. A sure way to weaken a litigation defense is for a plaintiff to be able to demonstrate that they were “singled out” for some other reason. This is especially critical if the litigant is member of a “protected class” who may be making a discrimination claim. Consistent effort across the workforce is required if they defendant hopes to show the claims are unfounded.

What Options Does an Employer Have?

Do it Your Self
Most entrepreneurs and small business owners are by nature do it yourself kinds of people. That can be a trap. Employment laws are changing all the time and in many cases are unique in different states. Ensuring your documents and processes are legal, up to date and consistent is a big job by itself. Most business owners are not willing to put the time and energy into doing it correctly and consistently. Unfortunately when they find out (in legal fees, civil judgments or regulatory fines), it will be an expensive mistake.

Hire a Labor Lawyer and Internal HR Expert
To get started, a labor law firm probably has template forms that are up to date and cover lots of legal contingencies. However document maintenance will demand someone in the company with an HR background ensure that these documents are consistently prepared, completed and communicated to employees. This route is expensive and most small business cannot justify the expenditure for a full time HR expert.

Hire a Professional Employer Organization (PEO)
PEOs are in business help other businesses navigate the minefields of employer related risks. Companies that join a PEO get:

• Access to a full suite of up to date and legal current employment forms
• Access to Human Resources experts to customize a maintenance plan for their company
• Legal advice and risk sharing should employment related litigation arise
• Staff training programs for managers and owners
• Access to Employment Practices Liability Insurance (EPLI) to mitigate the financial risk for (some) employment practices.

For business owners, joining a Professional Employer Organization ensures employer related risk are reduced and HR best practices make a better place to work. Investigate PEO solutions for your company now.

Image courtesy of dan4th Nicholas via Flickr