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Employment Liability: Got a case of the nerves or peace of mind?

 As many American businesses continued to downsize in 2011, a whopping 99,947 claims for discrimination were filed with the Equal Employment Opportunity Commission (EEOC). In the agency’s 46 year history, it was the largest number of cases ever filed. With the economy continuing to try to find its footing, and employment remaining uncertain for many, employers are facing the added pressures of increasing claims for wrongful termination, sexual harassment, discrimination and other employment-related exposures. It’s just one more thing to be concerned about.

And you should be concerned. The potential for an employee claiming they were inappropriately touched, the wrong joke was told, they were passed over for a raise, or were discriminated against during a job interview, are very real examples of employment practices liability claims that we hear about all the time. 

So what do you need to know about employment liability? Well first, if you’ve ever interviewed someone, or hired or terminated an employee, you have exposures and should be carrying Employment Practices Liability Insurance. Before someone can file an EPL civil claim, they first have to file an action before the EEOC, and even if the case is found to be without merit, there is still the expense to defend it. According to the EEOC, in 2009, the average cost for a small to mid-sized business exceeded $235,000. Employment Practices Liability Insurance will provide coverage, within policy limits, to defend and indemnify against covered job-related lawsuits. (This pre-filing is not required prior to an action under Washington State law against discrimination.)

But what can you do to try and mitigate employment liability? As with all risk management, good communication and documentation is the key. Having well defined policies in place that are clearly communicated to your staff is critical. An Employee Handbook can not only help protect you from litigation, but can also help your staff by conveying in positive terms, what the practice’s policies are. 

Your Employee Handbook should outline your policies against harassment, state EEOC designation details, have a statement that the practice follows EEOC policies, and any other federal and state laws that need to be posted. The handbook can express your policies on paid time off, salaries and promotions, benefits, and employee conduct (attendance, dress code, conflict resolution, breaks and rest periods, texting, cell phones, internet usage, etc.). Having the appropriate disclaimers should also be considered, e. g. the handbook is not a contract and does not guarantee employment, the handbook is the ultimate word on company policies, the policies in the handbook may be subject to change, etc. You should also have employees sign and return an acknowledgment page that they have read and understood the Employee Handbook.

To avoid discrimination claims, have written anti-discrimination policies in place that conform to EEOC guidelines. Use interviewing procedures and job applications that comply with local and federal laws. Job descriptions should comply with the Americans with Disabilities Act. Have a leave of absence policy that complies with the Family and Medical Leave Act of 1993, and the Pregnancy Disability Act of 1978. Your policy on office holidays should conform to state and federal laws. Post employment-related notices as required by law. If layoffs are necessary, your policy should be based on nondiscriminatory staff reductions.

To protect against sexual harassment claims, have a written policy against sexual harassment and make sure the policy is communicated to both employees and management. Be mindful that harassment can also come in the form of a third party, e.g. a delivery person or even a patient, and that you are responsible to respond to an employee’s complaint. Have a complaint procedure in place that protects the employee making a complaint. All complaints must be documented. Any complaint should be immediately, thoroughly and confidentially investigated. Following the investigation, appropriate action should be taken to resolve the complaint. 

To manage wrongful termination claims, have employees acknowledge in writing the at-will nature of the employer-employee relationship. Perform periodic performance evaluations, and keep them and employee warnings in personnel files. Use counseling, employee assistance and outplacement programs. When interviewing, perform thorough pre-employment interviews and background checks, and avoid statements at the time of hire that could be construed as promises of permanent employment. 

Take your time when hiring! It can be tempting to just hire someone who presents well at an interview when you’re short-staffed and you just want to fill the position. To avoid becoming the proud new employer of an embezzler or other employee-related issues, do your due diligence! Thoroughly check references, and even ask the reference for a reference. Again, always do background checks. Be clear on questions you can and cannot ask during an interview. Take advantage of character assessment tools and also test for the particular skill set you are hiring for. Use well known, established agencies when using temporary employees. 

To reduce wage claims, have a specific policy on paid or voluntary overtime and breaks. If an employee is voluntarily working off the clock, advise them to stop and document their personnel file. Non-exempt employees should be expected to take their breaks and clock out and back in during their designated break period. By requiring employees to take their breaks, even if they continue to work during their break, your office demonstrates that it is following wage and hour laws and this can help reduce unpaid overtime claims.
This is by no means an exhaustive list but it is meant to get you thinking about the steps you are taking to protect yourself and your staff. Implementing clear policies and guidelines, that are reviewed and updated regularly and shared with staff, are good ways to promote safe work environments for everyone. And having those policies in place also aids in defending you, should the need arise.

There is no way to guarantee that you won’t be sued for employment practices liability, but taking the proper steps to mitigate those risks and carrying the proper coverage can sure give you more peace of mind. And I don’t know about you, but I like more peace of mind.


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