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Between December 2007 and July 2009, the U.S. economy lost almost seven million jobs. In times of economic uncertainty, employees worried about their jobs might look toward the Workers Compensation system for supplemental income. Workers who have ignored aches and pains over the years and haven’t reported them might decide that the time is right to make a claim. Others who might have been healthy and who suffer an injury that they might have previously ignored might now decide they have nothing to lose by reporting it. Employers facing the possibility of having to lay off employees must be aware that their Workers Compensation costs could rise. However, there are steps they can take to keep a lid on costs.

Once risk managers learn that a workforce reduction is coming, they can prepare in a number of ways. They should become familiar with the unemployment insurance laws in each affected state, including the levels and durations of benefits and how they affect Workers Compensation benefits. They should investigate other state programs available to employees that could offset Workers Compensation costs. They also might want to meet with their insurance broker to review pending claims and identify those that might become problems.

Another priority is claims documentation. The firm should back up employee records and store both in secure locations. Claim records should be updated with the latest available information. The risk manager might want to create a video record of conditions in the building prior to the layoff so that they can demonstrate to a court what the work environment was like. Finally, exit interviews that include written questionnaires completed by the employees can serve as evidence as to the employees’ physical condition at the time of termination.

When the layoffs occur, the company should handle them as sensitively as possible. Losing a job is a traumatic experience for anyone; clumsy communications from the employer can inspire a worker to seek retribution. To the extent that the employer can help affected employees, it should do so. For example, it might want to offer resume preparation, outplacement services, or employee assistance programs for those who need emotional support. Also, if the company can afford them, it might want to offer severance payments to the employees in return for their written agreement to forego any future claims against the company. Finally, though it might seem unlikely, the company should have contingency plans in place should any of the employees become violent, either at the time of the layoff or later.

To defend against exaggerated or fraudulent claims, risk managers should ask the broker and the insurance company to coordinate claims handling through one office and one senior claims adjuster. They should also request that the insurer assign the defense of all cases to one law firm. To assist in the defense, they should make relevant records, such as videos, employee files, job descriptions, and exit questionnaires, easily accessible to the attorneys and any medical specialists the firm might hire. Finally, they should identify key personnel who might be available to testify as to job requirements and conditions, and make a list of their names and contact information available to the attorneys.

Cutting jobs is one of the most difficult things any organization must do. The goal of a workforce reduction is to lower the firm’s costs. Uncontrolled Workers Compensation expenses resulting from the action could wipe out any benefits from it. Careful planning and handling of the action and its aftermath can go a long way toward ensuring that the company’s pain will not be for nothing.

In the 1800s, manufacturers and builders started using a natural resource that vastly improved the quality of their products. It added strength to materials, resisted heat, electrical and chemical damage, and absorbed sound. When mixed with cement and used in building construction, it enhanced fire safety. By the middle of the 1900s, manufacturers were using it in insulation, automobile brake pads, drywall, lawn furniture, fireplace cement, gaskets, and a host of other products. Unfortunately, this material, asbestos, can cause serious lung disease and even death in those who inhale its fibers. Builders and manufacturers who used it have endured hundreds of thousands of lawsuits from the victims or their survivors.

Claims resulting from exposure to asbestos fall into the category of what is known as “toxic torts” — injury and damage lawsuits stemming from exposure to substances proven to cause illness or injury in people. Other substances that lead to toxic torts include lead paint, toxigenic mold, industrial chemicals, pesticides, and toxic landfill waste. These lawsuits can ravage a company’s balance sheet, ruin a good reputation that took years to build, and divert resources and attention away from normal operations and toward legal defense.

Asbestos has been associated with instances of cancer affecting the protective lining that covers most of the body’s internal organs. This form of cancer was killing 3,000 Americans a year by the late 1990s. Most of the victims had long-term occupational exposure to asbestos. A Rand Corporation study estimated that 27.5 million people in the U.S. were exposed to asbestos in their workplaces between 1940 and 1979. Consequently, by 2002 more than 730,000 people had sued more than 8,400 firms for illnesses caused by the fiber. The cost of asbestos-related litigation in the U.S. has exceeded $250 billion.

Toxigenic molds produce a chemical that can be dangerous to people exposed to large amounts of it over a long period of time. Normally, the mold is not present in large enough quantities to be harmful. However, concern has grown during the past several years about the possible effects of long-term exposure to these molds. Newer energy efficient homes have become air tight, preventing moisture from escaping and creating an environment in which mold can grow. A Texas woman who sued her insurance company over its refusal to pay for cleaning up mold that allegedly made her home unlivable won a multi-million dollar damage award; a court later reduced the amount. Although health experts have not reached a consensus about the actual harm mold can cause, the increased attention to it makes future litigation likely.

The standard Commercial General Liability insurance policy does not cover most losses resulting from pollutants. However, alternatives exist: Pollution Legal Liability insurance policies. These policies cover damage to the organization’s own property; injuries or damages that others suffer as a result of a toxic incident for which the organization is liable; and associated cleanup costs. Depending on its terms, such a policy might also cover new injury claims, cleanup, and the discovery of new toxic substances after the organization implements a pollution remediation plan. Our professional insurance agents can help locate the appropriate coverage at a reasonable cost.

Toxic torts are likely to remain a financial threat to all organizations for the foreseeable future. Controls to prevent injuries or to make existing ones less severe, coupled with the right insurance company, can help ensure that your organization will survive this threat.

During the past several decades, Congress and state legislatures have enacted numerous laws protecting workers from unfair discrimination by their employers. These laws affect all but the very smallest employers and cover a wide variety of employee characteristics. Failure to abide by them can cause a great deal of trouble for employers. Under Title VII of the Civil Rights Act of 1964, employers may not discriminate against employees on the basis of race, national origin, religion, or sex. The prohibition applies to aspects of employment such as:

• Hiring and firing
• Compensation, assignment, or classification of employees
• Transfer, promotion, layoff, or recall
• Job advertisements
• Recruitment
• Testing
• Use of company facilities
• Training and apprenticeship programs
• Fringe benefits
• Pay, retirement plans, and disability leave
• Other terms and conditions of employment.

Employers are also prohibited from taking actions that would have a disparate impact on a protected class of employees. For example, firing all employees who cannot work on Sundays might have a disparate impact on individuals whose religions forbid them to work. Title VII also bars discrimination based on pregnancy. Finally, the law prohibits “reverse discrimination,” which occurs when an employer goes so far to protect members of a minority or protected group that it harms members of other groups.

Other types of restricted discrimination include:

• Pay discrimination based on gender. The federal Equal Pay Act of 1963 requires employers to provide equal pay to men and women for equal work on jobs where the performance requires equal skill, effort, and responsibility, and which are performed under similar working conditions. However, employers can make allowances for seniority, merit, quality or quantity of production, or differentials based on factors other than sex.
• Age discrimination. The Age Discrimination in Employment Act bars deliberate discrimination against workers over 40. However, it does not prohibit actions that have a disparate impact against older workers as a group.
• Disability discrimination. The Americans with Disabilities Act forbids employers from discriminating against workers who are disabled, have a history of disability, or whom the employer considered to be disabled. The law requires the employer to provide reasonable accommodations for the disabled employee, such as modified work duties or schedules, special tools, and unpaid time off, if needed.
• National origin. Under the Immigration Reform and Control Act, employers may not discriminate against U.S. citizens or non-citizens who are in the country legally on the basis of their national origin.

Some of these laws also prohibit harassment against protected employees; retaliation against those who make complaints; and discrimination based on employee’s marriage to or association with a member of a protected group or participation in schools or places of worship associated with these groups. Although federal law does not prohibit discrimination based on a person’s sexual orientation, some state and municipal laws do. Other local laws may forbid discrimination against employees with children, welfare recipients, and on the basis of marital status. Employers should familiarize themselves with the laws in their states.

Even the most well-intentioned employers might find themselves the target of an employment discrimination action. For this reason, every employer should consult a professional insurance agent about purchasing Employment Practices Liability insurance. This coverage protects the employer from the cost of suits and damages alleging most types of discrimination. They do not, however, cover fines or penalties assessed by regulators. One of our agents can help you obtain appropriate coverage at a reasonable cost.

Workers who used to endure unfair discrimination now have the law on their side. Employers must avoid discriminatory practices, for the good of their workers and their businesses.