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Jul 01
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EDITOR’S COLUMN: KEEPING THEM MOTIVATED

By Your Employee Matters

Every person is motivated by either pain or pleasure. Today, many employees are motivated to work hard due to the pain that can be associated with losing their jobs. The problem is that fear-based motivation is similar to that of “kick in the butt” theory of motivation — it only works as long as the fear of the kick is present.

The challenge is to motivate our workforce toward growth, not just survival. This requires nurturing of intrinsic motivation. To paraphrase motivation expert, Bob Nelson, it’s more powerful to light a fire within folks than underneath them. Here are five proven motivational pointers to keep in mind:

1. When people are doing work they can do well and enjoy doing well, they are naturally motivated. This holds true for every one of us. So begin by placing employees in this “sweet spot.” The challenge then becomes not to demotivate someone in this position. The excellent book Leadership and Self-Deception, states that we often deceive ourselves as not being the problem. When you’re running 75 miles an hour, most of us have little time for the positive and tend to deliver negative messages — usually when we react to someone stopping us from running. Praise, perhaps the most important motivational tool, gets short shrift when we’re running for our lives.
2. How you show you care isn’t as important as your effort to show you care. Study after study shows it’s not a specific motivation or retention program that works; it’s the desire and effort to have the program in the first place that makes a difference. What holds true for parenting and marriage also applies to managing: Begin by making an effort, any effort, to show that you care. One way to do this is to spend five minutes listening to someone. When was the last time you stopped running long enough to do that?
3. Engage your employees. You have a sales job to do and you want to know your employees’ fears and desires. Since management by control is dead, the only alternative is management by agreement. Make the employees part of the action in addressing productivity and other management concerns. HR That Works users should take a look at the White Paper: “Getting Your Employees to Think.” Encouraging employee thinking will motivate them.
4. Don’t forget the greenbacks. Money remains the No. 1 reason people go to work — always has been, always will be. But here’s the tipping point: Once folks are paid a “fair day’s wage,” money then falls off as a distant motivator — as a sense of belonging, ego gratification, self-actualization, and other motivators kick in. Make sure you pay a fair day’s wage by doing market surveys. What would you have to pay to hire any one of these employees today? Also, bear in mind that paying too far above grade is a waste of money that doesn’t benefit either the business or the employee.
5. Open the books. I’m a big fan of open book management as a motivational tool. Have your management team read Jack Stack’s Great Game of Business.

Conclusion: Stop running for five minutes, show your employees that you care, engage them, monitor your pay scales, and open the books. Now that’s a motivating formula!

Jul 01
Love0

CONSIDER THESE IDEAS TO KEEP YOUR SPOUSE FINANCIALLY SECURE WHEN YOU’RE GONE

By Life and Health

When spouses develop their financial strategy for retirement, they consider what is best for them as a couple. They typically ignore one very important reality; and that is that one spouse will outlive the other, and could conceivably go on for a number of years. That means to really be ready for retirement, every couple also needs to design a plan to ensure the surviving spouse’s financial well-being for the rest of their retirement life.

Consider the following tips:

  • Take financial inventory – Start by making a list of the income that will exist before and after the death of each spouse. Be sure to include retirement assets that are listed in only one spouse’s name, and any Life insurance policies in which one spouse is the named beneficiary.
    If you don’t have Life insurance, consider purchasing it for extra protection. If you intend to buy a policy, do so before you retire, because as you age, Life insurance become more expensive, and you won’t get as much coverage for your money as you would if you were younger.
  • Know if your pension plan requires that an option for a survivor’s benefit be made available – Traditional defined benefit pension plans are covered by the Employee Retirement Income Security Act, which mandates that the plan participant must be offered an option for a surviving spouse annuity. To select the survivor’s benefit, choose a joint and survivor annuity payment, which means the amount you receive during your lifetime is reduced, but the income stream continues after your death.
    You can choose not to receive this benefit, but only with both spouses’ signatures on a form witnessed by a notary or plan representative.
  • Be aware of how Social Security benefits change after a retiree dies – The Social Security spousal benefit pays up to one-half of a retired worker’s benefit while the worker is living, but it stops when that worker dies. However, a surviving spouse who is at full retirement age or older gets all of the deceased worker’s full benefit or their own, whichever is larger.
    Surviving spouses who are younger receive reduced survivor’s benefits, depending on their age. When they reach full retirement age, they can choose to receive their own full benefit if it’s higher than the reduced survivor’s benefit that they’d been receiving.
  • Consider the impact future events will have on your finances – Think about healthcare needs, and whether your spouse will have company provided healthcare coverage after your death, or if they will have to purchase their own. In addition, you should also seriously consider whether you should buy long-term care coverage.
  • Get the advice of a reputable financial planner – If your retirement assets include a combination of 401(k) plans and IRAs, it’s a good idea to sit down with a certified financial planner to get some projections of how long your money will last. A competent planner can offer suggestions as to how to make the most out of what you have.
Jul 01
Love0

UNDERSTAND AND AVOID THE PAIN OF MEDICAL IDENTITY THEFT

By Life and Health

By now, you’ve probably heard countless harrowing tales about identity theft. After all, according to the Federal Citizen Information Center, it’s the fastest growing crime in the U.S. A Gartner Research study reports that another consumer becomes a victim of identity theft every two seconds.

Once they fall prey to this insidious crime, identity theft victims often suffer financially, professionally and even emotionally. Unfortunately, there’s a specific type of identity theft that can cause a person even more harm: Medical identity theft.

TAKING OVER YOUR MEDICAL CHARACTER

When an identity thief steals your insurance card from your wallet or somehow gets hold of your social security number and insurance information, he or she can then receive medical care and file false insurance claims under your name. This could not only lead to financial troubles, but also health record inaccuracies that endanger you in the future.

For example, let’s say an identity thief who has stolen your wallet takes your insurance card to a doctor and claims to be you. His blood type, drug allergies and pre-existing conditions are likely different from yours and, once this data is recorded, it will be mixed in with your medical files. If you then go to a hospital for care, you could receive the wrong diagnosis or treatment based on the thief’s medical history. What’s more, because the thief is receiving treatment under your name, you might suddenly find that you’ve reached your insurance payment maximum. Or you could become altogether uninsurable because of claims filed by the thief.

Another side effect of medical identity theft? Professional problems. You might have a hard time finding a job based on medical conditions that thief has — under your name, of course.

HOW DOES IT HAPPEN?

Having your insurance card stolen isn’t the only way you can fall victim to medical identity theft. Some health care workers have been caught selling patient information to identity theft rings. The health care industry works hard to keep this from happening, but it’s practically impossible to guarantee that no worker with access to patient files would ever make such an unethical choice.

DETECTING MEDICAL IDENTITY THEFT

Identity theft experts say that victims typically don’t realize they’re victims until they receive an “explanation of benefits” notice from their insurance company for services they never received. Unknowing victims might also receive calls from collection companies asking them to pay suspicious medical bills or might notice strange activity on their credit reports.

Unfortunately, once you detect medical identity theft, the problem can be hard to shake. Even with an identity theft police report, some victims have a tough time convincing collection agencies that they did not receive the medical care. Many victims also struggle to correct their health care files under the Health Insurance Portability and Accountability Act (HIPAA). Although this act was created to protect the privacy of patients, it often creates some tricky obstacles for victims looking to resolve medical identity theft problems.

FEW CASES, BUT ENOUGH TO CAUSE CONCERN

According to the Federal Trade Commission, more than 8 million Americans were victims of identity theft in 2005. Of those, only 3% had their information misused so the thief could obtain medical treatment or supplies.

However, while medical identity theft remains a relatively small threat, there have been enough cases to cause concern in the health care industry and the government. The U.S. Health and Human Service Department recently hired the strategy and technology consulting firm Booz Allen Hamilton to study the magnitude of the country’s medical theft issues. In addition, the Blue Cross Blue Shield Association recently announced that its anti-fraud investigators prevented $134 million from being spent on false medical claims in 2007. They also recovered almost $115 million paid on fraudulent medical claims, including some made by medical identity thieves.

In an effort to stop medical identity theft, some health care providers are asking patients to show their driver’s licenses or another photo ID along with their insurance card at doctor’s offices.

Jul 01
Love0

DISCREDITING FIVE DISABILITY INCOME MYTHS

By Life and Health

A long-term disability can have a devastating impact on a family’s finances. When you become sick or injured and cannot work, not only could you lose your income, you could lose all of your savings, investments and other assets as well. Without a steady income, you’d eventually have to tap into these assets to pay for your costly medical bills, your mortgage, utilities and other daily expenses.

Luckily, Disability Income (DI) insurance can offer your family much-needed financial protection in this scenario. But if you’re young and healthy or if your spouse also works, you probably assume you have no need Disability Income. You couldn’t be more wrong. Here are five of the most common Disability Income myths disproved:

Myth #1: I’m too young to buy DI insurance.

You would be surprised to learn how many young adults suffer from a long-term disability. According to the Social Security Administration, nearly three in 10 of today’s 20-year-olds will become disabled before they reach the age of 67. On top of that, you are five times more likely to become injured during your working years than you are to die before the age of 65, according to a study by Great-West Life.

In other words, you are never too young to suffer from a long-term disability, which means you’re never too young to purchase Disability Income insurance.

Myth #2: I don’t need DI because I’m healthy as a horse.

As we all know, good health can come and go like a flash of lightning. Even people who eat well, exercise and take great care of themselves can suffer from a stroke, cancer, a neurological disorder or an unexpected accident.

Myth #3: Only people with high-risk jobs need DI coverage.

Far too many people are under the impression that Disability Income is most often paid out to blue-collar workers who are injured in a workplace accident or professionals who are disabled in a car accident. Therefore, people who work from home or at a computer desk in a comfy office assume they don’t need DI coverage.

The truth is that non-work-related accidents or jobsite injuries are not the primary causes for worker disabilities. Most workers are disabled by a chronic disease, such as cancer or musculoskeletal problems, conditions that can strike anyone, anywhere, any time.*

Myth #4: If I were disabled, my spouse’s income would cover us.

If your spouse works, you might assume his or her income would be enough to pay the bills for a few months if you were sick or disabled. If your spouse doesn’t work, you might think he or she could find a job if something happened to you.

However, don’t you think if you were diagnosed with a disease or seriously injured, your spouse would rather be caring for you than running out to find a job or working overtime to pay the bills? Typically, if a family has DI insurance, both the injured worker and the spouse end up living off of the insurance benefit even if the spouse was working previously.

Myth #5: I don’t need DI insurance because I’m covered through my company’s group policy.

Although many workers receive Disability coverage through their company, it might not be enough. Most group DI insurance contracts will cover only a percentage of your salary (usually 50%-60%) and the benefits are usually fully taxable. Would your family really be able to live off of just 60% of your salary, especially considering that you might be facing some lofty medical bills? Probably not.

Most financial experts recommend that you go ahead and take advantage of your company’s group coverage if they offer it, but also buy individual coverage to fill in the salary gaps.

As you can see, everyone stands to benefit from Long-Term Disability coverage. Without coverage, an unexpected disability could end up crushing your family’s finances.

* http://www.investors.unum.com/phoenix.zhtml?c=112190&p=irol-newsArticle&ID=1138518&highlight=

Jul 01
Love0

AN UMBRELLA POLICY WILL PROTECT YOUR ASSETS IN A POTENTIALLY COSTLY LAWSUIT

By Personal Perspective

Hopefully, you will never be served with legal papers and involved in a costly lawsuit. But in the event you are, it will be imperative that you have the insurance to cover your legal liability. That’s where a Personal Liability Umbrella policy can help.

Umbrella policies supplement the Liability coverage you have through Home and Auto insurance and provide an extra layer of security by protecting your assets that might be at risk in a liability lawsuit.

If you don’t have enough Liability coverage from your Homeowners and Auto policies to adequately resolve a claim, the person suing you can go after your home and your other assets to pay for damages. Umbrella policies cover damage claims that you, your dependents, or even your pets might cause.

Umbrella policies kick in after, and pay in addition to, your Auto and Homeowners insurance liability limits. The bulk of the risk is assumed under the primary Auto or Home policy, which enables insurers to offer Umbrella policies at very reasonable costs.

However, most insurance companies will not sell an Umbrella policy unless both your Auto and Homeowners insurance is with them. In addition, your insurer may stipulate that your Auto or Homeowners liability limits be at least a certain amount, such as $200,000 to $300,000. Umbrella policies are generally sold with a deductible that might run anywhere from $250 to $1,000, pocket change if you’re being sued for millions!

Umbrella policies provide much broader coverage in case you are sued, covering you if you cause bodily injury, property damage, or personal injury. Certain Umbrella policies also cover you if you face liability arising from your service on the board of a civic, charitable, or religious organization.

Umbrella policies typically do not cover claims from business endeavors. If you own a business, even a small one, you’ll need to purchase Business insurance to protect yourself from business-related liability claims.

To determine if you need an Umbrella policy, analyze your risk of being sued and the assets you have at risk. Do you have a swimming pool or trampoline that might pose a threat to visitors? Of course, you may decide your personal situation makes lawsuits very unlikely.

Before making any decision, compare the umbrella premium with the cost of raising the liability limits on your Auto and Homeowners policies. It might work to your advantage to raise these current limits by several hundred thousand dollars, and you might come out spending less than you would on Umbrella policy premiums.

Jul 01
Love0

CHOOSE THE RIGHT CHILD SAFETY SEAT AND INSTALL IT PROPERLY TO KEEP KIDS SAFE

By Personal Perspective

If you’re about to hit the road with young kids in tow, listen up. It’s extremely likely that you either have the wrong child safety seat in your car or that your seat is not installed incorrectly. As a matter of fact, nearly three out of every four child seats in U.S. cars show an obvious mistake in selection or installation that could pose a risk to the child’s safety. Of course, with a barrage of different child seat options, safety regulations and complex installation instructions, it’s no wonder parents often get confused. However, one tiny child seat blunder could result in tragic consequences. So before you strap in your precious cargo and get motoring, take a closer look at that child safety seat.

THE RIGHT SEAT. Countless parents make their first child safety seat misstep in the store simply by purchasing the wrong type of seat. Here’s a quick guide on what type of seat you should buy your child:

  • Rear-facing seats: Infants should ride in rear-facing child safety seats for as long possible, according to pediatricians and safety experts. You should not switch to a forward-facing seat until your child is both one year old and weighs 20 pounds or more.
  • Forward-facing seats: After your child’s first birthday (and the20-pound mark is reached), you can switch to a forward-facing seat. Your child can continue to ride in a forward-facing seat until they’re tall enough that their ears are level with the top of the seatback, shoulders go beyond the top-most harness slots, or they reach the seat’s weight limit, as specified by the seat’s manufacturer. (Refer to the seat’s manual or look on the back of the seat for the weigh limit.) Forward-facing seats typically have a weight limit of 40 pounds.
  • Booster seat: Once your child is too big for a forward-facing seat, switch to a booster seat. (The average child typically moves into a booster seat around the age of four.) According to the National Highway Traffic Safety Administration, your child should continue riding in a booster seat until they are 8 years old or 4’ 9” tall. Here’s another way to test whether your child still needs a booster: If they can bend their knees comfortably at a 90-degree angle when seated with their spine flat against the seatback, your car’s shoulder belt straps across the chest (as opposed to the throat), and the car lap belt fits across the hips (not stomach), then they are probably ready to ride without a booster seat.
  • Back seat: Once your child is big enough to stop riding in a booster seat, they should ride in the back seat of the car until they’re 13 years old. Of course, they should wear a lap and shoulder seat belt at all times, as should everyone in the car.

Some states have passed specific child safety seat laws, so make sure you know and abide by the law in your state.

THE PERFECT FIT. Another child seat mistake many parents make is the way the harness fits on their child. Experts say many parents do not pull the harnesses snugly enough on the child. To ensure that your child’s harness fits properly, try the “pinch test.” If you pinch the car seat strap lengthwise and there is a loop of any size between your thumb and forefinger, the harness is not tight enough.

PROPER INSTALLATION. Of course, the biggest challenge with child safety seats is installing them correctly. Because every car and child seat is different and installation manuals are often incredibly confusing, parents are bound to make mistakes when installing their child’s seat. Luckily, in 2002, the federal government mandated LATCH (Lower Anchors and Tethers for Children). This system improves child safety by eliminating the need to use seat belts to install a child safety seat in a car, and it also makes the installation process a little easier. Cars with the LATCH system have anchors located in the back seat where child safety seats can easily be fastened. Nearly all vehicles and child safety seats manufactured on or after September 2002 include the LATCH system. However, if you have an older car or child seat, you will still need to use the seat belt to install the seat.

To ensure that your child’s safety seat is installed correctly, find a child safety seat expert in your area. You can find a list of certified CPS (Child Passenger Safety) Technicians and Child Seat Fitting Stations at www.nhatsa.gov or seatcheck.org. You can also call 866-SEAT-CHECK or the NHTSA hotline at 888-327-4236.

Jul 01
Love0

UNDERSTANDING ADDITIONAL LIVING EXPENSE COVERAGE FOR HOMEOWNERS

By Personal Perspective

Suffering major damage to a home is a traumatic event for any family. The experience brings shock, worry about family members and pets, grief at the loss of treasured possessions, and stress about the overwhelming task of replacing it all. Right on the heels of these emotions comes a more immediate question: Where will the family live now, and how will they pay for it? Fortunately, standard Homeowners policies provide coverage for loss of use of a home.

The standard policy contains three Loss of Use coverages: Additional Living Expense, Fair Rental Value, and Civil Authority Prohibits Use. Additional Living Expense coverage pays for the homeowner’s necessary increase in living expenses when the home, damaged by a covered cause of loss, becomes unfit to live in.

For example, assume that a severe windstorm knocks a tree into a home’s upstairs. It wrecks three bedrooms and two bathrooms, causing pipes to break and damaging electrical wiring. Since the policy covers windstorm damage and the home is unsafe for the family to occupy, this coverage will pay the extra amount the family must spend to live elsewhere for a period of time. However, the insurance company will pay only the amount necessary for the family to maintain its normal standard of living. If the family was not living in a luxury condo before the loss, the company will not pay for them to live in one after. The company will pay for the shortest period of time necessary to repair or replace the damaged property or to permanently relocate.

It is important to note that the insurance pays only for the increase in costs, less any costs that decrease. If the family had a mortgage payment of $1,000 per month, the rent for a temporary home is $1,200, and utility costs are $50 less, the insurance will pay $150 per month.

Fair Rental Value coverage applies to homeowners who rent out part or all of the premises. Should a covered cause of loss damage the home and make it uninhabitable, the insurance will pay the rental value that the homeowner loses. Coverage lasts only for the shortest time necessary to repair or replace the premises, and the company will reduce the payments by the amounts of non-continuing expenses. For example, if the rental value was $1,000 per month but the cost of heat, electricity and water was $400, and all of these services ceased during the repair period, the insurance will pay the $600 difference.

Recently, an airliner crashed into a neighborhood near Buffalo, New York. In addition to the tragic loss of lives, the crash destroyed one home while barely affecting the others on the street. However, law enforcement authorities required occupants of surrounding homes to evacuate for several days while recovery crews cleaned up the site. These families probably benefited from Civil Authority Prohibits Use coverage. This insurance pays for the increased cost of living elsewhere for up to two weeks when civil authorities prohibit the homeowner from using her residence because of direct damage to neighboring premises caused by a covered peril. Once again, the company will pay only the amount above non-continuing expenses and only the cost of maintaining the family’s normal living standard.

The amount of insurance that applies to these coverages is normally some percentage (typically 30%) of the amount covering the home. For example, a policy covering a home for $200,000 would provide $60,000 coverage for the loss of use coverages combined. One of our professional insurance agents can answer questions about them. Plan ahead; it is always much better to find out how much coverage you have before the worst happens.

Jul 01
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HOW WELL DO YOU UNDERSTAND INSURANCE PREMIUMS AND DEDUCTIBLES?

By Business Protection Bulletin

The underlying intent of insurance is to cover larger or significant losses, not minor ones. By sharing risk with the insurer via a deductible, the expensive costs of adjudicating minor losses are avoided, which translates into premium savings. Of course, your deductible also reduces the amount paid by an insurer for the claims you do file, which provides another basis for an insurer to lower your premium.

Most business people understand that a higher deductible results in a lower insurance premium. However, there are several vital points to consider before opting for a higher deductible:

How much risk are you willing to bear?

Not every business owner has the same tolerance toward risk. Risk acceptability should be premised on the general practice of others in your industry and your business’ current and projected cash flow predictions.
Insurance coverage with a higher premium / low deductible might appear to be more expensive and less tempting in the short-term. However, the psychological impact of a significant loss while possessing coverage with a lower premium / high deductible could have serious consequences to your bottom line when you actually suffer a significant loss.

You have to weigh carefully the pros and cons of what you can pay in premiums versus how much deductible you’ll have to absorb in the event of a significant loss.

Not all deductibles are equal.

Savings on premiums are not necessarily proportionate to higher deductibles. Although a $1,000 deductible might save you $200 in monthly premiums and a $2,000 deductible saves you $400 in premiums, a $3,000 deductible might only result in a $450 premium saving which is a smaller ratio in terms of costs versus benefits. The ratio of premium savings relative to higher deductibles will vary among insurance carriers. Consult with our insurance brokers to secure coverage which not only offers the best insurance benefits to cost ratio, but which is practical to the financial realities of your business.

Also, deductibles can be applied differently for different types of policies. The most common deductible types are:

  • Aggregate Deductible – the most common type of deductible you will find on a Commercial policy. This refers to a single deductible which applies for all losses during the policy period. If you have $18,000 in total claims and an aggregate deductible in the amount of $7,500, then you would receive $10,500 from your insurance carrier.
    Straight Deductible – the deductible you will pay for each and every claim you make during the policy period. Were you to have a straight deductible for your fleet and you incur three collision claims, then the ascribed deductible would be applied separately to each of the three claims.

Before considering a deductible change, be sure to consult with one of our insurance brokers to fully understand your options.

Jul 01
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EPLI INSURANCE AND THE AMERICANS WITH DISABILITIES ACT

By Business Protection Bulletin

One of the most significant federal laws of the last 20 years is the Americans with Disabilities Act of 1990. This law’s purpose is to provide full economic opportunity to disabled individuals without discrimination. It forbids employers from discriminating against them on the basis of their disabilities. The law has had a major impact on employers’ practices in job application procedures, hiring, job placement, compensation, promotions, terminations, and other areas. It has also been the source of much litigation against employers. The Equal Employment Opportunity Commission reported that it received nearly 140,000 ADA-related complaints in one seven-year period.

Some employers have worried about the ADA’s apparent effects on hiring and placement of workers. The law appeared to prohibit them from evaluating workers’ physical limitations when deciding their fitness for jobs. Some employers interpreted it to mean that they had to change a particular job to fit a disabled applicant. However, the law exempts an employer from having to do this if placing the person in the position would pose a “direct threat” to himself or other workers. A direct threat is “a significant risk of substantial harm to the health or safety of the individual or others that cannot be eliminated or reduced by reasonable accommodation.” Because of this provision, employers have not had to make unreasonable job modifications for disabled workers.

In addition, an employer has a variety of hiring and placement procedures available under the law. For example, the employer may still test for drug use. The ADA does not protect a worker’s use of illegal drugs, and the employer may deny or terminate employment for their use. Also, an employer is within its rights to ask about an individual’s abilities. It can require a medical examination of an individual so long as it does so for all applicants for similar jobs. If the person cannot perform the essential functions of the job, the employer does not have to hire them. The employer may also ask an applicant to perform a job demonstration. This technique provides a simulated environment where the applicant can show how they would do a job. It can be useful when applicants have obvious disabilities that appear to interfere with safe and efficient job performance.

Regardless of how an employer conducts its personnel practices, it is always vulnerable to claims of discrimination under the ADA. To protect themselves against financial loss from such claims, employers should consider purchasing Employment Practices Liability insurance (EPLI). This insurance covers an organization’s liability for “wrongful acts,” including discrimination. Most policies define discrimination as including violations of federal, state and local laws that give protected status to certain individuals. Because of these provisions, EPLI policies should cover employers for damages they must pay as the result of violations of the ADA. In addition, the policy will pay the costs of defending the organization against the claim, even if the claim is groundless.

EPLI policies cover claims made during the policy period, but only if the alleged wrongful act occurred on or after a specific date, known as the “retroactive date.” For example, a policy written for the period January 1, 2008 to January 1, 2009 and with a retroactive date of January 1, 2004 will cover a claim made on November 1, 2008 for an act that happened on July 1, 2006. It will not cover a claim made on the same date for an act that happened on July 1, 2003. There is no standard EPLI policy, so the policies will vary by company.

Modern employment laws like the ADA can easily trip up even a well-meaning employer. All organizations should consider buying an EPLI policy. Contact us with any questions about this vital coverage!

Jul 01
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UNDERSTAND DISCRIMINATION LAWS BEFORE HIRING EMPLOYEES

By Business Protection Bulletin

In the current weak economic environment, competition for jobs is intense. There might be dozens of candidates for each job opening, and hiring companies will have their pick. Even in times like these, however, employers must be vigilant about obeying the law when they make hiring decisions. Charges of illegal discrimination in hiring can become more likely during a tough job market. It is essential that employers follow federal and state laws that regulate what factors they may consider in the hiring process. Those who focus on the wrong things could find themselves the targets of government inquiries.

Several federal laws address discrimination in hiring:

  • The Age Discrimination in Employment Act prohibits an employer from refusing to hire, firing, or otherwise discriminating against employees age 40 or older, solely on the basis of age. For example, it is illegal for an employer to offer a benefit such as vision insurance to younger workers but not to older ones.
  • The Americans with Disabilities Act of 1990 forbids discrimination against disabled workers or job applicants. Under this law, an employer cannot refuse to hire a person who has difficulty walking solely on that basis; the employer must have another, legitimate reason.
  • The Civil Rights Act of 1964 prohibits discrimination on the basis of race, color, national origin, religion, sex, pregnancy, sex stereotyping, and sexual harassment of workers. Decades ago, an employer could fire a woman for becoming pregnant. The Civil Rights Act outlawed such actions.

Although these laws have been in effect for several years, some employers still try to get around them. In 2008, the federal Equal Employment Opportunity Commission leveled penalties against employers in the amount of $83 million for age discrimination; $57 million for discrimination against disabled workers; $12 million for discrimination against pregnant women; $79 million for race discrimination; $109 million for sex discrimination; and $25 million for discrimination on the basis of national origin.

What are valid considerations for an employer to use in hiring decisions? Instead of focusing on an applicant’s age, the employer should look at their track record of performance, accomplishments and continuous learning. Rather than assuming that they won’t work at a fast rate or will be slow to adopt new technology, the employer should find out through job simulations, reference checking, and testing. Instead of looking at an applicant’s disabilities (difficulty walking, for instance), the employer should look at their job skills, such as ability to calm angry customers and quickly troubleshoot problems. Rather than ask an applicant whether they’re a Christian or a Wicca or an adherent of any other religion, ask what they did to generate leads and close sales when the economy slipped into recession.

Prior to conducting interviews, employers should review with all involved personnel the legal restrictions on what they may ask or say when speaking with applicants. If necessary, training on effective and legal interviewing techniques should be given to these employees beforehand. It should be emphasized that interviewers need to focus on the tasks involved in the job and the applicant’s ability to perform them.

No matter how much preparation and training an employer does, things can still go wrong. It is important that businesses carry Employment Practices Liability insurance from a financially strong insurance company. One of our agents can obtain multiple coverage quotes, give advice on the various coverage features, and discuss the claims-handling performance of different companies.

Hiring new employees is always a difficult and uncertain proposition. Finding the right person for the job can be tricky. Complying with legal parameters can be trickier, but it is essential. By avoiding illegally discriminatory practices, employers can build a strong workforce and stay out of regulators’ crosshairs.

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