Business Protection Bulletin

Employment background checks are not just for high tech companies or executive level management any more. A thorough background check should be performed to avoid making any assumptions about an employee’s history.

To help you get started, here are some essentials of a complete background check:

Current address – Confirm a current address through a telephone directory, confirmation with landlord, rental or mortgage company, or county tax office.

Former addresses – Confirm former addresses through former employers, credit agencies, or by contacting the landlords of former residences. If the applicant resided in another city, state or country, you might use an investigative agency to perform some standard verification.

Other detailed information you might choose to verify is the amount of rent or mortgage paid, whether it was paid on time, details of complaints made against the applicant, whether their former residence was left in good order when vacated, whether they left on their own accord, and any eviction details, if applicable.

Current and Former Employers – Employers are reticent about providing too much information on current or former employees since negative references occasionally result in lawsuits. Most employers, however, will verify an employee’s job title, length of employment, starting and final salary, and reason for leaving. You might obtain resume data on old application forms to compare with the resume or application of the person you are considering for the position.

A more detailed background check might include obtaining the names of the applicant’s immediate supervisor or manager and trying to establish contact with them. Interviews can be conducted by phone or in person. Since there is a fine line regarding invasion of privacy, obtain the applicant’s permission in writing if necessary. Protect your liability exposure by discussing the legality of the background check with your company’s lawyer beforehand.

Education – Transcripts from most secondary institutions can usually only be obtained either by the applicant themselves or through a signed release that includes enrollment dates, department and subject of study or major, student identification number or social security number, and date of birth. A photocopy of the degree or certificate should be obtained for verification, if possible. Contact the applicable registrar’s office and they will be able to specify what is required to release information.

Additionally, verify the college is legitimate. Fake diploma mills offer degrees from fictitious institutions possessing names very similar to known established educational institutes, so do not assume you recognize the name.

Credit Check – A credit check is usually required in those situations where the position involves security, fiduciary responsibility, or bonding. Verify that all information provided in the credit check conforms to the information provided on the application. Poor credit references should be cross referenced and authenticated for accuracy.

References – All personal references listed by the applicant should be contacted. If it is a basic employment check, the integrity of the applicant’s personal character can be established by phone. Detailed checks might necessitate personal contact to meet with the references face to face, as the references given might provide information prejudicial in favor of the applicant.

Miscellaneous – Additional items which could be of relevance include a criminal records check performed in all states listed on the application form, driver’s abstracts and records check on civil suits.

Be methodical and take the time to perform a thorough back ground check that satisfies the need of your business.

With the U.S. economy in recession, companies are trying to make up for declining sales by reducing expenses. Workforce reductions, though they might improve short-run profits, could also cause long-term problems if the firm does not handle them with care. Angry former employees could look for justification for legal action. The employees who remain will take on extra work with no additional compensation, while they deal emotionally with the loss of colleagues and fear that the job cutting will eventually hit them. Consequently, companies must approach layoffs with caution.

The company must first determine whether a layoff is the best option. Although it might reduce costs quickly, it could also cause the company to dismiss valuable workers. This will hurt long-term productivity, lower the morale of the survivors, and wipe out valuable institutional knowledge. There is also a risk that a layoff will affect older or minority workers unfairly, which could lead to discrimination complaints. Therefore, the company should look at alternatives such as hiring and wage freezes, adjustments to employee benefits, not replacing workers who leave or retire, and job sharing.

If the company decides that it must reduce its workforce, several careful steps are required:

• Establish a specific goal for the layoff to achieve, such as a dollar amount of savings or number of positions.
• Identify those job functions and skills that it will need to operate successfully after the layoff.
• Set a timetable so that the reduction has a clear end.
• Comply with federal and state labor laws.
• Determine which jobs are unnecessary and eliminate them.

When determining which employees to dismiss, the company may legally use criteria such as length of service with the company, the necessity of a certain job classification, employee status (i.e., part-time or temporary), or employees’ performance records. Management should review candidates for dismissal to ensure that the cutback does not disproportionately impact classes of employees protected by law. If managers can find no other compelling business reason for terminating those employees, they must seek out alternatives.

Once managers have made selections and the decision to proceed, they must inform the affected workers in a professional manner. They should be able to explain clearly the reasons for the action; workers’ entitlement to benefits such as severance, health coverage, and others; and post-employment services available to the workers, such as outplacement. The workers might express emotions ranging from stunned silence to rage; the managers must be prepared to deal with their reactions in a businesslike manner. Remaining employees will have concerns about their own futures and the firm’s outlook. Management should, to the extent possible, explain the reasons for the layoff, the likelihood of additional job cuts, and the business goals the firm seeks to achieve through the layoffs.

The company must take particular care when the layoff involves older employees. Severance packages usually require the employee to waive his right to press a claim under federal law. However, regulations impose procedural requirements that an employer must meet before a court will consider the waivers valid. Companies must take special care to meet those requirements.

Shrinking a company is an unpleasant prospect that no manager relishes. Employee lawsuits might well result from a workforce reduction. However, if the firm handles the action with care and sensitivity, it can make such claims less likely and will be in a better position to defend itself against claims that do arise.

Employers in today’s marketplace face many formidable competitive and legal pressures. In addition to holding onto market share, they must comply with environmental, safety and trade practice regulations. Increasingly, they must also worry about legal challenges from their own employees. The job security that employers offered for decades has given way to a dynamic and sometimes unsettling work environment. Rising job insecurity has brought with it more frequent lawsuits from employees sensitive to perceived discrimination. Several trends in the workplace indicate that this will continue.

The baby boomer generation is reaching retirement age in rapidly increasing numbers; the youngest boomers are now in their mid-forties. The sheer size of this aging portion of the workforce, coupled with increased corporate downsizing, is producing accelerating numbers of age discrimination claims. The Equal Employment Opportunity Commission reported that the number of age discrimination complaints increased 15% in 2007. Employers that focus on hiring and promoting young people to keep themselves innovative could become targets for discrimination lawsuits from older workers.

The U.S. economy lost 1.2 million jobs in the first 10 months of 2008, and economists expect the job market to remain weak for the foreseeable future. The end of a recession does not necessarily mean a return to a strong job market; job losses continued for almost two years after the 2001 recession ended. Mass layoffs invariably produce lawsuits from workers who feel they were treated unfairly. A sustained period of falling employment should increase the number of such actions.

Computer technology and Internet applications have had major positive effects on firms’ productivity. They have also created new ways for employees to suffer harassment (sexual and otherwise), privacy invasions, discrimination, and hostile work environments. Uncontrolled Internet access can allow workers to download offensive material that’s then used to harass colleagues. Vulnerable computer networks can permit unauthorized access to private employee information. Modern software and equipment can allow employers to monitor virtually every move employees make. As a result, more workers will take legal action against their employers when they feel their privacy has been invaded or when they believe that technology was used to discriminate against them.

In recent years, gay and lesbian workers have sought increased protections against workplace discrimination. Newly enacted state and federal laws and local ordinances have made it easier for these workers to pursue claims against employers. At least 17 states have statutes or court precedents that prohibit discrimination in private workplaces on the basis of sexual orientation. Continuing success in the legislatures and the courts will encourage more discrimination suits.

In 2007, the EEOC issued guidance on how federal laws apply to workers with caregiving responsibilities. Working parents might be subject to a variety of unfair treatments, including assumptions about pregnant employees; discrimination against working fathers and mothers; and sex-based stereotyping about working mothers. The agency and courts expect employers to make reasonable accommodations for working parents. Perceived failures to do so or perceived discrimination in hiring and promotions might cause affected employees to take legal action.

To reduce the likelihood of employee lawsuits, employers must implement policies and enforced procedures to prevent unfair discrimination. Another essential component is Employment Practices Liability insurance (EPLI) from a financially sound insurance company. Employers face enormous challenges to survival and prosperity in the modern economy. With careful attention to their employment practices and the right insurance products, you can make those challenges a little more manageable. Contact us for a thorough review of your specific EPLI needs.

Sexual harassment is a serious issue for all organizations. It demeans and humiliates the targets, lowers workplace morale, and reduces productivity as employees spend energy worrying about the latest offense rather than furthering the business. It can also inspire employee lawsuits, bad publicity for the organization, and criminal charges. Even the best of organizations might face incidents of sexual harassment at some point. If it happens, how the organization responds is of the utmost importance.

The organization must take every report of harassment seriously. Brushing off a worker complaint as frivolous could be the basis for future legal action. The person receiving the complaint must judge it by two standards. First, would a reasonable person be offended by the alleged conduct? Second, did the person making the complaint actually take offense at the alleged conduct? If the answer to both questions is yes, the organization should conduct a more in-depth investigation.

Harassment complaints fall into three general categories. In full-fledged complaints, the complainer firmly believes they have been harassed, wants it stopped, and is willing to provide details as to what happened. “For your information” complaints involve employees who don’t necessarily want the employer to do anything, and are unwilling to provide details. Anonymous complaints might provide great detail or none, might be legitimate or complete fiction, and might or might not be from employees. Regardless of the type of complaint, the organization should take it seriously and investigate thoroughly.

Once it has determined that harassment occurred, the nature of the organization’s response depends on the seriousness of the offense. Less serious offenses include jokes, teasing, off-color comments, cartoons and photos, and profanity. The offender might not have intended harm toward anyone. Unless they have habitually done these things despite warnings, a reprimand could be in order. More serious offenses are uninvited and unwelcome physical contacts (hugs, kisses, pats on the butt, etc.), acts directed at a particular person or group of people (repeated comments about a woman’s clothing), and intentionally harmful actions or words (insults about a person’s sexual preference). Some of these actions might require disciplinary action at the first offense (touching a woman’s breast), while others might deserve a reprimand unless repeated (insults).

The most serious offenses involve deliberate physical, mean-spirited, and possibly criminal acts. Grabbing, forcible kissing, lewd exposure, and attempted rape are all examples of this kind of conduct. These might warrant immediate disciplinary action and might require involvement from law enforcement officials.

The organization should assign the investigator based on the seriousness of the alleged offense. A supervisor might be sufficient for less serious offenses, such as e-mailed jokes or suggestive calendars. Acts such as sexual insults, unwelcome advances, and demands for sexual favors call for the involvement of upper management. The most serious offenses could require hiring an outside investigator or attorney. Alleged criminal conduct will necessitate getting the police involved. In addition, the worker making the complaint might prefer speaking to someone of the same sex, of a certain age, or who shares the worker’s background. Organizations might want to have a group of people prepared to investigate claims so they can deal with such requests. However, all investigators must remain objective and free from bias toward either party.

A response appropriate to the situation is vital to an organization’s reputation, future employee relations, and vulnerability to lawsuits. The organization’s advance preparation will make this easier and may make it more attractive to insurance companies that provide employment practices liability insurance. Ultimately, the seriousness with which an organization treats the possibility of sexual harassment should discourage it from happening in the first place.

Most businesses are required by law to provide Workers Compensation insurance. It protects employees, providing income and medical care if they’re injured on the job. It also protects employers. The liability portion provides coverage for lawsuits filed as a result of a work-related injury.

As an employer, the amount you pay for Workers Compensation coverage varies according to your industry and claim history. Workers Compensation insurance for companies that engage in office-based work is generally much less expensive than insurance for industries such as construction or trucking.

Regardless of your industry, there are proactive steps you can take to keep Workers Compensation costs under control. Here are some tips:

• Thoroughly train new employees: Surveys show that nearly a third of Workers Compensation claims result from accidents involving newly hired employees. Take a look at your orientation program and see if you can improve overall safety by beefing up new employee training.
• Make safety a top priority: The best way to keep costs down is to not incur claims in the first place. Create a safety culture throughout the company, and engage employees directly in the effort. For example, you could establish safety councils and solicit ideas from employees on how to create a safer workplace.
• Pre-screen employees: Another preventive action you can take is to make sure you hire the right employees in the first place. Statistics show that workers who are substance abusers are far more likely to have an on-the-job accident. An investment in pre-employment drug screening can save a significant amount in claims down the road.
• Manage claims proactively: When an employee is injured, make sure you keep tabs on the worker’s condition and plan for their return to work as quickly as possible. In some cases, injured employees can rejoin your workforce on light duty, which can reduce the amount of the claim.
• Make sure employees are classified properly: There are hundreds of classification codes used to determine the appropriate level of Workers Compensation coverage. If employees are misclassified, you might not have the coverage you need, and misclassifications can result in fines.

Workers Compensation is essential to protect your employees’ and your company. To sharpen your company’s competitive edge, it’s important to control costs. Contact one of our specialists today to take a fresh look at your company’s approach to safety, hiring, classification, and claims management. We could help you to find new ways to keep costs under control.

When making the decision to return an injured employee to work, there are several significant legal issues that must be considered as a result of both state and federal law.

The first consideration is your state’s Workers Compensation laws. Although a common objective of Workers Compensation laws is to facilitate the injured worker in returning to a productive job, not all states approach this goal in the same manner.

Your state’s approach probably falls into one of the following three categories:

• States that provide for a specific number of weeks of rehabilitation and a limited amount for training for the injured worker. After training is complete, the worker is considered rehabilitated. This training component also limits the employer’s liability to find another job for the claimant.
• States that are considered defined benefit states. A worker is paid for his temporary total disability. If disability reaches a predetermined percentage of body loss, however, the employer can issue a lump-sum payment and close the case, whether the worker can return to work or not. Rehabilitation is a minor part of this approach.
• States that use loss of earning power as qualification for benefits. Once a worker is injured, his Workers Compensation benefits will continue for life unless he is proven to have an earning power. In these states, the employer at the time of injury must offer a job to the injured employee if one is available within the employee’s physical restrictions. If this is not possible, the law requires that rehabilitation efforts begin.

The Americans with Disabilities Act (ADA) also presents certain legal considerations concerning the manner in which an injured employee is returned to work. The first consideration is regarding the collection and maintenance of the injured employee’s medical information.

The ADA requires employers to collect this information to determine how to accommodate an employee’s disability and whether the employee is capably of performing a specific job. However, the ADA also mandates that employers:

• Treat this information as a confidential medical record.
• Maintain this information on separate forms and keep the forms in separate files.
• Not use this information for any purpose that is inconsistent with the ADA.

There are also specific rules regarding the disclosure of such information. Supervisors and managers may be informed about necessary restrictions and accommodations arising from the disability. In addition, first aid and safety personnel can be informed if the employee’s condition may require emergency treatment.

Another key consideration under the ADA is whether or not the returning employee is eligible for a particular job. The law says that if an employee can perform the essential parts of a job, they are eligible, even if certain minor aspects of the job cannot be performed. Employers are required to make reasonable accommodations as necessary so that the employee can perform the job. This is what is commonly referred to as a “light-duty” assignment.

Decisions regarding necessary accommodations must be accomplished through a joint process involving the employer, employee, and the employee’s doctor. A company refusing to make reasonable accommodations is at risk for a lawsuit. A worker who refuses reasonable light-duty work risks having their benefits or employment terminated.

”Respondeat superior” is a Latin phrase that translates “let the master answer.” This is legal jargon relating to the breadth of the employer’s responsibility for the actions of his employees. Literally, and in basic terms, any injurious or wrongful act of an employee within the course and scope of his employment creates liability for the employer (the master). This is commonly known as “vicarious liability.”

An employer’s liability for injury or damage caused by employees is considered “vicarious” because the act was not committed by the employer, but by individuals for whom the employer is responsible. Just like a parent is responsible for the actions of a child, even if the parent had no knowledge of what the child was doing, so too is the employer responsible for the employee’s actions.

When crews are spread over several job sites, the employer loses some direct control over the actions of the dispersed employees; however, he is not relieved of his responsibility for the actions or inactions of these workers. The “master” will be required to financially stand up and answer for any injury or damage caused, even though he might not have been aware of those actions.

Within the framework of construction operations, the employer is obviously responsible for any work done incorrectly or poorly. For example, if an employee of a plumbing contractor does not properly cement or solder a pipe, leading to severe water damage from a break at the connection point, the employer is expected to pay for the damages.

Beyond simply being vicariously liable, the employer has the potential to be accused of “negligent entrustment.” Negligent entrustment can be asserted when an employer allows an unqualified person to use a dangerous instrumentality. Construction sites teem with dangerous instrumentalities; from items as simple as nail guns and power saws, to man lifts, grading equipment, and trenching equipment. Employers owe a duty to the employee, others on the job site, and even the general public to affirm an employee’s ability to safely and correctly operate equipment necessary for their job.

To avoid breaching this duty and allegations of negligent entrustment, the employer must test employees to confirm they are adequately trained to operate the equipment they are expected to use. This can be accomplished by observing the employee’s use of the equipment and correcting misuse. Observation and training should be done by a highly trained supervisor or by the supplier. The training must include detailed safety instructions and “what-if” scenarios. Once the employee has been “cleared” to use the equipment, continued observation is necessary to ensure the employee doesn’t become careless.A common response to recommended training and testing is, “We don’t have time for that.” This may be true, but if you don’t have time to train, do you have time to go to court? Also, do you have the funds to pay the damages? Successful negligent entrustment suits often involve punitive damages that could drastically increase the cost for that particular incident.

Vicarious liability and charges of negligent entrustment aren’t limited to your employees. You may also face liability for the actions of entities or individuals to whom you sub-contract work. Making sure you hire qualified and properly insured subcontractors is of vital importance.

You, as the saying goes, are your employee’s keeper. Not due to lack of trust, but because you are ultimately responsible for the results and consequences of their actions. Choosing, training, and monitoring your employees and subcontractors will allow you to avoid or at least minimize many of the potential problems.

Harassment and discrimination can spell big trouble for a business. It can cause disruption in the workplace and lower employee morale. It can also result in lawsuits that have the potential to cost employers hundreds of thousands of dollars — or even more.

The U.S. Supreme Court has held that employers can be found liable for harassment and discrimination claims, even if the employer wasn’t directly aware that harassment and discrimination were occurring in the workplace. Employers are expected to take a proactive stance, and an employer who has not addressed the issue at work is vulnerable in the event of a lawsuit.

What are harassment and discrimination?

Harassment and discrimination are defined by federal, state and local laws. Title VII of the Civil Rights Act of 1964 prohibits discrimination on the basis of race, gender, creed, religion and national origin. Other laws prohibit discrimination on the basis of age, disability and pregnancy.

Harassment can include any verbal, written or physical act that makes employees uncomfortable at work or interferes with their ability to perform their jobs. It can include jokes, emails, cartoons, drawings or other material that is suggestive or reflects negatively on a protected class. It can include slurs or offensive language.

What can you do about it?

As an employer, you can be held accountable for all forms of unlawful discrimination and harassment, so it pays to have a proactive policy to protect your business and your employees. Here are some ways you can begin to address the issue:

Create a harassment and discrimination prevention policy: Make sure employees know that you will not tolerate harassment or discrimination. A formal written policy outlining your commitment to a harassment and discrimination-free workplace is a good way to start. Many employers include such a statement in employee handbooks that are distributed to all employees and collect a signed statement of understanding from each employee. Others combine a written statement with a mandatory employee training session.

Outline steps employees should take: Your policy should also include a method for employees who feel they are being harassed or discriminated against to report the behavior. A formal investigation process is also important. Some companies ask employees to report their concerns to their immediate supervisor first or to the next person in the chain of command to begin an investigation. Others direct employees to bring their concerns directly to the office manager or HR department. The important thing is to make sure the method is clear, easily accessible and highly confidential.

Make sure employees know you and your management team take your policy seriously: One of the best ways you can gain employee buy-in for your policy is to make sure you and your managers demonstrate that you believe it is important. Whether during a meeting or in informal settings, it’s a good idea to stress the amount of harm harassment and discrimination can cause and to make sure employees know they can come to you if they’re not treated fairly.

Taking care of business

In today’s competitive business environment, it can seem like there is too much information to process and too many tasks to perform. It can be tempting to put issues like harassment and discrimination prevention on the back burner, particular for a company that started out small but is growing rapidly. However, taking the time to establish and communicate a proactive policy is a wise move — one that can help you protect your company and build a stronger workplace in the long run.

In recessionary periods it is common practice for companies to downsize their operations. Downsizing would naturally include both your physical assets and personnel. Taking stock of your insurance requirements and re-evaluating your policy coverage should also be included in your downsizing strategy. And, even if you are not downsizing in the immediate future every business owner ought to take a close look and audit their insurance package anyway. If you are wondering why you should bother, the reason is simple: You could be missing out on some substantial savings!

Let’s elaborate further on the two main reasons you might want to audit your insurance coverage:

• Paying for what you don’t need – If you are selling off assets then simply put, you don’t need to be paying for the insurance coverage. Similarly, if you’re reducing personnel then you don’t want to be paying for unnecessary Workers Compensation coverage, do you? If your policies are based on the value of your current assets then you will want to re-adjust your coverage and save on the premiums in the process. You might even use some of the premium savings to boost your EPLI coverage because laid off workers are not only disgruntled, but litigious minded when the pink slip lands on their desk.
• There are bargains out there – Even insurance companies have to compete vigorously in a recessionary marketplace. Better deals can be obtained if you shop around. If you cannot find better competitive prices for your premium dollar, you will likely find alternative policies that offer better coverage for the same premium.

Start with an audit

Contact your insurance broker to help you perform a full insurance audit of your current situation. Think about your needs down the road by considering best and worst case scenarios. Don’t procrastinate and wait until the last minute when your policy is about to expire. An audit is best performed a few months prior to your policy expiration.

Ensure that your broker also comes back with other quotes from your insurance carrier’s competitors. This will at least prompt a very competitive bid from your current insurance carrier. They want to keep your business.

Remember to re-evaluate your insurance deductibles

When reviewing your policies don’t forget to review your current deductibles. If you are prepared to assume more risk then you can lower your premiums even further by increasing policy deductibles. Call us to arrange for a policy review with one of insurance professionals.

Workers Compensation claims are a major cost of doing business, and the length of time a claim remains open has a large effect. Claims that stay open for long periods of time are more likely to involve attorneys, high medical bills, and significant payments for lost wages. According to the Insurance Information Institute, between 2002 and 2007 the medical cost per lost-time claim (claims where the injured employee is unable to work) rose 50% faster than the annual rate of medical inflation for the economy as a whole. The institute estimates that attorney fees increase claim costs by 12% to 15% with no net gain in benefits to the worker. Most states index the maximum payment for lost wages to the state’s average weekly wage, a figure that generally rises each year.

Limiting the duration of Workers Compensation claims is an important strategy in the effort to hold down costs. To do this, employers have several options at their disposal:

• Prompt notice of claims to the insurance company hastens the onset of medical treatment, speeds up the injured worker’s recovery and return to work, and reduces the likelihood that he will hire an attorney. Therefore, requiring workers to immediately report all injuries, however minor, and promptly reporting them to the insurance company can have a huge impact on the duration of a claim.
• A prompt and thorough investigation of the incident is just as important. Interviews with the injured worker and witnesses, photographs, and other information gathered as soon as possible will help the insurance company to properly adjust the claim.
• If the employee will be out of work for an extended length of time, the employer should keep in regular contact. An injured worker who gets the sense that his employer does not care will become a receptive audience for plaintiff attorneys. Employers might want to call the worker periodically to check on their condition, offer assistance with completing the paperwork, and generally to check on their emotional state.
• The employer should have a good understanding of the state law pertaining to the waiting period for benefits covering lost wages. This is especially true if the employer operates in several states, as their laws might vary widely. Understanding how the law applies to the worker’s situation will help the employer set expectations properly. This reduces the chance of misunderstandings that can lead to problems down the road.
• Building relationships with the physicians treating the employee will keep the employer better informed as to his condition, treatments, medications, and expected duration of disability. This should eliminate surprises and help the employer get the employee back to work sooner.
• Return to work programs can shorten claim duration and reduce costs significantly. These programs permit an injured employee to return to work in some capacity before he has recovered to the point where he can resume his previous duties. They reduce payments for lost wages, meet the worker’s need to feel productive again, and remove incentives for the worker to hire an attorney.
• Employers should review loss reports with their insurance agents and claim adjusters and ask questions about losses that do not appear to be progressing toward closure. They should also look for patterns in the loss reports to identify correctible factors that raise the cost of lost-time injuries.

Employers owe it to their workers to provide a safe workplace and benefits to help them should they get hurt. With some extra care and attention, employers can meet those obligations and keep costs in check. Contact our office today to see how we can help!