Employment is an ongoing job for the human resources department of any organization. The process begins right from when you decide to hire an employee. These processes continue until, and even after, the employees leave the organization.
Onboarding of employees and keeping them on track can be a tricky job. Both employees and employers have a different set of expectations from each other. Sometimes, when the employer cannot meet the expectations, there are chances that the employee might sue you. Conflict of interest, a controversial management decision, appraisal issues, mismanagement and more reasons can lead to a disgruntled employee. These cases can happen even after all the preventive measures taken by companies. For example, you promote an employee who has been working with the company for six months to a higher position. An employee working with you for a year might still be awaiting and expecting a promotion. In such a case, the employee might sue you for discrimination. Irrespective of the reason for the promotion, you will still be in trouble. If the case reached court, you would have to pay legal fees, attorney fees and more to fight the case. As an employer, these risks are inevitable for you.
However, as a businessperson, risk management is your foremost skill requirement. An entrepreneur can be a preferred employer only when he or she knows how to manage skills well.
What are the most common lawsuits against employers?
The most common lawsuits against employers are:
- Wrongful termination;
- Sexual harassment;
- Breach of contract;
- Wrong evaluation;
- Appraisal issues; and
- Disciplinary actions.
How should you manage employment-related risks?
Employment practices liability insurance is a risk-management solution for employers. This insurance package covers the defense cost for employers when they are in an employment-related lawsuit. Therefore, the best way to manage risks for employers is to buy employment practices liability insurance and transfer your threats to your insurer. It is in the best interests of the company as well as employers. You can also add this policy to your business owner’s policy coverage. The cost of adding Employment Practices liability coverage would be much lesser than the defense costs of a lawsuit.
Tips to lower employment-related claims and insurance premiums
Insurance companies create insurance packages customized as per the client’s needs. Some companies need more coverage, and some companies need relatively less coverage. Also, the price of the insurance package depends upon the coverage requirements of the company. Here are some tips that can help you lower your risks and coverage requirement:
- Tighten the hiring and screening process:
If there are any discrepancies in your hiring process, it can lead to conflicts and increase the risks of an employee-related claim. You must hire experienced professionals and conduct a background check before hiring people. Also, the policies of hiring must be clear. With transparency, the risks are less, and the insurer’s quote will be as per the risks. It’ll also improve work quality and trust factors within your organization.
- Conduct special learning sessions for your employees:
The employees of your organization must know what is acceptable and what is not acceptable. You must conduct meetings with employees of all levels and let them know about the legal, moral, and ethical code of conduct. With a clear code of conduct, it is easier to integrate discipline without fear of acceptance.
- Employee handbooks and grievance departments:
Employee handbooks must state all policies related to hiring, termination, and promotion. Also, a grievance cell must help employees in bringing up concerns and issues to top-level management. It will help in resolving conflicts internally before bringing the matter to the court. When you handle problems internally, the chance of a lawsuit or claim becomes less.
- Maintain job description clarity:
The job description of an employee mentions the expectations of the employer from the employee. When both parties are clear about the duties and expectations, there are fewer chances of conflicts.
- Document employee-reviews and appraisal bases:
You must document employee reviews from time to time. When you send reviews employees, they come to know where they are going wrong. Similarly, you can give feedback forms to employees. When employee forms are analyzed, the human resources department will know where they are going wrong. You must also document the reviews if you use them as a basis of promotions or appraisals. With documentation and reviews, the relation between the employer and the employee can improve.
Overall, you can limit and minimize employment-related lawsuits by taking the preventive measure mentioned above. For the lawsuits that arise despite the precautionary measures, employment practices liability insurance will cover your business interruption losses and defense costs.
However, you must discuss the coverage and exclusions of your policy with your insurer beforehand.
Invest in the best risk management solutions and maintain a healthy relationship with your employees. It is your first step towards becoming a trusted employer. When people know that you have your risks managed, they want to work for you as it is an indication of security.
Puja Khetan is a Digital Marketing Associate at a US-based insure-tech brokerage, Quote Zebra. She has a special interest in marketing and content writing. She writes content related to the insurance industry that could help professionals.