PROTECT YOUR BUSINESS BY PREVENTING EMPLOYMENT BIAS CLAIMS

Norma is an assistant manager at a video store. After feeling very sick for a couple of days, she goes to the doctor and is diagnosed with strep throat. Since her employer provides sick time benefits, she calls the store manager and tells him she cannot work that day. He dismisses her illness as “just a sore throat” and orders her to report for work. She complies, but the strep infection takes most of a week to go away because she could not rest. On the third day, she calls in sick again, despite the manager’s obvious displeasure. Six weeks later, the manager terminates her employment, citing declining sales as the reason. Norma believes otherwise and files a complaint with the U.S. Equal Employment Opportunity Commission.

Since the great recession began in late 2007, complaints like this have become common. The EEOC reported that it received almost 100,000 job bias complaints in 2010, a new record. More than a third of them were from employees who felt their employers retaliated against them; another third were race discrimination claims. Why is this happening? Employment law experts believe the recession has a lot to do with it, as dismissed employees have had trouble finding new jobs. They also believe the EEOC has stepped up enforcement of anti-discrimination laws. However, they also point to internal problems with employers.

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Some employers might perform only those activities that they believe will give them an effective legal defense should an employee sue. They write anti-discrimination and anti-retaliation policies into their employee handbooks, make supervisors attend training once a year, and then call it a day. However, these things by themselves might not be effective. Policies do no good if managers do not enforce them. Training that does not address trends such as discrimination and retaliation complaints will not stop them from happening. In addition, if managers do not monitor whether this training changes supervisors’ behavior, supervisors might conclude that the company is not serious about it.

Employment Practices Liability insurance covers an employer’s legal liability for wrongful acts against employees, including discrimination and retaliation. Insurance underwriters will look at an employer’s policies and training practices, but they will also consider its claim history. Underwriters will be wary of insuring employers with a record of frequent complaints against them. If they offer coverage at all, they will charge higher premiums to account for the perceived higher risk.

To prevent claims and keep insurance premiums low, employers should consider these measures:

• Study financial results to determine how much these types of claims have cost or might cost in the future in terms of settlements, legal costs, time more profitably spent on other matters, workplace morale, insurance costs and other areas.
• Ensure that you have strong policies in place against discrimination and retaliation.
• Require supervisors and managers to attend training to prevent these kinds of claims. Include in the content of the training discussions of what is and is not permissible when it comes to discrimination and retaliation. Make it clear that performance evaluations will include incidents of discriminatory behavior.
• Create a workplace culture that does not tolerate illegal activities of any kind. Senior managers should conduct themselves in ways that model the behaviors they want to see from subordinates.

Experts say that recessions always breed increased discrimination complaints against employers. However, that does not have to be the case with every employer. Effective training costs money, but that cost is far less than the cost of insurance deductibles, higher premiums, demoralized workforces, and damaged reputations. Discrimination and retaliation claims hurt a business’s bottom line. Preventing them makes both economic and moral sense.

PREPARING FOR YOUR WORKERS’ COMPENSATION PREMIUM AUDIT CAN SAVE YOU MONEY

When your insurance company issued your Workers Compensation policy, you paid an estimated premium for the term of the policy. This rate was based on the nature of your business and your estimated payroll. However, once your policy expires, the insurance company conducts a premium audit to gather data about your actual costs for the applicable policy term. If there is any shortfall, you are responsible for the difference between the original estimate and actual premium.

Naturally, you want to keep the difference between the estimated and actual rate as low as possible. Consider the following list of tips:

• Have all necessary records available for the auditor.
• Break down your payroll by classification code so that the auditor doesn’t have to classify any unexplained payroll. Leaving the decision up to the auditor could result in having the payroll placed in the highest classification.
• Separate overtime wages from regular wages. This allows the auditor to discount the overtime wages back to regular wages.
• Exclude tips, severance pay, meal and travel advances and bonuses paid for inventions, because none of these are included in Workers Compensation premium calculations.
• Divide uninsured subcontractor billings into material and labor costs since you are only required to pay premiums for labor. If you don’t have an actual split, figure on 50% for each. One important exception to this is for heavy equipment operators who are employed as subcontractors. In this case, use a third of their total billings as reportable labor costs.
• Don’t include short- or long-term disability payments in the data given to the auditor because these are excluded from premium calculations.
• Be sure to cap all covered officers’ payroll at the maximum for your state.
• Exclude wages paid to employees who are on active military duty because their wages aren’t included in premium calculations.
• Present the auditor with all Certificates of Insurance for covered subcontractors so you aren’t charged for them.
• Classify all employees in the lower-rated payroll classifications if you aren’t sure about where they should be classified. However, you should never deliberately misclassify an employee.
• Be sure you make the auditor aware of all employees who do only clerical work and are physically located away from the shop floor. These employees qualify to be classified in the lower rated clerical codes. If your clerical staff isn’t physically separate from the shop, you should consider changing their work location.

INSURANCE PITFALLS OF COMMERCIAL OFFICE LEASING

Business owners who lease property for their businesses must be aware that every lease is unique. Any lease you sign can affect your insurance needs drastically. The best suggestion is to have the lease carefully reviewed by your legal representative and insurance broker before signing on the dotted line.

Insurance Considerations and Commercial Property Leases

Key insurance factors to consider include:

• Obligations and rights of tenants and lessors regarding disputes will vary from state to state.
• Confirm that the person signing on behalf of the lessor has the authority to sign the lease. Otherwise, the lease could be void should the owner suddenly sell the property.
• Ensure that the premises will conform fully to required building codes or any other statutory requirements, and that the lessor will absorb all costs to make it so. The same should also apply to any equipment or machinery already contained within the premises which is to be used by the tenant under the terms of the lease. The costs of any required repairs or alterations should also apply to contaminated property such as the removal of asbestos.
• Incorporate an ‘all risk’ property insurance policy for the full replacement value of the tenant’s equipment, inventory, fixtures, performed alterations, belongings and supplies in the event of a loss.
• Obtain an ‘all risk’ installation floater for any repairs or alterations that have been agreed upon between the lessor and the tenant.
• Consider purchasing an (ISO) Insurance Services Office Endorsed Commercial General Liability coverage or Comprehensive General Liability policy which should contain Broad Form Contractual Liability coverage, Fire Legal Liability coverage, and Premises Medical Payments coverage.
• Purchase Business Interruption insurance to cover all required expenses, including rental costs and fixed costs which might result due to the destruction or damage of the lessor’s property, for at least nine months.
• Include additional insureds such as employees, the lessor and their agents as your insurance coverage applies to personal and bodily injury.
• Include coverage for plate glass, earthquake and water damage. Coverage should also include fire and vandalism.

Insurance requirements as they relate to leasing business property can be complicated. This is true especially as your insurance needs relate to the agreed upon terms of the lease itself. Your rights and obligations pertaining to a lease should be reviewed and negotiated by someone qualified, just as your business insurance needs are best reviewed with the assistance of one of our insurance brokers.