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How is Risk Management Changing Employment Law?

Lawsuits and penalties are the common challenges every business or organization must avoid to ensure optimal company operations and success. Complying with the law requires that you understand all the regulations governing several workplace aspects – from taxes and finances to the numerous employment matters.

Over the years, businesses have taken several steps to safeguard their entities from potential lawsuits. Nowadays, nearly every company has some sexual harassment policy, safety procedures, employee handbook, company policies, etc., that are legally binding. These documents also align with the various state and federal laws, and they act as a shield against baseless legal claims that could be labeled against the company.

Before we look at how risk management is changing the employment law landscape, let’s first understand the common employment laws enforced at the federal and state levels.

Employment Laws at the Federal and State Levels

The list of employment laws continues to grow with time as more amendments are made and provisions added to the existing employment Acts. Some of the common rules governing employment matters include:

  • Compensation and overtime laws: The Fair Labor Standards Act requires employers to pay a minimum wage of $7.25 per hour and overtime for nonexempt employees, i.e., if they exceed 40 working hours per week.
  • Job-protected leave laws: The Family and Medical Leave Act (FMLA) allows employees to take a job-protected but unpaid leave for medical and family reasons. During this leave, their group health insurance coverage continues as usual.
  • Workplace Safety Laws: Occupational and Safety and Health Act requires employers to ensure safe and healthy working conditions for workers. Under this Act, some employers must provide employees with personal protective equipment (PPEs) and compliance training depending on the industry.
  • Discrimination and Harassment Laws: There are six federal laws governing discrimination and harassment issues in the workplace. Some of these laws are very common, such as the Americans with Disabilities Act, which prohibits discrimination based on disability, and the National Labor Relations Act (NLRA), which gives non-unionized employees the right to engage and collectively bargain in concerted activities. Other laws in this category include the Genetic Information Nondiscrimination Act (GINA), Immigrations Reform and Control Act (IRCA), Civil Rights Act (Title V), and the Age Discrimination in Employment Act(ADEA).

While the above federal laws still apply at the state level, most states have stricter alternatives. For instance, the minimum wage varies across several U.S. states, and some states require employers to pay their employees while on a Family and Medical Leave. As an employer, understanding both federal and state laws is key to ensuring compliance.

The Risk of Noncompliance

Violations of any of the state or federal laws governing employment matters can result in thousands, if not millions of dollars of fines and legal fees. If the employees or the public learn of these violations, you risk your business reputation and costly employee turnover. And even worse, a collapse of your company, i.e., if customers decide to do business elsewhere.

Working with an employment lawyer to identify legal loopholes and potential gaps in your company policies will help avoid repercussions of non-compliance charges which could otherwise hurt your business standing. The risk of non-compliance varies greatly depending on the company size and the employment claims labeled against you.

One of the biggest settlements in employment claims is the historic 2003 $250 million age-discrimination settlement for 1,700 retired public safety officers who worked for the State of California. The state’s Public Employee’s Retirement System discriminated based on the workers’ age when they were hired while calculating the industrial disability pensions. Several other public and private companies have fallen victims to employment laws, and you probably don’t want to join the list.

Insurance Policies for Employment Claims

Over the years, there has been an increased interest in coverage for employment-related claims, and the number of insurers offering Employment Practices Liability (EPL) insurance coverage has increased significantly. The annual premiums often depend on a couple of factors such as the employer’s claims history, size of the employer, and the availability of legally binding employment policies and guidelines.

Since EPL policies are still new in the market, their coverage scope varies, and most of these policies have limiting definitions and exclusions. At the moment, most EPL policies have express coverage for workplace discrimination and harassment claims, state-law wrongful discharge, and claims based on the company employee handbook.

However, a majority of these policies do not provide coverage for retaliatory discharge – NLRA, FMLA, COBRA, ERISA claims, etc. Similarly, most won’t cover claims based on breaches of CBAs or written employment contracts. The challenge with EPL insurance coverage is finding the right policy that suits your business needs. For instance, a coverage that could be affordable for you may define “claim” very narrowly. That is, the policy may exclude coverage for administrative proceedings, e.g., before the Equal Employment Opportunity Commission and similar government agencies, making it expensive to defend yourself in the long run.

While it’s often recommended for large companies to enroll in an employment insurance policy, the same isn’t always true for small businesses and start-ups. Even with an EPL policy, it’s still crucial to understand the risk management measures then work towards compliance within and beyond the workplace. This way, you can avoid legal problems and ensure your business runs smoothly.

Risk Management Resources You Should Consider

If you are looking to navigate the complexities of employment law, paying keen attention to risk management measures will help you and your company stay compliant and avoid costly litigations and penalties. Below are some of the risk management resources available in the market:

Employee Handbook Planning Guides

An employee handbook can help prevent several issues in the workplace, thanks to the well-documented policies and guidelines that every employee must adhere to. In the event of a wrongful termination claim, this handbook can serve as evidence that the employee did violate the company policies and the termination was justified.

Drafting an employee handbook that complies with federal and state laws can be challenging but not impossible. Even with a guide/template, you want to work with the best employment lawyers who have a deep understanding of your industry and the various laws within your jurisdiction.

Legal Compliance Training

The employment law landscape is constantly changing. It takes regular training and education to get everyone – from in-house legal staff, and new HR hires to supervisors and managers – to speed with changes in the law. Luckily, several legal compliance training programs or platforms exist where company management can network with peers and learn the best ways to remain compliant amidst the shifting regulations.

Employment Posters

Some federal and state laws require any employer with one or more workers to display specific labor law posters in the workplace to spread awareness and ensure employees are aware of their rights. The postings that every workplace should display include OSHA laws, federal minimum wage requirements, Equal Employment Opportunity, FMLA, Employee Polygraph Protection, and the USERRA provisions.

Closing Comments

With regular changes and amendments in labor laws, ensuring compliance with the various employment regulations is becoming a challenge among employers. Now more than ever, businesses and organizations must put measures in place to enhance regular monitoring and supervision for compliance, coupled with timely follow-up in case of non-compliance issues.

Auditing the employee handbook and company policies is also crucial to avoiding potential loopholes that could drive the company into years of court battles. Finally, implementing risk management initiatives can help identify non-compliant incidents and possible consequences before they occur. This will save the company from several risks, from a bad reputation to hefty fines and legal fees.

Originally posted 2021-05-25 21:33:09. Republished by Blog Post Promoter

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