5 Risks for HR Professionals: Why They Need Liability Insurance
There’s a growing trend out there that should alarm you if you work in HR.
The trend is that of employees seeking to solve workplace disputes through litigation, and they’re successfully pulling HR managers and consultants into the web of liability. In fact, the definition of “employer,” under the Fair Labor Standards Act and the Family and Medical Leave Act, provides for personal liability of company managers and officials.
As an HR professional, your employer may have a business policy that covers you under various circumstances, but an employer can also choose to distance itself from an employee individually named in a lawsuit – especially if the employer feels the employee acted outside the scope of employment.
What does that mean for you? It means you can be named individually in a lawsuit and then be left out in the cold by your employer.
If you’re an HR professional, your job involves taking a significant amount of risks. That’s why you need to protect yourself by having professional liability insurance. Here are five of the most common risks that can lead to lawsuits and why HR professionals need professional liability insurance,
Fortunately, there are affordable insurance options available for alleviating risk and allowing you to do your job with greater peace of mind.
WHAT IS PROFESSIONAL LIABILITY INSURANCE?
Professional Liability Insurance, also known as errors & omissions (E&O) insurance, provides financial protection for businesses and professionals in the event they are sued in conjunction with the performance of their duties as they relate to the services provided by a company or professional.
FLSA AND FMLA
Any HR professional with significant time in the business knows that adhering to the federal regulations is tricky. There are times when your best professional guess is what leads you through sticky decisions as you navigate the complexities of the laws.
Let’s take the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA) for example. The FLSA requires that most workers receive overtime pay at 1.5 times the employee’s regular pay rate for all hours worked over 40 hours in a seven day workweek, and that employees be paid at least the federal minimum wage.
Employees whose jobs are governed by the FLSA are either “exempt” or “nonexempt.” Nonexempt employees are entitled to pay overtime. Exempt employees are not. Most employees covered by the FLSA are nonexempt. Some are not. The determination of either exempt or nonexempt depends upon the amount an employee is paid, the title and nature of the job, and how they are paid. Exempt employees must meet certain detailed requirements in all three areas. Additionally, there can be permissible and impermissible reductions in salary base pay. Permissible reductions have no effect on the employee’s exempt status, but impermissible reductions may. And finally, the salary basis pay requirement for exempt status does not apply to some jobs at all, including doctors, lawyers and school teachers.
Now for FMLA.
The Family and Medical Leave Act is an on-going challenge for HR professionals. Because its rules are so complex, companies are vulnerable to FMLA abuse, exploitation, and miscomprehension. It takes only one confused or misinformed employee to cost a business tens of thousands of dollars in FMLA lawsuits. Family and Medical Leave Act offers employees up to 12 weeks of excused absence from their jobs every year.
The leave is applied to an employee who has a medical need, or to an employee whose approved family member is in medical need. The medical need must be determined a “serious health condition.” The leave may or may not offer pay. It can also be continuous, intermittent or reduced schedule. After the leave, the employee must receive his or her job and responsibilities back, unless officially unable to perform them. They are also protected from termination, but not more so than if they had been on the job at the time of an RIF, for example.
Additionally, FMLA has restrictions. Employees must have worked at their company for more than 12 months. They also must have worked at least 1,250 hours during the previous year. However, smaller employers are not required to provide FMLA leave to their employees if they meet certain requirements.
OTHER LAWS YOU SHOULD KNOW
Under the Immigration Reform and Control Act (IRCA) the law criminalizes knowingly hiring an illegal immigrant, along with financial and other penalties for employing them. This act introduced the I-9 form to ensure that documentary proof of employability was provided, however there are plenty of methods potential hires have found in forging their documentation. And, hiring personnel could still be found negligent in a possible case of employing an illegal immigrant.
The Employee Retirement Income Security Act (ERISA) establishes minimum standards for pension plans in private industry. And it includes extensive rules on the federal income tax effects on benefit plans. These stipulations and guidelines can at best become cumbersome, and at worst, make it difficult to confidently adhere to every part of the law. An example of this complexity is found in the way a pension plan may pay benefits: A defined benefit plan must pay a married participant’s pension as a “joint-and-survivor annuity” that provides continuing benefits to the surviving spouse unless both the participant and the spouse waive the survivor coverage. Additionally there are some exceptions to the federal regulations, determined by certain state regulations.
ERISA was later amended to include the Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA provides certain workers and their families with continued health coverage for a limited time after qualifying events such as the loss of a job. The rules and regulations are again complex, including certain exceptions, and can be modified or extended by the federal government, as was recently the case. These complexities can make the process of finding the correct path for individual employees a challenge, and can leave HR Professionals in a place of personal accountability.
WHAT ARE THE 5 BIGGEST RISKS FOR HR PROFESSIONALS?
1. WAGE AND HOUR LAWSUITS
One of the biggest risks HR professionals takes involves issues with wage and hour disputes. In fact, according to the United States Department of Labor, about 70 percent of employers are not in compliance with Wage and Hour Laws. Because of technology, many employees are able to do their work from any location as well as any time of day. As a result, there can be “off the clock” work issues if no definite ground rules have been established.
2. EMPLOYMENT FORM ERRORS
Too often, mistakes are made on employment forms, or they’re not completed on time. That’s why you need to ensure that new employees fill out their employment forms within three days after they’ve arrived. Also, don’t throw out the forms but keep them on file for three years or more after the date an employee has been hired.
3. MISCLASSIFICATION OF WORKERS
This is another huge mistake that could lead to being sued. You may be tempted to classify as many people as possible under the independent contractor’s code to save money and from not having to pay for entitlements, such as workers’ comp, disability insurance, unemployment insurance, and family leave benefits.
4. HIRING MISTAKES
Errors can easily be made when advertising for job positions and during the hiring process. These mistakes typically involve using discriminatory wording in classified employment ads. For example, it’s wrong to use terms, such as “recent college graduate” in a classified ad.
Furthermore, never inquire about the age of the applicant, their gender, or disability status. Instead, all your questions should revolve around whether or not someone is qualified for the job.
5. BLUNDERS WHEN FIRING PEOPLE
Probably the top reason for workplace lawsuits stems from mistakes made when firing workers. Instead of surprising employees with a “pink slip”, give them advanced warning, so they can improve their performance to avoid getting fired.
But if you do need to fire someone, ask another supervisor to be with you to serve as a witness. After the meeting, document what was said. Additionally, never discuss the firing with another employee.
THE BOTTOM LINE:
- You need professional liability insurance.
- Having professional liability insurance coverage is especially crucial if you’re an HR professional as there are several risks involved in this job.
- XINSURANCE is the solution for your insurance needs.
- Within the Professional Liability Coverage, there is Wage & Hour Liability, Employee Benefits Coverage, and D&O (Directors and Officers) Liability.
Employment lawsuits are becoming more frequent, and their nature is changing, too. Where most termination lawsuits used to be simply directed at the company, these days, attorneys are trying to hold managers, supervisors and human resources professionals responsible.
In these unfortunate cases, it helps to be protected. XINSURANCE’s solutions can provide extra insurance for the limits of your existing coverage. This way, in the case of unforeseen lawsuits, you’re extra-protected with your employer’s liability insurance, and can continue working without worrying.
Here are some other situations that have lead to HR professionals getting into legal trouble (and more reasons to talk to an XINSURANCE agent to get enough coverage):
- Termination lawsuits
- Sexual harassment claims
- Discrimination allegations
- Assault/Battery/other
You can depend on XINSURANCE to provide you with the best professional liability insurance that meets your specific needs. Our underwriting team has more than three decades of experience, besides the ability to offer customized limits, coverage, deductibles and premiums to create the ideal plan for your personal protection. We can provide a free policy review and let you know if there are any gaps or issues. Please contact us for a free quote or call 877-585-2853.
Authored by Rick J. Lindsey, President, Chairman, and CEO of XINSURANCE
Rick J. Lindsey hails from Salt Lake City, Utah. He began working in the mailroom of his father’s Salt Lake City insurance firm, getting his introduction to the business that became his lifelong career. Rick J. Lindsey quickly rose through the ranks while working in nearly every imaginable insurance industry job. As an entrepreneur, specialty lines underwriter, claims specialist, risk manager, and a licensed surplus lines broker, Rick J. Lindsey is highly skilled in all levels of leadership and execution. As he progressed on his career path, Rick J. Lindsey discovered an urgent need for insurers willing to write policies for high-risk individuals and businesses. He was frequently frustrated that he could not provide the liability protection these entities desperately needed to safeguard their assets. He also formed the belief that insurance companies acted too quickly to settle frivolous claims. Rick J. Lindsey decided to try a different approach. He started an insurance company and became the newly formed entity’s CEO. This opportunity has enabled Rick J. Lindsey to fill a void in the market and provide a valuable service to businesses, individuals, and insurance agents who write high-risk business. XINSURANCE also specializes in helping individuals and businesses who live a lifestyle or participate in activities that make them difficult for traditional carriers to insure. If you’ve been denied, non-renewed, or canceled coverage, don’t give up quite yet. Chances are XINSURANCE can help.
