Red Hot Thoughts

Archive for the ‘Employees’ Category

Employee Files

October 27th, 2014


One of the first things we do when beginning an HR Audit for one of our clients is request to see a sampling of their employees’ files.  Over the years, we’ve seen all sorts of things stuffed between the covers:  Pictures of an employee’s family taken at the company picnic, handwritten notes complaining about the obnoxious co-worker in the next cubicle, drug test results, and EOBs from a pregnant staff member’s last pre-natal visit.  Performance Reviews, undated and unsigned, are commonly crammed in between the I-9 form and requests for time off (again, either not dated or for leave that was denied ten years ago).  There are stringent guidelines for what goes into an employee file—and what should stay out!  Are your employee files in compliance?

Whether a business has one employee or 250 employees, business owners need to be concerned with the creation and maintenance of employee personnel files.  What types of information goes into an employee file? What doesn’t?

The first thing to remember is that you should only keep documents in an employee’s file that the employee is fully aware of; they have the right to access their file.  If it doesn’t apply to this rule, it probably has no business being there!

Items that can be considered as needed for employment-related decisions include an up to date record of the employee’s personal information.  It is important to keep these records current.  We advise our clients to remind their employees on a consistent basis to keep them informed if there are any changes in their address, phone number, or other personal information.  In addition to the employee’s current personal information, other documents which should normally be in the file include the employment application, current job description, performance evaluations, employment status change forms, compensation information, job related test results, benefit plan elections (but no health records), attendance and leave records and disciplinary actions.

However, not all documents related to employees should go into the main personnel files.  What needs to be filed elsewhere?  Because of federal and state guidelines concerning the confidentiality of health information, remember that all medical and other health related documents must be kept in a separate file.  I-9 immigration forms and EEOC information must also be kept separately in their own files away from the employee personnel records.  Also, garnishment information should be kept with your payroll records, not in employee files.  Please see our checklist on page three for further details of what items not to include in an employee’s record.

Employee files should be kept in a secure area where only those supervisors and managers who have a real ‘need to know’ are provided access.  Confidentiality should never be taken lightly, and it is vital to keep employee information in a safe place.

Many states have laws that dictate what access the employee can have to their files and for how long after their employ they can request copies of its contents.  Federal law provides employees the legal right to review records concerning employees’ exposure to toxic substances and any related medical records.


Typical items included in an Employee Personnel File:

Employee Personal Data Information including address, phone number, emergency information, date of birth, and social security number

Employment Application and resume

Academic Transcripts (if applicable)

Job-related test results

Benefit Plan elections

Time records

Attendance/leave records

Compensation information

Authorization for payroll deductions/withholding

Signed Job description(s)

Individual employment contract(s)

Acknowledgement and waiver forms

Education and training class records

License information if applicable to job

Signed Performance Evaluations

Awards and honors

Disciplinary actions or complaints


Items to keep separately, each in their own file:

Medical records

Drug and/or alcohol testing

FMLA notices

Accommodation requests

Workers’ compensation forms, reports, correspondence, and documents

Investigation notes files

I-9 forms

EEOC records

OSHA health and safety records

Exit interview information

Garnishment and child support payment information

The Flu

October 20th, 2014



According to the Centers for Disease Control and Prevention, there were around 22,000 flu cases reported from the end of September through the end of December last year.   Some are saying it was the worst flu season the nation has seen since 2009 when H1N1 (or Swine Flu) was rampant.   While flu epidemic is a concern every year, the timing, severity, and length of flu epidemics depends on a variety of factors.  Such factors include what influenza viruses are spreading, whether the vaccine is a good match for the viruses, and how many people get vaccinated.  While flu seasons are very unpredictable, flu activity has historically peaked in the U.S. sometime during January or February.   This means that it is not too late to protect yourself, your employees and your company from the negative impacts that can result from a flu epidemic.


The Centers of Disease Control have created a Toolkit to help businesses and employers fight the flu.  It offers tips and suggestions to consider when planning and responding to the seasonal flu.  We wanted to share some of their tips and suggestions with you so that you can take the proper steps to protect yourself, employees and company.


While it may already be January, consider hosting a flu vaccination clinic at your company at little or no cost to your employees.  If you don’t have an on-site occupational health clinic you can contract with various vaccinators in your community (such as Walgreens) who can come in and provide on-site flu vaccination services.  Having these services on-site offers employees an easy and convenient way to get vaccinated.    To host a successful flu clinic, ensure that you properly promote the event with handouts/flyers detailing the answers to frequently asked questions and consider offering incentives/rewards that encourage your employees to participate.  Such incentives may include handing out free hand sanitizer or antibacterial wet wipes, holding a drawing for prizes/gift certificates for those who receive the vaccine, or offering a reward to the department who has the highest participation rate.  You may even want to consider inviting family members to the clinic.  Often times there must be a minimum number of participants before a provider will come to your worksite.  Offering this service to family members may help you reach that limit but more importantly, offering the vaccine to family members will decrease the likelihood of employees missing work due to a sick family member.  Furthermore, if your company shares a building, shopping center, or office park with other employers, check to see if they would like to jointly host a flu clinic for all employees and family members.


While it certainly isn’t too late to get a flu vaccine, you may find that many of your employees have already received a vaccine for the year as the vaccination usually is made available earlier in the fall at the start of flu season.  So, rather than holding a clinic at your worksite, consider simply educating your employees on the flu virus and where they can get the flu vaccination in your community.  Research health providers, pharmacies, or clinics that offer the flu vaccine provide this information to your employees via a company-wide email, employee newsletter, or by posting flyers around the workplace.  You could even consider partnering with a nearby pharmacy or clinic to arrange for employees to get vaccinated.




As most of us are aware, the flu is extremely contagious.  Most experts believe that the flu virus spreads mainly by droplets made when people with the flu cough, sneeze, or talk.  These droplets can land in the mouths or noses of people who are nearby.  While less frequent, a person might also get the flu by touching a surface or object that has the flu virus on it and then touching their own mouth, eyes, or nose. The period of contagiousness is longer than you might think.  In fact, the flu virus can infect others beginning one day before flu symptoms develop and lasting up to five – seven days after becoming sick. Thus is it important to stop the spread of the virus through preventative measures such as vaccinations, good personal hygiene, and staying home when sick.


As always, promote hand washing and encourage employees to stay home when sick.  While the goal is to decrease absenteeism due to employee sickness, you want employees to understand that they are not to come to work if they are feeling ill.


For more information on the flu and the vaccination, please visit










October 15th, 2014


Last month we talked about the prevalence of prescription drugs use and their abuse in the workplace.  So, what can you do to keep your business, and your employees safe?  What signs might indicate the potential for drug misuse? 

The indicators listed below are “warning signs” of drug and/or alcohol abuse and may be observed by supervisors:

Moods:  Is an employee unusually…

  • Depressed
  • Anxious
  • Irritable
  • Suspicious
  • Complaining about others
  • Emotionally unsteady (e.g., outbursts of crying)
  • Moody (his/her mood changes after lunch or break)

Behaviors:  Do you notice that one of your employees is more…

  • Withdrawn or improperly talkative
  • Argumentative
  • Egotistical / Has exaggerated sense of self-importance
  • Violent / displaying violent behavior

Absenteeism:  Are any of your employees experiencing…

  • An acceleration of absenteeism and tardiness, especially Mondays, Friday, before and after holidays
  • Frequent unreported absences, later explained as “emergencies”
  • Unusually high incidence of colds, flu, upset stomach, headaches
  • Frequent use of unscheduled vacation time
  • Leaving work area more than necessary (e.g., frequent trips to water fountain and bathroom)
  • Unexplained disappearances from the job with difficulty in locating employee
  • Requesting to leave work early for various reasons

Accidents:  You have an employee…

  • Taking of needless risks
  • Disregarding the safety of others
  • With a higher than average accident rate on and off the job

Work Patterns:  One of your employees is experiencing…

  • Inconsistency in quality of work
  • High and low periods of productivity
  • Poor judgment/more mistakes than usual and general carelessness
  • Lapses in concentration
  • Difficulty in recalling instructions
  • Difficulty in remembering own mistakes
  • Using more time to complete work/missing deadlines
  • Increased difficulty in handling complex situations


Relationship to Others on the Job:  One of your employees is…

  • Paranoid
  • Avoiding and withdrawing from peers
  • Receiving complaints from co-workers
  • Borrowing money from fellow employees
  • Complaining of problems at home such as separation, divorce and child discipline problems

Any one of these signs, alone or combined, could be a signal to a number of concerns, not necessarily substance abuse related.  However, if any signs are combined with other signs of impairment, you have cause for concern.  Some signs of impairment may include, but not be limited to:


Still, even with a number of signs, there may be other issues, such as illness, or a recent family situation, which are causing many of the above signs and symptoms.  You must be careful not to judge too quickly.  While you want to take care of your business, you do not want to falsely accuse anyone.

Next month, we’ll discuss what steps to follow if you do notice an employee exhibiting many of the symptoms above.  Remember, if you possibly have a current situation, and cannot wait for next month’s article on how to follow through on the warning signs, give one of our HR Coaches at Red and Associates a phone call.  We’ll be happy to walk through the situation with you and see how we can help.



October 14th, 2014


The Work Opportunity Tax Credit (WOTC) was first introduced by the Small Business Job Protection Act of 1996. Its intent was to provide employers with an incentive to reach out and hire employees from economically disadvantaged populations.  As the program demonstrated its success in increasing employer’s participation, there has been a succession of federal acts to keep this tax credit in existence.  In December of 2006, Congress passed the Tax Relief and Heath Care Act of 2006. The provision retroactively extended the WOTC through 2006. In 2007, the provision combined the Welfare-to-Work (WTW) tax credit with the WOTC and extended both through Dec. 31, 2007.

For an employer to benefit from the WOTC, it must determine whether its new hires come from one of the following groups:

• Qualified welfare recipients.

• Qualified food stamp recipients.

• Qualified Supplemental Security Income recipients.

• Qualified veterans.

• Qualified ex-felons.

• Vocational rehabilitation referrals.

• Qualified summer youth workers.

• High-risk youths.

• Eligible work incentive employees.

To help you determine whether a new hire is an individual from one of the targeted groups, the “Pre-Screening Notice and Certification Form for the Work Opportunity and Welfare-to-Work Credits,” the IRS Form 8850, must be completed on or before the date a job offer is made. Although the WOTC is a federal program, it is administered by each state, and some of the administrative processes may vary depending on the state.

If it is found that the new hire is from a targeted group, the employer may then need to send the form to the state WOTC coordinator within 28 days after the employee begins work. For employees who have been conditionally certified, the “Conditional Certification” form, ETA Form 9062, may need to be completed. For employees who have not been conditionally certified, the “Individual Characteristics Form,” ETA Form 9061, may need to be considered instead. Please check with the state WOTC coordinator for additional information and guidance.  The HR eBook will have a listing of all state coordinators to help you locate the state specific information you’ll need!

When the company files its taxes, it should complete the IRS Form 5884, (use the appropriate year when filing) to take the tax credits for the employees who qualify. The value of the tax credit is 40 percent of the first $6,000 of wages paid the first year to a certified employee who works at least 400 hours. For employees who work less than 400 hours but more than 120 hours, the tax credit is 25 percent of the first $6,000. For youth hired for summer work, the percentage is applied to the first $3000.

While filing federal forms might seem intimidating and time consuming, the effort can be well worth it.  It can add up to a real win—for your business and for your community!

Wellness Programs

October 7th, 2014


With 2015 right around the corner, many people are starting to consider their New Year’s resolutions…getting more sleep, exercising more, eating healthier, reading more, spending more time with the in-laws (???), etc.  While there are some resolutions you as a business owner cannot help with, there are some that you can.   Improved wellness is often one of the number one resolutions for the New Year.  Companies can help their employees reach their health-related goals by instituting wellness programs.

The Departments of Treasury, Labor, and Health and Human Services in previous years issued proposed amendments to regulations regarding nondiscriminatory wellness programs that will impact group health coverage. Those proposed regulations provided clarification to regulations and helped employers provide more incentives to employees hoping to improve and maintain their wellbeing.  The final regulations went into effect January 2014 along with many other provisions of the Patient Protection and Affordable Care Act (PPACA).

Knowing many employers were eager to offer, or at least begin looking at the opportunity to offer, some type of wellness program to employees, we wanted to offer some approaches for creating a successful wellness program which can improve both the Company’s and employees’ “bottom” lines.


1. Create an overall business-wide culture that promotes health and wellbeing. At times, this may seem “easier said than done”.  Be patient and do not give up on your employees.  A healthier culture may not happen overnight. 

2. Confirm company policies and other programs which enrich employee health and productivity.  They should support the company’s wellness goals.  Some policies and programs to review are: smoking, drug testing/drug-free workplace, and leave plans including vacation and sick or PTO.

3. Offer motivating incentives to employees so they are excited to adopt healthier behavior.  When determining rewards, you may want to survey your employees to find out what types of rewards would motivate them. Also, you may want to refresh the incentive offerings on an ongoing basis in order to keep the program appealing to employees.  Furthermore, consider both financial and non-financial rewards.

4. Do not make rewards too hard to earn.  Make wellness goals achievable.  Even small changes can reap huge health benefits over time. 

5. Create a wellness program which offers opportunities for customization to fit employee needs. Maybe someone does not need to lose weight, but experiences lots of stress.  The program should embrace a holistic approach and offer options covering not just physical health, but mental, social and emotional health as well.

While considering these suggestions, please remember the wellness program must follow the current applicable regulations in effect as of 2014.  However, we do hope some of these ideas may make it easier for you to establish wellness programs which address your specific company needs.

If you have any questions, please do not hesitate to contact us at 866.599.1RED.

Extending the Job Offer

October 6th, 2014


As an employer, deciding whom to hire can be a tough decision. Not only do you expect the person to be qualified, but you also want him/her to be a good fit for your company’s culture. Once you have decided the best fit for your company, you must extend a job offer for acceptance. While extending a job offer can be a joy-filled task, careful consideration must be given to the process in which an offer is extended and the specific terms that are offered. A little planning can minimize the chance of creating any unintended employment contracts.

Here are some pointers to keep in mind the next time you extend a job offer:

• Be prompt—give the candidate a call and extend your offer over the phone. This conversation can touch on the employment basics. If your offer is accepted, a follow-up acceptance letter can provide more detail on the specific terms/conditions of the offer.

• If the candidate doesn’t give you an answer immediately, give the candidate a deadline for responding. Depending on the level of the job, anywhere from 24 hours to 7 days can be a reasonable time period.

• Pay attention to the details of the offer letter and don’t make promises that you cannot or do not intend to keep. Compensation should be given as an hourly rate or a biweekly or monthly salary. Annual compensation should not be stated in the offer letter as it may imply that you intend for the candidate to be with the company for one year and that you intend to pay them the annual salary, regardless of any extenuating circumstances that may arise.

• Be prepared to negotiate if needed. You may have three great candidates and if one doesn’t accept, one of the others might. But, if the candidate is worth fighting for and he/she wants to negotiate, be prepared. Research beforehand to determine what the major factors for acceptance are for that particular candidate. Maybe those factors are relocation assistance, helping his/her spouse obtain employment, more money or more paid time off. Regardless, always maintain sight of what is appropriate for your business.

Next time you have the opportunity to welcome a new employee, implementing these tips into your hiring process will make the experience an enjoyable one—for you AND your new hire!

Salary Compensation for non-exempt Employees

October 1st, 2014


While in a meeting last week, our client brought up a question regarding salary compensation for one of his non-exempt positions.  He had originally hired an employee to work for him on a temporary, trial basis so he could determine whether or not the individual was capable of performing the job.  While the individual was classified as a temporary employee, our client paid her $11.00 per hour.  He eventually decided that the individual was capable of performing the functions of the position and offered her a permanent position, which pays a monthly salary of $2,000.  However, our client stated that by definition, the position is a non-exempt (paid hourly) position.

Several weeks ago, on a Wednesday afternoon, the employee left work early in the afternoon.  It was the first of the month, and there was a lot of work she had not yet completed for the monthly reports that were due on the second.  She also did not show up to work the following Thursday and, although she claims to have called in to report her absence, our client was unable to find any record proving that she did.

While the employee was out of the office on Thursday, our client had to access her email inbox as he needed some valuable information for a project he was working on.  While viewing her email inbox, he found some valuable information he wasn’t even looking for.  He learned that the employee had been applying for other jobs, using company equipment and time to do so.

When she came to work on Friday, our client terminated her employment.  The employee was paid for the 6 hours she worked on the 1st in addition to her time worked between the 15th and 31st of the previous month.  Upon arriving home, the employee called our client stating that she should be paid for the entire first pay period of the current month since she was a salaried employee and not just the 6 hours she actually worked on the 1st.

Our client was not sure how to respond and asked for our clarification on what payment the employee truly was entitled to as a non-exempt, salaried employee.

Under federal law, when it comes to paying a non-exempt employee, employers must ensure that the employee is paid for all time worked, including time and one-half for all hours worked over 40 in a workweek, regardless of whether the employee is paid a salary or an hourly wage rate.

In this case, if our client had not been paying the employee overtime on all hours worked over 40 in a workweek, he may have inadvertently made her an exempt employee.  This is why we always caution our clients to pay non-exempt employees on an hourly basis instead of on a salary basis.

The law does not require employers to pay any non-exempt employee for time that he/she did not work. However, if the employee is exempt, she should be paid for a full 8 hours on the 1st instead of just the 6).  While our client had not been specifically tracking the employee’s hours worked per week, he was certain she has never been entitled to overtime as she worked approximately 6 hours per day, 5 days per week.

Our client confirmed that the terminated employee was indeed paid for all hours she worked, specifically the 6 hours that she worked on the 1st.  So, unless the employee had any accrued but unused paid time off for which she should have been paid for or if she is in fact exempt, we told our client that he does not owe the terminated employee any additional funds.

We also suggested before a replacement is hired, the position be moved to hourly pay and not salaried so there would be no confusion about the non-exempt status of the job.


Social Security Numbers and Record Keeping

September 29th, 2014


It’s a routine part of the morning.  Before you answer your voicemail or log into your computer, you open the mail.  From the return address on the first envelope in the stack, you realize it is not such a typical morning after all.  The return address states the communication is from the Social Security Administration (SSA).  The government is reporting that one of your employees has a social security number that does not match their records.  What do you do now?  Some employers may think they can ignore it, while others may believe that they must fire the employee immediately.  Neither of these actions is the right one.

There has been a lot of confusion about what an employer’s obligation is when they receive a “no match” letter from the Social Security Administration (SSA) stating that they have an employee whose name does not match the social security number in the system.  Much of the confusion has stemmed from the Department of Homeland Security’s proposed rules.

Historically, the no match letters were sent by SSA for the sole purpose of matching names to Social Security numbers to ensure that payments are properly credited. The proposed new regulations, if finalized, and pending legislation, would have serious potential implications for employers because they are based on border security concerns and the SSA no-match information would be shared with the Department of Homeland Security (DHS) which is responsible for coordinating apprehension of illegal aliens.

There has been a ground swell of feedback from organizations, both business and labor, who have disagreed with the proposed rules, which have not yet been finalized.  So, until that time, the old rules apply.  Your best course of action when you receive a “no match” letter is to avoid taking any adverse action against an employee.  The letter specifically states that it is “not a basis, in and of itself, for the employer to take any adverse action against the employee, such as laying off, suspending, firing, or discriminating against any individual who appears on the list”.

You should not however, ignore the “no match” letter.   Investigate the matter.  Make sure that the company did not make a typographical error in reporting the employee’s social security number.  If there is an error, write a letter submitting the correct number to the SSA.  If you don’t find an error you should share the “no match” letter with the employee and ask him or her to verify that what you have submitted is correct.  You should not require the employee to produce a social security card or other specific documentation, as this could be considered document abuse under employment eligibility verification laws.  You should ask the employee to investigate and get the error corrected, giving them a reasonable amount of time.  Ask them to keep you posted on the progress.  If there is an error, correct the employee’s Form I-9 and submit the correct information to the SSA.  Of course you should treat all employees who receive a no match letter consistently without regard to race, national origin or citizenship status.

If an employee verifies that the information given is correct ask them if they can think of any other reason for the “no match” letter.  If they have no other explanation, write a letter to the SSA explaining that the company has re-verified that the information submitted to the SSA is correct and that you have no explanation for the discrepancy.    If the employee admits to a false social security number and is actually unauthorized to work in the United States, you must immediately terminate the employee’s employment.


Terminations & Employee Loyalties

September 24th, 2014


It is never easy to terminate an employee.  No matter how egregious their actions might be, firing someone is by far one of the hardest jobs of management.  You hired them with the best intentions.  You saw something in them that made you want to take the chance and offer them the job.  You wanted them to succeed.  They have not.  You must now admit defeat – not only to yourself and that employee, but to the rest of your employees as well.

It isn’t too hard to announce that Susie, who never was popular with the employees and was the center of many complaints, has left the company.  It is much harder when the employee in question, let’s call him Joe, was extremely popular with his coworkers.  What can you say to justify your decision?  Shouldn’t you be able to let them know the facts behind your decision to terminate Joe?  Why do you have to come out as the bad guy when it was Joe who was hurting the company?

Because you are the boss.

At red, we often must counsel our clients to take a deep breath (and often more than just one) when we discuss a potential termination with them.  The “Joe” employee is always the hardest.  Often, poorly performing employees don’t show their colors in front of their peers.  It might be that Joe is able to hide his substandard performance from everyone in the department because his job is hard to monitor by anyone at his level.  It could be Joe is involved in something that is in violation of federal or state laws.  Often, the “Joe” is someone who is very good at buttering up to his peers, shifting most of his work to them; he might think he is being a great delegator but in reality he is a terrible employee.

When the decision is made to say good-bye to Joe, the employer is also faced with how to tell the rest of the employees that Joe is no longer part of the company.  If Joe has been an extremely poor employee – whether he broke law, didn’t live up to expectations, or was a poor influence on others – it is a real challenge on what you can say and what you need to keep confidential.

It is always the best advice to ‘take the high road’ and not say a word.  You are the boss, your employees trust you to make decisions based on what is best for the company…at least they should.

And that is one of the hardest parts of being the boss.  Popular Joe – fired.  Boss – not so popular any more.  No matter if the reasons were very serious or if Joe was a negative force in the workplace, employees will always question why a popular guy like Joe is let go.  In the best possible worlds, employees know that the manager makes these type of decisions based on hard facts and long nights of deep thought.  Sadly, such a perfect world doesn’t exist.

The watercooler will be buzzing – until you, the boss, walk in.  Morale might take a real dip for a while.  After all, if you let Joe go ‘who knows who will be next?’  Sometimes, loyalty to the terminated employee trumps loyalty to the employer and others might choose to follow Joe out the door.  It is a very human response to want to call an employee meeting, lay out your case and let them know exactly what Joe did (or didn’t do) that forced your hand.  DON’T DO IT!

Instead, remember that one of management’s first priorities is to protect the reputation of the company and all who work within its walls.  This means that you should have a policy in place that clearly states what happens at termination and that the privacy of the individual is to be respected at all times.  Therefore, reasons for termination will be strictly confidential unless there are legal reasons where other communications might be necessary.  It also means that when Joe’s leaving is announced, management is very careful to say that “while Joe is no longer part of our company, we all wish him well in his future endeavors.”  Finally, it is extremely important that management commit to much more face time with Joe’s work group for the following few weeks to reassure them that the company supports them and is focused on their success.

If the work team wants to meet Joe after work to commiserate, you should not say anything (even though you will probably be hurt by their perceived ‘disloyalty’).  Remember, most friendships forged in the workplace have a way of dying out once that person is no longer part of the work team.  One or two venting parties shouldn’t be enough to worsen morale if you have taken the steps to keep it confidential and professional at work and have made extra effort in being physically present for your employees.

If you have a history of being a respectful and caring manager, Joe’s leaving should only be a brief bump in the road.  No termination is easy, but often they are necessary.  It’s hard and it’s emotional.

However, we are always amazed at how quickly employees can adjust to a “world without Joe” if the employer follows these steps and keeps his team focused on creating an even better workplace in the future.

EPLI for Employers

September 22nd, 2014


Suzie worked for Dr. Jones for twelve years.  Dr. Jones thought the world of her.  Suzie was never sick and always volunteered to work late when a patient situation demanded it.  She brought treats to the staff meetings and, most importantly, she never rocked the boat.  Dr. Jones often wished he had ten Suzies working for him.  Not anymore.

The position for head assistant came open nine months ago.  Suzie, because of her length of service and impeccable work record, believed she was a shoe-in for the job.  She was so busy planning what she would do with her pay increase she barely heard the doctor when he announced that Megan, someone he had just hired last year, was getting the promotion. Megan???  How could that be?  Granted, she had more credentials than Suzie and had more experience in management, but how could a thirty year old girl get the job over a much more mature woman like Suzie?  Suzie was angry, very angry.

It didn’t take long for the whole staff to understand just how upset she was.  She began coming to work late and calling in sick.  She was abrupt and rude with the patients, so much so that Dr. Jones was getting calls from several of them complaining about her behavior.  He tried to reason with her, but Suzie was convinced that Megan got the job because she was younger and prettier than her.  She wouldn’t listen to any of the factors that came into his decision because she knew she was right.  Over the course of the next few weeks, her attitude became so poisonous that the doctor finally had to have a serious talk with her.  She could either go back to being the Suzie he knew or she would have to find a job elsewhere.

The next day, Suzie left a voicemail saying she could no longer work with Dr. Jones and his staff.  While they all missed the ‘old Suzie’ they were all relieved that she had made the choice to move on.  In just five short weeks, however, this relief turned to disbelief when Dr. Jones received a certified letter stating that he was being sued for age discrimination.  Having never been sued before, Dr. Jones was at a loss as to what he needed to do.  Thankfully, his next patient, Sam Smith (who was also his Property and Casualty insurance broker) reminded him that at last year’s renewal he was finally able to talk the good doctor into an Employment Practices Liability Insurance (EPLI) policy.  For years, Dr. Jones had refused to consider the coverage, feeling it was too much money for a practice with only ten employees.  He understood the need for Malpractice insurance, but not EPLI.  His employees were good people, they would never sue him.

Thankfully, he finally listened to Sam.  While such situations are never easy, at least Sam had provided him with a safety net.   Dr. Jones was lucky.  Many small and mid-sized business owners would not be as lucky, however, if this were to happen to them.  While a majority of large businesses have EPLI, smaller companies often do not.  Citing the same reasons as Dr. Jones did for many years, they feel it is too expensive or their exposure to such employee risks is minimal.

In fact, smaller companies (those with 15 – 250 employees) are sued by employees more frequently than larger organizations.  Experts cite the lack of a Human Resources professional on staff in smaller companies, along with little attention paid to risk management or training and the more ‘trusting’ culture usually found in small businesses.  The vast majority of federal and state employment laws and regulations apply to companies with as few as ten employees and, like the IRS, the government doesn’t care if the employer was aware of the law or not – if they are found out of compliance, they will face the consequences.

In 2009, federal age discrimination suits resulted in $72.1 million in fines; in 2012, the fines amounted to over $91 million.  Federal lawsuits for disability discrimination, under the Americans with Disabilities as Amended Act (ADAAA), awarded $67.8 million in 2009; in 2012, they were $103.4 million.  The numbers of complaints continue to raise exponentially, as do the monetary awards when these suits go to court.  Employees can file charges with no cost to themselves and, if the matter does get all the way to court, employees win the lawsuit over 70% of the time.  Juries usually side with employees, not employers, no matter how strong the employer’s case may be. As Baby Boomers enter their sixties and seventies, age discrimination suits will continue to multiply.  With the complexities of the ADAAA requirements along with the expanding definition of who is protected under anti-discrimination laws, the employer is more exposed to employment lawsuits and fines than ever before.  An EPLI policy, together with professional HR advice and support and a strong risk management program, can better protect employers and their companies.

The chance of being sued by a disgruntled employee is 1000% higher than a fire.  A fire can set a company back and cause some pain for the short term, but thankfully most have adequate coverage to get the business back on its feet quickly.  However, if there is not an adequate EPLI policy in place, an employment lawsuit can bankrupt not only the business but the individual owners and directors as well.  EPLI policies vary in cost and coverage, so even if you currently have a policy in place we urge you to contact your insurance broker to review the policy and assure that it covers your future and current needs.  If you don’t have EPLI, today is the day to make that important phone call.

On page four, we have a sample of the questions you will be asked when filling out an application for EPLI.


As part of the enrollment process to obtain Employment Practices Liability Insurance, the employer is asked to complete a checklist identifying the HR policies and procedures currently in place.  Along with answering questions such as the number of last year’s terminations, the total employee count, and the breakdown of those making under and over $50,000 per year, the employer must also complete the questions below.  The more YES boxes checked, the lesser the exposure to employee suits and government fines, which can lower the premium.  What is your risk score?

1. Is Human Resources personnel consulted prior to terminations?   Yes____   No___

2. Does the employer have written guidelines, policies, or procedures related to the following:

  • Employment at will    Yes____   No___
  • Discrimination    Yes____   No___
  • Sexual and other workplace harassment   Yes____   No___
  • Equal Employment Opportunity    Yes____   No___
  • Disabled Employees and Reasonable Accommodations   Yes____   No___
  • Reporting and Investigating and Resolving Employee Complaints    Yes____   No___

3. Are employees required to acknowledge receipt of the above guidelines, policies and procedures   Yes____   No___

4. Has employment counsel reviewed the above guidelines, policies and procedures    Yes____   No___

5. Does the employer

  • Utilize employment applications   Yes____   No___
  • Document employee performance   Yes____   No___
  • Conduct human resources training for management employees   Yes____   No___

3. Does the employer have written policies outlining employee conduct when dealing with customers, clients, or other third parties?   Yes____   No___

4. Does the employer conduct pre-employment criminal and credit background checks?   Yes____   No___

If you need assistance in changing your NO answers to YES, please give us a call.  We’d love to help you improve your score!