In early June, the US Supreme Court ruled that Abercrombie & Fitch Co. failed to hire job applicant Samantha Elauf in part because she wore hijab, a headscarf many Muslims wear to show modesty. Elauf was apparently recommended for hire by her interviewer, but ultimately not offered the position when it was deemed her headscarf was not in accordance with the company’s “look policy,” which bans headwear.
The case is being hailed as a victory by the EEOC and religious rights groups, but for HR professionals, it sets an important precedent about how religious accommodations must be handled during the hiring process.
While hiring and firing are two highly charged events that Human Resources professionals must deal with, they are by no means the only areas of complexity. This article highlights some of the most common risks HR professionals face and why carrying business insurance is a critical part of managing and mitigating those risks.
Lawsuits brought by current, former, or not-quite employees (as in the Abercrombie case above) are perhaps the biggest and most costly risk HR professionals must contend with. But employment lawsuits vary as much as the employees who initiate them, which means preventing these suits requires a variety of risk management practices.
The most common workplace lawsuits involve claims of…
- In 2014, the EEOC reported 88,778 discrimination charges. Allegations of discrimination on the grounds of race and retaliation were the most common, followed by sex, disability, and age.
- In 2014, 6,682 charges of sexual harassment were filed with the EEOC.
- Workplace injury. Roughly 7 cases of workplace injury happened for every 100 fulltime workers in 2013; see the next section “Workplace Injuries” for more information.
- Wrongful termination. Because there is no single law that governs wrongful termination, numbers on these cases are more difficult to track, but various sources have noted that lawsuits over improper firing are on the rise.
Consider, too, that the numbers above include only those cases that escalated to the point of formal legal charges. In their everyday work, HR professionals must contend with thousands of incidents and allegations that never result in legal charges. In fact, one major challenge in addressing such allegations is acting to prevent lawsuits and the financial, reputational, and morale-related damages they can cause.
The good news in all of this is that HR professionals can reduce their risk of lawsuits from these four sources by implementing certain risk management practices, including…
Establishing objective criteria for all hiring and firing decisions.
As many HR professionals know (and as Abercrombie recently learned), this may not be as straightforward as it sounds. Abercrombie, for example, had the “look policy” that prohibited head coverings. Elauf could have been granted a religious accommodation for her hijab, but she did not explicitly ask for one (it seems she did not know there was a policy that banned caps). The problem arose when, despite a hiring manager’s recommendation to offer Elauf the job, other managers decided not to, apparently at least in part because they assumed she would be unwilling to remove her hijab.
Training HR staff
Even the best-meaning HR professionals can unwittingly break the law if they don’t understand it. During interviews, for example, simple ice-breaking questions (“Oh, you went to State? So did my sister. What year did you graduate?”) could be construed as examples of age-based discrimination if an applicant doesn’t get an offer. In addition to training new HR hires on office policies and procedures, it’s a good idea to review state and federal anti-discrimination guidelines and how to follow them in various situations.
Establishing and communicating processes and procedures
Of course, employees cannot break the rules if there are no rules to break – and they can’t be held responsible for breaking rules if those rules were never communicated. Creating an employee handbook or similar document is an essential part of risk management. A handbook that includes expectations and outlines disciplinary measures for those who don’t meet expectations can also be a valuable document in the event of a lawsuit.
Documenting all violations of workplace rules
Documentation becomes an HR professional’s best friend in the event of an employee complaint or lawsuit. With written documentation in place, HR professionals have “evidence” to support their personnel decisions. Without this documentation, it is much more difficult to support a decision to fire, demote, or lay off an employee.
Implementing disciplinary measures as needed
Obviously, taking action when necessary communicates to all employees that a workplace’s policies are serious and that failing to follow them has consequences. Taking incremental disciplinary action, too, helps communicate to an employee that their actions are not acceptable so that they are less likely to be surprised if they are eventually fired – and hopefully, less likely to sue.
Maintaining open lines of communication
This might be the most important risk management measure of all. In fact, every other item on this list can be considered a kind of communication. When it comes to the types of risks that pose the biggest threat to HR professionals, it’s nearly impossible to over-communicate.
Of course, even with pitch-perfect risk management, the possibility of a lawsuit still exists. That’s where business insurance comes into play. Business insurance doesn’t actually reduce the risk of a lawsuit; instead, it minimizes the potential financial impact a lawsuit can have on a business. To address lawsuits over the issues outlined in this section, businesses can benefit from Employment Practices Liability Insurance, or EPLI.
EPLI provides benefits when an employer is sued by its employees (current, prospective, and former) over matters relating to employment. Those benefits might take the form of lawyers’ fees, court costs, and even settlement and judgment expenses. EPLI lawsuits are among the most expensive businesses can face, so this type of coverage tends to be more costly than General Liability policies.
Workplace injuries fall into a slightly different category.
Whether they happen because of repetitive motions, slips and falls, or on-the-job hazards such as heavy machinery, workplace injuries can be costly and demoralizing. In worst-case scenarios, they can leave employees permanently disabled or even dead – obviously not something any HR professional hopes to encounter.
Human resources staff members can help a business manage workplace injuries in several ways. First, they can ensure that the company’s Workers’ Compensation Insurance coverage is adequate and appropriate. Without adequate coverage, a company risks fines in the event of an audit or an employee claim. Second, HR professionals must keep lines of communication open in the event of an injury to minimize the likelihood of a lawsuit. The simple act of staying in touch with an employee who is injured and unable to come into the office demonstrates that the employer cares and is invested in the employee’s wellbeing – and greatly reduces the likelihood that an injured worker will enlist the help of an attorney to sue for additional benefits.
Finally, HR employees must be vigilant about ensuring that, when an injured worker returns to the job, no actions taken can be construed as retaliation for filing the claim. HRHero.com offers a helpful overview to Workers’ Comp issues for HR professionals in its whitepaper HR’s Guide to Workers’ Comp.
Lastly, a few words about privacy. One key covenant between HR staff and the people they serve is the expectation of confidentiality. On one level, this means disclosing information only to those who absolutely need to know it, as when an employee receives a negative performance review and is put on probation. On another level, maintaining privacy involves complying with state or federal laws about storing, encrypting, and disposing of sensitive information (such as SSNs and healthcare records).
If a Human Resources professional fails to keep employee information private, he or she might be named in a Professional Liability (also called Errors & Omissions) lawsuit. This is true for both those who work on a contract basis and those who work fulltime for a single employer. That’s because, in the event of a lawsuit, attorneys often sue “everybody in the room” to maximize their client’s odds of getting a favorable settlement or judgment.
Like any lawsuit, E&O lawsuits can be expensive. The good news is that those costs can be paid for by the benefits of an E&O Insurance policy. HR contractors likely have to purchase their own policy, while those who work fulltime may be covered by an employer’s policy.
For privacy breaches that involve exposure of sensitive data stored digitally, HR professionals may benefit from Cyber Liability Insurance (also called Data Breach Insurance). This policy pays for the costs associated with responding to and recovering from a breach of sensitive data, whether it be employees’ or customers’. The important thing to know about data breaches is that the damages associated with them are not covered by any other type of insurance policy. HR contractors who are unsure about their data security obligations should consult with their insurance agent about whether they could benefit from a Cyber Liability policy.
Business Insurance: Minimize the Potential Financial Impact of Lawsuits
An umbrella will not stop rain from falling, but it will prevent the carrier from getting wet. Think of business insurance in a similar way: it won’t eliminate the risk of lawsuits or prevent lawsuits from happening. It can, however, prevent lawsuits from financially devastating a business.
While most HR professionals will never have to deal with a case that makes its way to the Supreme Court, they will face challenges and risk exposures every day. Knowing how to minimize the likelihood that these turn into lawsuits is part of being an effective professional. Ensuring that the company is financially prepared to handle any lawsuits that happen despite all risk management efforts is part of running an effective business.