Tuesday, September 22, 2015

Employment Practices Liability: Defusing a ticking bomb

If you are like any other organization that conducts background checks on employees before hiring them, then you are at a graverisk of workplace harassment lawsuits. Protect yourself with an Employment Practices Liability Insurance (EPLI). Want to know more?


Background Checks are necessary for any organization. According to the Justice Department’s report on Workplace Violence Statistics, between 1993 and 2009, nearly 572,000 crimes of a minor nature occurred in the American Workplace. In most cases, the offender/assailant was an employer/employee/colleague of the victim. Little wonder that most companies have a thorough recruitment procedure which checks the prospective employee’s:
  • Skills
  • Family background
  • Educational background
  • Criminal Background
  • Credit History
  • Driving Offences
  • Drug and Alcohol tests
While these are common to most organizations, several of them have additional,custom checks to be completed. As a result, hiring cycles drag out much longer in the United States than in comparison to other countries.According to leading HR Consultancy – Glassdoor; since 2009, it takes an average of 22.9 days to hire a new employee, an increase of 4 days from the previous decade.

Interestingly, while most of these checks were mandated by the Federal Government, delays in hiring, during a recessionary economy, have forced the Government to rethink these policies. The Equal Employment Opportunity Commission (EEOC) and the Obama Government have been vociferous in demanding flexibilities around these checks.

Across the country, more than 100 cities and counties have adopted a policy, popularly known as ‘ban the box’. According to this, employers must primarily focus on the candidate’s skills or qualifications, and the conviction record check is conducted much later in the hiring process. As many as 18 states have adopted the policy completely, and another 7 states - partially.

The driving force behind the policy is the perception that criminal background checks and credit rating checks have a disparate or unequal impact across ethnicities. It allegedly puts African-Americans in generaland African-American males in particular,at a severe disadvantage.The EEOC published guidelines on the use of criminal background information during recruitment, in 2012. Since then, it has been aggressively driving the ‘ban the box’ policy through legislation and litigation.

Several lawsuits have brought the policy into the limelight and caused a pushback on some of the EEOC guidelines, to make it fair to both employers and employees.

Notable among them are:
  • Freeman: The EEOC vs Freeman suit was filed in 2008 by an African-American lady who alleged that her employer discriminated against her based on her credit history. Subsequent investigations and hearings expanded the scope of the charges and EEOC alleged that the employer practiced a pattern of discrimination against African-Americans by using their credit history, and against all African-American, Hispanic and white male applicants by using their criminal history, during hiring. The employer could prove that all of these checks were clearly communicated and there was no intention to discriminate.
  • Pepsi: Pepsico was forced to pay a $3.1 million fine and modify its hiring procedures, in the light of similar allegations.
  • Dollar General: In an ongoing suit, DolgenCorp is defending its right to withdraw the job offer, if a subsequent background checks reveal criminal history.
Refining existing guidelines and creating new ones is a continuous process. But the larger reality is that business organizations are constantly at the risk of lawsuits from various aspects of their operations.

The only option for organizations then, is to have anEmployment Practices Liability Insurance (EPLI) cover. EPLI is a comprehensive policy that covers not just hiring practices but a whole lot of situations that a business organization can face in its lifetime. This includes losses and injuries to prospective employees, existing employees, clients, vendors, consultants and third-party agencies;hiring practices, malpractice coverage, workplace harassment, etc.

In short, EPLI is Health Insurance for a company.

For more details, call and speak to any of our agents.

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