Growth in employment practices litigation
spurs agencies to offer human resources programs
By Phil Zinkewicz
Sexual harassment, employment practices liability, age and sex discrimination--all of these phrases and more send fearful chills up and down the spines of human resources people employed by the largest corporations. The giants of industry live in fear of the possibility of being in violation of any one of the myriad of federal and state laws relating to management's behavior towards employees in the workplace. They have to deal with the Americans with Disabilities Act (ADA), COBRA, the Family and Medical Leave Act of 1993, and the Equal Opportunity Employment Commission--and that's just at the federal level.
Violating one or more of these laws can lead to multimillion-dollar jury awards. In 2000, an Ohio jury returned a $31 million verdict against a health services organization for age discrimination. A major television network settled a sex discrimination lawsuit for $8 million in that same year. According to Jury Verdict Research in Horsham, Pennsylvania, the median award for an employment practices liability lawsuit rose to $218,000 in 2000, up from $150,000 a year earlier.
A fifth of all verdicts top $1 million, according to the research institute.
But large corporations have an edge over small and mid-sized commercial establishments. The large companies can at least afford to hire a legal staff and human resources people to keep abreast of trends and developments in the area of employment practices. Smaller organizations often do not have the wherewithal to bring on that kind of staff.
Because of that, a new trend seems to be developing in the property/casualty insurance industry. Insurers and even agents are striking deals with independent human resources operations that, for a fee, will assist the smaller and mid-sized companies in complying with employment practices laws.
For example, GuideOne Insurance has been a leading insurer of churches since it developed the first multi-peril policy designed especially for religious institutions in 1962. Based in West Des Moines, Iowa, the company also writes commercial insurance products for schools and colleges, as well as not-for-profit senior living communities. The company employs more than 1,000 individuals across the country and is licensed to do business in 50 states. It markets its products through a network of more than 2,000 independent and career agents.
Earlier this year, GuideOne contracted with HR Client, Inc., an online company that provides human resource tools and guidance to small and mid-sized organizations. "Since churches are in the business of providing members with quality ministry, they often don't have the time or the staff to manage an effective human resources infrastructure," says Jim Bonney, assistant vice president of business development at GuideOne. "By subscribing to any 'HRAdministrator' product offered by HR Client, GuideOne's church policyholders can receive forms, best practices processes, business policies, and federal and state regulatory information, all at a reduced price. The arrangement can also save GuideOne policyholders the cost of having a full-time human resources professional as part of their senior staff. The arrangement also demonstrates an ongoing commitment on the part of GuideOne to offer commercial customers a wide array of risk management services and products."
Says Janice Beach, a principal of HR Client: "We understand that we can enhance our product offering by developing strategic alliances with complementary businesses. As a result, we are interested in building strong relationships with companies that will lead to success for everyone--our customers, our partners, and HR Client. We are thrilled to work with GuideOne Insurance, a company that has a proven track record of meeting the specialized needs of churches."
Beach says that HR Client launched its first online human resources product in November 2000. She and her co-principal, Karen Clary, had been doing human resources consulting before starting up HR Client. "We noticed that there was a growing need among smaller organizations for just the basics--things such as employee handbooks and manuals. We also recognized that it was difficult for smaller organizations to meet the high consulting fees charged by large human resources consulting operations. We digested all the basic employment practices information into one online package called HRAdministrator. It is simple and easy to read and can be understood by everyone from the administrative assistant to the company CEO. The program helps the smaller organization develop a human resources infrastructure. HRAdministrator contains more than 150 forms and policies on things such as age discrimination and sexual harassment, which can be downloaded for use. We also offer HRAdministrator Special 19, which is designed for organizations of 19 or fewer employees. We don't act in a legal capacity for our clients. We are providers of the information that they need to be in compliance."
Just like large organizations, smaller companies have to comply with various federal laws regarding hiring practices, employee record keeping and compensation. HR Client's products assist small businesses in performing those tasks and also contain references to state laws and how they apply. Hiring practices are also addressed, according to Beach. "Churches have the same employment practices exposures as do other organizations," says Beach. "Our program offers advice on how to construct an employment application that will comply with federal regulations. Little things matter a great deal. For example, on an application you can ask, 'Did you graduate from high school?' but not 'What year did you graduate from high school?' because that latter question could land an employer in an age discrimination lawsuit if the applicant is denied the job."
Bonney of GuideOne said that the insurer became involved with HR Client after it began writing employment practices liability insurance for its churches and other clients. "We asked our insureds what procedures they had in place to satisfy federal and state employment laws," says Bonney. "We found that smaller churches had no procedures in place. We made this arrangement with HR Client to assist our insureds in complying with regulations and also to cut our losses. The beauty of it is that the HR Client program is not only available to our insureds but also to our agents who represent those insureds."
A similar type of arrangement has recently been reached between TcomplyCo. and Maschino, Fleet & Associates, the former being a human resources compliance and support firm and the latter being an insurance brokerage agency, both of Oklahoma City. Brad Taylor, marketing director for TcomplyCo., says: "We give employers the knowledge, resources and management support necessary to allow them to maintain their workplaces in accordance with state and federal laws and regulations, and in harmony with recognized principles of sound organizational management and development. We provide human resource auditing services or we can outsource an employer's entire human resource department. We take the multidisciplinary approach to human resource management, and in that respect we are unique in the industry."
Taylor says that TcomplyCo. employs attorneys with years of labor/employment and employee benefits experience as well as certified human resource professionals and international compensation and employee benefits experts. "With our strategic partners, TcomplyCo. provides its employer clients a single source for all their workplace challenges for one, economic price," he says.
Maschino says that his agency formed this strategic alliance with TcomplyCo. in order to offer his clients a wide range of expertise in regulatory compliance issues in the areas of human resources and employee benefits. "TcomplyCo. will provide human resources and regulatory compliance expertise on issues such as ERISA, COBRA and CAFETERIA compensation through a customer service help line exclusively for our clients," says Maschino. "This produces a significant new benefit for our insureds. This help line will raise the bar on our services and offer our clients seamless access to services, through the experts at TcomplyCo., that go beyond our scope."
TcomplyCo. has different human resources programs for organizations of varying sizes, from the smallest firm to the largest corporations; but for the smaller firms services include, but are not limited to: audit and assessment of the employer's policies and procedures regarding human resource functions and employee benefit plans; training for management employees who carry out supervisory and human resource functions; seven-days-a-week support via telephone; drafting policies, including an employee handbook, computer use agreements, and sexual harassment policies; drafting job descriptions and specifications; and compensation planning and control assistance.
"There is definitely a trend taking place with insurance companies and agencies seeking ways to offer human resources services to their clients," says Maschino. "Employment practices laws are so many and so complex that small businesses sometimes don't even know that they are open to fines and costly judgments. We believe that this arrangement with TcomplyCo. offers us the opportunity to give more value-added service to our insureds." *