How a PEO Can Help Protect You From Lawsuits

PEOs Help Avoid LawsuitsThere are many problems that a professional employer organization, or PEO, can solve for your business.  One issue that any company dreads having to deal with is employee lawsuits.

If you do not have anyone on your staff who is an expert in government compliance for small business, you are probably exposing your company to unnecessary risk.

PEOs can provide you with expert advice pertaining to employee legal rights and workers’ compensation laws.  With the assistance of a PEO, you can avoid many legal hassles outright.  And if a legal problem does arise, a PEO can reduce your liability and even provide you with an in-house legal adviser.

Employee Discrimination Lawsuits

Employee discrimination lawsuits can happen to any company that doesn’t conform to the government’s legal codes concerning age, disability, and other factors.  This can be an issue during the hiring process or afterward during the job.  Oftentimes, employers who find themselves on the losing end of a legal dispute over workplace discrimination had no ill intentions.  However, no amount of protesting or saying “But I didn’t know” to a judge is going to spare you the cost of a lost case.  The settlements awarded to victims in discrimination cases can total to hundreds of thousands of dollars.

Did you know it is illegal to refuse to hire a candidate on the basis of bad credit or a criminal record even though you are allowed to run a credit check and a background check?  Did you know that you are not allowed to post a job advertisement that states that you will not consider unemployed workers?  How familiar are you with ADA guidelines for disabled workers?  What about age-based discrimination laws?  Have you ever refused to hire a worker because he or she was over 40?  These are common mistakes but they are also illegal.

Workers’ Compensation Lawsuits

How does workers’ compensation work?  Many companies are unclear on workers’ compensation laws, and may not even know what to do if an employee makes a claim.  When an employee makes a workers’ compensation claim, that worker becomes protected under a set of government laws.  Any decisions your human resources department makes concerning that employee will be subject to scrutiny.

Before workers’ compensation laws were created, employees actually had to sue their employers outright in order to recover lost wages and pay for their medical treatments.  In general the employees lost these cases, but eventually the government stepped in and provided for employees in these situations.  Ultimately workers’ compensation has had a positive net effect for everyone involved, including employers.  Litigation is a costly process for businesses as well as employees, and workers’ compensation should, in theory, spare your company from having to go to court over workplace injuries or illnesses.

The workers’ compensation system actually protects your company, just as it provides protection for your employees.  In theory, you cannot be sued by an employee over a workplace injury.  That doesn’t always stop it from happening though.  If an employee believes you maliciously acted against him or her, that employee may be able to take you to court.  Furthermore, if you fail to fund your workers’ compensation program or commit some related violation, you could be guilty of a misdemeanor or even a felony.

Other Employee Lawsuits

Workers’ compensation and discrimination lawsuits are two common scenarios which can cost a company money, but they certainly are not the only ones.  There are many other situations where you could potentially find yourself in the middle of a legal dispute.  Some of these include:

  • Sexual harassment disputes.
  • Unlawful termination.
  • Breach of employee contract.
  • Defamation.
  • Invasion of privacy.
  • Violations relating to employee benefit plans or pensions.

Sometimes employees sue companies for seemingly nebulous reasons—and win.  Did you know you can even be sued for failure to promote or for “inflicting emotional stress”?  If an employee can come up with a reason relating to discrimination or make a case for some kind of malicious intent, you can end up losing the lawsuit.  Even if your actions weren’t harmful at all, you can find yourself paying a hefty settlement.  Your reputation also takes a knock, which can result in bad publicity and lost business.  This collateral damage ends up costing above and beyond the price of the litigation and the settlement.

Employee Lawsuit Insurance

Lawsuits and legal issues surroundings workers’ compensation, discrimination, and other issues are so widespread and so costly that many businesses opt to purchase employee lawsuit insurance.  When you buy employee lawsuit insurance, you pay a monthly premium for protection against these types of lawsuits.  The insurance cannot actually stop your company from being sued, of course, but it can cover the cost of your defense and settlements, up to a specified policy limit.

There are a lot of limitations to lawsuit insurance.  There’s the monthly cost to factor in for starters, plus the amount of any damages that exceed the coverage cap.  And then there’s the fact that employee lawsuit insurance cannot spare your company from collateral damage.  Your reputation will still be harmed by an employee lawsuit, and you can still lose business as a result.  You also may have a more difficult time finding new hires in the future.  Word of the lawsuit may get around, and qualified candidates may choose to work for your competitors instead of for you when it comes time for hiring.

A PEO Offers an Ideal Solution

A professional employer organization can do much more for you than employee lawsuit insurance.  A PEO can either replace or augment your existing human resources department, depending on the company you choose to contract with and the setup you choose.  Your PEO can establish a framework for employee hires, handbooks, training programs, and more.  The PEO can also help you to set up benefits and pensions and manage your workers’ compensation fund.  All of these preventative measures make it far less likely you will ever have to face an employee lawsuit, or that you will ever have to pay fees for failing to conform to government compliance rules and regulations.

Your PEO can also protect you in a situation where something does go wrong.  Professional employer organizations employ staff attorneys.  These legal experts can provide you with guidance during a legal dispute, and can help you win a court case or settle out of court.  If you do not have a PEO on your side during a lawsuit, you will have to pay for an outside attorney, which is very expensive.  You also will be faced with the task of selection, which in itself can be a challenge without guidance.

Employee lawsuits are pervasive, and the possibility of litigation is very real, even in situations where no harm was intended.  Many HR departments struggle with government compliance, workers’ compensation, and the complex nuances of discrimination laws. But with the help of a PEO, your company can avoid litigation altogether, or come out on top if an employee does choose to sue.  Along with providing legal guidance, PEOs can also help your company with many other aspects of business, including tax preparation, employee recruiting and onboarding, payroll, and conflict resolution.  You’ll enjoy greater peace of mind; all while saving time and money on common human resources assignments.

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