THE LEGAL SIDE OF RISK: HOW PEOS CAN PROTECT CLIENTS FROM EMPLOYMENT LAWSUITS

In today’s complex legal landscape, businesses face an ever-increasing risk of employment lawsuits. From wrongful termination claims to workplace discrimination cases, the consequences of a legal dispute can be devastating for a company’s reputation and finances. Professional Employer Organizations (PEOs) are uniquely positioned to assist businesses in navigating these turbulent waters through effective risk management strategies. By providing services like workplace safety services, proper management of workers’ compensation claims, and human resources consultation, PEOs can help clients avoid costly litigation that might arise from a workers’ compensation claim, EPLI claim, or other employment-related issues.

Let’s start with HR consultation and some key factors related to risk mitigation. By offering services like background checks and employment best practices, PEOs immediately strengthen a client’s risk protection. For starters, background checks for prospective employees help mitigate the risk of hiring the wrong individual, thus ensuring a safer, more compliant work environment. This also establishes better record-keeping practices, which can protect the business in the event of a legal dispute.

Another area where HR consulting plays a massive role in risk management is hiring and firing best practices. When it comes to costly EPLI (employment practices liability insurance) claims, it is paramount that businesses are well-informed of the delicate ins and outs of employment laws, especially those around employee terminations. Given the delicate balance of giving HR and legal advice, it is important for PEOs to understand when to refer clients to legal counsel.

Moving on, one obvious area of emphasis in this entire risk management conversation is workers’ compensation. Naturally, when workers’ comp is brought up, the mind naturally goes to a business’s insurance coverage for work-related injuries to employees. One of the significant benefits of partnering with a PEO is access to workers’ compensation insurance. In the event of a workplace injury, this coverage alleviates financial burdens and assists in navigating the legal obligations of the employer to its injured employee.

The second layer to this, however, is that PEOs (in conjunction with their carrier) can also offer consultative claims management services that can help clients understand their legal obligations to injured workers. This can be an effective way to make clients aware of the risk of violating state-specific workers’ compensation and/or employment/labor laws, thus minimizing their chances of an employee raising retaliation or discrimination issues against them. A good example of this would be a client terminating an employee because they filed a workers’ compensation claim. This can be considered unlawful retaliation against the employee and can leave the business vulnerable to a retaliation claim. Sound PEO advice can go a long way in avoiding these types of situations.

Similar to claims management services, PEOs can also provide employment compliance assistance to their clients, which helps them stay up-to-date with labor laws and regulations, including federal, state, and local laws related to wages, hours, benefits, workplace safety, discrimination, and harassment. By managing compliance, PEOs reduce the risk of violations that could lead to lawsuits. And of course, PEOs can also provide EPLI to protect clients in the event of a claim.

Now, if you’re starting to feel like this is a lot of information, you’re absolutely right. This leads us to two crucial pieces of this puzzle: clearly written company policies and high-level employee training. Oftentimes, even if employers don’t stay diligently informed and proactive in these areas, they fail to keep their employees informed, which can be a major pitfall and open them up to major risk even when they thought they had covered all their bases.

Let’s start with clearly written policies. PEOs can assist in creating comprehensive employee handbooks and policies that clearly define expectations, rights, and responsibilities in the workplace. Well-documented policies can prevent misunderstandings and provide a defense in case of litigation. PEOs should work with their employment attorney to ensure their handbooks are compliant with applicable laws.

But it’s not just about having these policies – you have to roll them out the right way. And the most effective way to do this is through proper employee training and education. Many PEOs can offer training on your company policies, key workplace topics like harassment, diversity and inclusion, and management practices that promote a fair and respectful work environment. Simply put – a strong training program is an effective and proactive way to prevent situations that may lead to lawsuits.

In an era where employment lawsuits pose a significant threat to businesses, partnering with a PEO offers companies essential protection and peace of mind. With effective risk management strategies in place, companies are better positioned to focus on growth and operational success, knowing the legal obligations are being adequately addressed. And while some businesses may be hesitant to partner with a PEO because of the additional cost, the cost savings associated with reduced legal claims, lower insurance premiums, and increased operational efficiencies make it well worth it.

Ultimately, the investment in PEO services pays dividends by fostering a stable, compliant, and productive work environment. As businesses recognize the intricacies of employment law, PEOs are undoubtedly indispensable partners in ensuring workplace safety and legal compliance.