Employee Risk Management: Best Practices for Small Business

For many companies, the costs related to disputes and issues with employees are on the rise. Businesses big and small frequently face lawsuits and claims made by employees as a result of unlawful termination, work harassment discrimination, denied promotion, and deprivation of career opportunity, among others.

Most of the time, the employer doesn’t even need to be in the wrong to face a lawsuit.

No company is immune to lawsuits, no matter the size, but small businesses are particularly vulnerable without the safety net of a large legal team. Every small business therefore needs a good insurance policy in place to protect against costs and damage claims made by disgruntled employees.

Employment practices liability insurance (EPLI) offers protection to small businesses and covers lawsuit costs—whether the company wins the lawsuit or not. To help decrease your chances of running into a legal snafu in the first place, here are some employee risk management tips.

1. Ensure Critical Monitoring   

In the case of a lawsuit, evidence provides a fundamental component to the case. Lack of proof that the employee is wrong is a liability and a base for anyone to lay a claim.

To protect against unlawful claims, employers should monitor the employee at all angles. Background investigations about the employee could provide useful information about the overall conduct of the employee to use against them in future in case of a lawsuit.

Monitoring could provide valuable information to use for termination by unlawful conduct. The evidence collected would help defend against a lawsuit for wrongful termination.

2. Management of Everyday Risks

On top of monitoring, you should make risk management a core function and habit of your business. Every action, every move should aim at mitigating risk. Every director should manage the risks in their specific areas to prevent any future occurrences.

Companies should keep their staff updated with all health and well-being requirements and compliance training. This knowledge about compliance furnishes the employees with rules and guidelines on different factors that make clear what counts as grounds for termination, thus avoiding the risk of being sued down the line for firing someone who didn’t comply.

Compliance training also offers staff information and techniques on how to react to questionable situations and to reduce the chances of further damage.

3. Manage Employee Risk at Board Level   

Most of the time, organizations entrust employee risk management to one senior employee. In many cases, certain aspects could get overlooked when terminating an employee, thus creating a basis for that employee to seek a legal lawsuit.

Companies should form a board to manage employee risk, a team that includes HR, security guards, and IT personnel. This provides an effective way to identify counter-productive behavior at any level, which can then be quickly explored and resolved in timely manner.

4. A Risk-Based Approach     

Every company should have a security strategy to identify critical business assets and associated vulnerabilities. You should also use knowledge-based recruitment strategies to protect against injuries brought about by inexperienced staff.

Every small business needs to identify where their most valuable assets are and who is managing them. Only through keeping records will employers be ready to face a lawsuit about injuries occurred at work.

5. Avoid Recklessness

While EPLI is important for any small business to have, don’t get reckless in managing risks simply because you have your business insured. You should ensure that security measures are still in place to prevent against fraudulent claims.

Too many claims made against the company can not only increase your insurance premiums, but can also lead to a loss in credibility, opening the doors to many other employees making fraudulent claims because they know the insurance company will handle the allegation.

Employers should follow these best practices for employee risk management to investigate cases beforehand and follow up on reports carried out before they advance into a lawsuit.

Dan Levenson

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