As business cycles ebb and flow, companies must make important decisions about hiring and firing to minimize EPL risk. By taking the right actions as an employer, you can improve your workplace culture and productivity with new hires, and ease transitions for employees after separation.
However, it’s important to recognize the risk that employment practices carry for your business. Every day, workers file lawsuits against employers, with many claims targeting small businesses.
To protect your business, follow these best practices for hiring and firing to minimize the risk of an employment practices claim.
The Best Tips for Hiring to Minimize EPL Risk
Successful hiring often comes down to preparation and knowledge of employment law. Plan for your next hire with these tips:
- Create an employee handbook that includes all workplace policies and procedures. Include a job description for each position you hire. Clearly define the role and include the company’s expectations of skills and performance.
- Develop a screening and hiring system to weed out unsuitable job applicants on paper first. Have applicants submit applications, not resumes, so you can better control what information is requested and minimize the risk of improperly volunteered details. If your franchise requires background checks, be sure to follow their guidelines.
- Plan ahead for candidate interviews. Decide what to ask beforehand and ask every candidate the same questions. Use the interview to evaluate potential hires, explain details about the opportunity and answer questions.
- Avoid improper personal questions when interviewing candidates, including questions about age, sex, family, pregnancy, religion, national origin or disability. Request only information that is related to the job to determine eligibility for employment. If a candidate volunteers such information, don’t use it as a basis for rejecting employment.
Familiarize yourself with key provisions of federal and state employment law. Note especially which questions are permissible or prohibited for applications and interviews. Important federal statutes include:
- Title VII of the Civil Rights Act of 1964
- Equal Pay Act of 1963
- Civil Rights Act of 1966
- Immigration Reform and Control Act of 1986
- Americans with Disabilities Act of 1990
- Bankruptcy Code
- Equal Employment Opportunity Act of 1972
- Age Discrimination in Employment Act
- Family and Medical Leave Act
Companies with even one employee may be subject to some employment practices laws, while most businesses with 20 or more employees are subject to most laws. Note that state laws may require compliance at lower thresholds.
The Best Tips for Firing to Minimize EPL Risk
Whether due to layoff, policy violation or performance, all employers will eventually need to terminate an employee. By following employment best practices, employers can minimize risk of a wrongful termination claim, provide continuity to business operations and ease the stress of separation for employees.
Ensure your business follows these tips:
- Document everything in writing. Your workplace should have a written code of conduct with disciplinary or corrective actions for misconduct. Document each infraction to create a record. Keep documentation professional as it may one day become evidence at trial.
- Terminate according to documented policies. Be evenhanded with employees. Review employee files, follow the employment handbook, monitor compliance with policies, substantiate any infractions and document violations and any actions taken.
- Minimize risk to the business. Determine whether access keys, ID cards and computer privileges need to be suspended. Note what property must be returned and arrange for personal belongings that may need to be collected.
- Think about timing. Avoid anniversaries, birthdays and Fridays. Notifications earlier in the day and earlier in the week can aid transition for all involved. Ensure you are prepared with final pay and benefits information, as well as a plan for notifying the rest of the workforce.
- Hold termination meetings in private, away from other workers. Prepare a succinct script to deliver the message respectfully while providing needed information. Allow the exiting employee to respond but do not stray from the message to argue or justify.
- Make sure the reason for the termination is legitimate and consistent with practices and policies. Federal law does not require a reason be given, though some states have a “service letter” law. If a reason is given, offer only legitimate reasons.
- If available in your state, consider offering employment “at-will”, which gives employers the ability to terminate employment at any time, for any reason or no reason at all, and with or without notice. An employment at-will statement should be included on the job application and in the employee handbook. Check your local laws as several states recognize public policy, implied contract and/or good faith exemptions.
The Best Tips to Minimize EPL Risk
Any employer can be sued by an employee over employment practices, and legal judgments and settlements can be costly. Small businesses and new businesses are particularly vulnerable, with one in three claims filed against small businesses.
Proper preparation before hiring, knowledge of applicable law, thorough documentation and observance of policies and procedures can reduce your risk of a claim, but won’t eliminate it.
You can more fully protect your business with Employment Practices Liability Insurance (EPLI).
EPLI coverage protects your business from employment-related claims that past, current and prospective employees of the company bring against the company and other employees. For more information about EPLI coverage, contact Lockton Affinity, the administrator of the WellBiz Insurance Program.
These are simply considerations which should not be construed as legal advice.