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Employment Complaints Are Not a Professional Liability Issue

Wednesday, August 05, 2015/Categories: hiring-and-human-resources

The Law Professors Blog offers a reminder to tech companies: just because you work with new fangled technology doesn't mean you're immune from:

  • Old school employment liabilities.
  • Disputes over wages.
  • Discrimination issues.

It's especially important to understand these concerns because employment lawsuits won't be covered under your Professional Liability Insurance (aka Errors and Omissions Insurance).

The blog post details problems Google is having with complaints over bonuses. To help you understand your employment-related risks as a small-business owner, let's look at how the moguls of Mountain View are struggling with employment liabilities.

What Google Gets Wrong about Employment Practices

Google's bonuses are under scrutiny — and could potentially lead to employment discrimination lawsuits. When employees do something well, their coworkers can nominate them for small $150 bonuses tacked onto their paycheck. A manager then approves these bonuses. But inconsistencies from one manager to the next have led to complaints about discrimination.

The $150 bonus seems like a nice way to create a cooperative, engaged work environment, but when these bonuses aren't subject to scrutiny and are inconsistent, employees could have a legitimate employment practices complaint.

Of course, Google isn't the only tech company to face employment issues. As we covered in "'Tech Companies' Uber and Lyft Facing Workers' Compensation Challenges," sharing-economy companies are coming under increasing pressure over their classification of workers as independent contractors.

5 Lessons to Learn from Tech Employment Complaints

We mentioned above that employment complaints aren't covered by your Professional Liability Insurance, so let's return to this issue and look at it from a risk management perspective. Employment lawsuits can be expensive. Here are five things you'll need to know as an IT business owner and employer:

1. Even salaried, high-skilled tech employees with all the perks that come with working at Google can have legitimate legal complaints about unfair compensation practices (even for something as small as $150 bonuses).

2. While employment issues might not seem relevant to a small tech business (admittedly, you might be your only employee), it's important to understand these risks. If you hire employees in the future, you'll want to be prepared for any potential legal disputes.

3. Employment-related lawsuits aren't covered by Professional Liability or General Liability Insurance. For small businesses that don't have an HR department, it'll be up to you and your staff to follow best practices.

4. Some employment lawsuits can, however, be covered under Employment Practices Liability Insurance (EPLI), which may cover disputes over compensation, discrimination, wrongful termination, and some other employment-related issues. EPLI coverage can be expensive, so ask your insurance agent about your options and ensure you have a plan to prevent employment disputes.

5. Workplace injuries and accidents are a separate issue. Medical cost for on-the-job accidents and work-related injuries can and should be covered under Workers' Compensation Insurance.

The point of this article shouldn't be to frighten you away from hiring employees or overwhelm you with information about Professional Liability and Employment Practices Liability. The point is this:

Your IT business insurance has limits. It's important for IT contractors to understand what their coverage can and cannot handle. While Professional Liability Insurance is very common among IT business owners, remember that this insurance isn't going to cover every risk.

Strong risk mitigation should include a combination of insurance coverage and policies, education, and training that prevent incidents and lawsuits.

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