Employment Risks to Watch in 2019

People Risk Management

Sexual harassment, legalized marijuana, equal pay, and time off issues create opportunities for agents

Laura Kerekes writes a monthly “Innovative Workplace” column for Rough Notes, a publication that has been serving the insurance industry since 1878. While written for brokers, the information in her column applies equally to employers. Enjoy her January column on important areas of risk.

The new year is well under way, and your clients have closed the books on 2018. They have implemented changes to this year’s business plans based on last year’s results. Ensuring that they consider risk exposures in their planning and sharing your expertise in managing those risks is what makes you a valuable and trusted business partner.

Do you also advise clients about the hidden risks to their businesses that arise from their employee management practices? Potentially uninsurable hidden exposures exist regarding discrimination and harassment, benefits and pay practices, and managing time off/leave programs. Insurable employee hazards stem from worksite injuries, theft, property damage, workplace violence, and cybersecurity.

Although the data varies widely based on industry, geography, and other factors related to product and operating expenses, employees typically represent your clients’ biggest investment and potentially their biggest risk. Ensuring that good employees remain productive and committed to the organization requires risk management strategies and programs that cover both compliance and the softer issues that could become bottom-line risks. These include reputational damage to the company and employment brand, legal costs, lowered productivity, poor morale, and loss of good employees.

Employees typically represent your clients’ biggest investment and potentially their biggest risk.

Now is the time to provide your clients information about these possible exposures and offer resources to reduce their risks because state and local regulations and talent shortages set the agenda for 2019.

Sexual Harassment

Sexual harassment awareness has been heightened since the #MeToo movement began in late 2017, and your clients can no longer stop with strongly stated policies that say harassment won’t be tolerated. The issue is a focus for Equal Employment Opportunity Commission (EEOC) enforcement, and regulators expect companies to be very clear about what avenues are available for employees to report harassment and how investigations will be conducted. For example, many employers are developing reporting procedures that go beyond the management chain or human resources to an external resource such as the board of directors or an outside firm. Board members need to be trained to manage those complaints. Strong nonretaliation statements also are important.

States are taking this issue seriously with new laws that include stronger training requirements and contractual provisions. Legislative activity varies by state, but common themes are training for employees and managers, nondisclosure agreements, and restrictions on mandatory arbitration clauses for harassment cases.

It is common for employers to have employees sign agreements stating that any employment dispute will be settled through binding arbitration. That practice, as it relates to sexual harassment and sex discrimination disputes, is getting a lot of attention. California, Maryland, New York, Vermont, and Washington enacted laws to protect employees by removing harassment claims from standard company arbitration agreements or prohibiting nondisclosure agreements in settlements where sexual harassment is involved.

Employers in California and New York are among those who are complying with new harassment prevention laws, including stronger policies and stringent training requirements for both employees and managers. Connecticut, Maine, and Delaware also mandate harassment training for employers. Other states are considering similar measures for 2019.

Nondiscrimination

Related to sexual harassment is the broader focus on nondiscrimination, which continues to be a hot issue for 2019. This includes pregnancy accommodations and disability discrimination of all kinds. Another key focus is bringing injured workers back to work safely and accommodating light-duty restrictions. Court cases involving extending protected classes under Title VII of the Civil Rights Act of 1964 based on sexual orientation and gender identity are being litigated and may be heard by the Supreme Court this year.

The EEOC’s enforcement division reported that it recovered $354 million during fiscal year 2018 in settlements from employers of all sizes across various industries. These claims generally average almost a year from complaint to close, which significantly disrupts the business. Approximately three quarters of claims aren’t even settled or taken to court. A more alarming statistic is that almost half of EEOC claims involve some form of retaliation. This brings home how important it is for your clients to ensure that their management has not only the tools to prevent discrimination but also the knowledge to handle issues appropriately and swiftly.

Legalized Marijuana

Legalized marijuana is complicating drug policies in workplaces across the country. With a growing number of states legalizing medical and recreational marijuana, what used to be a clear workplace policy enforced by HR and safety managers — zero tolerance —I s becoming hazier. Support for legalization is reaching new highs, according to a Gallup poll reporting that 64 percent of Americans support legalization. Medical marijuana is now legal in 32 states, and the state count for recreational marijuana use is growing.

At the federal level, however, the Food and Drug Administration (FDA) maintains its position that marijuana is an illegal Schedule 1 drug. OSHA continues to support consistent testing and regulation of the drug in the workplace, and workers compensation underwriters take the same position. Businesses that have federal contracts must follow the Drug-Free Workplace Act and can lose eligibility unless they have strong zero-tolerance drug policies. Some states have similar rules for state contractors.

Your clients have a duty to protect employees and customers by providing a safe and healthy work environment. Historically this responsibility meant that they could develop and enforce a zero-tolerance policy against substance abuse in the workplace with the right to test for the presence of those substances. Today multi-state employers may face confusion over how to apply the policy consistently across the entire organization. Are they still able to use a consistent policy across the organization, or does it need to be modified based on the different state laws? Should policies be different in states that permit medical marijuana use than in states that allow recreational use?

In the states where medical marijuana use is allowed, your clients may have a duty to accommodate its usage, similar to accommodations for other prescription drugs. The accommodations might include moving the employee to a less safety-sensitive position, changing work hours or shifts, or taking other measures that would be considered reasonable and would not cause undue hardship to the business.

Another concern is testing for cannabis use, both pre-employment and based on reasonable suspicion. An individual can test positive for marijuana weeks after it was last used, leading to unreliable drug test results. Whereas the smell of alcohol might trigger reasonable suspicion, this might not be the case for cannabis. The skunky smell once associated with the drug isn’t present in other modes of consumption such as edibles, oil, or vape devices that deliver concentrated THC. Your clients must develop clear standards to manage drug testing for their safety-sensitive jobs and they must decide how they will handle the testing question for other positions in the company.

As marijuana legalization continues across the country, you have an opportunity to provide expertise to help your clients balance their compliance and safety obligations with risks to their workplace.

Pay Issues

Managing pay can be tricky. If not handled correctly, pay can exacerbate talent shortage risks such as being unable to attract the right candidates, losing great employees to the competition, presenteeism (employees are physically in the workplace but not engaged in their work), employee relations issues, compliance audits, and lawsuits. These problems adversely affect productivity, infect the company culture, and tarnish the employer brand.

Complicating the pay issue is a host of new rules, including a big raise in minimum wages in 20 states and 26 local jurisdictions that could affect your clients’ entire compensation structures. Job classification rules governed by the Fair Labor Standards Act for overtime exempt versus nonexempt and employee versus independent contractor status continue to create employer risks. Last year the Department of Labor was expected to issue a new salary threshold for exemption and promises to release new guidance early this year. Depending on the new threshold, this could create additional overtime costs for your clients.

Another EEOC priority that will continue this year is enforcing the Equal Pay Act to close the gap between men and women. The Trump administration has been silent about changing this direction. This topic is trending as legislators in several jurisdictions have introduced bills related to equal pay. California, New York, Massachusetts, and Maryland are setting the pace. These states have set rules that more broadly define the equal pay standard by requiring employers to use factors such as skill, effort, working conditions, and responsibility to justify gender pay disparities. These states also are broadening the geographic restrictions for employee pay differentials. Recommend that your clients review gender pay differences in their workforce, document the bona fide business reasons for the differences, and correct wage disparities as needed. Permitted differences could include seniority, documented merit performance, pay based on quantity or quality of production or sales quotas, or geographic factors.

Asking an applicant about salary history traditionally has been part of job interviews. In a growing number of jurisdictions throughout the country, however, an employer no longer can ask an applicant about salary history. That rationale is tied to the equal pay issue to close the gap in pay for previous gender discrimination. Employers are expected to make job offers based on the applicant’s worth with regard to what the employer expects to pay for the job. As of the beginning of this year, 11 states and nine localities prohibit asking the salary history question. Urge your clients to develop compensation ranges for their open jobs and to train hiring managers and interviewers to avoid asking the salary history question.

Time-off Laws

Employers must satisfy many compliance requirements related to time-off rules. Some states are providing additional leave benefits for employees on top of the federal Family and Medical Leave Act protections, adding additional parental leaves or paid sick time. Currently 11 states and the District of Columbia offer paid sick leave, along with some cities and counties offering similar benefits. On April 1, Michigan will become the 12th state to begin paid sick leave benefits. The time off rules are complicated with regard to what is paid leave and what is unpaid, what kinds and sizes of employers need to comply, and what the eligibility rules are for employees. Your clients that operate in multiple states have a tough task to manage these state-by-state and in some cases local variations.

Currently no federal laws require employers to provide paid sick leave for their employees. This year could see a push for a federal standard.

Talent Shortages

Talent shortages continue to challenge employers in 2019. According to November 2018 Bureau of Labor Statistics figures, the national unemployment rate was the lowest since 1969, at 3.7 percent with similar projections for the first quarter of 2019. Your clients feel the impact of the labor shortage because it’s harder than ever to hire qualified candidates, and employees have more options to jump to new jobs. In fact, Work Institute’s 2018 Retention Report found that while most workers (82 percent) say they are loyal toward their employers, 59 percent of that group would leave for the right opportunity.

Retaining employees for the long haul requires employers to provide the right mix of effective workplace practices and processes that enhance the organization’s culture, coupled with rewards, training and development opportunities, and solid leadership. This can create an environment where employees feel empowered to speak up when safety or issues of workplace unfairness arise. That can be an advantage for employers that are willing to listen, investigate, and correct issues quickly.

Key Takeaways

In light of the many challenges that confront employers in 2019, agents need to think about the impact of uninsurable HR-related risks on employers and consider what opportunities exist for agents to step in with leadership to mitigate them.

Starting the year right by implementing a consultative approach to effective HR and management strategies that includes policies, training, and best practices programs will go a long way toward mitigating those operational risks.

The key takeaways for your employee risk management planning in 2019 are:

  • If your clients have employees, they have risks.
  • Awareness of compliance risks with new federal, state, and local laws, plus regulations and enforcement activity, is the first step. Effective processes, training, and management leadership reduce those risks.
  • Workplace harassment awareness sparked by #MeToo continues to be a social mandate. Employees expect your clients to make it one too. A holistic approach to workplace harassment policies, training, and programs reduces exposure.
  • Coach your clients to consider the softer issues that become bottom-line risks when not appropriately managed

ThinkHR People Risk Management Suite

ThinkHR has launched the world’s first technology-powered People Risk Management (PRM) suite. ThinkHR People Risk Management will give organizations the ideal combination of content, best practices, and access to live expertise from the company’s experienced advisory team. To learn more about how ThinkHR People Risk Management Suite can protect your business, read the press release or request a download of a white paper, The Case for People Risk Management.

About Laura Kerekes, SPHR, SHRM-SCP

Laura Kerekes is ThinkHR’s Chief Knowledge Officer and leads the company’s human resources knowledge operations teams. She provides expertise to customers with complicated human resources and management issues, offers knowledge and guidance regarding management and HR best practices, and regularly shares her expertise through articles and webinars.