August 2009

In the modern workplace, men and women work together for eight or ten hours a day; sometimes even longer. When people spend that much time together, it’s not surprising that occasional romances will bloom. Many people have met their spouses at work. Unfortunately, workplace romances don’t always have happy endings. When a couple in an office breaks up, the atmosphere can become, at best, uncomfortable and, at worst, hostile. Productivity can suffer as the ex-partners feud with each other. More serious, in some cases the firm might have a significant financial exposure when love goes wrong.

Relationships between two people of equal position in the company might not be cause for concern, but romances involving supervisors and their subordinates can expose the company to legal liability. Workers outside the relationship might detect favoritism toward the subordinate when he or she receives pay raises, promotions, or other desired rewards. Conversely, if the couple breaks up, the subordinate might be sensitive to any actions that smack of retaliation. In the worst cases, the subordinate could decide he or she is a victim of sexual harassment and take legal action against the company. The federal Equal Employment Opportunity Commission received almost 14,000 complaints of sexual harassment in 2008. Almost 30% of these settled in the injured employee’s favor, costing the employers $47 million, not including damage awards won through litigation.

Employers who wish to avoid close relationships with government investigators should consider several options, including:

• Not having an office romance policy. Firms who choose this option might emphasize anti-harassment and anti-discrimination policies instead.
• At the other extreme, some companies have outright bans on employee romances. Although this might have some appeal, it can be difficult to implement because the forbidden behavior could be hard to define. Also, courts might not uphold such a ban.
• Some companies require employees who date each other to notify a company representative, such as the human resources manager, when the relationship begins and if it ends. This might protect the company from ensuing sexual harassment claims.
• Many companies have policies against spouses working for the same company or against employees supervising significant others, spouses, or other relatives. This can make it less likely that other employees will perceive favoritism, but the company must apply the policy equal to members of both sexes to avoid discrimination claims.
• Some companies actually require employees in a relationship to sign contracts. These agreements state that the employees have entered into a voluntary relationship, affirm that they understand the company harassment policy, describe how to report complaints, and describe acceptable and unacceptable behaviors.

In addition to adopting one of these options, employers can take some steps to reduce their chances of having to fend off sexual harassment claims. First, they should communicate to supervisors that relationships with subordinates should be avoided. They should create an environment where supervisors and other employees feel safe to report improper behavior. They should have policies against harassment and implement procedures for making complaints. They should take steps to end direct reporting relationships between romantic partners by transferring one of them, if possible.

Human nature being what it is, there will probably always be workplace romances. Thoughtful consideration and implementation of policy alternatives will help protect a company from potential resulting lawsuits. However, all the best precautions might still fail to prevent litigation, so all employers should carry Employment Practices Liability insurance. One of our experienced insurance agents can provide advice on the available coverage options and companies. With preventive measures in place and risk financing in the form of a good insurance policy, employers can focus on their top priorities: Growing their businesses.

The recession that started in December 2007 has had a major impact on the construction industry. The demand for new homes has collapsed together with the general housing market. Owners of commercial projects have put them on hold, either due to lack of financing, cash flow problems, or lack of demand for the space. Although surviving might seem like the top priority for contractors, a period of economic slowdown might be the perfect time to take steps that will plant the seeds for long-term profitability.

One step with an immediate payoff is using equipment more efficiently. Are employees making unnecessary trips up and down ladders to retrieve tools and materials? Consider using scaffolding or scissor lifts, which will allow the worker to bring all necessary materials in one trip while also keeping him safer than a ladder would.

Now might be an excellent time to review contracts with an eye toward inserting clauses to improve worksite safety. For example, you might want to require tools with safety enhancements, specific fall protection measures on scaffolding, footwear that meets a specific protection standard, or eye protection. Improved safety practices will reduce liability insurance claims and make the business more attractive to insurance companies, resulting in lower rates.

During a slow economy, you probably have downtime between projects. Use this time to think about how to improve safety on the next job. Meet with the general contractor to discuss ways to prevent accidents. Meet with the subcontractors who will bid on the work. Ask them about how they will prevent accidents from happening. Take their answers into consideration when you evaluate their bids.

Don’t forget training. A downturn affords you time you didn’t have before to train employees on safety, different types of projects (such as environmentally sensitive jobs), and more efficient work processes. When the recovery comes, you will be in a position to bid on more and different jobs and your safety practices will make you attractive to general contractors.

Together with training, consider replacing outside safety consultants with your own jobsite superintendents. Give the supers the training they need to manage worksite safety effectively. This will give you stronger supers, allow for immediate safety improvements on the job, and save money that would have been spent on consultant fees and higher insurance premiums.

Arrange meetings with the loss control professionals at your insurance company. Ask them to evaluate your worksites, provide training materials, or even to come in and discuss loss prevention with your workers.

If your safety record is already solid, talk to one of our insurance agents about changing to a loss-sensitive insurance rating plan. These plans, which normally apply to Workers Compensation insurance but can also apply to other coverages, adjust your premium based on your loss experience during the policy term. Very large contractors might want to consider a retrospective rating plan, which bases the final audit premium almost entirely on the contractor’s loss experience during the term. Contractors with sound safety practices stand to benefit enormously from this type of approach.

The economy will eventually rebound. When it does, the companies that were proactive during the slowdown will reap handsome rewards in the form of more contracts, higher revenue and greater profits. By investing in efficiency, safety and training, contractors will be poised for future growth. The economy is at a standstill; your business shouldn’t be.

The American workforce is growing older and the economy is struggling. These two factors indicate that, as companies lay off workers to cope with a slow economy, older workers who lose their jobs might increasingly take their former employers to court for alleged age discrimination. However, a recent decision of the U.S. Supreme Court could make it harder for workers to win those lawsuits.

Jack Gross, a 54-year-old claims administration director for a financial services firm, was reassigned in 2003 to the position of claims project coordinator; some of his duties were transferred to a person in her forties whom he formerly supervised. Because he lost some of his duties, he considered the move a demotion and sued his employer a year later, claiming a violation of the Age Discrimination in Employment Act of 1967. At trial, the judge instructed the jury that it must find in Gross’s favor if he proved that he had been demoted and that age played a part in the employer’s decision. The jury did return a verdict in his favor and awarded him lost wages. An appeals court reversed the ruling, saying that the judge’s instructions were incorrect, and Gross appealed to the U.S. Supreme Court.

On June 18, 2009, a divided court ruled against Gross. Writing for the majority, Justice Clarence Thomas said that a person suing for a violation of the ADEA must prove that the employer would not have taken the action if not for the person’s advanced age. The employer does not have the burden of proving that it would have taken the action regardless of the employee’s age, even when the employee has evidence that age was one factor in the decision. He also wrote that the ADEA requires the employee to show that age was the primary reason for a demotion, not just one of multiple reasons. He noted that Congress had the opportunity to prohibit considering age among other factors and neglected to do so.

Justice John Paul Stevens denounced the majority’s interpretation of the ADEA as “an unabashed display of judicial lawmaking.” Noting that the court had interpreted other anti-discrimination laws to prohibit discriminatory actions based partly on a protected characteristic, he said it was inconsistent and arbitrary for the court to apply a different standard to ADEA violations. He pointed to a previous decision where the court held that an action was illegal if discrimination against a protected characteristic was “a motivating factor” in the decision. Justice Stephen Breyer added that to apply the majority’s standard “is to engage in a hypothetical inquiry about what would have happened if the employer’s thoughts and other circumstances had been different.” The answer, he wrote, will often be far from obvious.

This decision should be good news for employers and their insurance companies. Employment Practices Liability insurance policies normally cover employment terminations, demotions, decisions not to hire or promote, and denials of employment benefits based on factors such as age, sex, race, religion, sexual orientation, and others. This decision should result in fewer successful lawsuits against employers for alleged age discrimination, with a corresponding drop in payments under EPLI policies for these actions. Although insurance companies will still incur the cost of legal defense, they are less likely to pay for judgments against employers.

Because the court based its reasoning on Congress’s failure to clearly prohibit actions based even in part on age, members of Congress may seek to change the law. Employers should continue to avoid any actions that older workers could perceive as unfairly discriminatory. If that proves to be unworkable, they should work with their attorneys, and our insurance agents, to ensure that their practices are legal and their insurance coverages adequate.