Business Protection Bulletin

In the U.S. today, one result of corporate downsizing, is that there are many independent contractors in the marketplace. After picking themselves up off the ground and dusting off their overcoats, many former members of “Corporate America” have struck out on their own. With that shift comes freedom, but also new anxieties, and, perhaps, new found insurance issues. One such issue is that of the business contract.

Detailed business contracts with explicit and often confusing legalese have become a common document for independent contractors to evaluate. The contractor must often either acquiesce to unfavorable terms dictated by corporate legal departments, or forego the contract. Below are some suggestions on how to resolve the contractual dilemma of whether or not to sign on the dotted line.

1. Speak with your attorney. Although it might not be practical to have a lawyer review every contract offered to you prior to signing, it is usually better than the alternative. It is probably better to limit the legal review to advice rather than negotiations, though there are some contract negotiations for which it would be appropriate to have a lawyer or a representative agent present. However, for a typical small contract where you are being asked to sign boilerplate language, it might send the wrong signal to your client.
2. Consult with our insurance agents. Contracts generally contain clauses that might impact your insurance coverage. They might require either indemnification, certificates of insurance, and/or additional insured status for the client (on your Professional Liability, General Liability, and/or Workers Compensation policies to name a few). Each of these provisions could impact your insurance as follows
   • Indemnifications – a typical indemnification provision looks something like this: “Consultant (or contractor or subcontractor)” shall indemnify, defend, and hold harmless Client against any and all claims, liabilities, losses and expenses arising out of or in connection with Consultant’s performance of the Services hereunder … ” This is considered a unilateral indemnification. It is the least favorable to the contractor and you would do well to request a mutual indemnification provision where both parties agree to indemnify the other for liability arising out of their respective negligence. The worst that can happen is your suggestion being rejected.
   • Certificates of Insurance – it is quite common for certificates of insurance to be requested by your client. This documentation of your insured status serves as a confirmation to the existence of your coverage. With the request often comes a provision for notice to the client if coverage lapses. Check with your insurer to see if he will agree to this provision. Many insurers don’t have a mechanism for notifying certificate holders of the imminent lapse of a policy and will not agree to, though some will compromise with less onerous “endeavor to” wording, such as, “we will endeavor to notify you within 30 days of the termination of the policy … ”
   • Additional Insured – additional insured status for your client can provide an acknowledgement of the liability that you have taken on in the contract and effectively transfers the liability to the insurer, subject to all the terms and conditions of the policy. Check with our agents to see if there is any cost for adding on additional insureds. If there is any charge at all, it is usually nominal.
3. Review your Liability insurance contracts for exclusions. Many liability contracts exclude contractual liability, with the exception of liability that would attach to you in the absence of the contract. An example of a contractual liability that might be excluded would be a penalty for failing to meet a deadline. On the other hand, indemnifications are often considered a liability you would incur regardless of the contractual provision. For instance, if a suit is brought against you and your client, and it is clear that it was your work that was being questioned, your insurer might offer to defend your client to avoid the potential for a hostile witness.
4. Create your own engagement letter. It is always a good idea to spell out your thoughts regarding payment terms, work expectations, limitations of liability, and other aspects of the work you will perform. In lieu of or in addition to a client’s contract, this letter could help to prevent future misunderstandings.

Every year, millions of teenagers join the workplace for the first time. A first job can be a positive experience for many, teaching them discipline and responsibility in addition to giving them some extra money. However, some teens find themselves working in hostile environments. Their supervisors might treat them unfairly because of their sex or race, harass them, hassle them about reasonable work accommodations, and retaliate against them if they complain to upper management about these conditions. Employers who tolerate mistreatment of employees, including teens, could find themselves in trouble with the law.

The federal Equal Employment Opportunity Commission described several examples of harassment of teens on its YouthAtWork.com Web site:

• In Pennsylvania, a 19 year-old shift supervisor at a Mexican restaurant sexually assaulted a 16 year-old female employee. His manager accused the girl of making it up, but after the supervisor confessed to the police, the EEOC sued the restaurant, which paid $150,000 in restitution to the employee and a fine to the EEOC.
• A store manager at a fast food place in Kansas harassed and sexually assaulted a 14 year-old girl. He eventually went to prison, but because the company had permitted him to harass at least four female employees, it paid restitution, wrote letters of apology, and was required to implement mandatory sexual harassment training for employees.
• Several women, both teen-aged and older, were sexually harassed by a store manager at a California bagel shop. Their complaints to management did not improve the situation, and eventually some of them quit. The EEOC sued the shop, the offending manager lost his job, and the owners of the shop paid a steep penalty.

The EEOC’s Web site lists several rights and responsibilities of teen-aged workers, including:

• The right to work free of discrimination.
• The responsibility to treat other employees without discrimination.
• The right to work free of harassment.
• The right to complain about job discrimination without punishment, and the responsibility to inform management of discrimination.
• The right and responsibility to request workplace changes for the worker’s religion or disability.

The right to keep medical information private. To avoid harassment claims from any employees, young or old, employers should:

• Adopt, promote, and enforce a formal policy against sexual harassment.
• Take reports of harassment seriously. Investigate all reports and take appropriate action, if required.
• Emphasize to supervisors and managers that they are not to retaliate against employees who complain of harassment.
• Provide training for managers on how to recognize sexual harassment and how to receive complaints.
• Train new employees on how to recognize harassment and how to make complaints.

Employers should also carry Employment Practices Liability insurance (EPLI) to protect themselves against the financial consequences of claims that do occur. EPLI policies cover the employer’s liability for discrimination, wrongful termination of employment, sexual harassment, rights violations, and other harmful acts committed by company managers. One of our professional insurance agents can give advice on the different policies available and their cost.

Employers have a responsibility to provide a safe working environment for all employees, but that responsibility is magnified when it comes to teenage employees. Keeping your workplace harassment-free will ensure a happy, productive workforce and keep your attention where it should be — on growing your business.

Employee leasing firms earned $68 billion in gross revenues in 2008, according to the National Association of Professional Employer Organizations (NAPEO). Their clients, primarily small businesses with fewer than 20 employees, outsource to leasing firms the responsibilities for payroll administration, employee benefits, Workers Compensation claim management, human resource management, and related operations. Businesses trying to reduce costs and focus on growth might find employee leasing to be an attractive option. It is an option, however, that comes with advantages and disadvantages for both employer and employee.

The NAPEO cites a number of benefits from employee leasing. The benefits for employers include:

• Access to professionals with expertise in human resources, payroll, risk management, and employee benefits.
• Assistance with labor law compliance.
• Professional claim management.
• Reduced and controlled administrative costs.
• Professionally written employee handbooks, policies, and procedures.
• Relief from some employment-related liabilities.
• Reduced Workers Compensation costs resulting from improved workplace safety.

Employees might also benefit from leasing in several ways.

• Access to benefits that might not have otherwise been available, such as 401(k) plans, cafeteria plans, insurance, and credit union membership.
• Timely and accurate paychecks.
• Protection under federal labor laws.
• Improved communication among and between employees.
• Employees who move from one leasing client to another do not lose eligibility for benefits.
• Efficient and timely claim processing.
• Assistance with employment-related issues.

Employee leasing carries some risks. A poorly managed leasing firm might mishandle payroll and benefits or could go out of business, leaving the client with its obligations. The employer might also be legally liable for the actions or inactions of the leasing firm. For example, if the leasing firm fails to comply with regulations, it could be the employer who bears ultimate responsibility. Also, the employer is ceding control of its workforce to a third party who might or might not do things the way the employer would. Employee relations could suffer during the transition to leasing.

From the employees’ standpoint, the employer would have to fire them and the leasing firm would have to re-hire them. Also, there is no guarantee that the leasing firm’s benefits will be as good as those the employer offered. Some employers have also used leasing as a means to avoid dealing with unions, though federal rules might limit their ability to do this.

Employers who decide to lease their employees should evaluate the leasing firms it considers carefully. The financial stability of the firm and of the insurance companies providing its benefits are a major consideration, as the failure of either could leave the employer with unfunded obligations. The firm’s experience in the employer’s industry, track record of success, and safety record are also important. Another consideration is the range of benefits the firm offers; a plan that does not meet the employer’s needs will not be worth the expense of hiring the leasing firm.

Employee leasing is a big step and not one to be taken lightly. Employers must weigh the upsides and downsides of leasing and make decisions that are best for their employees and their businesses.

In recessionary periods it is common practice for companies to downsize their operations. Downsizing would naturally include both your physical assets and personnel. Taking stock of your insurance requirements and re-evaluating your policy coverage should also be included in your downsizing strategy. And, even if you are not downsizing in the immediate future every business owner ought to take a close look and audit their insurance package anyway. If you are wondering why you should bother, the reason is simple: You could be missing out on some substantial savings!

Let’s elaborate further on the two main reasons you might want to audit your insurance coverage:

• Paying for what you don’t need – If you are selling off assets then simply put, you don’t need to be paying for the insurance coverage. Similarly, if you’re reducing personnel then you don’t want to be paying for unnecessary Workers Compensation coverage, do you? If your policies are based on the value of your current assets then you will want to re-adjust your coverage and save on the premiums in the process. You might even use some of the premium savings to boost your EPLI coverage because laid off workers are not only disgruntled, but litigious minded when the pink slip lands on their desk.
• There are bargains out there – Even insurance companies have to compete vigorously in a recessionary marketplace. Better deals can be obtained if you shop around. If you cannot find better competitive prices for your premium dollar, you will likely find alternative policies that offer better coverage for the same premium.

Start with an audit

Contact your insurance broker to help you perform a full insurance audit of your current situation. Think about your needs down the road by considering best and worst case scenarios. Don’t procrastinate and wait until the last minute when your policy is about to expire. An audit is best performed a few months prior to your policy expiration.

Ensure that your broker also comes back with other quotes from your insurance carrier’s competitors. This will at least prompt a very competitive bid from your current insurance carrier. They want to keep your business.

Remember to re-evaluate your insurance deductibles

When reviewing your policies don’t forget to review your current deductibles. If you are prepared to assume more risk then you can lower your premiums even further by increasing policy deductibles. Call us to arrange for a policy review with one of insurance professionals.

Workers Compensation claims are a major cost of doing business, and the length of time a claim remains open has a large effect. Claims that stay open for long periods of time are more likely to involve attorneys, high medical bills, and significant payments for lost wages. According to the Insurance Information Institute, between 2002 and 2007 the medical cost per lost-time claim (claims where the injured employee is unable to work) rose 50% faster than the annual rate of medical inflation for the economy as a whole. The institute estimates that attorney fees increase claim costs by 12% to 15% with no net gain in benefits to the worker. Most states index the maximum payment for lost wages to the state’s average weekly wage, a figure that generally rises each year.

Limiting the duration of Workers Compensation claims is an important strategy in the effort to hold down costs. To do this, employers have several options at their disposal:

• Prompt notice of claims to the insurance company hastens the onset of medical treatment, speeds up the injured worker’s recovery and return to work, and reduces the likelihood that he will hire an attorney. Therefore, requiring workers to immediately report all injuries, however minor, and promptly reporting them to the insurance company can have a huge impact on the duration of a claim.
• A prompt and thorough investigation of the incident is just as important. Interviews with the injured worker and witnesses, photographs, and other information gathered as soon as possible will help the insurance company to properly adjust the claim.
• If the employee will be out of work for an extended length of time, the employer should keep in regular contact. An injured worker who gets the sense that his employer does not care will become a receptive audience for plaintiff attorneys. Employers might want to call the worker periodically to check on their condition, offer assistance with completing the paperwork, and generally to check on their emotional state.
• The employer should have a good understanding of the state law pertaining to the waiting period for benefits covering lost wages. This is especially true if the employer operates in several states, as their laws might vary widely. Understanding how the law applies to the worker’s situation will help the employer set expectations properly. This reduces the chance of misunderstandings that can lead to problems down the road.
• Building relationships with the physicians treating the employee will keep the employer better informed as to his condition, treatments, medications, and expected duration of disability. This should eliminate surprises and help the employer get the employee back to work sooner.
• Return to work programs can shorten claim duration and reduce costs significantly. These programs permit an injured employee to return to work in some capacity before he has recovered to the point where he can resume his previous duties. They reduce payments for lost wages, meet the worker’s need to feel productive again, and remove incentives for the worker to hire an attorney.
• Employers should review loss reports with their insurance agents and claim adjusters and ask questions about losses that do not appear to be progressing toward closure. They should also look for patterns in the loss reports to identify correctible factors that raise the cost of lost-time injuries.

Employers owe it to their workers to provide a safe workplace and benefits to help them should they get hurt. With some extra care and attention, employers can meet those obligations and keep costs in check. Contact our office today to see how we can help!

Workers Compensation premiums represent a major personnel expense for most organizations. Injuries that cause employees to miss work are especially costly, in terms of both lost wage compensation and lost productivity. Also, the longer a worker is disabled and unable to work, the more his future earning power decreases and the more likely it becomes that he will hire an attorney. For these reasons, it is advantageous to both employer and employee to get the injured worker back on the job as soon as possible. As a result, many employers have implemented return to work programs.

Under a return to work program, the injured employee performs a different job while receiving their prior level of pay. The new job should be matched to their current physical capability, reflecting their state of recovery from the injury. To succeed, this requires a good working relationship between the employer and treating physician. The employer needs accurate information as to the tasks the worker can safely perform; otherwise, the result might be a second, more severe injury. If the worker’s physician will not cooperate or provide a realistic estimate, the employer or insurance company might have to require a physical examination by an independent physician.

A return to work program should be one piece of a comprehensive and coordinated loss management program. The elements of the program should include:

• Immediate reporting and investigation of accidents
• Arrangement of primary medical care
• Return to work program
• Regular communications with the injured worker

To assist in the arrangement of primary care, the employer should provide the treating physician with job descriptions that explain each job’s physical tasks in detail. Meetings with the physician to explain the nature of the employer’s operation will help match a job to the worker’s capabilities. Communications between the physician and the employer are vitally important. The employer might want to arrange for direct reports from the physician or regular reports delivered by the employee. The ideal situation is one where the employee can assume light duties without missing any time. Barring that, limiting lost time to a week or two will still keep the claim’s cost down, resulting in premium savings for the employer. The experience modification formula, which adjusts the premium based on loss history, gives the most weight to losses of $5,000 or less. Getting the injured worker back on the job quickly will help keep the loss well under that limit. Since losses remain in the calculation for three years, the effect of holding down claim costs is long lasting.

Of course, return to work programs have pros and cons. The pros include:

• Limiting or eliminating lost work time
• Keeping the worker involved in the work environment
• Eliminating the need to locate, hire and train a replacement
• Increasing the chances of success should the worker refuse the new duties and sue for lost wage benefits, since the employer can show that it made a reasonable job offer

Among the cons are:

• The employer will pay the employee’s full wage for reduced productivity
• An employee with a bad attitude about his alternative duties could lower morale among the other employees
• If the alternative arrangement does not work out, returning the employee to lost wage benefits will wipe out any cost savings

Although individual cases might not produce the desired results, employers should realize long-term savings by implementing return to work programs. Beyond the verifiable dollar savings, return to work programs can give the employer a more stable, happier workforce and a good reputation with potential employees.

Between December 2007 and July 2009, the U.S. economy lost almost seven million jobs. In times of economic uncertainty, employees worried about their jobs might look toward the Workers Compensation system for supplemental income. Workers who have ignored aches and pains over the years and haven’t reported them might decide that the time is right to make a claim. Others who might have been healthy and who suffer an injury that they might have previously ignored might now decide they have nothing to lose by reporting it. Employers facing the possibility of having to lay off employees must be aware that their Workers Compensation costs could rise. However, there are steps they can take to keep a lid on costs.

Once risk managers learn that a workforce reduction is coming, they can prepare in a number of ways. They should become familiar with the unemployment insurance laws in each affected state, including the levels and durations of benefits and how they affect Workers Compensation benefits. They should investigate other state programs available to employees that could offset Workers Compensation costs. They also might want to meet with their insurance broker to review pending claims and identify those that might become problems.

Another priority is claims documentation. The firm should back up employee records and store both in secure locations. Claim records should be updated with the latest available information. The risk manager might want to create a video record of conditions in the building prior to the layoff so that they can demonstrate to a court what the work environment was like. Finally, exit interviews that include written questionnaires completed by the employees can serve as evidence as to the employees’ physical condition at the time of termination.

When the layoffs occur, the company should handle them as sensitively as possible. Losing a job is a traumatic experience for anyone; clumsy communications from the employer can inspire a worker to seek retribution. To the extent that the employer can help affected employees, it should do so. For example, it might want to offer resume preparation, outplacement services, or employee assistance programs for those who need emotional support. Also, if the company can afford them, it might want to offer severance payments to the employees in return for their written agreement to forego any future claims against the company. Finally, though it might seem unlikely, the company should have contingency plans in place should any of the employees become violent, either at the time of the layoff or later.

To defend against exaggerated or fraudulent claims, risk managers should ask the broker and the insurance company to coordinate claims handling through one office and one senior claims adjuster. They should also request that the insurer assign the defense of all cases to one law firm. To assist in the defense, they should make relevant records, such as videos, employee files, job descriptions, and exit questionnaires, easily accessible to the attorneys and any medical specialists the firm might hire. Finally, they should identify key personnel who might be available to testify as to job requirements and conditions, and make a list of their names and contact information available to the attorneys.

Cutting jobs is one of the most difficult things any organization must do. The goal of a workforce reduction is to lower the firm’s costs. Uncontrolled Workers Compensation expenses resulting from the action could wipe out any benefits from it. Careful planning and handling of the action and its aftermath can go a long way toward ensuring that the company’s pain will not be for nothing.

In the 1800s, manufacturers and builders started using a natural resource that vastly improved the quality of their products. It added strength to materials, resisted heat, electrical and chemical damage, and absorbed sound. When mixed with cement and used in building construction, it enhanced fire safety. By the middle of the 1900s, manufacturers were using it in insulation, automobile brake pads, drywall, lawn furniture, fireplace cement, gaskets, and a host of other products. Unfortunately, this material, asbestos, can cause serious lung disease and even death in those who inhale its fibers. Builders and manufacturers who used it have endured hundreds of thousands of lawsuits from the victims or their survivors.

Claims resulting from exposure to asbestos fall into the category of what is known as “toxic torts” — injury and damage lawsuits stemming from exposure to substances proven to cause illness or injury in people. Other substances that lead to toxic torts include lead paint, toxigenic mold, industrial chemicals, pesticides, and toxic landfill waste. These lawsuits can ravage a company’s balance sheet, ruin a good reputation that took years to build, and divert resources and attention away from normal operations and toward legal defense.

Asbestos has been associated with instances of cancer affecting the protective lining that covers most of the body’s internal organs. This form of cancer was killing 3,000 Americans a year by the late 1990s. Most of the victims had long-term occupational exposure to asbestos. A Rand Corporation study estimated that 27.5 million people in the U.S. were exposed to asbestos in their workplaces between 1940 and 1979. Consequently, by 2002 more than 730,000 people had sued more than 8,400 firms for illnesses caused by the fiber. The cost of asbestos-related litigation in the U.S. has exceeded $250 billion.

Toxigenic molds produce a chemical that can be dangerous to people exposed to large amounts of it over a long period of time. Normally, the mold is not present in large enough quantities to be harmful. However, concern has grown during the past several years about the possible effects of long-term exposure to these molds. Newer energy efficient homes have become air tight, preventing moisture from escaping and creating an environment in which mold can grow. A Texas woman who sued her insurance company over its refusal to pay for cleaning up mold that allegedly made her home unlivable won a multi-million dollar damage award; a court later reduced the amount. Although health experts have not reached a consensus about the actual harm mold can cause, the increased attention to it makes future litigation likely.

The standard Commercial General Liability insurance policy does not cover most losses resulting from pollutants. However, alternatives exist: Pollution Legal Liability insurance policies. These policies cover damage to the organization’s own property; injuries or damages that others suffer as a result of a toxic incident for which the organization is liable; and associated cleanup costs. Depending on its terms, such a policy might also cover new injury claims, cleanup, and the discovery of new toxic substances after the organization implements a pollution remediation plan. Our professional insurance agents can help locate the appropriate coverage at a reasonable cost.

Toxic torts are likely to remain a financial threat to all organizations for the foreseeable future. Controls to prevent injuries or to make existing ones less severe, coupled with the right insurance company, can help ensure that your organization will survive this threat.

During the past several decades, Congress and state legislatures have enacted numerous laws protecting workers from unfair discrimination by their employers. These laws affect all but the very smallest employers and cover a wide variety of employee characteristics. Failure to abide by them can cause a great deal of trouble for employers. Under Title VII of the Civil Rights Act of 1964, employers may not discriminate against employees on the basis of race, national origin, religion, or sex. The prohibition applies to aspects of employment such as:

• Hiring and firing
• Compensation, assignment, or classification of employees
• Transfer, promotion, layoff, or recall
• Job advertisements
• Recruitment
• Testing
• Use of company facilities
• Training and apprenticeship programs
• Fringe benefits
• Pay, retirement plans, and disability leave
• Other terms and conditions of employment.

Employers are also prohibited from taking actions that would have a disparate impact on a protected class of employees. For example, firing all employees who cannot work on Sundays might have a disparate impact on individuals whose religions forbid them to work. Title VII also bars discrimination based on pregnancy. Finally, the law prohibits “reverse discrimination,” which occurs when an employer goes so far to protect members of a minority or protected group that it harms members of other groups.

Other types of restricted discrimination include:

• Pay discrimination based on gender. The federal Equal Pay Act of 1963 requires employers to provide equal pay to men and women for equal work on jobs where the performance requires equal skill, effort, and responsibility, and which are performed under similar working conditions. However, employers can make allowances for seniority, merit, quality or quantity of production, or differentials based on factors other than sex.
• Age discrimination. The Age Discrimination in Employment Act bars deliberate discrimination against workers over 40. However, it does not prohibit actions that have a disparate impact against older workers as a group.
• Disability discrimination. The Americans with Disabilities Act forbids employers from discriminating against workers who are disabled, have a history of disability, or whom the employer considered to be disabled. The law requires the employer to provide reasonable accommodations for the disabled employee, such as modified work duties or schedules, special tools, and unpaid time off, if needed.
• National origin. Under the Immigration Reform and Control Act, employers may not discriminate against U.S. citizens or non-citizens who are in the country legally on the basis of their national origin.

Some of these laws also prohibit harassment against protected employees; retaliation against those who make complaints; and discrimination based on employee’s marriage to or association with a member of a protected group or participation in schools or places of worship associated with these groups. Although federal law does not prohibit discrimination based on a person’s sexual orientation, some state and municipal laws do. Other local laws may forbid discrimination against employees with children, welfare recipients, and on the basis of marital status. Employers should familiarize themselves with the laws in their states.

Even the most well-intentioned employers might find themselves the target of an employment discrimination action. For this reason, every employer should consult a professional insurance agent about purchasing Employment Practices Liability insurance. This coverage protects the employer from the cost of suits and damages alleging most types of discrimination. They do not, however, cover fines or penalties assessed by regulators. One of our agents can help you obtain appropriate coverage at a reasonable cost.

Workers who used to endure unfair discrimination now have the law on their side. Employers must avoid discriminatory practices, for the good of their workers and their businesses.

Inherent in the employer-employee relationship is the understanding that the employer should supervise an employee’s work activities. Effective supervision ensures that the necessary work is being performed at the time it’s needed, resulting in an efficient and profitable operation for the employer. Also, a minority of workers, if left unsupervised, might do or say things that can hurt a business’s reputation, reveal trade secrets, or even incur legal liability. Although this has always been true to some extent, the rapid changes in communications technology during the past two decades have heightened concerns about it. An employee can hurt a business by saying something inappropriate on the phone, sending an offensive e-mail, visiting Web sites that are inappropriate for work, or in a variety of other ways. As a result, employers are using new technology tools to monitor their employees’ activities.

Some employers frequently monitor employees’ phone conversations. Federal and state law generally allows this for quality control purposes when an employee is on the phone with a client. Although some states require advance notification of monitoring to the parties to a call, federal law allows monitoring of business calls with no prior notice. A federal court decision does require employers to stop listening when it becomes apparent that a call is personal in nature, but an employer might monitor all calls made from phones designated as “business use only.” It is also legal for employers to obtain lists showing phone numbers dialed from a particular extension and the duration of each call. Although the law does not require notifying employees in advance, employers might wish to do so to head off problems.

Courts have also recognized an employer’s right to monitor use of its e-mail system. A federal court held that a private sector employee did not have a reasonable expectation of privacy in e-mail messages where he described management in profane and derogatory language. Another court ruled against a CIA employee who violated agency Internet use policy by downloading pornographic material. The federal Electronic Communications Privacy Act of 1986 permits employers to monitor employee e-mail in the ordinary course of business, when the employee consents to monitoring, or when messages are stored on a computer located on an in-house network. Employers may even monitor an employee’s keystrokes on a computer to see what and how much text the employee is producing.

Oregon-based law firm DuVal Business Law recommends that employers take the following steps to avoid legal problems arising out of e-mail monitoring:

• Working with legal counsel, develop a comprehensive e-mail and Internet use policy for employees.
• The policy should make it clear that employee communication over the employer’s network is not private and that the employer will monitor them for legitimate business reasons.
• The policy should state the workplace’s rules for Internet use, including types of sites employees may not visit and types of files they may not download. It should also state the penalties for breaking the rules.
• Finally, the policy should state how long the employer will store electronic files and how it will delete them.

DuVal also recommends either having employees sign a copy of the policy before they may receive access to the system, or posting the rules on the login screen they see at the start of each day.

Even with these precautions, employee lawsuits for invasion of privacy are still possible. Employers should consider buying Employment Practices Liability insurance to cover them for the cost of defending these suits and the cost of any court-ordered judgments. With this coverage and common sense policies in place, employers can take advantage of Internet technology while not placing themselves at undue risk.