CONSIDER THE POSITIVES AND NEGATIVES OF EMPLOYEE LEASING

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.

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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.

UNDERSTAND THE RIGHTS AND RESPONSIBILITIES OF TEEN EMPLOYEES IN THE WORKPLACE

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.

INDEPENDENT CONTRACTORS SHOULD EVALUATE BUSINESS CONTRACTS CLOSELY

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.