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Employment Practices Risks: Reality Check

I just finished listening to an interesting podcast by the Freakonomics authors about the risks that gun use presents. For example, they indicated that the odds of a gun causing a person's death are about 1 in 10,000, while the chances of a backyard swimming pool causing a death are some 100 times greater. Does this mean that we should focus on swimming pool control and forget about gun violence? Although I doubt that anyone would suggest this, it does give food for thought.

For the past dozen years, I've been in a catbird seat observing the incident of employment practices liability exposures and lawsuits. My conclusion: Employee Liability Practices Insurance cannot cover the major personnel practice exposures facing businesses. For example, there's no risk mitigation for making poor hires, fostering low productivity, triggering high turnover, or failing to have workers play like a team. The frequency of such exposures, and their expense, far exceed those associated with employee lawsuits.

Let me share another statistic. In 2012 the U.S. had one of the worst years ever for mass shootings, with approximately 700 fatalities (four times the annual average toll). As you might expect, these sensational and painful cases grabbed plenty of headlines. However, in the same year, roughly 20,000 Americans committed suicide using guns, killing some 11,000 other people in the process - and garnering little, if any, media attention.

The same thing holds true for workplace risk exposures. How many articles are you going to read about the impact of bad hires or productivity left on the table every day? Where's the drama in that? However, a, juicy lawsuit in which a sexual harassment claimant gets a multi-million dollar verdict will get plenty of press.

Likewise, more than half of the discussions at any HR conference will involve compliance exposures. Meanwhile, the greatest risk to your company's survival has little or nothing to do with compliance litigation. In my 30 years as an attorney, I've seen only a handful of small businesses go under because of employee lawsuits - and hundreds of companies of all sizes go out of business because of poor management practices.

As with the gun/swimming pool example, we need to understand the relative probabilities of the various risks employers face.

None of us need the horror of mass shootings or nasty employee lawsuits. These events make for good press (as they say, "if it bleeds, it leads.") When we run 75 mph as a society, it's hard for us to connect without doing so through a mass pity party. The media taps into this social reality on a daily basis with sensational headlines and lead stories, making it all too easy to divert business owners and managers from focusing on significant employment risk management issues.

Food for thought...

 
Shawna Kreis
Other articles by: Shawna Kreis
Categories: News, Gates-Cole Insurance, Employee Matters, Tips
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