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Employment Practices: The Importance of An Employee’s File

Posted on: February 5, 2014 by Caitlin Morgan

Employment Practices The Importance of An Employee’s File

Employment Practices: The Importance of An Employee’s File

At Caitlin-Morgan, we provide access to markets for Miscellaneous Professional Liability coverage, which includes Directors & Officers Liability, Employment Practices Liability Insurance (EPLI), and Cyber Liability. In addition to offering these needed coverages, we also stress the importance of Best Practices and implementation of loss control measures to help mitigate risk and reduce the potential for claims.

One of the issues making front-and-center news is the risk of employment practices claims especially when it comes to discrimination, sexual harassment, class-action suits and retaliation claims. In 2012 alone, 99,412 charges were filed with the U.S. Equal Employment Opportunity Commission (EEOC), which is just short of the record high set in 2011. Moreover, in a recent survey of employers by a major insurer, the most common charge against companies is retaliation following an employee’s complaint involving an incident of discrimination or sexual harassment. In addition, 25% of those surveyed have had an employment practices-related event in the past three years, with the average cost of an EPL event at $70,267.

What’s key to remember is that even the best-run companies are subject to employment-related allegations and lawsuits. Which is why it is so important to continually review the organization’s procedures regarding employee relations, including company culture, training, hiring and firing practices, reviews, complaint and follow-up procedures, among many other measures. One good practice, according to legal experts, in reducing risks of potential claims of discrimination and retaliation by employees is through thoughtful management of personnel files, which involves, among many steps, that employers ensure documents that do not belong in a personnel file are kept in separate files and locked up.

As part of the organization’s training, employers should be mindful of the types of documents that belong in one’s personnel files and those that need to be kept separately. The rule of thumb, legal experts cite, is that employers should keep documents containing subjective information separate. This is because when managers make personnel decisions about an employee and the file contains information about protected characteristics of that employee, such as race, age, medical condition etc., the file may serve as circumstantial evidence in a discrimination claim against the employer.

How do you discern what belongs in a personnel file and what documents should be kept separately? Use the following as a guideline:

Documents for the Personnel File: Any objective information related to the hiring, promotion, demotion, compensation, discipline or discharge of an employee, including, but not limited to: application; resume; offer letter; performance reviews; disciplinary notices; termination letter; resignation letter; compensation and deduction information; acknowledgment of receipt of handbooks; attendance records/receipt of vacation and personal leaves; change in name, address, telephone number; beneficiary regarding insurance provided by company; emergency contact information; and training records.

Documents Kept Separate from Personnel File: Any subjective information regarding the employee, including, but not limited to: subjective notes about the employee during the interview process, on application, resume etc.; reference checks or letters of reference; documents pertaining to criminal or other investigation of the employee; credit reports; immigration and naturalization information (I-9 Forms); medical files of any records informing of a medical condition, including drug test results; wage garnishments; any photos of employee, including photo of driver’s license, passport etc.; and EEO forms. This file should not be available to supervisors who have no legitimate need for it.

Of course, in addition to strong risk management practices, Employment Practices Liability Insurance is critical in protecting your organization should an employee file a claim even if the allegations are groundless. Surprisingly, however, only 30% of the employers surveyed carry EPLI coverage, with 60% mistakenly believing they are covered under their General Liability policy.

Caitlin-Morgan offers EPLI insurance and can help a company protect itself against employment-related issues such as allegations of discrimination, sexual harassment, wrongful termination, wage-and-hour disputes, etc. Give us a call at: 877.226.1027.

Sources: Chubb, MONDAQ

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Posted in: Employment Practices Liability Insurance