Reduce Your Risk of Claims by Making the Right Choices


Business owners are forced to make tough decisions, including substantial cutbacks, due to the challenging economic conditions. Unfortunately, staff shortages and prospective layoffs often lead to an increased risk of claims ranging from worker misclassification to wrongful termination. Here’s how to reduce the risk of claims.

Document. It is essential to have a written policy in place and then follow it. The next step is to thoroughly document each and every step when downsizing or redistributing duties. Make sure all managers are familiar with the process and implement it equally for each employee. Proper notification, submission of employer-provided equipment, final paycheck and other considerations should all be standardized in advance of terminations.

Review. Make sure your written policy is up to date and conforms to all state and federal requirements. Change is inevitable so it’s important to use the services of a professional to make sure the latest information and knowledge is up to date. An annual review should be conducted to make sure you comply with all recommendations and are not inadvertently exposed to additional risk in the event of an audit. Stringent new guidelines and incentives regarding worker classification should be carefully understood prior to cutting jobs in order to avoid potential claims.

Evaluate. Calculate the cost of cutting back prior to making a final decision. New mandates related to worker misclassification place severe penalties on employers that cut jobs then hire back employees under the ‘independent contractor’ status.

Re-schedule. Reducing the number of workers often results in an increased workload for the remaining employees. Pay special attention to creating job duties that comply with existing employment contracts, or take time to recreate the job position as well as provide proper training well in advance. Requiring employees to perform duties for which they are not compensated or properly trained is a sure-fire way to increase the risk of litigation, lawsuits or injury. It’s also a good idea to carefully consider the wisdom of re-hiring a recently downsized employee. To stay on the safe side, consider using a third-party employment service provider or outsourcing company instead.