Last week we posted about the importance of Employment Practices Liability Insurance (“EPLI”) for rapidly growing startup companies.  If you read that post, it should be pretty clear why there’s so much risk exposure related to employment practices.  I wanted to follow up that post with a quick EPLI risk exposure checklist for startups.  Here’s a brief cross section of practices/policies that startup companies should consider putting into place before ramping up hiring.

1. Employee Handbook

Setting up a uniform code of conduct for your employees is crucial.  You want clear guidelines on how employees should act in the workplace.  It sounds like no fun, but in reality this will help shape the company culture.  So how do you go about doing this? Draft and implement the official employee handbook.  Luckily this isn’t as daunting of a task as it may sound.  There are plenty of free resources out there on the interwebs…just google it!  Here’s one example just for reference.

Generally, employee handbooks start out with a bit of background and the company’s mission statement.  The rules of the workplace follow, including office hours, dress code (no XL white tee shirts…), vacation days, salary, benefits, grounds for termination, etc.   The handbook should also state your willing compliance with all of the laws related to employment practices, including Title VII, the ADA, and the ADEA.  How do you cover these?  Try broaching these subjects for starters:

  • Employment at Will
  • Discrimination
  • Sexual and Other Workplace Harassment
  • Equal Employment Opportunity
  • Disabled Employees and Reasonable Accommodations (
  • Procedures for Reporting, Investigating and Resolving Employee Complaints

One other thing that should be in there is an Information Security and Social Media Policy.  This isn’t really limiting EPLI risk, but it definitely helps out on the E&O, Cyber, and Media liability front.

 

2. Hiring Policies

Another good thing to have in place is a definitive hiring policy.  Again, there are plenty of resources out there to help you formulate this one (here’s a decent example).   The goal with this policy is to set definitive guidelines for prospecting, qualifying, and on-boarding employees.   You want this document to contain clear guidelines for the whole process from the moment a prospect is put in to the queue through their first day of work.  Here are some things to consider:

  • Prerequisites to be considered for hiring
  • Manner in which job openings are posted / advertised
  • Procedures surrounding internal transfers
  • Interviewing process (from screening through each round of interviews)
  • Any required background checks
  • Authorization to present a job offer
  • Any paperwork required post-offer and pre-orientation

 

3. Firing Policies

One of the major risk exposures related to EPLI is wrongful termination.  It’s pretty obvious why…nobody enjoys getting fired, and it tends to bring out the crazy in people.

Therefore, it’s super beneficial to have definitive procedures in this area: when termination is appropriate, what lines had to be crossed to reach that point (warnings, violations, etc…),  and how the termination is carried out.  For example, you definitely want to have strict access revocation procedures in place so that a fired employee can’t pull an office space and wreck your company from the inside out.

Keep in mind that procedures will differ for termination for cause and without cause.  Here’s a good place to get started with your termination policies.

 Summary

While this is by no means a completely exhaustive list,  this short EPLI risk exposure checklist is a great starting point for most startups.  Of course, it’s near impossible to completely eliminate risk in this area…but that’s what Employment Practices Liability Insurance is for!  Implementing these policies will reduce not only your risk exposure, but also your premiums for EPLI insurance.  Its a double win and totally worth the minimal time investment to implement these changes.

Leave a Reply

Your email address will not be published. Required fields are marked *