HR PEO Blog

Liability

StaffScapes review of the devastating labor initiatives on the November Ballot.

Initiative #74 would “hold a business executive criminally responsible for the business’s failure to perform a duty required by law if the official knew of the duty and the failure to perform it.” The term executive extends to partners, officers, directors, managers, proprietors, supervisors and includes executives of non-profits and home owner associations. This initiative would extend criminal accountability to business executives who were aware of their business’s failure to perform a legal duty.

Listed below is the potential impact of initiative #74:

Ø      Current state and federal laws already hold business executives accountable with recent federal laws strengthening criminal and civil penalties for executives who commit fraud.

Ø      Initiative 74 does not require the party bringing the suit to have legal standing, allowing politically-motivated or frivolous charges to be brought against business executives.

Ø      Initiative 74 also allows the plaintiff’s attorney fees to be reimbursed if successful but does not extend that to the executive defending the suit.

Ø      Extending the definition of an executive down to manager level can hinder recruitment of employee talent.

Ø      Community leaders and volunteers may be reluctant to serve on nonprofit boards and home owner associations due to fear of prosecution.

Ø      Initiative 74 creates a way to avoid accountability by creating an immunity loop-hole for executives who report knowledge of their business’s failure to comply with the law.

Should your son or daughter, working as a shift-manager at a local fast food restaurant, face criminal prosecution for a hair on a french fry? Do you think a teenage supervisor at your city’s recreation center should be imprisoned for the pool’s chlorine level being slightly too low? Should you have criminal liability for volunteering on your home owners association? Do you want political organizations to be able to threaten criminal lawsuits against individuals employed by companies that they do not like?

If the organized labor initiatives are successfully passed this November, our state’s economic growth will be dramatically stunted for years to come. Please check future editions of our blog to view the other initiatives that can have a devastating impact to Colorado.

Sources: Tomlinson & Associates; Economic Development Council of Colorado

Though EPLI insurance continues to become more costly, the need for coverage has risen as well. With an upward trend in employment-related lawsuits and government administrative actions, employers cannot afford to believe they have all their bases covered.

According to a recent HRMagazine article, Employer Practices Liability Insurance, though unheard of only ten years ago, has become a vital investment for businesses of every size. Similar to personal insurance coverage, like health insurance; you may find it unlikely that you will get cancer; but if you do, it will cost a great deal. An employer may believe that the organization will never have to use its policy, but if they do, it would be a costly mistake to not have coverage. With a recent $30.6 million verdict in a sexual harassment case, it is evident claims are becoming more expensive. Furthermore, employers must recognize that during troubling economic times, the likelihood of receiving a claim increases. And while verdicts have been increasing monetarily, there is also an upward trend in small businesses being battered by more frivolous claims.

You can consider buying this type of coverage, but that is still treating the symptom and not the cause. It is possible to put in place employment practices that reduce your exposure to employer related liabilities whether you purchase insurance or not. These practices are often easy to implement and cost very little, if anything, to maintain. Make sure the person in your firm is putting these procedures into practice in your business.

A house bill has recently been introduced that will significantly change the liability of misclassifying employees as independent contractors.

A bill concerning employee status was introduced in the House on July 30 by Rep Jim McDermott (D-Wash). The bill, H.R. 3408 or Taxpayer Responsibility, Accountability, and Consistency Act of 2009, makes it substantially harder to avoid employment tax liability for misclassifying an employee as an independent contractor, repealing the safe harbor provisions of current Section 530 in the Code. The bill also states “any individual who performs services for a taxpayer may petition (either personally or through a designated representative or attorney) for a determination of the individual's status for employment tax purposes”. In addition, H.R. 3408 would significantly increase (by 1,200% with some fines) employer penalties for misclassification.