Age Discrimination: Avoid The Whole Mess With A PEO

This article will detail some of the potential risks of hiring and employing people, particularly how it pertains to the age discrimination in employment act (ADEA), which prevents discrimination in the workplace based on age. We will also shed light on how HR Outsourcing, specifically, Professional Employer Organizations (PEOs) can help reduce the risk employers face. ADEA was put into place in order to protect people and make workplaces more fair. However, it creates major risks and boundaries for small companies to comply with. Without a formal HR department, which is usually the case in companies of 2-50 employees, staying abreast of laws like ADEA creates cost and an obligation to comply and manage to the satisfaction of the law. Employers that do not know this will quickly wind up in a courtroom. Observance of the Law: The ADEA is a federal law that forbids discrimination in the workplace of employees or prospective employees that are 40 years of age or older. Enforced by the Equal Employer Opportunity Commission (EEOC), it is illegal to deprive someone of being hired, being offered promotions, or receiving benefit packages based solely on age. It is also illegal to fire someone based solely on age. The ADEA applies to any company with 20 or more employees for each working business day in at least 20 weeks during the working year. However, certain states have their own anti-age discrimination laws to stop companies from getting around this, including forbidding discrimination of a person of any age. In the Supreme Court’s ruling in Meacham, et al. v. Knolls Atomic Power Laboratory 31 employees were laid off due to an involuntary reduction-in-force (RIF) after a voluntary buy-out offer fell through. Of the 31 employees, 30 were in the age group of 40 or older. Even though the company collected performance, critical skills and flexibility scores prior to termination; twenty-eight of them filed a disparate impact claim under the ADEA. A jury ruled in their favor, awarding them more than five million dollars. The 2nd Circuit Court of Appeals confirmed the verdict, ruling that the company failed the “business necessity” test; that is, the employees alleged at least one substitute, non-discriminatory method for achieving the RIF without having a different impact on older workers. How PEOs help with ADEA: It is important to understand that with all of the following services we will touch upon below, it is not just a job for the Professional Employer Organization to perform them well, it is in their best interest. All PEOs co-employ with their clients, which basically means they’re splitting the risk of managing your employees. Be sure to check out our other articles to learn more about co-employment.

HR Policy Audit

At the onset of a relationship with PEO, they will perform a complete audit of their client’s policies and procedures as it pertains to hiring, firing, promotion, demotion, etc. This will ensure that underlying structure of the company complies not only with ADEA, but every other regulation that pertains to that company. They will develop an employee handbook in order to properly communicate company policies to employees. Often PEOs identify problems before they happen, which is ideal for all parties. Management Training Courses PEOs regularly provide training to managers and supervisors not only on employee relations and employee communication, but also the various laws that are required to be followed. ADEA is certainly one of them. Training on proper interview techniques and managing through a lay-off are just a few that are offered. PEOs also offer training on discrimination and harassment for the entire workforce to learn, and it can be company policy for all employees to complete the training. As a business owner, it’s not just your actions that can lead to trouble, but the actions of any one of your employees. Employee education and training is critical to running a safe and stable company. Ongoing HR Support Throughout a client’s relationship with a PEO there are bound to be some sticky situations to manage through. PEOs provide continuous support to their clients in order to manage for success, but maintaining proper compliance. For example, what are the proper and safest steps for terminating a non-performing employee that is in a protected class such as being over 40 or a minority? PEOs will consult clients on how to properly document performance, employee warnings, and exit interview. COBRA, Unemployment, and Workers Comp Management So an employee was terminated. They are not suing the employer, but there is still a workload that is created. PEOs maintain all COBRA administrative obligations for their clients and ex-employees—however, be sure to know the additional costs for this, as PEOs usually charge extra for COBRA administration. PEOs all help manage faulty unemployment claims–if an employee makes a claim, it is up to the PEO to fight the claim in court. In most cases, if the employee is awarded unemployment benefits, it will affect the PEOs rating, not the small business. Workers compensation insurance is ranked as having the one highest propensities for insurance fraud, often faulty claims are made by employees who know they’re on their way out. Since a Professional Employer Organization co-employs with their clients, their clients will usually operate on the PEOs workers comp policy, so again, its not just a service, its in their best interest to manage and investigate all claims properly. Be sure to ask your PEO in fact you will be on their workers comp policy, sometimes a client will not be without the point being properly addressed. Employment Practices Liability Insurance (EPLI) So the worst scenario is upon us, an employee has filed a claim in court for wrongful termination due to ADEA. Most PEOs offer EPLI insurance to their clients with protection ranging from $1-$2 million to offset legal fees, settlements, and claims. Again, be sure to make sure the PEO you’re dealing with is in fact building EPLI into their price. Getting EPLI coverage separately can be very expensive, estimated numbers would be about $5,000 per year for a 10-20 person company, however that can vary. These services are just a few things that Professional Employer Organizations offer their clients. In fact, there are many other services that will help manage employees in compliance. There are over 700 PEOs throughout the country, and they are not created equally. Having expert advice on how to screen and select the right PEO is becoming more important. Find a quality PEO broker to help with the analysis, they usually provide free service and can drastically help reduce risk and price.