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Employees say the dandiest things when they call in sick. "My toe is stuck in a faucet" and "Someone glued my windows and doors shut" were among the least believable sick-day excuses heard by company managers polled in a recent survey by CareerBuilder .

One in 7 women have called into work and lied about being sick, the survey found. The number for men is 1 in 5 (what's going on guys?). And while it's not uncommon for employees to occasionally call in sick when they're actually fine, most every company has one or two sick-day abusers.

Here's what to do about employees who call in "sick" too often:

1. Merge "Sick" Days with "Vacation" Days

In an attempt to curb sick-day abuse, a growing number of companies now allot employees a specified number of paid days off for any purpose -- that is, both sick time and vacation time are considered the same thing and consolidated into one paid leave package. By doing so, employers effectively reward employees who don't have frequent illnesses and discourage employees from taking sick days off when they're not actually sick.

With such a policy in place, sick-day abusers may think twice before calling in because the absences cut into what could be their vacation. According to the 2014 Small Business Success Study, 67% of small business owner's aren't hiring , so it makes good business sense to manage your current employees well.

2. Do Away With Voice Mails

Some employees are more likely to abuse sick time if they don't have to speak with a supervisor and can simply get out of work by firing off an email or leaving a groggy-toned voice mail. With this being the case, employers should require workers, especially those whose attendance record is sub-par, to speak directly to an immediate supervisor when they call in sick.

3. Relax Your Policies

This one is a little counter-intuitive. But it's possible that your strict sick-leave policy is actually having the reverse effect and causing employees to skip out on work instead of preventing unscheduled absenteeism.

Studies show the majority of workers who call in sick at the last minute do so for reasons other than physical illness, citing personal needs and stress as chief reasons for taking time off. Workplace flexibility, on the other hand, has been shown to reduce worker stress.

In other words, giving employees more freedom, so long as their share of work gets completed, makes staff more appreciative of the company and less likely to take advantage of paid leave policies.

Finally it May be Time To Talk

Okay you've merged sick time with vacation time, done away with voice mails and boosted morale by increasing workplace flexibility, but there are still sick-day abusers at the company. Now it's time to take them aside for a sit-down and let them know that you've noticed the days off.

Emily Dusablon, an advisor at Insperity, a provider of HR services, suggests asking employees whether there's any reason in particular that is causing the absences. "Maybe you're not aware of an underlying condition," Dusablon says. "Maybe the employee needs a schedule adjustment or accommodation based on the Americans with Disabilities Act. Don't assume you know all the facts until you have talked with the employee."

And, Know The Law

If, after a sit-down, the absenteeism persists, and you choose to take action, it's necessary to first consider the laws associated with paid sick leave.

For instance, under the Family and Medical Leave Ac t, certain employers are required to offer their employees leave to care for themselves or sick family members.

Determining if an employee's circumstances qualify them for such legal protections, or if employers are on the hook for paying them during such times, is typically where things get sticky. In most cases, the safest bet is to consult an attorney before withholding pay or firing an excessively absent employee.

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EPLI covers businesses against claims by workers that their legal rights as employees of the company have been violated.

The number of lawsuits filed by employees against their employers has been rising. While most suits are filed against large corporations, no company is immune to such lawsuits.

Recognizing that smaller companies now need this kind of protection, some insurers provide this coverage as an endorsement to their Businessowners Policy (BOP). An endorsement changes the terms and conditions of the policy.

Other companies offer EPLI as a stand-alone coverage.

EPLI provides protection against many kinds of employee lawsuits, including claims of:

• Sexual harassment
• Discrimination
• Wrongful termination
• Breach of employment contract
• Negligent evaluation
• Failure to employ or promote
• Wrongful discipline
• Deprivation of career opportunity
• Wrongful infliction of emotional distress
• Mismanagement of employee benefit plans

The cost of EPLI coverage depends on your type of business, the number of employees you have and various risk factors such as whether your company has been sued over employment practices in the past.

The policies will reimburse your company against the costs of defending a lawsuit in court and for judgments and settlements.

The policy covers legal costs, whether your company wins or loses the suit. Policies also typically do not pay for punitive damages or civil or criminal fines. Liabilities covered by other insurance policies such as workers compensation are excluded from EPLI policies.

• To prevent employee lawsuits, educate your managers and employees so that you minimize problems in the first place:
• Document everything that occurs and the steps your company is taking to prevent and solve employee disputes.
• Create effective hiring and screening programs to avoid discrimination in hiring.
• Post corporate policies throughout the workplace and place them in employee handbooks so policies are clear to everyone.
• Show employees what steps to take if they are the object of sexual harassment or discrimination by a supervisor. Make sure supervisors know where the company stands on what behaviors are not permissible.

Lawsuits against Employers: Some Sobering Statistics

• Employee lawsuits have risen approximately 400% over the last 20 years.
• Of these, wrongful termination suits have risen more than 260%.
• 41.5% of these lawsuits were brought against private employers with fewer than 100 employees.
• When employee lawsuits go to trial, the employee wins more than 63% of the time.
• The average cost to settle an employee lawsuit out of court is $75,000.
• The average amount awarded to employees in jury trials is $217,000.

Consider the Costs of Defending Employee Lawsuits

• Average court costs and legal fees when settled out of court: $15,000.
• Average court costs and legal fees when the case is dismissed: $50,000 to $75,000.
• Average court costs and legal fees when the case goes to trial: $125,000.

You need to review your current risks/liabilities in light of these facts.

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"Under Solis, the amount of back pay Labor collected for workers in wage and hour enforcement actions rose to $250 million in fiscal 2013, up from $173 million in fiscal 2009 -- an increase, after inflation, of more than a third. Since the start of the Obama administration, Perez crows, the agency has "recovered over $1 billion" in lost wages.

Meanwhile, the number of man-hours spent on enforcement rose nearly half, to 1.3 million, up from 880,000."

And employment lawsuits are expensive, even if you win the costs of defense can be very high.  

Sometimes just the threat of a employment lawsuit is enough to bankrupt a franchise owner.  The underlying complaint could be baseless, but you cannot afford to defende the employment lawsuit.

As reported at the website Agents and Broker, a couple of years ago, 

"Workplace discrimination claims are at an all-time high, and small-business owners feel vulnerable.

With a difficult economy, Employment laws are making lawsuits more likely, employment practices employment liability insurance, EPL, is evolving from a high-priced option to an affordable necessity for smaller companies.

A recent survey of small-business owners conducted for Hartford Steam Boiler found that 66 percent were concerned their employees would file an employment-related charge against them, 2010."

This number has probably increased since then!

At the same time, a recent industry study by MarketStance in Middletown, Conn., indicates that only 1.1 percent of small businesses have purchased EPL insurance

"One of the chief advantages of purchasing EPL is that the insurer has a duty to defend, even when the insurer is not going to indemnify you - the insurance may not pay the legal damages, if you are found liable."

The cost of defending even an ordinary employment lawsuit could run well over $100,000, which is beyond the reach of most franchise owners.

One possible solution is to purchase EPL at an affordable rate, which will give you the piece of mind that should you be sued even for a frivolous claim, your insurer pay to defend you.

It is Always the Little Things that Trip You Up

By Doug Groves on October 14, 2014 9:53 AM | 2 Comments

Gaps in Your Defences

Remember the story of the little Dutch boy who saved Holland by putting his finger in the Dyke?

What started as trickle could have been a disaster. But, who goes around looking for holes in the Dykes? What sort of job is that?

Mostly, we are interested in sailing the Seven Seas, not standing around looking for small gaps in our defences.

Yet, there is a breed of humans who do exactly that. Auditors.

So, Call in the Auditors

A franchisor executive recently told me this story. They were a publicly traded company. Large cap.

And as auditors are trained to do, they thought they spotted a gap in the franchisor's defences.

They weren't sure.

And they wanted to be sure. (Especially, because it lead to billable hours. Lots of them.)

So, they asked the franchisor:

"Hey, Are Your Franchisees in compliance with insurance requirements as laid out in Franchise Agreement?"

The auditors were doing their job - trying to catch potential leaks before they became floods.

The Production of the Records

So, this franchisor executive asked for the production of their insurance file from staff.

Simple request.

Here is what the request produced:

1. The franchisor didn't know if they were named as "additionally insured". Meaning they didn't know if they were going to be covered if the franchisee and the franchisor were going to be sued, together. If a franchisee is sued, the franchisor almost always sued, too.

2. The franchisor didn't know how many franchisees were in compliance with the insurance requirements.

3. The franchisor didn't how many franchisees had the right amount of coverage.

4. Heck, the franchisor didn't know how many franchisees even had insurance!

He complained to me:

"KPMG asked for records - we didn't have them. Caused us a lot time and money - all of which was wasted."

Cleaning up after a flood is not so fun.

The Program Insurance Certificate Solution

I told you that true story to tell you another one.

That same franchisor executive told me how he had implemented a program insurance certificate program at the previous franchise he had worked with.

It was a simple idea:

a) Appoint an insurance broker as the preferred vendor for insurance.

b) As part of the deal, the insurance broker had to keep a record of all the insurance certificates.

c) As part of the deal, the franchisor would give the insurance broker the telephone numbers of each of the franchise owners & tell them to expect a call.

The franchisor got their insurance records for "free", and the insurance broker got the opportunity to make a lot of warm sales calls.

Better than waiting for flood, wouldn't you say.

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Get Rid of Leadership Worries Once and For All

By Matthew Kreutzer on December 8, 2013 6:56 PM | 1 Comment

This week, the Hollywood Reporter posted this article about if, and how, the film studio Universal will handle completion of "Fast and Furious 7" in the wake of actor Paul Walker's death. Although a significant portion of the movie has already been filmed, apparently most of the action sequences still remain to be lensed.

Universal has indicated that it wants to move forward with the movie (after doing some rewrites to respectfully address Mr. Walker's death), but that decision may not be up to the studio.

According to the Hollywood Reporter, the destiny of "Fast 7" may actually be decided by . . . an insurance company?

It's common practice in the film industry to insure a movie's production against accidents. This includes insuring the lives and physical health of actors in key roles. Because of Mr. Walker's death, an insurance company may have final say in whether "Fast 7" goes forward because much of the financial risk, and cost of filming reshoots or rewrites, would be borne by the carrier.

The company will have to decide whether the cost of completing the movie (which would allow the carrier to recoup some of its money upon release) will be worth the investment versus shutting down production and writing off the cost of the insurance payment made to Universal. Speculation has it that the insurance carrier will opt to proceed with production on the film, but that decision still remains to be made.

Any fan of the films knows that the impact that Mr. Walker's death had on "Fast 7" cannot be understated. His character, Brian, was central to the "Fast and Furious" franchise. Mr. Walker's absence from future films will be felt by the film's fans, as he cannot easily be replaced.

Of course, many different businesses in a variety of industries rely on key people -- without whom the business would not function smoothly.

Indeed, sometimes a key person is so important to her or his company that the loss of that person would be devastating. The same is true of some franchise companies.

Some franchisors are heavily influenced by a small group of individuals, typically the business's founders. These people and their dynamic personalities are what drive the brand strength and have created the majority of the company's goodwill. If one of these key people is lost, it could have a severe, perhaps even ruinous, financial impact on the company.

This is the type of risk that "key person" insurance (sometimes called "key man" insurance) is designed to protect against. If you are a franchisor that is heavily dependent upon the continuation of one or more key individuals, you may want to talk to your insurer about obtaining this type of coverage.

My sympathy to the friends, family, and fans of Mr. Walker. I appreciate his contributions to an enormously entertaining film franchise.

The Best Way To Keep Your Franchise Digital Information Safe & Protected

By Nancy Lanard on August 12, 2013 10:19 AM | 2 Comments

"If you can't reach out and touch it, it is not insured."

That was the gist of a court's ruling in a lawsuit brought by a company that lost a large amount of electronically stored data when an employee inadvertently pressed the "delete" key on a keyboard.

The company looked to its insurer to cover the expenses for restoring the data and to recover lost income caused by the disruption. The insurer denied coverage on the basis of policy language that limited coverage to a "direct physical loss of or damage to" covered property.

The language from the policy was meant to be interpreted in its ordinary and popular sense.

Thus, "physical" means "tangible" or capable of being touched. The information in a computerized database, in and of itself, has no material or tangible existence, unlike a storage medium for information, such as a disk, tape, or even papers in a file cabinet.

The court concluded that when the employee sent the data into thin air with an unintended keystroke, there was no direct physical loss within the meaning of the insurance policy.

The court distinguished this case from another case in which the loss of a computer tape and the data on it were covered under a policy covering "physical injury or destruction of tangible property.")

Recognizing that the dictionary was not on its side, the company that lost its data also argued that public policy should weigh heavily in favor of insurance coverage.

After all, loss of information in the same manner as occurred in this case is common, and our economy unquestionably is highly dependent on computers and the intangible information that they contain. However, the court declined to use public policy as an "interpretive aid."

There are plenty of useful legal principles for construing insurance contracts, but using public policy to redefine the scope of coverage agreed to by parties to a contract is not one of them.

The lesson: Questions of insurance coverage are to be answered solely in the language of the policies and, therefore, careful drafting of policy language is critical.

 

Franchisee Ordered to Defend Franchisor

By Eric Choi on January 2, 2013 2:59 PM | 0 Comments

In Pekin Ins. Co. v. Equilon Enters. LLC, 2012 IL App (1st) 111529; the court held that the additional insured was owed a defense under an endorsement limiting coverage to claims of vicarious liability, where the complaint alleged a "possibility" that the additional insured could be found liable, even solely, as a result of the acts or omissions of the named insured. 

In Pekin Insurance Company v. Equilon Enterprises, a customer at a Shell gas station was injured in an explosion that resulted from lighting a cigarette.  The customer filed a lawsuit asserting separate claims of negligence against the gas station and franchisor. 

The alleged acts of negligence were identical and each count alleged that the party against whom the count was asserted "owned, operated and controlled the premises." 

Franchise agreements between the gas station and franchisor imposed a duty on the gas station to name the franchisor as an additional insured under the gas station's liability policy.

Pekin, in its complaint for declaratory judgment, argued that the insurance policy at issue named the franchisor in two additional insured endorsements, one which limited coverage to negligence in the granting of a franchise, and the other limiting coverage to claims of vicarious liability. 

Initially, Pekin argued that only the first endorsement applied and limited coverage to claims of negligence in the granting of a franchise.  Unsurprisingly, the court held that where there are two endorsements, each of which purported to provide coverage, an insurer cannot argue that only one controls, for that would "render meaningless the coverage provided by the second endorsement."

As to coverage for vicarious liability, the court first distinguished cases where the additional insured was covered only to the extent that liability was incurred "solely" as a result of some act or omission of the named insured.  The court then reminded that it was Pekin's duty to demonstrate that the allegations in the underlying complaint did not potentially fall within coverage, and, that it had failed to do so because there was a "possibility" that the franchisor could be found liable, even solely, as a result of the acts or omissions of the gas station. 

The court ended by noting that the two endorsements, when read together, were ambiguous as one provided coverage for the negligent act of the franchisor, while the other, in the words of Pekin, limited coverage to the negligence of the gas station and not of the franchisor.

Concurring, Justice Gordon noted that the case was even more easily decided on the fact that the underlying complaint alleged that the franchisor "owned, operated and controlled the premises." 

Control being the "key element" of vicarious liability, Justice Gordon noted that the underlying complaint expressly alleged vicarious liability, bringing the franchisor within coverage under the second endorsement.

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• Do You Know the True Cost of Even Successfully Defending a Lawsuit by Your Employees?
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