A self-guided presentation that we recommend all employees review annually to refresh themselves on safety basics.
How confident are you that you have properly classified your employees as exempt under the Fair Labor Standards Act (FLSA), or that your employees’ exempt status has not been affected by COVID-19 workplace changes? Over the past year, the pandemic has transformed how we do business – converting brick-and-mortar workspaces into home offices and online meeting platforms, converting your employees into remote workers, and altering employee pay, hours, and job duties. With these changes, employees that you previously classified as exempt may no longer meet a particular exemption under federal wage and hour law. Continue reading the rest from our friends at Fisher Phillips by clicking here.
Purpose of background checks
There have recently been several situations in which a university/college instructs and/or requires that all chapter advisors and house corporation volunteers submit to background checks. We would like to address the request for background checks from a risk management standpoint.
Background checks have long been used in the hiring process and are designed to protect existing employees, assets, members and other individuals with whom the employee may come into contact. A more recent trend has occurred where some type of background check is required for adults who work with young children, youth, or even young adults. “Background check” is a common term; however, there are two main types of background checks, each searching for different information and providing different results.
- Criminal Background Checks: This will look into the criminal past of an individual, revealing such things as misdemeanors, felonies, and sexual offenses.
- Credit Checks: A credit check will uncover an individual’s past credit history. This can include loans, mortgages, other lines of credit, and bill-payment histories. Credit reports will not disclose the nature of a problem, such as divorce, medical bills, job loss, etc. In order to qualify to receive credit reports, there are significant compliance hurdles as well as a set up fee.
Background Checks for Employees
Criminal background checks are considered prudent business practice for employees who have significant control over employer property and for those who manage physical and financial assets as well as any other employees. If you choose to run background checks, it is recommended that you develop a policy which would define the positions that are subject to background checks, as well as how you will act upon the information that is discovered during a background check.
We believe that this may yield some benefit to you in the process of hiring employees. However, we have reviewed our worker’s compensation, employment practices and bond claims experience and the claims that occurred with these employees would not have been predicted from the review of a background check. As a tool, it can be of use in specific situations of employment such as where an individual handles the expenses or the inventory of the chapter house property.
Background Checks for Volunteers
Criminal background checks for volunteers have been generally used when adults are working with minors. Because chapter advisors and house corporation volunteers for a sorority work with members who are almost exclusively adults (above 18 years old), this is less of a concern. We see many inherent issues with any requirement of the sororities to subject their volunteers to these types of requests. What is it that the requestor is hoping to achieve with the securing of background checks for the volunteers?
Critical points to consider:
- The organization runs the risk of getting too much information, which if abused and not handled properly could develop into a violation of the volunteers’ right of privacy.
- It would be administratively difficult, if not impossible to maintain any type of a current and accurate list of alumnae volunteers either serving as chapter advisor or as house corporation volunteers.
- If said list is posted but later not maintained, your liability is increased should a volunteer’s name not be on the list and a problem emerge from her actions.
- Alternatively, a posted list may increase the organization’s liability for a defamation of character lawsuit, should a potential volunteer feel that she was unfairly included on such a list
- The cost to secure the background checks would be a significant financial burden upon the organization. Should the university take on this responsibility, it begs the question of why would they want to “invite in” greater liability?
- The member groups have a good system in place to address behavioral issues of their collegiate members however we are less confident in the area of alumni issues. Should some disturbing information materialize from a background check, this may be problematic for the group to deal with the issue.
- If a background check would yield some concerning information on a person, who makes the decision on the volunteer, the university or the sorority?
- Should there be a volunteer who is not allowed to work with a chapter, what problems does this present to their status, as a member of your organization?
- The only way to secure any type of a background check is to have the individual’s Social Security number. This is problematic for a number of reasons:
- Volunteers may be hesitant to release this information
- Any location that has the SS#’s of individuals has significantly increased their exposure to a data breach claim of this information which is referred to as Personally Identifiable Information (PII)
- The costs associated with data breach allegations is substantial with the state law requirements of notification, providing credit monitoring services and the reputational harm to the organization
- The Sorority community has worked very diligently these last several years to eliminate the need for our members SS#’s and this would undo that work and could put the organization at great risk.
- Volunteers are often hard to engage and retain and the requirement for a background check may deter someone very qualified from volunteering.
The only instance in which we feel the benefits of getting a background check on a volunteer outweighs the risk is for any volunteer who is serving as a treasurer and has access to substantial funds of the organization. A modest credit check may reveal some prior behavior that should be noted.
However, we have also reviewed our past claims of volunteers and, once again, a background check would not have revealed any prior violations and therefore would not have prevented any loss or claims. What we find with these types of claims, primarily embezzlement, that it is an independent action due to current issues facing the volunteer. We do not often see “career criminals,” diminishing the effectiveness of this risk management tool for our clients.
It is our stance that background checks pose a substantial increase of risk to our clients and we are opposed to this requirement. We fail to see the need for this additional information and in creating this requirement the increased risks far outweigh any potential benefit.
Background Check Provider
Travelers, the insurance company that provides the workers’ compensation coverage for MJ Sorority clients, has partnered with Intellicorp to offer comprehensive and affordable background checks for Travelers customers. IntelliCorp is a nationwide provider of comprehensive background checks and employment screening solutions. Refer to this resource for additional information. Register directly via this site and contact your Client Executive for your policy number.
Claim Involving a House Director
The House Director purchased personal items on the Chapter’s account. The Chapter became aware of unusual purchases such as gift cards and began to investigate further. During the investigation, the Chapter discovered that when they would issue a check to Costco, the House Director would purchase gift cards for her personal use instead of food for the Chapter. The insurance carrier paid $7,326.90. The total amount of the loss was $9826.90 A $2,500 retention was applied.
The House Director would alter/increase Sam’s Club invoices when she submitted them to the House Corporation for reimbursement. The insurance carrier paid $134,036.87. The total loss was $234,036.87. A $100,000 retention applied.
The House Director opened a second Costco account membership without the knowledge of the House Corporation. The House Director used the card to purchase Costco Cash Cards, gift certificates and other personal items. The insurance carrier paid $53,066.94.The total amount of the loss was $58,066.94. A $5,000 retention was applied.
Claims Involving the House Corporation
The House Corporation Treasurer embezzled approximately $37,000. The majority of the funds were taken by the Treasurer writing checks for cash. The embezzlement was discovered when the new House Corporation Board took over and realized that payroll withholding tax had not been paid, which lead to an audit. At the time the money was embezzled, the checks did not require two signatures. The insurance carrier paid $32,000. A $5,000 retention was applied.
The House Corporation Treasurer embezzled money from the House Corporation funds. The House Corporation Treasurer wrote checks for cash and for personal items. The checks only required one signature. The claim was discovered when a new House Corporation Treasurer took over. The insurance carrier made a payment of $146,859. The total amount of the loss was $149,359. A $2,500 retention was applied.
The House Corporation Treasurer wrote checks to pay for the remodeling of her house. Only one signature was required on the checks. The loss was discovered by another member of the House Corporation during an annual review. The insurance carrier made a payment of $16,856.96. The total amount of the loss was $19,358. A $2,500 retention was applied.
The House Corporation Treasurer issued checks to herself and made ATM withdrawals using the House Corporation’s bank card for personal purchases. The loss was gradually discovered when the Treasurer became difficult to reach, checks started bouncing and bills started to go unpaid. At the time, the House Corporation only required one signature to be on checks. The insurance carrier paid $33,143. The total amount of the loss was $35,643. A $2,500 retention was applied.
A House Corporation President stole over a million dollars over a seven year period. The House Corporation President would use House Corporation funds to pay several of her personal credit cards every month. Most of the payments were coded under food, house supplies, and repairs. The House Corporation President was the only board member. Therefore, no one else was reviewing payments issued out of the House Corporation’s account. The loss was discovered when another volunteer assumed the role of the House Corporation President. The volunteer immediately questioned payments issued to credit cards companies as the House Corporation did not have a credit card in their name. The insurance carrier paid the policy limit of $500,000. The total amount of the loss was $1,600,000.
A House Corporation President stole $106,348. The loss was discovered as the House Corporation President failed to respond to a new House Corporation member. The new House Corporation member was able to follow a paper trail to find out the bank the House Corporation used. It was discovered that the account had been depleted. The funds were used for the House Corporation President’s personal use. Only once signature was required to be on the checks and the House Corporation President was the only person with access to the House Corporations account. The insurance carrier paid $101,348. A $5,000 retention was applied to the loss.
A House Corporation President colluded with a third party and stole approximately $3,000,000. The House Corporation President set up a separate account without the knowledge of the other members of the House Corporation. The House Corporation used dual controls for legitimate business purchases. The insured carrier paid the policy limit of $500,000.
Claims Involving Chapter Officers
The Chapter Treasurer wrote checks to herself by signing the previous Chapter Treasurer’s name to the checks. The loss was discovered when the Chapter discovered unpaid bills. After learning of the unpaid bills, the Chapter ordered bank statements and discovered the embezzlement. The insurance carrier paid $4,674.11. The total amount of the loss was $7,174.11. A $2,500 retention was applied.
The Chapter Treasurer stole Chapter funds by issuing reimbursement checks to herself. The Treasurer falsified a spreadsheet and made up expenses that she allegedly incurred. When questioned about this, the Treasurer could not provide any documentation or receipts. The loss was discovered when bills were not being paid. The insurance carrier paid $10,782.73. The total amount of the loss was $13,282.73. A $2,500 retention was applied.
Claims Involving Headquarter Staff
The Finance Director wrote checks to herself and other entities. The loss was discovered after the Finance Director was terminated. While cleaning out her desk, checks with forged signatures were discovered. This prompted the organization to review their bank accounts. It was discovered that the Finance Director had been making payments to her mortgage and credit card companies for a few years. The insurance carrier paid out $80,043.59. The total amount of the loss was $85,043.59. A $5,000 retention was applied.
An employee and her husband colluded to steal badges that had been returned to the organization and stored at Headquarters. Additionally, the employee was also misdirecting the shipments of new member badges to her home address and selling for scrap value. Both the former employee and her husband were arrested. The insurance carrier paid the policy limit of $500,000. The total amount of the loss was $696,803.
Retentions are used by Chubb Insurance and they are also called deductibles, which is a more commonly known term. You will find varying retentions depending upon:
- When the claim occurred (insurance company keeps increasing the deductibles as the claims experience trends in the negative
- When the claim occurred and whether there was evidence of dual controls
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The employee fell on the ramp outside the house and injured his leg. The insured disputed the employee’s injury because he was working the next day and was not limping. The injured employee then told the insured he would be off work because the doctor did not know the full extent of his injury without an MRI. Despite the concerns of the insured, the claim was accepted. The employee was released to work, but with restrictions with which the insured could not comply. The doctor requested surgery on the employee’s knee, which the employee wants to do; however due to the employee being overweight, he could not find a surgeon who would operate. The issue is whether the carrier is liable for the injured employee’s gastric bypass surgery, which the employee looked into before the injury. The carrier submitted their opinion to panel doctors, and they found the carrier is liable for the bariatric surgery. The injured worker’s knee surgery is on hold until the bariatric surgery is completed, and the employee is a better candidate for knee surgery.
In summarization, there was an admitted knee injury but due to non-industrial health issues (obesity), the employee’s attorney and adjuster agreed to an Accredited Medical Exam specifically on need for bariatric surgery on industrial basis. The report confirmed the liability on the carrier to provide surgery, which is scheduled soon. The workers’ compensation carrier has paid $59,757 thus far and has set aside an additional $78,884 in reserves (what the carrier expects to pay additionally).
Issues to Discuss
- What procedures do you have in place to prevent slips and falls?
- What policies could have been in place to prevent a claim like this from happening in the first place?
Acting fast when you have a claim is always important, but especially so when an employee’s health is concerned. Use our First Report of Injury form to get started, and get in touch right away with Heather Cox if you have questions.
We are receiving an increasing number of calls asking for our risk management opinion on House Directors with pets in the chapter house. Historically, we have addressed these types of situations on a case-by-case basis, but with the recent influx in the number of questions, we decided that a position paper on the topic was in order.
Ownership of any pet is a liability exposure. In light of recent claim activity and the corresponding risk management concerns (see attached article for reference), we are now asking that that any House Director with a pet secure a tenant’s policy (also referred to as “renter’s policy”) with a minimum liability limit of $500,000. We recommend that the House Corporation require proof of insurance with a minimum liability limit of $500,000 from the House Director before allowing the House Director to have a pet on the premises.
We strongly discourage House Corporations from allowing the House Director to own or care for any of the following:
- Wild animals kept as pets, such as iguanas, snakes and tigers;
- Akitas, Alaskan Malamutes, American Straffordshire Terriers (or any of the variety/breed commonly known as “pit bulls”), Boxers, Chow Chows, Doberman Pinschers, Dogo Argentinos, Filas, German Shepherds, Huskies, Mastiffs, Presa Canarios, Rottweilers, Tosas and wolves/wolf mixes;
- Any dog trained as a guard or attack dog;
- Any animal/pet that needs to be restrained or confined to ensure the safety of people present in the same area;
- Any animal with a bite or other liability loss history.
The Personal Lines Department of MJ Insurance may be able to place a tenant’s/renter’s policy for House Directors. Please contact your Client Executive for more information.
A major retailer faces a lawsuit from a prison ministry organization and a job applicant who allege the employer’s application process discriminates against individuals with a criminal history.
According to the lawsuit, the retailer applies an overly-strict process of eliminating any individual with a criminal history, regardless of the nature of the crime or when it occurred. As a result, the screening policy “disproportionately disqualifies Black and Latinx applicants and employees from job opportunities.”
The case involves one qualified applicant who received a job offer, only to have the retailer rescind the offer when her criminal background check revealed a traffic-related misdemeanor conviction from 10 years prior. Brianna Smith “Macy’s Hit with Discrimination Lawsuit Over Criminal History Screening Policy” www.legalreader.com (Jun. 28, 2019).
Commentary and Checklist
A thorough screening process is a best practice for any employer hoping to hire a new employee. This can include credit checks (depending on the job position); interviews with personal references; interviews with professional references; skills testing; medical testing (post-offer); and a criminal history background check.
Criminal background reports will disclose both arrests and convictions of felonies and misdemeanors. They also reveal court records, warrants, sex offenses and incarceration records. However, employers need to tread carefully when using this information to make employment decisions.
The Equal Employment Opportunity Commission (EEOC) encourages employers to avoid blanket practices that exclude people from employment based on criminal record, and instead manage each applicant on a case-by-case basis. Employers should consider the nature and gravity of the crime, when it occurred and the nature of the job. Also, employer should give the applicant an opportunity to respond to the report and their past criminal offense.
Also, keep in mind that many states have passed “Ban the Box” laws that prohibit inquiring about criminal records on a job application form. This is to enable an applicant to make it through the interview process, perhaps as a finalist, and then to have their past offense evaluated for any relevancy to the job under consideration now.
Here are further considerations to help employers limit the discrimination risk associated with criminal background checks in the hiring process:
- Train managers, hiring officials, and decision-makers about Title VII and its prohibition on employment discrimination.
- Develop a narrowly tailored written policy and procedure for screening applicants and employees for criminal conduct using the EEOC’s Enforcement Guidance and individualized assessments. https://www.eeoc.gov/employers/smallbusiness/facts/tips_criminal_records.cfm; https://www.eeoc.gov/laws/guidance/arrest_conviction.cfm
- Identify essential job requirements and the actual circumstances under which the jobs are performed and determine the specific criminal offenses that may demonstrate unfitness.
- Determine the duration of exclusions for criminal conduct based on all available evidence.
- Document any determinations made regarding an applicant’s criminal record, and the justification for your employment decisions.
- When asking questions about criminal records, limit inquiries to records for which exclusion would be job-related and consistent with business necessity.
- Keep information about applicants’ and employees’ criminal records confidential and only use the information for the purpose for which it was intended.
Written exclusively for ChubbWorks, the employment practices liability carrier for MJ Sorority, January 21, 2020.