Limiting Lawsuit Exposure Through Outsourcing

If you are a small or mid-sized company, you may be more susceptible to discrimination lawsuits than you might think. Having the right human resources professionals assisting your company could give you just the protection you need to avoid costly litigation. To provide this kind of protection, companies are increasingly looking to outsourcing HR.

Discrimination Claims

Often times, smaller businesses have a razor focus on revenues, profit and other factors that weigh significantly on a company’s success but neglect things like potential lawsuits. Even risk conscious companies may not have all of the tools they need to successfully navigate the often complex legal and regulatory regime related to employment. It may not be that these companies are simply burying their heads in the sand and hoping for the best.  Instead, they may just have under-skilled (or no) dedicated human resource personnel.

An article published by Law360 (quoting the 2015 Hiscox Guide to Employee Lawsuits) stated that organizations with fewer than 500 employees have an 11.7% chance of having an employee file a suit or claim for discrimination. With the average cost of responding to and settling a discrimination claim being close to $130,000, this percentage should be significant to all business owners.  If chance puts you in the crosshairs of a potential lawsuit and you have neglected your human resource function, be prepared to pay out.

Lawsuit Prevention

Although there is no way to completely prevent potential discrimination claims, businesses with sophisticated human resource departments can significantly minimize the risk. The Benjamin Franklin axiom that “an ounce of prevention is worth a pound of cure” is applicable here. First and foremost, a company should dedicate time and resources to understanding and implementing the requirements of the Equal Employment Opportunity Commission (EEOC). This should be coupled with training managers on EEOC requirements and providing an adequate means of resolving any issues that could give rise to a claim before involving the EEOC or the courts.

The Problem Facing Many Small Businesses      

The problem with many small businesses is that creating and staffing a human resource department can be costly. Human resource managers with the proper competencies typically demand a higher compensation and may require a support staff. Smaller companies with limited resources may seek to minimize this cost by staffing less seasoned professionals and/or making it a department consisting of one individual, which may not give the company the appropriate focus, skills and expertise required to avoid this potential liability. Remember, the responsibilities of human resource departments encompass myriad tasks in addition to avoiding discrimination claims, including the following:

  • Payroll.
  • Recruiting.
  • Benefits.
  • Training.
  • OSHA regulation compliance.

The Solution

What owners and managers may not know is that there are companies that dedicate their time to providing fully competent and staffed human resource departments for small to medium-sized companies. Similar to the way in which many companies outsource their legal needs to law firms, companies can also outsource their human resource needs. For a fee that is significantly less than staffing your own department, you have all that you need to effectively manage your most important resource.

ModernHR and CPEhr

Two companies that have multiple offerings for multiple types of businesses are ModernHR and CPEhr. Whether you own or manage an international firm, non-profit organization, medical practice, real estate firm, physical therapy practice, or any other type of business, these companies can provide you with dedicated professionals that can handle all or some of your human resource needs. Even if you already have a dedicated human resource department, these companies can offer additional resources.

So, don’t leave your most important resource unattended or under managed and expose your company to unnecessary risk.  

For more information on how ModernHR and CPEhr can assist your business, follow the link above.