February 8, 2008

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EAP Bragging Rights to Lawsuit Prevention

Are you still marketing your employee assistance or behavioral risk program with the argument that it costs an average of $7,000 to replace a secretary whom the EAP might otherwise help salvage? Not bad, because a six-figure executive being fired for behavioral problems and personal troubles costs even more--a lot more.

Still, I'd like to suggest that you rework your marketing presentation. There is a better argument for an EAP--prevention of lawsuits. It doesn't exactly fit with the health care model so many of us consistently employ, but the real financial power and future of EAP promotion rests within this other "continuum of care" for corporate financial health.

You may have missed the news about Lockheed agreeing to a record settlement on January 2, 2008, to award $2.5 million to end a racial discrimination suit brought by an electrician who says he was subjected to harassment and threats to his life during the two years he worked there.

You probably could not find a soul at United Healthcare, Aetna, or Magellan who knows a thing about this lawsuit. Indeed, health insurance companies do not wander into this murky arena of loss prevention. And they don't insure against it. Not at all.

This is the purview of property casualty insurers whom EAPs never talk to. (Most EAPs anyway. I have convinced a few lucky ones to run, not walk, to visit these folks.) These big boys of loss control include such billion-dollar entities as Lloyd's of London, AIG, Chubb, USF&G, and many others. They write Employment Practices Liability Insurance.

Well, so what makes this EAP-rich territory? Let me explain what made the $2.5 million lawsuit I just mentioned possible. By the way, that amount is peanuts. Other companies have paid employees well over $100 million for similar offenses. Toyota and a bunch of others.

All these sky-high awards were made possible by the 1991 Civil Rights Act. ("What!? Wasn't that in 1964!?" you say.) Yes. It was, but it was not-so-quietly amended in 1991 to allow, among other things, UNLIMITED PAYOUTS in jury awards to victims of discrimination.

Guess what came the following year? Employment Practices Liability Insurance. That's right. The first such policy was developed in 1992. Now more than 80 property casualty insurance companies write this insurance. Deductibles are can be $50K and higher.

OK, next question: How many times in your professional EA life have you heard employees threaten to sue the company while they are sitting in front of you? As a little experiment in my last full-time EAP job, two of our staff counted seven such statements within a span of a couple months.

Do you believe that EAPs play a significant role in dealing with anger, employment-related complaints, and other issues that reduce the risk of lawsuits in work organizations? Indeed they do. But EAPs aren't bragging about it. It may be our most cost-beneficial activity--calming people down and helping supervisors not shoot themselves and the company in the foot.

You do not know how many confidential out-of-court lawsuit settlements exist for the large employer you currently service. Some organizations have many. Very few management officials are privy to their details, but EAPs are reducing the risk of these types of lawsuits every day.

There is no way to calculate the untold millions that EAPs have helped protect simply because we worked diligently with employees, who otherwise might have sued, to get their needs met in healthy ways. Wrongful termination cases are awarded to employees 60 percent of the time by juries who sympathize with employees. That means settle out of court. The average jury award is $500K. The average out-of-court settlement is $100K. That's why Lockheed probably settled out of court for $2.5M. They got off easy.

EAPs have several things going for them that make them unique as loss-control programs when it comes to employment practice liability lawsuits. I won't elaborate on them all, but the most important is confidentiality and trust.

No other employer-paid department/service earns as high a place in an employee's mind. Not OD. Not Wellness. Not HR. Not Occupational Health. All are suspect. The EAP is not. It is at the very least more trusted. It is the only one of these governed by the level of confidentiality afforded to alcohol and drug treatment records--the strictest level of all medical confidentiality provisions: CFR42 Part A. And it helps.

Begin a dialogue with P-C insurers. Discover how to collaborate and build synergy with them. Find the crack in the wall and pull the EAP profession through it to new opportunities on the other side. Once P-C insurers know EAPs can really do, it is unlikely that they will want a watered-down version of what you do. This is a different insurance model--one that works with EAPs. But EAPs will have to get the attention of these folks. There is much desire on the part of some groups to define EAPs differently than they were just a few years ago.

P-C insurers would benefit from the core technology, not just a piece of it. There is an unexplored world of EAP collaboration out there. Go for it.

February 2008 Sample
of WorkLife Excel
Did you know that we are the official EAP newsletter for the U.S. Congress? All 12,000 employees get WorkLife Excel. They had a of lot choices. They chose us.