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Why Employment News?

Over the last twelve months, we have seen a concerning increase in employment-related claims. We have attempted to address employment-related issues in our bi-monthly newsletter, but with the complexity of the employment issues that our clients face, we concluded that a resource focused exclusively on employment-related topics would be helpful to our clients.

We welcome your feedback, as always. If you have questions or topics that you would like to see us address, please contact Sara Sterley, Director of Risk Management Education.

Claims Corner

Embezzlement and forgery claims are on the rise. We tend to see frequency issues at the chapter level and severity issues at the house corporation level, but embezzlement and forgery claims are always concerning – and expensive, whenever they occur. 
 
We recommend some simple steps for chapters and house corporations to incorporate in order to minimize claims in this area: 
  • We recommend that someone other than the individuals authorized to withdraw funds should reconcile the monthly statements. 
  • We recommend that two signatures be required on all checks or at least those over a certain dollar threshold. 
  • We recommend that each chapter and house corporation undergo an independent annual audit. 
  • We recommend that chapter and house corporation mail go to a PO Box, not a home address. 
  • We recommend that a volunteer is required to inspect all pre-numbered checks and other forms on a regular basis to ensure that checks from the back of the checkbook have not been removed. 
If you are concerned that an embezzlement or forgery claim may have occurred, please contact Heather Cox, Claims Account Manager. 

Here are a few claim examples for your review:
  • 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.  
  • The Chapter Advisor took chapter dues and used the chapter’s debit card for her personal use. The Chapter’s funds were held in an account by the University. The University required the Chapter allow them to manage their funds. The Chapter Advisor was also a University employee and had access to the funds. The insurance carrier made a payment of $18,607. 
  • The Chapter Advisor wrote checks from the chapter’s account for her personal use. The checks only required one signature. The insurance carrier made a payment of $45,634.
  • The House Corporation President received reimbursement for excessive mileage that she was unable to document. The House Corporation President reported her mileage directly to the accounting firm to request reimbursement. The National Organization was contacted by a vendor regarding unpaid invoices. This prompted the organization to conduct a forensic audit and the mileage was discovered during the audit. The insurance carrier made a payment of $35,513 which included the cost of the audit and the undocumented mileage.
  • The House Corporation President transferred funds from the House Corporation Account to her personal account. The embezzlement was discovered when the House Corporation Board President did not submit information for annual taxes.  The insurance carrier made a payment of $163,342.
  • 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. This lead to an audit. At the time the money was embezzled, the checks did not require two signatures.
  • 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.
  • The Chapter Treasurer embezzled Chapter funds. The Chapter Treasurer advised the Chapter President that $500 was stolen from her back pack. The Chapter Treasurer refused to file a police report which led to the Chapter President looking into the matter further. It was discovered that the Chapter Treasurer was not making complete deposits into the Chapter’s account. The insurance carrier made a payment of $4,180.
  • The Chapter Treasurer embezzled 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.

Employment Practices Liability Resources

The Employment Practices Liability coverage is provided by Chubb Group of Insurance Companies, one of the leaders in professional and management liability insurance coverage. Employment Practices Liability coverage protects an employer against claims made by employees, former employees, or potential employees that covers allegations of discrimination, wrongful termination, sexual harassment and other employment-related allegations. 

Chubb offers many resources to help our clients better understand and prevent employment-related claims, including the following:
  • ChubbWorks.com website: a free online resources for clients seeking assistance with employment issues
  • Employment Practices Loss Prevention Guidelines Manual: a free booklet that discusses key employment issues in layman's terms and offers proactive ideas for avoiding EPL lawsuits
  • EPL Hot Line: the toll-free hot line enables employers to contact directly with a nationally recognized law firm for immediate answers to your EPL questions.
We are most excited to be able to offer the EPL Hot Line to our clients to assist you with your human resource and employment law questions. The Hot Line is available to employers all over the country, not just specially designated individuals at each organization's national headquarters like the previous helpline.

The toll-free number is (888)249-8425. In order to connect with a Hot Line attorney, you will need to reference your EPL policy number, which should be located on the Insurance Overview that was emailed to you at the inception of your policies. Please contact your Account Executive if you have trouble identifying your policy number.

Monopolistic States 

Virtually every state requires its employers to buy workers’ compensation insurance coverage for its employees.  Should there be no Workers’ Compensation and an employee is injured, the state will levy significant fines and costs to the employer for not meeting their obligation.

In the following states of ND, OH, WA and WY, the Workers’ Compensation insurance coverage is purchased through a state agency and these states are referred to as monopolistic states.  If your employment exposure is in one of the other states, your organization has secured a national Workers’ Compensation policy of which you have access.  Please refer to the Insurance Overview for your chapter/house corporation to determine if your location is covered by the national insurance policy.  
 
Monopolistic State Workers’ Compensation Website
North Dakota http://www.workforcesafety.com/
Ohio https://www.bwc.ohio.gov/
Washington http://www.lni.wa.gov/
Wyoming http://www.wyomingworkforce.org/

Check References

If you are hiring a new employee, you are always welcome to call Bev Stiles at MJ Sorority to see if there has been any past claim activity associated with the potential employee.

bev.stiles@mjsorority.com
888.442.7470 (ext. 7582)

FLSA Implications

Essential reading for employers on Fair Labor Standard Act implications for House Directors from Fraternal Law.

Want to learn more?

We have many more employment-related resources on our Resource Library: www.mjsorority.com.

Caterers & Kitchen Management Companies

Many of our clients have began to use kitchen management companies to outsource the food-related operations of the facility. We are happy to review those contracts for you. Also, be sure to to review our Reviewing Contracts resource for additional tips.

Employee Safety Basics

Now is a great time for your employees to review some safety reminders. We encourage you to have your House Directors and other employees register for an upcoming webinar

On the Frontlines: House Directors

House Directors are an integral requirement for a safe property for employees and members, which is why we have created a webinar geared specifically toward issues that House Directors face. Register here.
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