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Is Workplace Drug Testing Really the Best Thing for Your Business?

Is Workplace Drug Testing Really the Best Thing for Your Business?

Is Workplace Drug Testing Really the Best Thing for Your Business?

Personal accountability is especially important in a small business to meet deadlines, satisfy clients, control budgets, and produce positive results. With fewer employees to run day-to-day operations, small-business owners rely even more on individual contributions than do larger corporations.

A small-business owner has two choices to ensure his company employs personally accountable and law-abiding individuals: (1) a system based on trust, or (2) a system based on test results.

Surprisingly, however, a system based on trust yields higher productivity and employee morale than one based on testing. Take, for example, drug testing in the workplace.

More than half of employers in the United States (57 percent) still conduct drug tests on job candidates, and many employers (36 percent) continue to conduct periodic drug tests on current employees, according to 2011 research by the Society for Human Resource Management1.

Because drug testing costs as much as $50 per candidate, small-business owners (99 or fewer employees) are less likely to conduct drug tests (39 percent) compared with owners of businesses employing 2,500 or more employees (71 percent), according to the same research.

However, in a study of 63 high-tech firms in the computer-equipment and data-processing industry, drug testing was found to reduce rather than enhance productivity, according to a report by the ACLU2. Firms with pre-employment drug testing scored 16 percent lower on productivity measures than firms with no drug testing in the workplace at all, according to the ACLU report.

Here are three more reasons to reconsider drug testing in the workplace:

  • Drug testing is expensive. According to an ACLU study, the federal government spent $11.7 million to find 153 drug users among almost 29,000 employees tested in 1990 – a cost of $77,000 per positive test2.
  • Drug testing is not completely accurate, as it is not a pure science. There is a chance that an employee will receive a false positive. This unfairly destroys the rapport between an employee – falsely accused of using drugs – and an employer – forever biased by the inaccurate results.
  • Drug testing does not catch drug users. Drug testing, especially when conducted exclusively during the hiring stages, doesn’t guarantee that you’ll identify a drug user.

“The vast majority [of workers who use drugs] undergo examinations only when they apply for a job, and they can pass by abstaining from drugs for a reasonable period before the test – or by using a variety of masking agents or devices that make their urine seem clean,” Reynolds Holding wrote for Time3.

If you want to improve productivity and decrease absenteeism in your workplace, you have other methods available for encouraging personal accountability at your company, including:

  • Encourage participation in substance abuse programs. Medical insurance often covers counseling and substance abuse programs. If you suspect that an employee has a problem with drugs or alcohol, promote a substance abuse program at the office. Small businesses are more like families. As such, raising awareness for insurance-covered counseling kindly allows employees to address issues confidentially and quietly, and it shows that your company supports healthy recovery and doesn’t just issue reprimands.
  • Conduct comprehensive reference checks. Instead of testing candidates for drugs, try conducting more comprehensive reference checks on your employees. Ask for three professional and three personal references.
  • Prepare a list of questions in advance that ask previous employers and personal references to honestly evaluate a candidate’s sense of personal accountability. (Of course, check with a lawyer ahead of time to ensure that you’re not violating any workplace discrimination laws.) Reference checks done correctly will identify more areas for potential problems or conflict than will a drug test.
  • Hire outside consultants to improve workplace efficiency. If there is a decrease in productivity at your business, it may have nothing to do with your employees at all. Hire an outside consultant to analyze your operations and bookkeeping.

Implementing more efficient workplace systems may be just what your business needs – as opposed to promoting a culture of mistrust – to increase morale, efficiency, and company profits.

For more information, visit:

1. Society for Human Resource Management: “SHRM Poll: Drug Testing Efficacy

2. American Civil Liberties Union: “Drug Testing: A Bad Investment

3. Time: “Whatever Happened to Drug Testing?”

Business Owners Need Protection

The Small Business Authority

Two major forms of insurance for businesses are Directors & Officers (D&O) insurance and Professional Liability (Errors & Omissions) insurance. Both types of policies protect businesses and business owners but in different capacities.
1. D&O insurance applies to the directors and officers of public companies who can be held liable for their decisions. Lawsuits may come from a number of sources, including: employees, shareholders, investors, competitors, suppliers, customers, and lenders. D&O policies provide directors and officers of a company financial protection if they are sued in conjunction with the performance of their duties with the company. D&O claims come in the form of alleged financial damage. As neither general liability nor professional liability policies provide such protection, a Directors and Officers Policy is the only back stop for this type of claim or suit.
D&O is available from a number of carriers, but we recommend you look for carriers/policies that that have the following.
A highly rated carrier with experience in D&O and a good record of claims handling.

  • Coverage for the entity and individual directors and officers
  • Coverage for punitive damages where insurable by law
  • A risk-management helpline (HR consultation)
  • Separate limits for management liability and EPLI
  • Reasonable rates and deductibles

2. E&O/Professional liability insurance is applicable to businesses that offer professional advice or render services. Clients may come forward with claims of negligence or claims that a company made an error or omission in a service it provided or failed to provide, for which the customers suffered a financial loss. E&O insurance protects professionals such as doctors, lawyers, dentists, and accountants as well as service providers such as consultants, home health-care providers, fitness trainers, beauticians, and many others. E&O insurance provides for defense and payment for these claims and helps companies avoid the full cost of potential lawsuits. For a small-business owner, professional liability insurance is extremely beneficial to consider and for many business classes can be combined with general liability, saving the business owner money and simplifying claims handling and billing.
This article originally appeared on Forbes.com.

13 Types of Insurance a Small-Business Owner Should Have

13 Types of Insurance

1. General Liability Insurance: Every business, even if home-based, needs to have liability insurance. The policy provides both defense and damages if you, your employees, or your products or services cause or are alleged to have caused bodily injury or property damage to a third party.

2. Property Insurance: If you own your building or have business property, such as office equipment, computers, inventory, or tools, you should consider purchasing a policy that would protect you if you had a fire, vandalism, theft, smoke damage, etc. You may also want to consider business interruption/loss of earning insurance as part of the policy to protect your earnings if the business is unable to operate.

3. Business Owner’s Policy (BOP): A business owner’s policy package contains all required coverage a business owner would need. Often, a BOP includes business interruption insurance, property insurance, vehicle coverage, liability insurance, and crime insurance. Based on your company’s specific needs, you can alter what is included in a BOP. Typically, a business owner will save money by choosing a BOP because the bundle of services often costs less than the total cost of all the individual coverages.

4. Commercial Auto Insurance: Commercial auto insurance protects a company’s vehicles. You can protect vehicles that transport employees, products, or equipment. With commercial auto insurance, you can insure your work cars, SUVs, vans, and trucks from damage and collisions. If you do not have company vehicles but your employees drive their own cars on company business, you should have non-owned auto liability to protect the company in case the employees don’t have insurance or have inadequate coverage. Many times, the non-owned vehicles can be added to the BOP policy.

5. Workers’ Compensation: Workers’ compensation provides wage replacement and medical benefits to those who are injured while working. In exchange for these benefits, an employee gives up the right to sue his employer for the incident. As a business owner, it is very important to have workers’ compensation insurance, because it protects you and your company from legal complications. State laws will vary, but all require you to have workers’ compensation if you have W-2 employees. Penalties for noncompliance can be very stiff.

6. Professional Liability Insurance: This type is also known as Errors and Omissions Insurance. The policy provides defense and damages for failure to render, or improperly rendering, professional services. Your general liability policy does not provide this protection, so it is important to understand the difference. Professional liability insurance is applicable for lawyers, accountants, consultants, notaries, real estate agents, insurance agents, hair-salon operators, and technology providers to name a few.

7. Directors and Officers Insurance: This type of insurance protects the directors and officers of a company against their actions that affect the profitability or operations of the company. If a director or officer of your company, as a direct result of her actions on the job, finds herself in a legal situation, this type of insurance can cover costs or damages lost as a result of a lawsuit.

8. Data Breach: If a business owner stores sensitive or nonpublic information about employees or clients on his business computers, servers, or in paper files, he is responsible for protecting that information. If a breach occurs either electronically or from a paper file, a Data Breach policy will provide protection against the loss.

9. Homeowner’s Insurance: Homeowner’s insurance is one of the most important kinds of insurance you need. This type of insurance can protect against damage to the home and against damage to items inside the home. Additionally, this type of insurance may protect you from accidents that happen at home or may have occurred due to actions of your own.

10. Renter’s Insurance: Renter’s insurance is a subset of homeowner’s insurance that applies only to those whose who rent their homes. The coverage protects against damage to the physical property, contents of the property, and personal injury within the home.

11. Life Insurance: Life insurance provides for an individual’s loved ones in the event of the individual’s death. If you have life insurance, the insurer pays a certain amount of money to a beneficiary upon your death. You pay a premium in exchange for the payment of benefits to the beneficiary. This type of insurance is very important, because it allows for peace of mind. Having life insurance allows you to know that your loved ones will not be burdened financially upon your death.

12. Personal Automobile Insurance: Another very important type of insurance is auto insurance. Auto insurance covers all road vehicles (trucks, cars, motorcycles, etc.). Auto insurance has a dual function, protecting against both physical damage and bodily injury resulting from a crash, and also any liability that might arise from the collision.

13. Personal Umbrella Insurance: You may want some additional coverage, on top of insurance policies you already have. This is where personal umbrella insurance comes into play. This type of insurance is an extension to an already existing insurance policy and covers beyond the regular policy. This insurance can cover different kinds of claims, including homeowner’s or auto insurance. Generally, it is sold in increments of $1 million and is used only when liability on other policies has been exhausted.

This article originally appeared on Forbes.com.

Five Disasters Your Business Owner’s Policy Doesn’t Cover

Are you covered?

A lawsuit can shut you down. As a small-business owner, your best protection is insurance. Do you know if you’re insured against hacked credit card numbers, sexual harassment allegations, or a flood—or are you skating along with your fingers crossed?

Some common disasters require special insurance. The general liability and property insurance coverage in your Business Owner’s Policy (BOP) is reasonably comprehensive. However, other insurance policies to augment it might cost relatively little and give you peace of mind. One-size-fits-all insurance such as what you get with a BOP may not be sufficient if you find yourself in one of these five situations:

Insurance disaster no. 1—You get sued over allegations of sexual harassment, wrongful termination, or discrimination. A cap-making business in Texas agreed to pay a $21,500 fine to settle a sexual harassment lawsuit in 2010. Defending the lawsuit may have potentially increased that cost. A BOP can include coverage for allegations of sexual harassment and the related issues of wrongful termination and discrimination. But depending on how many employees you have and what you feel your potential risk is, you may want to add Employment Practices Liability (EPL) insurance. It’s a coverage that can be included in unlimited amounts and at reasonable rates.

Insurance disaster no. 2—An accident closes you down completely. If an SUV were to plow through the front of your store, breaking glass and fixtures, and you were not able to reopen for many days, you would incur a loss of revenue over and above the damages sustained. For this, the answer is Business Interruption insurance. It compensates your business for lost profits (based on your financial records) and for overhead, like electricity. Business Interruption insurance is usually built into a basic business policy, but look at it carefully in light of your operation. You may want to increase the limits. Some policies pay out a designated amount and others pay the actual loss sustained.

Insurance disaster no. 3—Your business premises are flooded. If you own your property, consider whether you need flood insurance. It is not part of a basic BOP and being without it could be devastating to your business. Small-business owners have to consider the cost of physical property damage and loss of business, and insure for it. All major carriers sell flood insurance, with the National Flood Insurance Program providing coverage.

Insurance disaster no. 4—You are sued as a professional for giving bad advice if you’re a consultant, for a bookkeeping error if you’re a financial advisor, or for other sorts of professional negligence. Insurance for purported breaches that result in losses by clients is called Professional Liability insurance, or Errors and Omissions insurance. Professional Liability policies come in many forms, varying by the type of profession.

Insurance disaster no. 5—Your customer data is hacked. How many financial transactions do you handle online each week? Think about that exposure. Also think about the customer data you store for loyalty programs or customer relationship management (CRM) programs. Today, data breaches are of great concern to many small-business owners because the potential for financial damage is huge. Any business owner who stores personal information on customers is responsible for maintaining that information securely. If there is a breach, whether internal or external, the company that was breached is liable. Even if suspicion of a breach exists though no breach has occurred, a major credit card issuer may conduct a forensic audit. You could be assessed the cost of the audit.

Data-breach policies are tailored to various industries. For example, online retailers can get one that the PCI Security Standards Council endorses. The Small Business Authority, in conjunction with its merchant-processing services, offers a reasonably priced, PCI-compliant data-breach-protection policy as an add-on. The add-on policy provides coverage in case your merchant account, your terminal, or your software is breached. The policy will also cover you if you are suspected of a breach. The Small Business Authority, which has relationships with more than 40 carriers, sells BOPs as well as a range of other insurance products.

Most people consider insurance to be a necessary evil, but there’s another way to consider it. An adequate amount of insurance is what allows you to satisfy contractual requirements and go after bigger pieces of business. You may have to show that you carry a certain type of insurance in order to move into a particular retail location or to sign on with a big distributor. Then it not only becomes part of the cost of doing business, but also a way to help you increase revenue.

What Is Employment Practices Liability Insurance?

What is EPLI insurance?

What is EPLI insurance?

If you find that your one-man operation is about to become a fully staffed organization, you may need to protect your business with employment practices liability insurance (EPLI).

Companies can be sued for a myriad of reason these days, including lawsuits from past, current, and even potential employees. EPLI can minimize your risk in these instances.

EPLI is a relatively new liability insurance line, but serves a critical purpose. EPLI’s coverage insures you for the following:

• Discrimination based on age, sex, race, disability, etc.
• Wrongful termination
• Sexual harassment
• 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 plan

With employment-related lawsuits on the rise, some estimates show that up to three out of five business will be sued by employees. As such, business owners need to ensure that they are taking all the appropriate steps to protect their companies.

How to Sustain Your Business While Taking Leave

Apple Inc. CEO Steve Jobs announced Jan. 17 that he is taking a medical leave of absence. This will be Jobs’ third leave of absence in six years, and it comes at a time when Apple’s stock prices command more than $300 per share.

We send him thoughts of health and well-being.

As a small-business owner, you may not have the budget or staff of a company like Apple. You may not only be the CEO, but also the COO, general manager, and customer service representative.

If you needed to take a leave of absence from your business, what would you do to sustain your business?

You can glean ideas from Steve Jobs’ announcement as well as from Ready Business, an emergency preparedness collaboration between the Advertising Council and the Department of Homeland Security.

Here are some suggestions.

Make a plan. Ready Business has a page dedicated to “continuity of operations planning” in case of emergency. You can apply several of the tips to create a directive for business operations in your absence.

Consider this tip: “Carefully assess how your company functions, both internally and externally, to determine which staff, materials, procedures, and equipment are absolutely necessary to keep the business operating.”

What are the most important functions of your business? How can you plan to keep them going? Who will keep them going?

Determine your level of involvement. In his announcement, Jobs wrote, “I will continue as CEO and be involved in major strategic decisions for the company.”

That’s good advice for you. What decisions do you want to remain involved in while you are on leave? Will you remain the Big Ideas Czar? Do you want to be notified of daily details, or do you only want to be bothered if your employees stage a mutiny?

Delegate the rest. Jobs also wrote, “I have asked Tim Cook to be responsible for all of Apple’s day-to-day operations. I have great confidence that Tim and the rest of the executive management team will do a terrific job executing the exciting plans we have in place for 2011.”

Who is your Tim Cook? Do you have an interim buck-stopper? If you don’t, select one. If you’re a one-person service provider, you don’t have to hang up a “Will Return” clock. Select a trusted colleague to funnel your clients to until you return.

Respect your own privacy. Jobs closed his letter with, “I love Apple so much and hope to be back as soon as I can. In the meantime, my family and I would deeply appreciate respect for our privacy.”

You may also love your company—so much so that you have to be surgically detached from your desk. If you’re a micromanager, you may be chewing not only your own but other people’s fingernails. This would be a good time for you to learn meditation and recite the serenity prayer.

Remember what Gen. Patton said: “Never tell people how to do things. Tell them what to do and they will surprise you with their ingenuity.”

You are being called to take care of yourself for the time being. The future health of your company depends on your health today. Relax. Your business probably won’t burn down while you’re away.

But in case it does…

Get the right insurance. According to the Ready Business “Review Insurance Coverage” page, “Inadequate insurance coverage can lead to major financial loss if your business is damaged, destroyed, or simply interrupted for a period of time. Insurance policies vary; check with your agent or provider.”

Make sure you know what you’re covered for—fires? Floods? Tornadoes? Employees falling in manholes on company time?

In addition, Ready Business recommends that you figure out where your income will flow from in case of an emergency.