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Data Breach Insurance — What You Need to Know

At one time or another you have likely received an email informing you that you will need to change your password for one of the websites you visit. The trigger for these advisories is often a data breach, a nightmare scenario in which a hacker gains access to consumer data, which could include personal information such as credit card numbers, social security numbers and addresses.

Consumers are understandably upset when this occurs, and are often victimized once the hackers sell the information they have gathered to individuals who can run up their credit cards or otherwise wreak financial havoc. The consequences for a company whose data has been breached are often dire. Since hackers often steal data that belongs to thousands of customers, the expenses can run into the millions of dollars. Medical databases are not the only targets, however. Anyone suspected of storing customer financial information can become a victim.

Data breach insurance protects against a company’s losses in the event a breach of data security occurs.

If you decide to purchase it, make sure that your policy covers fines levied by the state, as otherwise you could be left without the amount of financial protection you need. Note that some data breach policies include access to professional assistance to help you comply with regulations and implement practices that can further protect your company.

Many policies provide protection against lawsuits arising from stolen data.

Since the victims cannot sue the hackers who sold the data, they will often look at the next best option – your company. Since a data breach could result in multiple lawsuits, the peace of mind is likely worth the premiums you will pay. Your policy may also offer assurance that forensic services will be paid for in the event you need to gather data to protect yourself in a lawsuit.

Some policies also provide reimbursement for money your company has lost due to the inevitable interruption in business that data breach events cause.

If customer data is stolen during the holiday season, for example, and your business sells smoked turkeys, the financial loss you will experience during that time could be an amount equivalent to your entire profits for the year. While you struggle to reestablish your company’s reputation and deal with notifications, your financial needs will be taken care of if you choose a policy that has this provision.

Insuring your company against data theft is not the only step you can take to protect yourself, however.

Evaluate your data security practices (have you updated your passwords recently?), ensuring that current anti-virus and malware software is installed on all computers, that a network firewall is in place, and data is encrypted. These steps can go a long way toward protecting your organization against financial loss and can help to reduce your liability in the event that a customer initiates legal action.

Five Big Causes of Employee Disengagement

Engaged employees are enthusiastic about their work. They do their best to contribute positively to their employer’s reputation and the achievement of company goals. They don’t make excuses, take excessive time away from the office, or often say, “That’s not my job.” Unfortunately, engaged employees are also fairly rare. According to a study conducted by Dale Carnegie Training, 71 percent of employees are not fully engaged. Employment experts consider the following the five biggest causes.

1. Loss of Job Security

Since the Great Recession, many employees feel they no longer have job security. They’ve seen staff cuts, and their managers have asked them to work harder to compensate—generally without any additional earnings. There is a sense that their employer is holding all of the cards, and they have little to no room to bargain for what they want. They may jump ship to a competitor for a minimal increase in pay or decrease in workload as a result.

2. Loss of Trust

According to a study by Towers Watson, less than 40 percent of employees have any confidence in the senior leadership at their employing organization. Executives have told them too many lies (such as “our company is doing great” right before mass layoffs), and they have developed a wait and see attitude as a result. It’s difficult to feel engaged in the future of the company when you no longer trust or believe in the individuals leading it.

3. Changing Demographics

Today’s workplaces are in the midst of a demographic shift. Baby Boomers are retiring, Generation X employees are struggling to balance their work and home life under increasing pressures, and Millennials are moving in. They’re bringing their impatience with them. Many Millennials expect to move up the corporate ladder quickly, and they will move on if an employer does not meet this expectation. In fact, they spend an average of only 3.2 years in any one job.

4. Top-Down Hierarchies

Corporate organization has changed little since the 1950s. Most of the decision-making still happens at the top—with the c-suite executives and company owners—and employees on the ground floor rarely have any control over the way the business runs. When an employee who has an idea for improving workflow or another aspect of the company feels powerless to affect change—or sometimes even get their idea to someone who can—it easily leads to disengagement.

5. Lack of Work-Life Balance

Many companies operate with a 24/7/365 mindset. Their employees are always on the job and never quite feel like they can shut down to unwind. This increases stress, affects their health, undermines their relationships and basically obliterates any work-life balance they could have. It also causes them to feel disengaged. In one study, 80 percent of employees said that a flexible work schedule is essential to achieving a positive work-life balance.

Disengagement costs employers $11 billion dollars every year. If you’d like to turn the tide—and enjoying more enthusiastic, inspired, empowered and confident employees as a result—contact your benefits professional for information on improving employee engagement at your organization.

The High Costs of Employee Misclassification

You hire a graphic designer to work in your office on a short-term project and pay him as an independent contractor rather than a temporary employee. Your bookkeeper—whose workflow you also direct and control—asks to work from home, so you pay her as a freelancer. You’re now guilty of employee misclassification—whether you intended to break labor laws or not.

Since the onset of the Great Recession, the Department of Labor (DOL) and the Internal Revenue Service (IRS) have seen a surge in worker misclassification. With the rollout of the employer-sponsored insurance mandate under the Affordable Care Act (ACA), they expect to see even more—as companies deliberately misclassify employees as independent, temporary or contingent workers in order to come in under the full-time employee limit requiring coverage.

According to the National Employment Law Project, 10 to 30 percent of employers—possibly even more—misclassified employees as independent contractors in 2012. This is equal to millions of misclassifications and billions of dollars in lost tax revenue for state and federal governments. They want that money back, and they’ve stepped up their litigation and enforcement efforts as a result. But that’s not all; in addition to various federal and state penalties an employer may have to pay, there is the potential for expensive individual and class action lawsuits.

Consider the case of Vizcaino v. Microsoft. Initially, the IRS discovered that Microsoft was misclassifying temporary employees as independent contractors and ordered them to correct this error. Microsoft complied, reclassifying its workers according to the law—and in some cases, assigning them to temporary staffing agencies. The term “temporary” implies a short duration of time. However, many of these so-called temps had worked with the organization for years. They decided to sue Microsoft for equal treatment with the “permanent” employees—including the benefit plan with stock purchase options. Microsoft ended up settling the case for $97 million dollars. This was in addition to the millions they had to pay in back payroll taxes.

How can you avoid a similar situation? Experts recommend the following:

Seek legal or other professional assistance to ensure your employees are properly classified.
Stay current on federal, state and local agency standards for employment status.
Limit the length of any “temporary” assignments.
If you regularly use the same temporary workers, require a period of non-employment between assignments.
Ensure your employee handbook addresses the issue of contingent employees
Ensure your benefits information is specific about which workers are not covered by the employee benefits plan.

Would you like additional insight on classifying your employees, or to learn more about the ACA’s employer-sponsored insurance mandate? Contact me today!