When Good Intentions Cause Bad Problems

I was speaking with a friend earlier this week who owns a growing company. After starting out by himself, he now has almost ten employees. He asked for advice regarding a disciplinary issue. My first question was whether he had an employee handbook. As a young, growing company, I wasn’t entirely surprised to hear him reply that he did not. His issue is going to resolve itself, and I helped get him on track to prepare an employee handbook so that there are clear “rules of the road” at his company going forward. But it got me thinking about how important it is to have rules in human resources and benefits… and how important it is to follow them.

I can’t count the number of times over the years that I’ve seen a client get in trouble because they were just trying to help out a valued/long-term employee. It’s natural (especially in smaller businesses) to create family-like relationships with your co-workers. And it can be really hard to make dispassionate human resources decisions when these strong relationships have developed. But good intentions can really come back to haunt a company. Let me give you an example.

A long time ago in a galaxy far, far away, a gentleman that had been employed by his company for decades became disabled. The disability stretched out for months. Now, if they were following their own rules, at some point the company would have terminated the gentleman’s employment (when he exhausted his leave) and helped him file for long-term disability. However, the company did not do that. The gentleman had served the company for so long, so faithfully… so they thought, we should leave him on payroll – that is the nice thing to do. Not only that, they thought, but we should let the gentleman keep his company truck and gas card. Well, fast forward several months, and the gentleman causes a massive car wreck in the company truck (which thankfully did not result in any fatalities). Around that time, the company finally decides to terminate his employment, and a long-term disability claim is filed. Fast forward several more months, and the gentleman passes away.

Thankfully, the insurance broker did not have to deal with the fallout from the car wreck. But when the gentleman passed away, the broker most certainly got a phone call. See, the gentleman’s spouse had called HR to ask about the life insurance that the company offered, and wanted to know how to file a claim. The difficult answer was this: there probably could have been a benefit payable, if the rules had been followed. But as the client was trying to “help” the employee by playing fast and loose with when he was actively at work, when he was getting paid, when he was actually terminated… a lot of relatively straightforward “rules of the road” were ignored, and opportunities that otherwise would have been there to continue the life coverage were missed. The life insurance company had a strong case that the gentleman had lost eligibility for his $25,000 life insurance benefit some time ago. Needless to say, the widow was not concerned with the story of the company's good intentions – all she cared about was getting that $25,000.

This was a problem, as was the fact that the client had set a really bad precedent for how they handled the case – ignoring their own rules for one employee because ownership had good intentions. Thankfully, the very talented broker was able to make things right in terms of the death claim. And the client decided that from now on, they would follow their own employee handbook and plan documents to the letter.

Is your employee handbook in good shape? Do you understand when to terminate employees, and your benefits obligations when doing so? We’re here to help. Give us a shout at bayoubenefits@gmail.com