How Labor Shortages Affect Liability Risks

We've been seeing labor shortages across industry lines for years now. These shortages have resulted from various factors, many of which are related to individuals reevaluating their employment priorities due to the COVID-19 pandemic.

Such shortages can carry numerous consequences for businesses. Specifically, a depleted workforce increases the likelihood of current employees being overworked and employers having to hire inexperienced or less qualified workers to fill available positions. Together, these issues can cause employees to be prone to making mistakes or getting involved in accidents on the job—thus creating elevated business liability risks. With this in mind, it’s critical for employers to do what they can to mitigate labor shortages and related liability concerns.

Keep reading to better understand the factors contributing to the ongoing labor crisis, how employee shortages impact business liability exposures and steps employers can take to help minimize these workforce concerns.

How Labor Shortages Affect Liability Risks
Widespread labor shortages can create several liability exposures for businesses of all sectors. In particular, these shortages often force employers to schedule fewer staff members for each shift (leaving them overworked) and resort to hiring lesser-skilled employees to fill job openings.

This culmination of exhausted and underqualified workers can increase the risk of employees cutting safety corners or making careless errors during their daily tasks, potentially resulting in workplace accidents. These accidents could harm or injure both employees and customers, creating major liability issues. Overworked and inexperienced employees may also be more likely to miss important project deadlines and cause service delays, contributing to disgruntled customers and associated liability problems. Additionally, staff shortages can make it more difficult for employers to maintain adequate workplace security, making them more vulnerable to property and inventory losses—which could result in liability troubles.

Here’s a closer look at how labor shortages have created elevated liability risks within specific industries:

• Construction—Due to the nature of the construction industry, labor shortages can pose substantial liability risks by way of elevated (and more severe) job site accidents, project delays and decreased workmanship.
• Manufacturing—To combat these shortages, some manufacturers have leveraged artificial intelligence instead of employees to complete daily tasks. On the other hand, some manufacturers have reduced their job requirements relating to criminal history, legal marijuana usage and previous work experience to expand their candidate reach. Yet, this change in criteria can lead to an underqualified workforce, increasing instances of job site accidents and subsequent liability issues. After all, the latest industry research shows that manufacturing employees with one year or less of job experience contribute to over one-third (35%) of worksite accidents and related insurance claims. Apart from exposures from underqualified employees, a recent survey found that 60% of manufacturing workers have reported added stress and muscular pain or discomfort due to being overworked since the pandemic began—creating additional accident risks and related liability concerns.
• Trucking—According to the American Trucking Associations (ATA), an estimated160,000 commercial driver positions could be unfilled by 2030. Amid this shortage, many trucking employers have had to extend their existing employees’ driving schedules and lower their driver applicant standards to fill open positions. Nevertheless, such factors can make employees more likely to be involved in serious accidents on the road. These accidents can create various liability issues, including driver injuries and fatalities, damaged or lost inventory, and delivery delays.

Steps Businesses Can Take
To combat labor shortages, employers should consider the following guidance:

• Increase pay. Providing more competitive wages can help employers retain existing workers and attract new employees within their respective industries. Offering sign-on bonuses may also improve employers’ hiring capabilities.
• Offer additional benefits. A range of employment benefits can assist employers in maintaining an ample workforce. These benefits may include remote work capabilities, flexible scheduling, additional paid time off and well-being stipends.
• Reward existing employees. Employers can also use rewards and incentives to help retain current workers. These incentives may include monthly bonuses for top performers or extra discounts on business merchandise (if applicable).
• Limit business hours. To ensure existing employees feel properly supported in their roles, employers may need to adjust their business hours. Doing so can prevent employees from being overworked amid understaffed shifts.

To minimize potential liability risks caused by labor shortages, businesses should consider these measures:

• Ensure effective onboarding processes. Especially if labor shortages require employers to hire inexperienced workers, it’s critical to have proper onboarding protocols in place. These protocols can equip new employees with the knowledge and resources they need to succeed in their roles.
• Provide routine training. Employers should have all of workers—regardless of experience—engage in regular, job-specific safety training. This training will help promote a safety culture and minimize the risk of workplace accidents and injuries (as well as related liability concerns).
• Schedule regular check-ins. Finally, it’s vital for employers to check in with their workers on a frequent basis. Keeping such consistent communication will motivate employees to share any safety concerns or other work-related issues that arise, allowing employers to remedy these problems before they cause liability incidents.

For more risk management guidance, contact us today.