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Counterfeit employee qualifications could lead to financial losses

The issue of bogus qualifications has received increased attention recently when it was revealed that the former head of engineering at The Passenger Rail Agency of South Africa (Prasa) had lied about his qualifications. This case serves as a good example why it is becoming increasingly important for South African businesses to vet all professional employees’ qualifications.

A failure to check whether employees are dishonest about their training and qualifications could result in substantial financial losses for the company. No Professional Indemnity insurance policy will pay out a claim when employees with counterfeit qualifications conduct technical professional work and something goes wrong.

A recent example where a company in the built environments used the services of a non-professional to perform reserved work which was not checked by a professionally qualified person. The unqualified employee made a mistake which was unfortunately not picked up by the qualified professional which led to a major loss for the company. Insurance providers did not respond to the loss as the risk of an unqualified staff member making mistakes when performing professional work was not the risk covered by the insurance policy.

In many instances qualifications are a legal prerequisite in order to perform a certain function or to be a member of a certain profession. He explains that attorneys and advocates need to hold certain tertiary qualifications, have passed Bar Exams and been admitted in court before they are fully qualified. Within the built environments professions engineers, architects and quantity surveyors also have to hold certain tertiary qualifications to call themselves by a certain professional designation. In the financial services industry the Financial Services Board (FSB) has since the advent of the Financial Advisory and Intermediary Services (FAIS) Act in 2004 been implementing certain minimum qualification standards to perform certain functions.

The execution of professional work by a nonprofessional employee could potentially also be the subject of regulatory action against the company. For example, Geraghty says that should it be found that a non-qualified employee was allowed to give financial advice to consumers, the company holding the license could face license suspensions or fines from the FSB.

Regulatory breaches of this kind could also lead to civil action being taken by third parties who may have been misled by the non-qualified person and they could sue for financial redress subsequent to the loss caused by the non-qualified person’s work, says Geraghty. “In some extreme cases we have also seen that a regulator may require a company that holds an accreditation to redo the work done by the non-professional staff member, which in turn results in huge financial losses for the company.

A Professional Indemnity policy covers both the entity that employs professionals, as well as the individual professional people who are employed or contracted to the firm. Both parties are only covered for a negligent breach of a professional activity or duty which in turn is defined by the policy to refer to certain activities performed by professionally qualified staff. Should a business allow non-qualified staff to perform professional tasks that are reserved for professional staff, it is considered as illegal and the non-qualified person would disentitle the company to the insurance cover.

When business owners uncover qualification fraud they need to act swiftly. In an effort to avoid regulatory action, the company will be required to prove what measures were taken to mitigate any consequences. The company also has the obligation of informing the professional body or regulator.

Business owners to vet qualifications or employ a reputable company to verify credentials before a candidate is employed. It is not just about the knowledge threshold required to practice a certain profession, but to a large extent most professionals are committed to uphold certain professional codes of ethics and conduct by which they are bound to.

By employing a non-professional to perform professional work in an attempt to save costs could end up costing the company a fortune. This conduct could lead to regulatory action, criminal action, license suspension, fines or civil action from clients, all of which in all likelihood would not be covered by an insurance policy.

Dave Geraghty, Executive Director at SHA Specialist Underwriters

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