How should an employer respond to an employee filing a false claim of serious and willful misconduct?

• A. Increase the reserves
• B. Allow the claim
• C. Investigate and heed employee warnings
• D. Decrease the reserves

Answer: (A)

When an employee files a false claim of serious and willful misconduct, the best response from the employer is to increase the reserves. This is because the claim involves potential financial liability and may require resources to address the false allegations, including costs associated with legal defense or any potential compensation if the claim were to proceed.

By increasing the reserves, the employer is preparing for the possibility of any legal repercussions or costs that may arise from the claim. This proactive measure ensures that the employer has sufficient financial backing to manage any disputes or claims related to the incident. It reflects prudence and responsibility in financial planning, particularly in scenarios involving allegations that could escalate into more serious legal matters.

Other potential responses, such as simply allowing the claim or investigating it without adequate reserve adjustments, may not appropriately prepare the employer for the possible outcomes of a legal claim. Therefore, increasing the reserves is the most strategic choice in such situations.