If you are like most business owners, you pride yourself on treating your employees well. You pay them fairly, treat them with respect and follow state and federal regulations about wages, overtime, and paid time off.Thus, chances are you feel confident that you will never be the defendant in an employee discrimination lawsuit.
Unfortunately, that is not necessarily the case. Employment lawsuits are the fastest growing type of civil case in the United States, representing 25 percent of all lawsuits filed in federal court and a much higher percentage of cases filed in state courts. Fully six out of ten of the nation’s employers faced employment related lawsuits during the last five years.
Nor are large corporations the only companies being sued. Over 40 percent of employment- related cases are filed against small businesses with fewer than 100 employees.
The High Cost of Employment Practices Liability Claims
The costs of defending against an employee discrimination lawsuit are significant, even when the employer has done nothing wrong. Attorney’s fees for a case that never goes to court often top $15,000, and lawsuits that proceed to trial cost an average of $45,000 to defend. If the employer loses, which it does in 67 percent of cases tried in the courts, the average compensatory award is $220,000. Many plaintiffs receive much more.
How Employment Practices Liability Insurance Protects You
Unlike general liability insurance, employment practices liability insurance provides coverage for employment-related claims, including court costs and legal fees. Specific coverages vary, but employment practices liability insurance typically applies to:
- Sexual harassment by you or an employee
- Unlawful retaliation
- Discrimination based on race, age, gender, disability or sexual-orientation
- Wrongful termination
- Violations of whistleblower protection laws.
Additionally, many policies cover
- Wage and overtime disputes
- Breach of contract
- Intentional infliction of emotional distress
- Hostile work environment
- Providing a negative reference for a current or former employee.
Exclusions also apply. These generally relate toviolations of federal statutes, such as OSHA violations, racketeering and corruption, fair labor standards violations or claims related to the Worker Adjustment and Retraining Notification Act (WARN).
What You Can Do to Mitigate Your Risk.
No employer can completely protect against employment-related lawsuits, but an effective mitigation strategy can help minimize their impact when they do arise.These suggestions from legal experts are a good place to begin:
- Update human resource policies, procedures and handbooks regularly to ensure that your company is complying with any new or revised laws.
- Implement clear policies for hiring, firing and promoting employees, and train all managers in the appropriate use of performance management tools.
- Follow-up immediately and completely on any employee complaints
- Audit employee records to ensure that policies are being followed consistently.
More importantly, don’t wait for an employee to sue you before you act – find out more about employment practices liability insurance now. Call our office at 516-292-3780, or request a free consultation today.