Employment Practices Liability – Is Your Business at Risk For a Lawsuit?

Employment Practices Liability Insurance (EPLI), is an insurance policy that protects you from claims by your employees arising from the general conduct and management of your business.

Is it more likely that you, as the business owner, will be sued by an outsider than by your employees?

According to the Equal Employment Opportunity Commission (EEOC), there are a staggering 80,000 Employment Practices Liability cases filed each year. A recent study found that the average employee-related claim payout is now at over 30%, or $180,000.

This new wave in litigation isn’t just for large corporations. EPL lawsuits are ravaging small and mid-sized businesses. This is illustrated by a recent case.

Philadelphia jury ruled in favor of the plaintiff, who was employed at a water treatment plant with fifteen employees. The plaintiff was sued and subject to national origin slurs. The jury decided to award the plaintiff $200,000 back pay, $100,000 for emotional distress and $265,000 for his attorneys. This totaled $565,000.

Other insane awards

A jury awarded $80.7million to a UPS female supervisor for claiming that a male supervisor had raped her during an argument.

A New York jury found the NBA sexually discriminated against a woman when it failed to make her a regular season referee. They were awarded $100,000 in lost wages and $8 million in punitive damages.

– A large P&C insurer settled a class action for $157 Million in sex discrimination

Mitsubishi settled two cases of sexual harassment arising from the same incident for $45 million

Publix Supermarket has announced a $81 million settlement in a sexual harassment case

These are just a few of the many ways employees can sue their employers.

1. False termination of employment
2. Age discrimination
3. Failing to hire or promote
4. Breach of implied employment contract
5. Negligent hiring or evaluation
6. Harassment in the workplace, whether sexual or otherwise
7. Retaliatory treatment
8. Emotional distress is caused
9. Misrepresentation of employment
10. Violations of employment-related laws
11. Negative changes in employment terms
12. False reference (deprivation or career opportunity)
13. Tenure not granted
14. Invasion into privacy
15. Libel, slander or defamation

Employee lawsuits are destroying businesses. Employers are responsible for paying defense costs and damages. A company must defend itself in a lawsuit, regardless of whether a judgment is ever awarded. A simple response to an EEOC complaint without a lawsuit can run into the thousands.

How to Protect Your Business

A Employee Handbook is the best way to protect your company.

Create employment policies and procedures that are tailored to your company. Your business will be more efficient if you take the time to research and write down your procedures. You can protect your company from lawsuits and allegations by employees if you have procedures in place.

To ensure that all laws and regulations are adhered to, define hiring processes and create checklists.

Define employee termination and disciplinary procedures.

After you have completed the employee handbook, your attorney should review it before publication.

After the Handbook is published, you can meet with each employee individually or in groups to go through it. Each employee must sign off to indicate that they have been given a copy of the Employee Handbook.

Also, ensure that you strictly enforce all employment regulations in your Employee Handbook and the law. This means you need to train your management team in the Employee Handbook procedures.

For every employee who is laid off or terminated, insist on an exit interview. Review all issues, and then have the employee sign off.

Business should also purchase Employment Practices Liability Insurance. EPLI policies usually cover discrimination, workplace harassment, and wrongful dismissal. An EPLI policy covers defense costs of the business, as well as coverage for jury awards and claims.

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