Employment-related lawsuits are a growing concern for employers of all sizes. In 2007, the U.S. Equal Employment Opportunity Commission (EEOC) reported 82,792 charges filed for harassment, and harassment charge receipts filed and resolved were $251.7 million. As costs for litigation and damage awards climb, experts predict that employment liability will only become more complex. As a result, it is critical for employers to understand their exposures and options to manage the risk.
Strategies to reduce your company's exposure
Two effective risk management strategies include solid human resources practices and employment practices liability (EPL) insurance coverage, a policy used to cover your risk due to the ever-changing legal and employment environment.
The three most common employment-related lawsuits today are:
1. Wrongful termination - the discharge of an employee for invalid reasons
2. Discrimination - the denial of equal treatment of workers who are members of a protected class
3. Sexual Harassment - when a worker is subject to unwelcome sexual advances, obscene or offensive remarks, or the failure to stop such behavior
Employment practices liability (EPL) insurance works hand-in-hand with your internal employment practices to provide the necessary resources to defend your company against a suit or to pay a claim. To best understand how to cover your EPL risk, it's important to know the potential sources:
- Recruitment practices;
- Employment applications;
- Employment offers;
- Employee orientation;
- Annual conduct reviews;
- Enforcing performance policies;
- Termination; and
- Improper documentation of the above items
To limit your exposure, engaging in solid human resources practices is an important strategy in reducing your company's liability. To verify your HR policies and best practices, conduct a thorough HR audit:
- Verify the Employee Handbook outlines all policies and terms of employment in clear and concise language;
- Require employees to sign an acknowledgment form for receipt of Handbook; and
- Develop training for supervisors including interview skills, performance reviews, 'zero-tolerance' policy, etc.
Employment law is often complex and varies depending on the jurisdiction. Well-organized and credible documents can demonstrate fair treatment, deter litigation, ensure employee honesty, and, should litigation occur, demonstrate the employer's actions. In addition to having the appropriate employment policies and HR best practices in place, EPL insurance coverage is another useful risk management tool used to defend against a suit or pay a claim.
Why Choose Employment Practices Liability Insurance?
According to researchers, three out of five employers will be sued by a prospective, current or former employee while they are in business. While many suits are groundless, defending against them is costly and time-consuming.
Employment Practices Liability Insurance typically provides protection from the following wrongful employment practices:
- Harassment
- Discrimination
- Actual or alleged wrongful dismissal, discharge or termination
- Employment-related misrepresentation
- Employment-related libel, slander, humiliation, defamation or invasion of privacy
- Wrongful failure to employ or promote
- Wrongful deprivation of a career opportunity, wrongful demotion or negligent evaluation
- Wrongful discipline
- Vicarious liability for intentional acts
- Punitive damages (where allowed by law)
- Coercion or humiliation in relation to race, marital status, gender, age, physical and/or mental impairments, pregnancy, sexual orientation and any other protected class established by federal, state and local statutes.
Many policies also offer HR assistance and other risk management consultative services.
From the moment that you start the pre-hiring process until the exit interview, you are vulnerable for a lawsuit. EPL insurance works hand-in-hand with your internal employment practices to provide the necessary resources to defend your company against a suit or to pay a claim.
As with all of your risk-management needs, Michelle Keller is committed to assisting you in assessing your employment-related policies and helping you to develop best-practice solutions. Call us today at 585-641-2548 to learn more about our effective risk management services. ◊
This Risk Insights is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Content © 2009 Zywave, Inc.
