In an increasingly litigious business environment, companies in many industries have implemented measures to protect against damages from lawsuits. Whether filed by dissatisfied clients or initiated in regard to contractual or premises liability, each successful lawsuit can potentially harm the business’ financial position and reputation.
Regardless of the company’s size or type, insuring the company against these significant risks has become a priority. Hauser Insurance Group is a nationally recognized leader in this arena, helping clients in diverse industries to greatly decrease their risk exposures. The firm’s commercial insurance experts deliver a comprehensive risk management package to each company.
Employment Practices Liability Lawsuit Impacts
Every day, businesses of all sizes are targeted by employee-filed lawsuits. These claims are also called employment practices liability (or EPL) lawsuits. In fact, the Equal Employment Opportunity Commission (or EEOC) states that employees file almost 250 lawsuits daily. This figure does not include state complaints or claims currently in litigation.
Not surprisingly, an employee lawsuit can become a significant drag on the company’s bottom line. Although most EPLI claims settle out-of-court, each business will likely pay an average of $10,000 to defend itself. Claims that reach the courts will cost the business considerably more.
Realistically, these numbers represent a drop in the bucket for a large corporation. However, a smaller business can be substantially affected by this unexpected expense. A budget-conscious company could experience a severe financial impact.
To add insult to injury, a business owner’s liability policy does not cover EPLI claims. Almost 60% of business owners without EPLI coverage believe they have employee lawsuit protection – and they do not. In fact, commercial insurers have broadened exclusions in their business owner’s liability and general liability insurance policies.
EPLI Insurance Gains Prominence
In recent years, employment practices liability insurance (or EPLI) has gained its share of the spotlight. Targeted EPLI insurance policies cover employers against employee-filed claims regarding hiring, discipline, and/or termination.
Targeted EPLI Insurance Offers Protection
Many well-heeled corporations already have comprehensive EPLI insurance coverages in place. As a result, these firms are well-positioned to address most employment-related lawsuits. In addition, each company’s legal experts are well equipped to handle lawsuits that reach the courts.
However, smaller (or newer) businesses often do not possess the financial or legal resources needed to mount a successful lawsuit defense. For this reason, proactive implementation of a targeted EPLI insurance policy represents the preferred path forward.
Increased Risks Predicted for 2022
In early 2022, United States companies face a higher number of employment-related risk exposures. Potential lawsuits could stem from multiple sources.
COVID-19 Pandemic Impacts
The COVID-19 pandemic continues to impact businesses across the United States. Although many companies are again operating from their physical addresses, others have adopted a hybrid or even a fully remote work model. Other businesses have restructured employees’ jobs to reflect evolving staffing needs. Finally, some companies were forced to close, and employees were compelled to find other jobs.
Each of these pandemic-related workplace changes has affected employers and employees in some way, states Ron Adler, president-CEO of Laurdan Associates. “Properly responding to this workplace impact requires an understanding of how it affects not only the organization, but also how it affects the organization’s employees, both as a group and individually,” he concludes.
Further, employers should be aware of the changes resulting from “the sheer number of employment-related exposures resulting from COVID-19—furloughs, reductions in force, layoffs, disability discrimination, religious discrimination, vaccine mandate policies and return to work policies that have and will continue to increase employers’ liability,” Adler says.
Other Sources of Risk Exposure
Companies could also face a range of other employee lawsuits. These claims can arise during any stage of the employment cycle.
Hiring Practices
When evaluating applicants for an open position, an employer is at risk even while interviewing a job candidate. If the employer does not hire that person, the applicant could claim they were a victim of discrimination.
General Discrimination
An employee could file a discrimination lawsuit based on their race, sex, age, disability status, or other factors. The worker could file this claim in conjunction with multiple types of workplace incidents.
Workplace Harassment
The United States Equal Employment Opportunity Commission (or EEOC) states that harassment is “unwelcome conduct that is based on race, color, religion, sex (including sexual orientation, gender identity, or pregnancy), national origin, older age (beginning at age 40), disability, or genetic information (including family medical history).”
Harassment becomes illegal under one of two conditions: (1) The subject must accept the offensive conduct to remain employed or (2) the conduct is sufficiently extreme that it creates a work setting that a reasonable person would regard as hostile, abusive, or intimidating.
Wrongful Termination
An employer may choose to fire an employee for specific reasons. In response, the worker may decide to file a lawsuit alleging that wrongful termination took place.
How to Decrease EPLI Risk Exposures
Companies that want to reduce their employment practices liability risks should employ several coordinated strategies. These tactics apply to businesses of every type and size.
Most importantly, the employer should consult with an experienced commercial insurance agent, such as Hauser Insurance Group. After reviewing the employer’s risk exposures, the agent will recommend the right employment practices liability insurance coverages.
Create a Comprehensive Employee Handbook
A professionally produced employee handbook spells out the company’s expectations for employees’ workplace conduct. Each publication should prominently feature an EEOC employment statement along with an “at-will” employment declaration.
This comprehensive workplace resource should also address the entire gamut of workplace policies and procedures. Attendance and disciplinary issues will be covered along with the handling of employee complaints. Other company-specific workplace issues should also be discussed.
Produce Well-defined Job Descriptions
The employer should generate a clearly defined job description for each company position. Each description should outline the required job prerequisites (including education) along with performance expectations. Failure to produce comprehensive job descriptions leaves the employer open to job-related employee complaints.
Adopt Uniform Screening and Hiring Procedures
To cultivate a high-quality workforce, and minimize follow-up for unsuitable job candidates, the employer should formulate structured screening and hiring procedures. By using standard Applicant Tracking System (or ATS) screening algorithms, along with internal protocols, the employer should be able to limit in-person interviews to serious qualified applicants.
Use an Application with Two Key Clauses
The employer should always use an employment application containing two important clauses. Each form should state that the company adheres to EEOC hiring guidelines.
In addition, the application should emphasize the company’s “at-will” employment policy. Stated another way, a worker is subject to termination at any time, with or without notice. The company may give a reason for the termination or it may provide no reason at all.
Finally, the employer should ensure that the application does not ask for any information that could be used as the basis for an age discrimination complaint. To illustrate, the application should not ask for the applicant’s high school graduation year.
Perform Thorough Background Checks
The employer should conduct an exhaustive background check on all serious job candidates. Besides helping to ensure compliance with applicable regulations, a pre-employment background check may offer protection against future liability claims.
Finally, a background check could uncover information that could compromise a safe work environment and/or put company assets at risk. An efficient background check specialist should be able to complete the process with minimum delay.
Complete Employee Performance Reviews
The employer should ensure that each employee receives timely performance reviews. The employee’s file should contain a copy of all performance review documentation. Maintenance of these records can help the employer’s defense if an employee complaint occurs.
Document All Employee Issues
The responsible manager should record each employee-related issue’s details immediately after the incident occurs. The manager should also note the company’s actions to resolve the issue. Informing the Human Resources Department of each issue is also advisable.
Adhere to a Zero-tolerance Policy
The employer should establish a zero-tolerance policy relative to discrimination, harassment, and substance abuse. Employees should also be informed that they can report an infraction without being subject to retribution.
Understand Applicable Employment Law
Numerous federal laws protect the rights of current or potential employees. Each employer should familiarize themselves with laws regarding discrimination in any form. The company is not permitted to practice discrimination for any of these reasons:
- Age
- Color
- Disabilities
- Ethnic Origin
- National Origin
- Race
- Religion
- Sex
Putting EPLI Coverage in Place
The cost of EPLI coverage depends on several factors. The number of company employees, along with the employee turnover percentage, are two considerations. The presence of existing employment-related policies and procedures is also a key factor. Finally, if the company has been the subject of prior employee lawsuits, that will also affect the cost of coverage.
The business’ size may dictate whether the EPLI coverage will be recommended as an endorsement of a business owner’s policy. Alternatively, the EPLI policy can be added to a general liability policy.
To navigate the complexities of EPLI coverage, companies should consult with a commercial insurance agency that offers specialized expertise. For over four decades, Hauser Insurance Group has provided targeted insurance solutions for businesses of all sizes and types.
Comprehensive Risk Management Strategies
Many companies may prefer a coordinated risk management plan that complements the firm’s overarching business strategy. Hauser Insurance Group easily meets that challenge, working through a consultative approach that benefits both parties.
To begin the process, Hauser conducts a thorough risk evaluation and current coverage analysis. Next, Hauser’s commercial insurance experts design a customized program that aligns the client’s risk with the firm’s coverage needs. Hauser also executes all carrier negotiations and provides administrative support throughout the life of the risk management program.
Hauser Insurance Group frequently provides risk management services to large companies and multinational corporations. Concurrently, the firm also partners with founder-led businesses in many industries. Each client receives the same top-tier service and targeted risk management solutions that enable the company’s continued growth. Contact Hauser Insurance Group for complete details on its risk management programs.
