Lawsuits by employees against their employers are increasing dramatically, but businesses can protect themselves with certain basic policies and good insurance.
In the past year, the Equal Employment Opportunity Commission received more than 65,000 allegations sexual and race-based discrimination alone. Those charges account for almost two-thirds of the agency’s private sector charges and represent a 20 percent increase over the past three years.
Charges of race discrimination are just the tip of the iceberg. Consider the following statistics:
- Almost three-quarters of all lawsuits brought against companies today involve employment disputes.
- The EEOC reported it received a record high 99,922 private sector discrimination charges in 2010, a 25 percent increase since 2007.
- The EEOC paid out over $319 million in monetary benefits in 2010. That is almost $30 million more than the previous year, and the highest in the EEOC’s recorded history.
- According to Jury Verdict Research, the median award for all discrimination claims shot up to $317,000. That’s an increase of 46 percent from the past year ($216,000).
- On average, employees will win 6 out of 10 lawsuits. In 2009, employers won only 42 percent of employment lawsuits.
No business owner would consider going without general liability and property insurance, yet employers are more likely to have an employment practices liability claim than a general liability or property claim. And the legal costs just to defend such a claim could easily be $25,000 or more.
Astute employers protect themselves.
Some employers might feel they are immune to litigation, and that they will not, or cannot, be subjected to an employee lawsuit. What they hear on the news only applies to “someone else.” However, despite an employer’s illusions, employees can file a claim at any place, at any time, for any reason. Even with the strongest human resources policies and trained management, a disgruntled employee can still sue. Therefore, it is highly recommended that employers protect themselves by purchasing an insurance policy that will protect them against employment-related actions. This insurance is known as Employment Practices Liability Insurance (EPLI).
What is EPLI?
Employment Practices Liability Insurance is an insurance that protects employers against a wide range of employment practices. While companies have long recognized the value of General Liability or Errors and Omissions insurance, many are now beginning to consider the importance of EPLI.
EPLI is a comprehensive insurance policy that is specifically designed to cover claims and lawsuits brought by employees alleging discrimination, wrongful termination, sex harassment and other sorts of harassment, assault, battery and wrongful employment decisions or acts.
EPLI is not expensive. The annual premium is probably less than $1,000 for a quarter million dollars in coverage, usually with a deductible of $5,000. Employment practices liability insurance covers not only actual but also alleged acts of discrimination, harassment, retaliation and wrongful termination.
Factors that affect EPLI premiums
EPLI rates vary, based on many risk factors. First and foremost, insurers review the Employee Handbook and corporate employment policies. Additionally, they consider the number of employees, the turnover rate and prior employment lawsuits against the company. Small employers with solid human resource practices and clean history can often procure coverage for a reasonable premium that can be added to their other corporate insurance policies. Larger employers, or companies with prior lawsuits or weak HR practices, can expect to pay more.
Employers can lower their company’s exposure to lawsuits, and thus reduce their premiums by implementing certain basic policies, such as:
- Instituting zero tolerance policies toward workplace harassment, discrimination, and alcohol and drug abuse.
- Developing a comprehensive Employee Handbook which reviews and clearly defines accepted corporate policies and practices.
- Regular performance appraisals.
- Complete employee files and documentation.
For advice on employment practices or a quote on EPLI, contact Axcess Insurance Services Group Inc.