Did you witness how quickly the #MeToo movement swept through the country? It seemed as if no sectors were left untouched, and everyone has become hyper aware of potential harassment concerns. It has caused many companies to increase their efforts in preventing harassment and discrimination in the workplace. However regardless of those efforts sexual harassment and discrimination claims against a company can still occur. Having an Employment Practices Liability policy in place can eliminate the financial consequences of those allegations.

Even before the #MeToo movement began unfolding in late 2017, employee lawsuits were on the rise due to an increasing awareness of current laws and regulations. Research shows that 33% of employers have experienced an employment related allegation in the past 3 years.

Employees can file claims for all sorts of reasons, and the employer may be liable under a huge—and downright intimidating—range of potential offenses. It is important to understand the risks associated with these simple mistakes and how these allegations can spiral due to the effortless access  to social media. A simple offhand comment or unintended bias in an interview, can be held against you and place your company at significant risk. Areas of potential liability for employers include the following:

  • Wrongful termination
  • Wrongful discipline
  • Discrimination based on race, age, sex, gender, religion
  • Sexual or workplace harassment
  • Breach of employment contract
  • Employment-related misrepresentation
  • Failure to employ or promote
  • Invasion of privacy
  • Negligent evaluation
  • Emotional Distress or mental Anguish

These claim types may seem straightforward, but you may be surprised at the scope of claims that can be filed in any one of these areas, which suggests that no company is resistant to these types of lawsuits. Here are a few examples that may just provide a wake-up call to how serious—and common—these exposures can be:

  • an employee vandalizes your bathroom by writing offensive or crude comments on a stall wall and another employee is offended
  • you offer early retirement packages to certain employees with differing benefits according to age
  • an employee in the lunchroom tells off-color jokes that offend other employees
  • you are deciding between two female employees for promotion and select the one who is not pregnant
  • you prohibit an employee from returning after a medical leave unless the employee has full clearance to perform all job duties
  • an employee has filed a harassment lawsuit and doesn’t get a raise during a performance review when other similarly classified employees receive them

The tricky thing about employment claims, and the reason it can be so hard to protect against them, is that you never know when or from whom they may originate. And according to industry statistics, the average court costs and legal fees for claims that are dismissed can top out at $15,000 or more. Cases that are settled out of court can set you back $75,000, while those that go to trial can carry a whopping $300,000 price tag or more. It’s enough to bankrupt a company.

To help avoid these complaints and lawsuits to the greatest extent possible, your company should follow some simple common-sense practices. While a few of these recommendations may require additional resources, some are fairly simple and inexpensive to implement and will help improve your work environment and clarify expectations for everyone. Also, if you do face an employee complaint, these actions will demonstrate that you have made good-faith efforts to establish an open and welcoming work environment.

  • Document employee issues with as much detail as possible from the earliest point possible.
  • Develop job descriptions for every position so expectations and responsibilities are clear for each individual.
  • Create an employee handbook that spells out conduct policies and company procedures. Include rules against harassment with specific detail about what constitutes harassment.
  • Offer mandatory training sessions to managers and staff to review policies in person and provide an opportunity for Q&A.
  • Scrutinize your employment application to ensure that there are no questions related to a candidate’s age or disclosure of other identifying information.

Of course, the best way to safeguard your business against these claims is by purchasing Employment Practices Liability Insurance (EPL). Employment Practices Liability Coverage is an optional policy and many business owners are not even aware of its existence. A thorough broker will not only take the initiative in recommending this type of coverage but will research EPL your policy options and present you with a range of choices. Differences may include coverage for prior offenses, punitive costs, and third-party actions. Many have “duty to defend” provisions, which assigns the right to choose legal representation to the insurance company. You can also expect variation among premiums, which will depend on the number of employees at the company, the amount of coverage purchased, whether you have had similar prior allegations, and whether your company has antidiscrimination and antiharassment policies in place. 

The plain truth is that there is no possible way to monitor all of your employees’ actions at all times. You have too much to do already, and at a certain point, preparation and trust will need to kick in. To learn more about EPL policies that can provide protection in this area, please contact Kayla Bunnett at Benson Kearley IFG.

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