Innocent Employers go to Court Every Day

Misunderstandings can lead to consequences for your company.

Employers can take action to reduce risk to protect your business. Imagine these scenarios:

• A manager terminates an employee based on negative performance evaluations. The terminated employee sues the employer for pregnancy discrimination, alleging she was fired based on her pregnancy and leave of absence.
• The Equal Employment Opportunity Commission sues a manufacturing company for race and gender discrimination in their hiring procedures. The EEOC alleges Asian applicants were turned down for all positions except administrative ones.
• A former employee alleges that after he informed his employer of the need for a kidney transplant, he was terminated.

Even if the employers in these examples were completely innocent and the allegations are unfounded, they may nonetheless incur significant defense costs. What would your company do if these claims were filed against it? Would your company have the resources to pay for litigation costs that may take months or even years to resolve?

How Does Insurance Fit In?

Employment practices liability insurance (EPLI) protects your company against the financial consequences of employment-related lawsuits and from allegations that an employee’s rights were violated. Lawsuits can result in defense costs and possible state or federal fines and penalties if your company is found liable. Complaints and charges could be brought by past, present or prospective employees.

Allegations could include:

• Wrongful termination of employment
• Wrongful failure to employ or promote
• Failure to create and provide workplace employment procedures
• Violations of the Family and Medical Leave Act, Americans with Disabilities Act, Age Discrimination in Employment Act and Title VII of the Civil Rights Act
• Wrongful retaliation
• Breach of oral or written employment contracts

Top-trending employment practice claims also include:

• Pregnancy discrimination
• Illegal background checks
• Health-related employment discrimination
• LGBT gender identity discrimination

Ways to Reduce Risk

Take action to mitigate the risk in employment decisions:

• Discuss employment practices liability insurance with your attorney, risk manager and local independent insurance agent.
• Minimize the risk of lawsuits by educating your managers and employees.
• Create employment procedures that extend from pre-employment all the way to termination and beyond.
• Maintain accurate and thorough documentation regarding any employment action that occurs, including steps your organization takes to prevent and solve disputes.
• Develop an employee handbook detailing company policies for discipline, termination and prevention of sexual harassment and discrimination in the workplace.
• Ask interview questions that are nondiscriminatory when recruiting and selecting talent.

Employee-related complaints, charges and allegations could seriously damage the reputation and bottom-line results of your company or organization. Take action. Seek advice from your attorney and your risk management team, including your local independent insurance agent.

This loss control information is advisory only. The author assumes no responsibility for management or control of loss control activities. Not all exposures are identified in this article. Contact your local, independent insurance agent for coverage advice and policy service.