July 2010: Employment Practices Protection

Workplace culture, the state of the economy, and changes in employment law have all led to increases in employment related claims. Every business faces the potential of a suit from past, present, or prospective employees.

Do you know what types of decisions could trigger a claim? Is it legal to:

  • terminate a driver with a bad driving record?
  • deny a promotion to an employee who complained about working conditions?
  • require your employee to work on a religious holiday?
  • choose not to interview a qualified candidate for a position historically held by the opposite gender?

As if these exposures were not enough, you could also be sued by independent contractors and customers if the actions of your employees are perceived by them to be offensive or discriminatory.

Even groundless or fraudulent allegations require you to respond and defend your business which can be stressful, expensive and time-consuming.

What actions cause claims?

The following routine business activities expose you to potential charges if handled in a manner which discriminates based on race, color, religion, sex, national origin, age, disability, or genetic information as outlined in the laws enforced by the EEOC (US Equal Employment Opportunity Commission):

  • Job Advertisements
  • Recruitment
  • Application & Hiring
  • Job Referrals
  • Job Assignments & Promotions
  • Pay & Benefits
  • Discipline & Discharge
  • Employment References
  • Reasonable Accommodations & Disability
  • Training & Appprenticeship Programs
  • Terms & Conditions of Employment
  • Pre-employment Inquiries

Read more at US Equal Employment Opportunity Commission (EEOC) or the US Department of Labor.

93,277 discrimination charges were filed in 2009 with the EEOC:

36.0%   Race
36.0%   Retaliation
30.0%   Sex
24.4%   Age
23.0%   Disability
11.9%   National Origin
3.6%    Religion
1.0%    Equal Pay Act

A single charge may include multiple allegations and be attributed to multiple categories.

Could one of these claims happen to you?

A restaurant guest states she was sexually harassed by employees and managers after completing an employment application. An investigation showed that after several hours of drinking she applied for the job and instigated the sexual activity. A jury found in favor of the employer but defense costs exceeded $350,000.

An employee alleged that he was wrongfully terminated when he complained to supervisors that co-workers had made disparaging remarks relating to his ethnic background. The plaintiff was awarded $250,000 in damages.

Two employees made inappropriate comments about the physical appearance of a female freelance contractor working on the premises. The contractor filed a claim against the company for third party sexual harassment. The suit was settled for $100,000.

An employee alleged that his employer discriminated against him on the basis of age and disability. He further alleged that he was terminated in retaliation for filing a workers’ compensation claim and for complaining about discrimination. The employer stated that he was discharged for inability to perform essential job functions. The employer incurred $175,000 in defense costs and the claim was settled for $142,000.

A restaurant employee alleged she was released from her position due to age, but the restaurant claimed it was because of performance issues. Although the allegation of age discrimination was groundless, the employer settled for $10,000 plus legal fees in excess of $10,000.

An owner of a tool shop was sued for wrongful termination by a longtime employee who was elderly and had arthritis. The employer moved the employee to other positions to accommodate his failing dexterity, but performance problems continued and he was eventually terminated. The suit was thrown out of court but incurred $25,000 in defense costs.

How We Can Help You

Employment lawsuits can impose a financial burden on your business. Employment Practices Liability Insurance (EPLI) can help reduce this burden by protecting the business from employment related claims brought against your company, its managers, and its directors and officers. EPLI covers such things as age and gender discrimination; sexual harassment; wrongful discipline and termination; negligent decisions involving hiring, promotion, and compensation; breach of employment contract; emotional distress; mental anguish; invasion of privacy; libel; slander; etc.

The cost of EPLI has dropped dramatically over the years making it extremely affordable especially when you consider the average cost of defending an EPLI claim is estimated at $125,000 plus time, damage to reputation, and simply the anxiety surrounding the claim. An additional benefit of this coverage is that most carriers also make accessible to their insureds loss prevention consultant services, toll-free hot lines, and/or prevention manuals which are extremely valuable resources.

You can reduce the likelihood of a lawsuit, and strengthen your defense by:

  • Creating effective hiring and screening programs to avoid discrimination
  • Documenting essential job functions and establishing measurable standards for each position
  • Developing and maintaining an employee handbooks
  • Advising employees on steps to take if they are subjected to sexual harassment or discrimination
  • Educating supervisors and managers as to what behaviors are not allowed
  • Documenting employee disputes including steps taken to prevent and solve

Our Agency offers HR that Works, a cost-effective online source for HR strategies and tools designed to help you develop these preventive processes, comply with confusing employment laws, and increase productivity. Using HR that Works’ comprehensive training materials and personnel forms, you can confidently hire and terminate employees, appraise performance, manage disability, prevent lawsuits, and more.

Don’t delay – contact us today to learn more about EPLI and HR that Works. RiskManagement@tooleinsurance.com

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