Is Your Company Protected Against Employee Lawsuits?

Posted by Jim Pietro on Mar 4, 2011 2:24:36 PM

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If you think you've seen a spike in employee claims against employers, you're right. The Equal Employment Opportunity Commission recently announced that workplace discrimination filings against U.S. businesses hit a new high during the 2010 fiscal year.

And if you're wondering if there could be a connection between the rise in this kind of claim and the tough economy, you're right again. Companies that have had to downsize have experienced a surge not only in wrongful termination suits, but also in claims of sexual harassment or discrimination based on race, gender, age, or disability. There's also been a growth in retaliation claims in which an employee charges that a change of assignment is actually a demotion as a result of an earlier claim.

In Massachusetts, employees who feel they have experienced discrimination can contact the Massachusetts Commission Against Discrimination and file a report. The MCAD informs the employer of the complaint, and it becomes the employer's responsibility to respond. Some employers are expressing frustration that businesses seem to be considered guilty until they can prove themselves innocent. And win, lose, or settle, these claims are accompanied by hefty price tags. Even when cases are eventually dropped or settled out of court, defense costs can easily reach $40,000 or $50,000. And in cases that do go to trial, costs can rise exponentially.

If your company hasn't faced charges from a disgruntled employee, consider yourself lucky. But as you know, relying on luck is not a sound business strategy.

So what can your business do to protect itself against these types of lawsuits? For starters, every business should have employee practices liability insurance (EPLI) to protect itself against the financial costs that accompany employment-related lawsuits.

It's also important to have an employee handbook that spells out company policies. In many cases, insurance companies will not write coverage without a handbook that shows that solid procedures and practices are in place. Training is another essential. It's a good practice to review your training programs periodically to be sure they're educating your people about what is appropriate and what is not acceptable in their day-to-day interactions with co-workers, customers, and the public.

Back to EPL insurance. If you're wondering if your company has adequate protection in place, we invite you to talk with us. We'll review your current coverage, explore your business needs, and explain your options. Since EPLI is less standardized than other forms of business insurance, this product gives us a chance to craft one of the "individualized solutions" that are a hallmark of Mid-State Insurance and that provide maximum protection for each of the businesses we serve.

Topics: Jim's Blog, discrimination, business insurance, Employment Practices Liability Insurance, EPLI

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