By Deirdre Ashlock, QBE Regional vice president of commercial liability
Question: Which of these everyday scenarios could result in an expensive lawsuit and potentially threaten the future of your business?
A. An employee shares off-color jokes with a coworker.
B. You terminate an employee for being late too often, while several other tardy employees aren’t reprimanded.
C. An experienced minority employee is turned down for a promotion. A less experienced non-minority is given the job instead.
D. All of the above.
If you chose D, you're right.
These are just a few of the many situations that could lead to an employee lawsuit. The U.S. Equal Employment Opportunity Commission (EEOC) recorded about 420,000 workplace complaints from 2002 to 2006. Almost $1.25 billion was awarded to employees due to resulting lawsuits. Since then, the average cost of an EEOC suit has only increased.
Although business owners usually protect themselves against the dangers of fire, theft or third-party lawsuits, they often don’t protect their businesses against the equally dangerous and damaging threat of employment practices liability. As a result, insurance “peace of mind” goes out the window.
Protection from a legal nightmare
In this day and age many business insurance providers offer Employment Practices Liability Insurance (EPLI) at affordable rates. This coverage protects the business when an employee claims a violation of their legal rights. Some of the employment practices claims typically covered by EPLI include harassment, wrongful termination and discrimination, but insurers may differ in the terms and conditions provided.
For example, General Casualty, a Wisconsin-based property and casualty insurer, offers EPLI to a broad range of small businesses and insures against sexual harassment; wrongful termination; wrongful demotion or career opportunity deprivation; slander or libel; negligent evaluation; failure to employ or promote; retaliation; or acts of discrimination relating to an employee’s disability, race, handicap, age, gender, sexual orientation or pregnancy. Prior acts coverage and punitive damages (for select states) are also available. To ensure you’re getting thorough EPLI coverage, you should double-check what coverages you’re actually purchasing. Other insurance companies may offer more limited coverages.
“When optional coverages like EPLI are offered as part of a policy, a small business can buy coverage that used to be unaffordable,” said Tyler Morgan, vice president of Tilton, Thompson and Morgan Insurance in St. Joseph, Mo. A General Casualty insured, the agency has purchased EPLI and is a proponent of the coverage. “The stereotype is, EPLI is a coverage businesses can’t afford. But honestly, they can’t afford not to.”
So why not spend a little to save a bundle while getting peace of mind? Talk to your independent insurance agent about EPLI. This valuable coverage may be available as part of some insurers’ commercial package policies or as a stand-alone policy.
What else you can do
In addition to investing in EPLI coverage, business owners can take other steps to help reduce chances of an employee lawsuit. These include:
- Educating managers and employees to help minimize potential problems before they occur.
- Having all job announcements and employment applications reviewed by an attorney prior to using.
- Noting on applications that your company doesn’t discriminate against persons in any protected class.
- Creating hiring and screening programs to avoid discrimination in hiring.
- Publishing, reviewing and updating company policies regularly in an employee handbook. Train management and supervisors on how to carry out these policies. Require employees to read the handbook and acknowledge they’ve done so. An attorney should also review all materials before distribution.
- Documenting all actions used when hiring, terminating and disciplining employees, as well as conducting formal, written employee performance evaluations.
EPLI: your next line of defense
In the event of a slip-up, EPLI can protect against a range of wrongful employment practices. Contact your independent insurance agent to find out more about what’s offered by your business insurer.
“Having EPLI provides peace of mind,” said Jim Clayton, co-owner of Clayton Paper and Distribution, Inc., also located in St. Joseph and insured with General Casualty. “We’re all human. There’s always a chance of mistakes. This gives us an extra layer of protection.”
About the author
Deirdre Ashlock is vice president of commercial liability with property and casualty insurer General Casualty. The company offers personal and commercial insurance products through independent insurance agencies in 25 states and writes more than $1 billion in premiums. It is part of QBE Regional, a division of QBE the Americas and Australia’s QBE Insurance Group Ltd.
For more information contact Anne M. Smith.