The threat of being sued by an employee is an everyday reality for business owners, and small/mid-sized businesses are no exception. It only takes one event to turn a once happy employee into a disgruntled worker. Thinking you might be safe since you have a small, loyal staff? Think again. While your current staff may be happy and loyal, the threat of a lawsuit can come from past, present and even prospective employees.
The idea that you could be sued by someone you’ve simply interviewed as a prospective employee may seem absurd, but employer liabilities begin before the employment relationship begins. Prospective employees can claim that you failed to hire them for an illegal reason such as their age or gender. Even though this claim may be hard to prove, it can still result in costly legal fees for your business.
Law suits from prospective employees are not extremely common, but law suits from current and former employees seem to be a mainstay in our current business climate. Employees who are terminated, passed over for promotion, or who feel harassed or slighted in some way may all take legal action.
One way to help mitigate the risks of an employee lawsuit is by purchasing Employment Practices Liability Insurance (EPLI). EPLI protects businesses against claims that the company is violating employee rights. While policies differ, EPLI in general will reimburse for court fees, judgment amounts and legal defense costs whether the company wins or loses. If you believe your current insurance already provides this coverage, be aware that many general liability policies exclude employee lawsuits and discrimination charges.
Every employer, regardless of size, can be the target of legal action. While cases against large, nationwide employers seem to be the only ones to make the headlines, insurance industry data suggests that mid-size business, those with at least 15 but no more than 250 employees, are sued frequently by current and past employees. These employees can often file a lawsuit without bearing any of the cost or risk involved.
According to the Conflict Solution Center, a nonprofit organization specializing in workplace mediation, the average cost to litigate an employment practices claim is $160,000. That doesn’t include settlement or judgment costs. When you start to think about the impact of those costs on your business, it makes sense to consider adding EPLI to your risk management strategy.
Speak to your insurance professional to see what your current coverage will cover and determine if EPLI is right for your business. Alternatively, give us a call at (305) 273-4066, and we would be more than happy to refer you to an insurance professional who will work with you to review your options for this type of coverage.