Jonathan Geissler January 8, 2018 No Comments

Good Employers Like You Can Get Sued Too

The Cost of Having No Employee Practices Liability Insurance (EPLI)

Rise of EPLIIn today’s society, many people sue first and ask questions later. Unfortunately, as an employer, there is a good chance that eventually one of your employees will sue your business.

Employee lawsuits can be much more than just an inconvenience. They are expensive, distractive for your management team, and can quickly erode productivity and employee morale. Employee lawsuits are becoming much more common, making employment practices liability insurance (EPLI) a necessity for businesses large and small.

Over the last 20 years, employee lawsuits have risen roughly 400%, with wrongful termination suits jumping up more than 260%. Oddly enough, you are more likely to be sued by an employee these days than to have a fire at your facility.

It’s not just large corporations that are being hit. Roughly 41.5% of employee lawsuits are brought against private companies with less than 100 employees. The financial damage of employee lawsuits can be dramatic; the cost of settling out of court averages $75,000, and the average jury award hits $217,000 if you go to court and lose.

It’s not just wrongful termination that can end in a lawsuit, you can be sued for many reasons. Despite all of these scary numbers, roughly 7 out of 10 businesses don’t carry EPLI insurance. This can be an expensive mistake.

The Top 4 Trending Employment Practices Liability Claims

According to industry experts, unpaid internships, illegal background checks, and issues related to pregnancy and health are the top trending employment practices litigation cases. The cost of claims is rising, as is the length of time it takes to resolve EPLI claims Advisen recently released a white paper that showed defense costs topping out around $300,000 and resolutions taking between 18 and 24 months.

Here is a quick look at the four most common types of claims:

1. Pregnancy Discrimination: The U.S. Equal Employment Opportunity Commission (EEOC) made pregnancy-related discrimination one of its top six priorities in its latest Strategic Enforcement Plan. The Pregnancy Discrimination Act was put in place in 1964 and states that employers must allow pregnant employees to stay at their jobs as long they can continue to perform their duties. In addition, employers cannot hold pregnancy against a prospective new employee.

2. Illegal Background Checks: Illegal background check lawsuits have also become much more common, according to industry experts. If you use background checks in your hiring process, the key to avoiding lawsuits is fully complying with the requirements of the Fair Credit Reporting Act and any relevant state laws. Background checks must be conducted across all hires, not just certain applicants.

If your business pulls credit reports on potential hires, they must be notified in writing of the credit report request and that it will be used in your hiring decision. You must have written permission to request a credit report. One of the major issues is the concern that inaccurate information and errors on the credit report could affect the hiring decision.

3. Unpaid Interns: Parameters have been set by the Department of Labor that help companies determine whether an intern is or isn’t an employee. A couple of the factors are whether there is an educational component to the internship and whether their duties are similar to a current employee’s duties. In recent years there have been a number of class action suits and settlements related to intern programs. Experts advise that all internship programs and practices be reviewed to make sure they fall within true internship parameters.

Make sure your programs have an educational component, interns are not doing work that is usually done by employees, and there are no promises of paid jobs at the end of the internship.

4. Genetic Discrimination: The Genetic Information Nondiscrimination Information Act (GINA) prohibits employers from using any genetic information in decisions related to employment and bans classifying employees based on genetic information or requesting any genetic information from employees.  In order to avoid GINA lawsuits, verify that your hiring process doesn’t ask for family medical history information or any other genetic information from potential hires.

What is Employment Practices Liability Insurance?

Employment practices liability insurance, commonly referred to as EPLI insurance, is specifically designed to protect employers from lawsuits brought on by employees. It provides coverage for many situations that general liability insurance does not.

Even lawsuits that are thrown out of court or are won by your company are expensive, due to the high cost of securing legal defense. Therefore, this insurance coverage is very important as financial protection for your business enterprise.

Not Having EPLI Insurance Can Cost Your Business

Lawsuits are not only expensive, they are also stressful.  Resolution can take 18 to 24 months; a lawsuit will have an effect on your personal and business life for a long time. When it comes to expenses, the cost of a lawsuit can be daunting. According to the law firm of Murphy Austin Adams Schoenfield LLP, here are average court costs and legal fees when:

  • Average court costs and legal fees when settled out of court: $10,000 to $50,000
  • Average court costs and legal fees when the case is dismissed: $10,000 to $15,000
  • Average court costs and legal fees when the case goes to trial: $150,000 to $200,000

The cost of EPLI insurance is a fraction of what you will pay if you end up on the losing side in a lawsuit. EPLI premiums will vary depending on a number of factors:

  • The number of employees
  • The amount of coverage purchased
  • Whether your company has anti-discrimination and anti-harassment human resource policies in place
  • Whether your company has had any EEOC complaints or lawsuits filed against it in the past
Why Your Business May Not Be Covered

Don’t be fooled, unless you have an EPLI policy, your business is not covered against employee lawsuits. According to an industry study, 6 out of 10 non-buyers of EPLI coverage mistakenly think they are protected under other polices.

EPLI Coverage

If you are not carrying an EPLI policy, your business is not alone. A study done by Advisen found that only 23% of companies with fewer than 100 employees purchase EPLI insurance; that number is 34% for companies with 500-700 employees and 40% for businesses that employ over 1,000 people.

Choosing the Right EPLI Policy?

Businesses have different needs when it comes to EPLI coverage. Those needs will vary depending on the industry you operate in, the activities your employees perform, and the state (or states) where your business operates.

Businesses in certain states are more likely to be sued than in others. According to Advisen, the top states for EPLI litigation are New York, California, Texas, and Florida.

Consulting an independent agent is the best way to learn more about employee practices liability insurance and to compare a selection of EPLI insurance quotes. Let us help you find the right business insurance solutions that meet your needs and budget to help protect your business. For more information, please contact us at 845-986-1177, or fill out the quote form below and we’ll get back to you shortly!

We are your insurance solutions provider and partner, serving Warwick, Greenwood Lake, Florida, Goshen, Middletown, Chester, Monroe, Newburgh, Orange County, and the Hudson Valley.

This blog post was provided by our partners at Trusted Choice.

 

Related:

Understanding NYS Paid Family Leave

Ways Your Business Can Avoid Employment-Related Claims

Understanding Employment Law

Protect Your Business from Sexual Harassment in the Workplace

Employment Practices Liability Insurance

 

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