Take steps to avoid the high cost and high risk of employment-related lawsuits.
Almost 75% of all litigation against companies
involve employment disputes and, of those, over 40% of the claims involve smaller
employers (15-100 employees), according to a study done by CNA, a national insurance
carrier.
From discrimination
to wrongful termination, employment practice claims can carry a heavy price tag
when businesses fail to have the right risk management procedures and insurance
coverage in place. It is impossible to
prevent lawsuits. However, you can take mitigating steps to reduce your business’
risk and high cost associated with employment-related lawsuits.
“You always
need to be thinking a few steps ahead, ‘What do my employees care about the
most? What could be a big liability for me?’ Make sure you are addressing these
needs and preventing liability to the fullest extent,” warns Karen Silverman, RPLU, CPCU, CEBS,
ARM, Policyholder Counsel, HUB International.
Silverman suggests
the following best practices to avoiding EPL claims.
Create policies and procedures. The first step is to create and implement concrete policies and
procedures. Make sure that there are specific ways and means to address common
on-the-job issues that could lead to a lawsuit. For instance, policies
addressing hiring, promotions, evaluations, changes in status, training,
harassment, and termination should all be considered. It is not about eliminating all employee
questions, but instead about making sure that the employer and employee
expectations meet reality. The best way to institute formal policies and
procedures is to work with a seasoned employment law attorney to ensure that
you’ve covered all your bases as an employer.
For many
employees, the employer/employee relationship is an at-will one, meaning it can
be terminated with or without cause by either the employee or their
employer. The employee handbook will
become the closest thing that the employer and employee have to a contract,
which is why it is so vital. An employee handbook is the best way to identify
and outline the rights and policies.
Make sure the
handbook is a living, breathing document that is updated, reviewed and revised
with counsel at least annually, as each year there is new case law, new legal
issues that may not have ripe case laws and new considerations that should be
included in the employee handbook. It is important to have each employee sign
the handbook to show they are aware of and agree to the policies and procedures
inside.
Insurance
companies follow claims and litigation trends so they ask a lot of questions in
their underwriting process. Documented
policies and procedures will enable you to examine exclusions or risks specific
to your business and their impact/defense as it relates to employee liability. Working
with an experienced broker will ensure all liabilities unique to your business
are considered.
“When you’re
getting employment practice insurance or renewing it, the question to ask is:
do you actually have the necessary policies and procedures in place to ensure
defensibility?” said Silverman. “You’ll have to prove yourself each time you
get insurance by providing information about past claims and what remedial
actions were taken.”
Document it. Keep a
written log of disciplinary and absentee issues, complaints and anything that
falls under HR’s jurisdiction. This documentation will serve as the first line
of defense should an employee discrimination claim be filed against you, as
you’ll have written proof of what happened with a disgruntled employee along
the way.
“If you have
to defend an employee termination, for example, based on their absenteeism,
you’re going to have to build a case and documentation is going to be key,”
said Silverman. “You’ll need to be able to say: the employee was 50 minutes
late, 20 times and provide the dates and specifics.” Silverman warns that in a
case like this, employers should document when an employee was notified of
their tardiness, document the ongoing tardiness and when you notified the
employee of their failure to improve.
Understand third-party risks. Look at your risks from a third party standpoint. Consider the
legal ramifications of your vendors, clients, customers, potential employees
and more being a potential liability.
Make sure whoever is interfacing with third parties is trained and understands
employment practice risks so they don’t cause a liability that could lead to an
employment practices claim.
In
California, for example, businesses with 50 plus employees are required by law
to train management and supervisory staff on harassment and discrimination
every 18 months to two years. “The better employers will train all employees to
make sure that even the doorman knows to let everyone in whether they’re in a
wheel chair and regardless of their ethnicity or gender,” said Silverman. “You
don’t want third-party claims because you didn’t have policies and procedures
in place to teach people how to help others and deal with customers.”
Know your recourse as an employer. Employees aren’t the only
ones that have legal recourse to file a claim. Employers (especially when they
hold workers’ compensation policies through private insurers), have recourse as
well. Employers have rights and shouldn’t be afraid to speak up if there’s a
fraudulent claim and more. Make sure you have a conversation with your claims
adjusters both before and during a claim to determine what your rights are as
the employer.
Retain a comprehensive Employment Practices
Liability (EPL) insurance policy. An employer is more likely to have an
employment practices liability insurance claim than a general liability or
property loss, according to studies conducted by the Professional Liability
Underwriting Society. A good broker will
determine which EPL policy is right for your business and, in the event of a
claim, help you amend your policies and procedures for successful renewal.
Contact your HUB employment practices liability broker to find out if you’ve
got the right EPL coverage.