Employment Practices Claims Causing Concerns
The news today is filled with charges, counter charges, and huge awards arising from employment practices issues. In fact, employees are probably one of the greatest liability challenges in business today. Whether the charges involve discrimination due to race, sex, or age; wrongful termination; or sexual harassment, the results can be financially devastating. A worker in Iowa was awarded $85 million, another in Milwaukee, $26.6 million.
The more employees read of employment practices charges and awards in the newspapers and magazines, and see cases heavily covered on television, the more they begin to feel their gripes are actionable and they should be monetarily compensated. The charges may seem minimal: "He looked at me funny - suggestively." "She brushed against me unnecessarily." "I refused to date him and that is why I was fired a year later." "My boss insisted I go out with her after work. My girlfriend didn't like that." Yet, the consequences can be overwhelming.
Many claims appear to be bogus and the employer often has no knowledge of the alleged discrimination or sexual harassment until after termination when the charges are first made. Even if an employee quits, the employer is not free from potential claims. The employee may charge constructive termination, suggesting that he or she had no choice but to leave the hostile environment. All current and prior employees may present charges at any time, even months after an employee's departure.
Consider as an example, the employee who is injured in an accident outside the work place and is out on a non-workers' compensation disability leave for several months. During the leave, the employer discovers there are many serious deficiencies in the employee's work. When the employee reports back to work after the leave, he or she is then terminated for cause.
Because the worker was protected by the Family and Medical Leave Act (FMLA) during the disability, a problem is now likely to develop. A termination for any reason after such a leave could easily be construed as a violation of FMLA. An attorney specializing in employment law should be consulted prior to the termination to confirm that no laws are being innocently violated. Ignorance of the law is no defense.
Employers are often left wondering how to appropriately address personnel issues. It may seem that even with the development and implementation of appropriate human resources policies and procedures, the charges and claims still arise; however, good human resources policies and procedures can mean the charges are defensible. Unfortunately, the costs to conduct an effective defense can quickly escalate.
One way for employers to limit their exposure is by obtaining Employment Practices Liability Insurance (EPLI). This product protects employers in two important ways. First, in the event of charges against the employer for covered incidents such as wrongful termination, discrimination, harassment (both sexual and non-sexual), or negligent hiring, the insurance carrier will provide the employer with attorneys and experts specializing in the defense of such claims.
This professional guidance in the assessment and response to charges significantly improves the employer's defense. Additionally, EPLI coverage will help protect the employer's financial well-being by covering eligible losses.
Although many carriers offer EPLI, each one has a different form providing different coverages. It is important to determine the type of coverages needed and what is being offered. While some of the less expensive policies may save the employer money in the short term, these policies may not pay for the claims which are most likely to occur.
In today's litigious environment, protection from potentially devastating employment practices claims is critical. By implementing a combination of human resources policies and procedures, employment practices legal advice, and employment practices liability insurance, employers can better protect themselves against this growing threat.
- By Rachel McKinney, Underwriting Manager, Swett & Crawford.
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