The Value of EPL Insurance to Protect Your Business Against Employment Lawsuits

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Year after year, employment lawsuits lodged against American businesses continue to skyrocket, with no end in sight. In the past year, the Equal Employment Opportunity Commission received over 65,000 charges of alleged sexual and raced-based discrimination alone. Those charges account for almost two-thirds of the agency’s private sector charges and represent a 20 percent increase over the past three years.

These numbers are shocking, and employers may rightfully feel they are under attack. Consider further the following statistics:

  • Almost three-quarters of all lawsuits brought against companies today involve employment disputes.
  • The EEOC reported it received a record-high 99,922 private sector discrimination charges in 2010, a whopping 25% increase since 2007.
  • The EEOC paid out over $319 million in monetary benefits in 2010. That is almost $30 million more than the previous year, and the highest in the EEOC’s recorded history.
  • According to Jury Verdict Research, the median award for all discrimination claims shot up to $317,000, a massive 46% increase from the past year ($216,000).
  • On average, employees will win 6 out of 10 lawsuits. In 2009, employers only won 42% of employment lawsuits.

Employers Must Protect Themselves!

If viewed in a vacuum, these statistics are frightening. However, employers often feel they are immune to litigation, and that they will not, or cannot, be subjected to an employee lawsuit. What they hear on the news only applies “to someone else”. However, despite an employer’s best intentions, employees can file a claim at any place, at anytime, for virtually any reason. Even with the strongest human resources policies and trained management, a disgruntled or “wronged” employee can still sue. Therefore, it is highly recommended that employers protect themselves by purchasing an insurance policy that will protect them against employment-related actions. This insurance is known as Employment Practices Liability Insurance (EPLI).

What is EPLI and How Does It Work?

Employment Practices Liability Insurance (EPLI) is a critical insurance that protects employers against a wide range of employment practices. While companies have long recognized the value of General Liability or Errors and Omissions insurance, many are now beginning to consider the importance of EPLI.

EPLI is a comprehensive insurance policy that is specifically designed to cover claims and lawsuits brought by employees alleging wrongful termination, discrimination, sexual and non-sexual harassment, assault and battery, wrongful employment decision or act, and wrongful termination.

Factors That Impact EPLI Premiums

EPLI rates vary, based on many risk factors. First and foremost, insurers review the Employee Handbook and corporate employment policies. Additionally, they consider the number of employees, the turnover ratio, and prior employment lawsuits against the company. Small employers with solid Human Resource practices and clean history can often procure coverage for at a reasonable premium that can be added to their other corporate insurance policies. Larger employers, or companies with prior lawsuits or weak HR practices can expect to pay more.

Employers can lower their company’s exposure to lawsuits, and thus reduce their premiums, by implementing certain basic, common-sense precautions:

  • Institute zero-tolerance policies toward workplace harassment, discrimination, and alcohol and drug abuse.
  • Develop a comprehensive Employee Handbook which reviews and clearly defines accepted corporate policies and practices.
  • Regular Performance Appraisals.
  • Complete employee files and employee documentation.

Conclusion

The risk of being sued for violating labor and employment laws continues to increase. Therefore, in today’s highly litigious society, it is recommended to purchase EPL Insurance, if you have not already done so. With the cost of EPLI well within the reach of most employers, there are no more excuses for not purchasing a policy today.

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