Why You Need Employment Practices Liability Coverage

In today’s litigious climate, small business owners must protect themselves from damaging employment charges.  Extensive news coverage, advertising and publicity about employment cases and awards have made employees and customers more aware of employment laws, along with their rights and how to exercise them by taking action against employers. 

As the workforce becomes even more diverse, and federal and state employment-related laws and regulations continue to be broadened, Employment Practices Liability (EPL) exposures continue to build for even the smallest employer. 

Workplace discrimination cases have soared over 32% in recent years, including suits related to race retaliation, gender and age bias, sexual orientation, wrongful termination, and noncompliance with laws such as Americans with Disabilities Act (ADA), Family and Medical Leave Act (FMLA), Affordable Health Care Act, and more.  No matter how well you run your business, an employee or a customer can allege anything at any time. 80% of EPL claims cost over $25,000 in defense costs and liability damage payments.  Even groundless employment charges require legal defense that can cost thousands of dollars as well as time away from your business operations.  

Many small business owners don’t have the time or inclination to properly document employment decisions related to hiring, performance appraisals, terminations, etc. This leaves them exposed.  Even sole proprietors and companies with only a few employees can still be exposed to claims brought by customers or vendors.

Don’t think employment-related claims are a serious risk?  Could something like this happen to you?

Professional: Tool shop
Allegation: Wrongful Termination Alleged by Employee
Damages: Legal fees of $25,000

A tool shop owner was sued by a long time elderly employee for wrongful termination. This employee had been like part of the family and was originally hired by the owner’s father. Due to the employee’s arthritis, the employer moved him to other positions in order to accommodate his failing dexterity. The employee continued to have performance problems and was let go after several warnings. The suit was thrown out nine months later but cost the employer $25,000 in defense costs, lost time and productivity away from his shop, not to mention the emotional toll.

Professional: Restaurant
Allegation: Race Discrimination Alleged by Customer
Damages: Settlement of $12,000, and legal fees of $4,000

A small downtown restaurant offered take-out lunch services. One customer, a business person of Middle Eastern decent, alleged that the counter help made repeated derogatory remarks about his ethnic clothing and accent. Upon investigation, the manager of the restaurant found that the counter staff had in fact made the derogatory comments to not only this individual but several others regular customers. The restaurant settled with the customer for $12,000. Legal fees were $4,000.

Employment Practices Liability (EPL) insurance from Providence Mutual can save small businesses from financial disaster.  Contact your local agent to learn more about this affordable protection, and the value-added services we offer with it, including access to legal advice, sample Human Resources procedures and manuals and other tools to help minimize employment claims’ exposure.