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Harassment. Discrimination. Wrongful termination. Failure to promote. Infliction of emotional distress. What do all of these things (and more) have in common? They are all situations for which everyone from customers to current, potential and former employees can sue your company.
If you have Employment Practices Liability insurance (EPL), these situations are all covered risks. But if you don’t have Employment Practices Liability insurance, you are essentially “self-insuring,” which can be an enormous mistake. Defending your company against employment practices claims can be so expensive that sometimes just a single EPL lawsuit causes a small business to go under completely.
To understand how expensive these claims can be, let’s look at some real-life examples, as provided by insurance companies:
• Age discrimination – A 62-year old sales rep filed an age discrimination suit after he was fired for not making his sales quotas. The settlement: $540,000.
• Sexual harassment and retaliation – An employee claimed that she faced retaliation after she complained about sexual harassment. Total defense and settlement costs: over $550,000.
• Emotional distress – An employee claimed that derogatory statements were posted by co-workers on an online company bulletin board. After the employer denied responsibility, the employee sued for defamation and emotional distress. Total defense and settlement costs: over $600,000.
• Sexual harassment and retaliation – After being fired for divulging confidential information, an employee filed a retaliation and sexual harassment suit, claiming the CFO’s behavior had been inappropriate for quite some time. Total defense costs: $150,000.
Think that because you’re dedicated to doing things right that this can never happen to you? Think again. One in ten businesses will face an employment practices charge. Which actually seems low given the results of a recent survey, in which 35% of respondents—including 41% of women respondents—stated that they had been harassed at work at some point in their career. 1 Plus, contrary to the #metoo stereotypes, not all harassers are bosses or men. This survey also found that 22% of alleged harassers were women, and 27% were peers.
Two more things to keep in mind: Many employment practices lawsuits are filed by former employees, when it’s too late to put an end to the offending behavior. And even handling unfounded allegations takes time and money.
Prevention, early detection, appropriate responses and proper insurance coverage are all key to dealing with Employment Practices Liability issues.
Need help getting the right insurance coverages in place? Give me a call. As your part-time CFO this is just one of the many services I can provide for you.
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