What Is Employment Practices Liability?

Employment Practices Liability - TJ WoodsEmployment Practices Liability is an issue when former employees make claims that their legal rights as employees have been violated. Traditionally most lawsuits have been filed against big corporations, but numbers have been on the rise, putting smaller companies at greater risk. Many insurance companies have begun including this coverage in their Businessowners Policy (BOP) or offer it separately. The purpose of this insurance is to protect the corporation, directors, officers and employees from alleged employment-related wrongful acts.

Coverage often pertains to claims of:

  • Sexual or workplace harassment
  • Discrimination
  • Breach of employment contract
  • Infliction of emotional distress
  • Wrongful termination
  • Wrongful discipline
  • Negligent evaluation
  • Age Discrimination
  • Mismanagement of employee benefit plans
  • Violation of Employment Discrimination Laws
  • Violation of Americans with Disabilities Act
  • Wrongful failure to employ or promote
  • Wrongful deprivation of a career opportunity
  • Employment related misrepresentation
  • Failure to adopt adequate workplace employment policies & procedures
  • Illegal retaliatory treatment
  • Invasion of privacy

What Does Employment Practices Liability Insurance Pay For?

Policies vary in what they cover. Some cover attorneys’ fees and compensatory damages, for punitive damages where insurable by law, for actual or alleged retaliatory treatment, etc. They may also pay front or back pay. Back pay is an amount paid to employees who were wrongfully terminated based on the wages they would have received from the date of discharge to the date that the plaintiff accepts or refuses an offer of reinstatement. In some cases of failure to promote, the employee is paid an amount based on estimated wages they would have received in that promoted position.

Most Common Employee Lawsuits

Discrimination is by far the most common charge. In 2014 alone the U.S. Equal Employment Opportunity Commission (EEOC) handled 88,778 charges related to race, sex, nationality, religion, sexual preference, age or disability. Discriminatory discharge occurs when an employee is either fired or laid off because they fall into a legally protected category.

Retaliation refers to any type of disciplinary action (most often termination) taken in response for a legally protected act: filing a claim of discrimination, participating in an investigation of such a claim, or refusing to commit an illegal act, like lie during an investigation.

Harassment includes any offensive conduct related to one of the legally protected categories, or anything that creates an intimidating, hostile, or abusive environment. This can come in the form of workplace objects or pictures (such as in a company email), name-calling, physical assaults, threats and anything else that might interfere with one’s performance at work.

How to Prevent Employee Lawsuits

  • Familiarize yourself with federal laws dealing with employment and discrimination.
  • Create and document effective hiring and screening programs to prevent discrimination.
  • Review employee contracts.
  • Consult a specialist in Human Resources to create workplace policies and employee handbooks.
  • Post policies around the workplace and distribute employee handbooks, then meet with employees to make sure the policies and expectations are clear to everyone.
  • Make resources available for employees to report sexual harassment or discrimination from their supervisor. There should be another person to report to aside from the person overseeing them.
  • Make sure supervisors understand what behavior is unacceptable and handle all actions swiftly.
  • Document everything that happens in the case of an employee dispute and all the steps taken to prevent and resolve disputes.

Lawsuits of any kind can devastate a company’s finances and morale. Given the incidence rate of employee lawsuits, many businesses are choosing to add this coverage. If you have questions about employment practices liability or the insurance that covers it, contact the experienced professionals at TJ Woods Insurance Agency today.