Employment Practices Litigation Is on the Rise. Measures to Prevent It!

In the latter part of this decade, we have seen a significant increase in employment practices lawsuits. Major ones have been well-publicized. For instance, media companies such as Fox and CBS have been required to pay record-breaking judgments and settlements due to sexual harassment allegations against Bill O’Reilly and Charlie Rose. According to Workforce.com, a multimedia publication that covers the intersection of people management and business strategy “Over the past 20 years, employee lawsuits have risen roughly 400%, with wrongful termination suits jumping up more than 260%.” 400% increase in two decades is significant and disruptive. 

With today’s media scrutiny and record-breaking settlement amounts, these lawsuits can be catastrophic for businesses. An article in Claims Journal12 reports that “the cost of EPL claims are rising, as is the length of time it takes to resolve them, according to an Advisen study. On average, defense costs top out around $300,000, and resolutions take between 18 and 24 months. In addition, multiple claimant disputes are increasing, as federal, state, and city regulators and plaintiff attorneys can file a claim on behalf of an employee or group of employees.” Likewise, we as agents and underwriters, need to fully understand what employment practices liability insurance is and educate our clients about it. One single employee lawsuit can end a business!

What is Employment Practices Liability Insurance (EPLI)?

According to the Insurance Information Institute (Triple I), a leading insurance information resource “EPLI covers businesses against claims by workers that their legal rights as employees of the company have been violated.” EPLI provides protection against many kinds of employee lawsuits, such as sexual harassment and wrongful termination.

Why are employee lawsuits increasing:

The Equal Employment Opportunity Commission (EEOC), a federal agency that administers and enforces civil rights laws against workplace discrimination writes that “the leading causes are workplace sexual harassment, gender and sexual orientation discrimination, retaliation charges, age discrimination, disability-related charges, gig economy litigation, unpaid internships and lawsuits, pregnancy-related discrimination, drug testing and marijuana laws, wage gender equality, wage-hour lawsuits, family medical leave, and social media.” For instance, gig economy, marijuana laws, and social media litigations are new forms of lawsuits that have increased employee litigations to its 400% rate.

Measures to Prevent Employee lawsuits:

To prevent employee lawsuits, these are recommended steps provided by the Insurance Information Institute (Triple I):

1. Create effective hiring and screening programs to avoid discrimination in hiring.
2. Post corporate policies throughout the workplace and place them in employee handbooks so policies are clear to everyone.
3. Show employees what steps to take if they are the object of sexual harassment or discrimination by a supervisor. Make sure supervisors know where the company stands on what behaviors are not permissible.
4. Document everything that occurs and the steps your company is taking to prevent and solve employee disputes.

EPLI is an assist and let’s advise our clients about it. 

Furthermore, check out our free trial of Underwrite to see how data would enable you to write accurate policies.