Insurance that protects a business from claims made by job applicants, current employees, and former employees.
For most cleaning businesses, a reliable employee is the most valuable asset the company can possess. That is why most good business owners do everything in their power to keep great employees. Once owners/managers have found these great employees, they figure these people will never sue me. Right? According to Trusted Choice, a leader in the insurance industry, employee lawsuits have increased by 400% in the past 20 years. These lawsuits can be made by current and former employees; even job applicants who never worked for your business can claim harassment in the hiring process. Protecting your business from these types of claims is paramount to the success of your business. That is why Employment Practices Liability Insurance (EPLI) should be part of your insurance package.
Employment Practices Liability Insurance (EPLI) is a type of liability insurance that protects a business from claims made by applicants, current employees, and former employees involving various violations of their legal rights. Many business owners add EPLI to their Business Owners Package as a way to safeguard their business from the dangers of employment-related lawsuits, providing legal protection for the business, owners, officers, directors and other employees. Protecting your business from the risk of these types of lawsuits is critical to your long term success.
Types of Protections
Here are a few types of claims that EPLI coverage can protect you and your business from.
· Employee Discrimination
· Wrongful Termination
· Age Discrimination
· Libel or Slander
· Sexual Harassment
· Discrimination on the basis of Race or Gender
· Wage and Hour Violations
· Failure to Promote
These are just a few of the types of claims covered in the typical EPLI policy. It is important to note that each carrier will have its own specific policies with its own individual exclusions. This is why it is crucially important to your business for you to have a long honest conversation with your independent insurance agent. A great insurance agent can explain to you exactly what risks you do and do not face, but they can only do that with the information you give them. Most times they are asking additional questions because of experiences they have had with customers who were not fully insured. In many cases business owners know their business inside and out, but they may not realize some of the risks their business actually does face.
Costs of Not Adopting EPLI Coverage
Some business owners may not feel the need for EPLI coverage, but in most cases it can be added to a Business Owners Package (BOP) for as little as a few hundred dollars. This is all dependent on the size of your business and the exact class code. When considering how much a lawsuit could cost, this is a very good coverage to add in order to fully protect your business.
A frequent reason business owners do not elect this coverage is because they employ long-term employees. They know these employees well and feel they can trust them. In many instances this is exactly the type of employee who ends up filing a lawsuit, and these are the types of lawsuits that tend to cost the most.
The cost of a lawsuit can easily reach in to the thousands of dollars. That is regardless of whether the claims are accurate or not. Not only will those costs include legal fees, but it will cost your business the time it takes you away from the business to defend yourself in court. This is exactly the type of coverage most EPLI policies provide.
Exceptions to EPLI Coverage
Now there is one common exception to this coverage and that is when a crime is committed. If you or someone representing your business commits a crime, this policy is invalid. This is extremely important in cases of sexual harassment and discrimination. If an employee of a business commits a crime, their legal fees will not be covered by an EPLI Policy.
Preventing Employment Practices Lawsuits
There are several ways a business can go about preventing Employment Practices Lawsuits, and this begins before you even post a job opening. Having well documented hiring practices can prevent many lawsuits. Claims can be made from people who think they were mistreated during the hiring process, not just current and former employees. There needs to be a strict policy in place for the people conducting interviews and it needs to be documented. These people conducting interviews on behalf of your company need to be thoroughly aware of what is and what is not acceptable behavior.
After hiring someone, the new employee should go through an extensive onboarding program where s/he is introduced to a complete and thorough policy structure and given examples of compliant and non-complaint behaviors. Before beginning work, employees need to be crystal clear about what is acceptable behavior for your organization. Do not assume anything, especially in regards to harassment. Your businesses training program should include extensive training about sexual harassment. Videos are good tool to use to give concrete examples of acceptable behavior.
The human resources officer(s) needs to have specific policies in place that determine how to deal with complaints by employees. A frequent reason why businesses lose Employment Lawsuits is because an employee went to HR and HR did nothing. A clear reporting and action protocol needs to be in place for every meeting HR has with an employee. Those responses need to be documented and there needs to be more than one person involved in the decision-making process, especially when harassment claims are made. Having more people involved prevents “he said; she said” types of situations.
Every company with even one employee needs a clear policy and procedure for terminating employment. When the business has made the decision to fire someone, there needs to be well documented evidence of the reason the person is being let go. Without a clear policy and procedure with documentation, your business loses credibility in the eyes of the court during unemployment or lawsuit claims. These types of situations are the primary reason why businesses lose employment lawsuits and why the lawsuits drag on.
Fighting Claims versus Settling Out of Court
The ‘Hammer Clause’ is the final thing to consider when purchasing an EPLI Policy. This is a clause that gives the insurance carrier the right to tell the insured it wants to settle a claim for a set amount of money. Often this is because the insurance company thinks the amount of legal fees to prove the business innocent will be larger than the amount of the settlement. When a claim gets to this point, the business must either accept the advice of the insurance company or risk having to pay the claim if the court rules in favor of the employee.
What is most important to remember when purchasing an EPLI Policy is to speak openly and honestly with your agent. These conversations can go a long way towards covering your business completely. They can also help you prepare your business for the risks you do face. In relation to employment practices lawsuits, the crucial thing to remember is that prevention is an ongoing process. It includes pre-employment, hiring, employing, firing and after termination. This risk is not one that is comfortable to talk about for many business owners, but securing this coverage can determine the success or failure of your business in many situations.
Mitchell Sharp is a Marketing Associate at General Liability Shop.com. He has extensive knowledge in all forms of business insurance with particular expertise in cyber liability and workers’ compensation.