How to Avoid Employee-Related Lawsuits

Over the past few years law firms have seen a dramatic rise in employee lawsuits against their firm for claims like harassment, age discrimination, failure to promote, unlawful termination, and racial discrimination.

In fact, according to the EEOC, almost 100,000 discrimination claims were filed by employees last year.

Before a claimant can press a discrimination claim in federal court, they need to bring an action before the EEOC. But even if the claims wind up being ruled unfounded, EPL cases can be a drain on time and monetary resources for a small or mid-sized law firms. The average tally for a discrimination case exceeded $235,000, according to the EEOC.

What can a law firm do to protect itself against EPL lawsuits? The following guide will show how businesses can take out special insurance, called EPL insurance, to protect against employee claims, the types of claims covered under EPL insurance, and other steps legal experts recommend businesses take to protect against EPL claims. 

What Is EPL Insurance?

EPL insurance policies protect businesses from the financial costs incurred from employment-related lawsuits filed for a range of reasons, from wrongful termination to harassment to discrimination and so on.  While every EPL policy is different, a company with $1 million in sales and 50 employees can likely get a policy for about $7,000 per year.

Leading Causes of EPL Claims

The leading charge filed in discrimination cases is an allegation of racial discrimination, at 36 percent of cases, according to EEOC figures. Gender-based discrimination was alleged in 30 percent of cases. Age-based claims made up 24 percent, and allegations from the disabled tallied 23 percent. In many cases, multiple allegations are made. One of the growing charges, according to the EEOC, is retaliation against employees for making discrimination claims, which can involve a job switch that the employee views as a demotion related to the initial claim.

Protections Against EPL Lawsuits

In general, the more protections a small business puts in place against EPL claims and the better internal policies and procedures that are implemented, the lower the business’s premiums will be for EPL coverage and the more likely the business will be considered a candidate for coverage. It’s essential that businesses have a written employee handbook with strong anti-harassment and anti-discrimination policies, but other efforts can also pay off.

The following steps are important for businesses to take in order to protect themselves against EPL claims.

  • Distribute an employee handbook. Generally speaking, it’s not as important how long or detailed it is as what topics are in there. The handbook should contain the business’s equal employment opportunity policy. It should also provide employees with an internal mechanism to complain about discrimination or harassment ‘so maybe you can head off a lawsuit at the pass.. If the employee doesn’t use that procedure, your business may be able to use that as part of its defense, saying that the employee didn’t exhaust internal channels for seeking resolution to the problem.
  • Develop a code of ethics policy. This policy tells employees that they shouldn’t do certain things, like giving kickbacks and engaging in other ethical violations. This reduces the employer’s exposure to punitive damages, which may not be covered by EPL insurance policies anyway, if the business is sued over the actions of an employee.
  • Include an anti-retaliation provision. In light of the new rise in claims of retaliation, it is recommended that you include a statement saying that it’s the policy of the business not to retaliate against employees over accusations of discrimination or harassment.
  • Institute handbook auditing procedures. Having an audit procedure in place under which the handbook is periodically updated to keep up with changes in the law is also important and can help in the defense of a business.
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