Employment Practices Liability insurance safeguards businesses against employee lawsuits alleging inappropriate or unfair acts. Even when done unknowingly, violating an employee’s rights can have devastating financial consequences. Employment Practices Liability insurance is not automatically covered under a business liability policy but can be added by endorsement or coverage can be purchased by a separate policy. Employment Practices liability insurance covers alleged “wrongful acts” of an employer such as discrimination (due to race, age, religion, sexual orientation), harassment, wrongful termination, invasion of privacy, libel, slander, defamation of character, humiliation, retaliation, immigration violations, wage and hour etc. Coverage can extend to claims made by vendors or customers, not just claims from employees. The claims may be invalid or frivolous and result in no payment to the claimant, but the employer still has to defend itself, which can be extremely costly.
Employment Practice Liability claims are on the rise with the five top trending litigation claims being:
- Retaliation (50% of total claims made)
- Sexual harassment (33%)
- Gig worker classification
- Gender pay gaps (women earned 80.7% of what men earned in 2020 for same position)
- Medical marijuana usage.
What can an employer do?
- Create and implement effective screening and hiring procedures to avoid discriminatory hiring practices
- Develop an employee handbook. Be sure the handbook includes an employment-at-will statement and an equal employment opportunity statement
- Create a detailed job description of each employment role. The job description should clearly define the required skills and performance expectations.
- Institute a zero-tolerance policy regarding substance abuse, harassment and any form of discrimination. Provide an “open door” policy in which employees can report infractions without fearing retribution
- Post company policies reinforcing your stance regarding unacceptable and illegal workplace behavior.
- Document all employee complaints along with the actions the company took to resolve those issues.
- Seek the advice of Business Insurance Consultants, Inc. (732-946-9300) about the appropriate insurance coverage to buy to protect them from these types of claims.