The Equal Employment Opportunities Commission (EEOC) recently reported that nearly 100,000 workplace discrimination charges were filed in 2012, with retaliation, and race and sex discrimination, the most frequently filed charges. Other data shows that more than half of all claims are against small businesses.
In a nutshell, EPLI, or Employment Practices Liability Insurance, protects employers against claims made by former/current staff and prospective employees. EPL covers claims made due to discrimination, wrongful termination, sexual harassment and other employment-related allegations. Claims protection usually extends to the business, employees, directors, and owners.
It’s estimated that three out of five firms will be sued by an employee in the future. The Society for Human Resource Management (SHRM) says there has been an exponential increase in employment-related lawsuits in the last ten years. Furthermore, according to SHRM, companies are spending hundreds of thousands of dollars in legal fees. Because companies are vulnerable to litigation from before an employee is even hired, so when an employee has his exit interview, the probability of employees filing claims is uncomfortably higher than most employers care to consider.
Because most small businesses can’t afford to pay the legal fees associated with these claims, EPL can help prevent financial disaster for a small firm. Below are some typical costs associated with responding to an employee claim:
Administrative steps for claim response: $5,000 to $6,000
Average settlements vary, but are usually between $20,000 – $75,000, before the cost of defense, which could be upwards of $15,000.
If the claim goes to trial, the cost of defense averages $125,000 and settlements range between $100,000 to $250,000.
Employee lawsuits are a big inconvenience. Not only do they take your attention away from your business, they are expensive, erode productivity, decrease employee morale and distract your management team.
Current Optimum clients aside, this is most likely due to the fact that small businesses do not have always have legal counsel on staff or an adequate human resources department. Also, small businesses don’t always have the resources available that allow them to keep accurate and ongoing records of employee performance.
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