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The Value of EPL Insurance to Protect Your Business Against Labor Lawsuits

Year after year, labor lawsuits filed against American companies continue to skyrocket, with no end in sight. Last year, the Equal Employment Opportunity Commission received more than 65,000 charges of alleged discrimination based on sex and race alone. Those positions represent nearly two-thirds of the agency’s private sector positions and represent a 20 percent increase over the past three years.

These numbers are shocking, and employers can rightly feel that they are under attack. Also consider the following statistics:

  • Nearly three-quarters of all lawsuits filed against companies today involve labor disputes.
  • The EEOC reported that it received a record 99,922 charges of discrimination in the private sector in 2010, a whopping 25% increase since 2007.
  • The EEOC paid out more than $ 319 million in cash benefits in 2010. That’s almost $ 30 million more than the previous year, and the highest in EEOC’s recorded history.
  • According to Jury Vedict Research, the median award for all discrimination claims skyrocketed to $ 317,000, a massive 46% increase over last year ($ 216,000).
  • On average, employees will win 6 out of 10 lawsuits. In 2009, employers only won 42% of labor lawsuits.

Employers must protect themselves!

If viewed in a vacuum, these statistics are terrifying. However, employers often feel that they are immune from litigation and cannot or cannot be sued by employees. What they hear on the news only applies “to someone else.” However, despite the best intentions of an employer, employees can file a claim anywhere, anytime, and for virtually any reason. Even with the strongest human resource policies and skilled management, a disgruntled or “aggrieved” employee can still sue. Therefore, it is strongly recommended that employers protect themselves by purchasing an insurance policy that will protect them against employment-related actions. This insurance is known as work practices liability insurance (EPLI).

What is EPLI and how does it work?

Work Practices Liability Insurance (EPLI) is essential insurance that protects employers against a wide range of work practices. While companies have long recognized the value of general liability or errors and omissions insurance, many are now beginning to consider the importance of EPLI.

EPLI is a comprehensive insurance policy that is specifically designed to cover claims and lawsuits brought by employees alleging wrongful termination, discrimination, sexual and non-sexual harassment, assault and battery, wrongful employment decision or act, and wrongful termination.

Factors Affecting EPLI Premiums

EPLI rates vary based on many risk factors. First, insurers review the Employee Handbook and corporate employment policies. In addition, they consider the number of employees, the turnover rate, and past employment lawsuits against the company. Small employers with strong human resource practices and a clean track record can often provide coverage for a reasonable premium that can be added to your other corporate insurance policies. Larger employers or companies with past lawsuits or weak HR practices can expect to pay more.

Employers can reduce their company’s exposure to lawsuits, and therefore lower their premiums, by implementing certain basic common-sense precautions:

  • Institute zero tolerance policies towards harassment, discrimination, and alcohol and drug abuse in the workplace.
  • Develop a comprehensive Employee Manual that clearly reviews and defines accepted corporate policies and practices.
  • Periodic performance evaluations.
  • Complete employee files and employee documentation.

Conclution

The risk of being sued for violating labor and employment laws continues to rise. Therefore, in today’s highly litigious society, it is recommended to purchase EPL insurance, if you haven’t already. With the cost of EPLI within the reach of most employers, there are no more excuses not to buy a policy today.

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