Employment Practices Insurance a Growing Need for Small Business

Does your company have a few bad bosses? Take heart and read about some of the nation's worst at http://www.ebosswatch.com. You don't have any bad bosses? Think again, because discrimination is such an emerging area of law, what may be legal this month may well be illegal next month. For example, did you know the Americans with Disabilities Act (ADA) 2008 Amendments significantly expands the definition of disability? Or that any of your employees' medical information that has any genetic component must now be handled separately from other medical information?
 
If you do not have any employees or do not plan to hire any this year, read no further.  If you do have employees, however, last year's trend of increased labor and employment claims should concern you.

"Those who are terminated are not hesitating to file personnel actions," according to one Phoenix labor attorney. In addition, she said, "The EEOC is screening every new complaint for potential class action implications." That means if one of your employees files a complaint, the EEOC may interview other employees at your business to determine if the complaint is a systemic pattern of behavior practiced against other employees in addition to the complainant. What business needs that?

In fiscal year 2009, the US Equal Employment Opportunity Commission (EEOC) reported that 93,277 discrimination charges were filed last year with them, the second highest number on record. Awards obtained by the EEOC for victims amounted to over $376 million.
 
What are the costs of an employment action? They can be huge, including possible judgments, defense costs, which can be steep, loss of good will and morale issues and damaging public reaction. Can your company afford to take that risk?

The law requires every organization with employees to enact a policy that prohibits discrimination and harassment. The focus on employment actions is always on "reasonableness." Were the actions you took in response to a complaint reasonable?

The only way to limit your organization's liability is to:

1. Have a non-discrimination and anti-harassment policy,   
2. Train all employees to the policy,
3. Enforce the policy, investigating and taking appropriate action where warranted,
4. Avoid any appearance of retaliation.

Small businesses traditionally have a difficult time obtaining affordable employment practice liability coverage (EPL), but that trend is beginning to change, according to a recent article in Rough Notes, an insurance trade journal. This is probably because more than half of the employment practices claims filed are against "smaller businesses," according to the article, yet only 1.2 percent purchase coverage.

Coverage affordability has long been an issue for small businesses, but new markets are emerging to meet the small-business demand. Limits as low as $25,000 are available from some carriers. Another benefit to purchasing EPL coverage is the loss prevention information many carriers supply free of charge to their insureds. Creating myriad employment policies can be time consuming and prone to error, but many carriers offer turnkey programs that employers can use to implement or improve their employment policies. In addition, some carriers offer a helpline for their clients that offer advice and guidance prior to making employment decisions. Chubb Group of Insurance Companies, for example, offers access to lawyers, model employment policies, and a free, 120-page loss prevention manual with great tips to prevent employment claims. Take a look http://www.chubb.com/businesses/csi/chubb2215.pdf.
 
With four generations and soon a fifth working together in today's increasingly diverse employment arena, the potential for employment litigation looms too large to ignore. If you have employees and you have never purchased EPL coverage, take time today to call your agent or broker to explore your options.