Employment Practices Liability Claims Trends, Stats & Examples

Topics: EPLI Coverage

Sue first; ask questions later. That’s the mindset of many employees in today’s workforce.

Fueled by many factors, employee lawsuits can be devastating. Beyond damaging your business’s reputation, an employment claim can lead to lower morale, diminished productivity and lost trust.

Speaking of lost, the cost of defending an employment-related claim can skyrocket as high as $300,000, and the timeline for resolving that claim can be as long as 24 months, according to Advisen. That’s a lot of lost time and revenue.

Over the past 20 years, Employment Practices Liability Insurance, or EPLI, has become a coverage staple for thousands of U.S. businesses large and small. As EPLI has become more popular, five trends have emerged.

Top Trends in Employment Practice Litigation

Invasion of Employee Privacy

Whether it’s done from a computer or through the lens of a security camera, many employees are monitored at work. While employers have rights in the workplace, so do their employees. Legal experts predict that privacy will soon replace wrongful termination as the biggest hot-button issue in the workplace, according to a recent article in the Insurance Journal.

According to industry experts, these are the most common situations that spawn workplace privacy lawsuits:

AmTrust EPLI can help cover the costs of employment lawsuits for small businesses.
  • An example would be failing to mention a drug-screening policy to a candidate and then firing him or her for failing a random drug test.
  • Secret Monitoring. Installing hidden cameras in a place of business can be unethical and illegal.
  • Personal Life Monitoring. In most cases, an employee’s life outside the office, assuming he or she isn’t breaking the law, is off limits to an employer.
  • Accessing Social Media Accounts. Today, social media has become a valuable tool for mining information about prospective employees. In fact, according to a 2016 survey, 60 percent of companies now check job applicants’ social media profiles before hiring them.

While perusing a candidate’s LinkedIn page isn’t illegal, demanding access to a person’s social media accounts is.

When it comes to monitoring your employees’ social media use during the workday, discretion is key. For tips on how to create a policy that is intended to work for everyone, check out this post from the Small Business Administration.

Illegal Background Checks

The federal Fair Credit Reporting Act (FCRA) sets national standards for employment screening. Two common tools employers use to screen candidates are credit reports and criminal background reports. However, a candidate must provide written consent before an employer can request these documents. Businesses that attempt to secure this information without a candidate’s consent are inviting a potentially damaging lawsuit, according to the Equal Employment Opportunity Commission (EEOC).

Pregnancy Discrimination

According to the Insurance Journal, the Pregnancy Discrimination Act requires employers to allow pregnant employees to work at their jobs as long as they can perform their duties. Additionally, an employer cannot hold pregnancy against a candidate who’s applying for an available position.

Genetic Discrimination

GINA, the Genetic Information Nondiscrimination Act, prohibits employers from using genetic information as a factor in employment-related decisions. What’s more, under GINA, employers cannot request family medical history or any other kind of genetic information from job applicants, according to a recent article in the Insurance Journal.

Unpaid Internships

Employee or intern? It’s a question the U.S. Department of Labor can help you answer. Interns, unlike employees on a payroll, are not subject to the Fair Labor Standards Act. To protect themselves, businesses should know what defines an internship. For the six key criteria, visit the Department of Labor’s Test for Unpaid Interns.

With employment laws continuing to evolve, staying in compliance can be quite a challenge. Fortunately, the EEOC launched a Small Business Resource Center to help. The site contains FAQs, tips, fact sheets and videos, along with free outreach programs, to assist businesses with staying on top of nondiscriminatory laws.

The Cost of Not Being Covered

If you think EPLI isn’t worth the investment, you’re putting your small business at risk for big trouble. Employment-related claims, from discrimination to retaliation, can be extremely costly:AmTrust EPLI mitigates the risk and cost of an expensive employment lawsuit.

  • The average cost to settle a discrimination claim is $125,000
  • The median discrimination judgment against an employer is about $200,000
  • The average cost to settle an employee lawsuit out of court is $75,000 (including legal fees)
  • The average amount awarded to employees in jury trials is $217,000

For more information on these statistics, see the Resources section at the end of this article. To learn more about EPLI and its benefits, read our blog post “Building a Case for EPLI Coverage.”

Key Takeaways

  1. Lawsuits can cost a small business in many ways. Beyond damaging its reputation, employee lawsuits can lead to lower morale, less productivity and lost revenue.
  2. EPLI is more valuable than ever. New trends in employment practices claims have emerged, from pregnancy to genetic discrimination, resulting in an even greater need for EPLI coverage.
  3. Education can be your best defense. Following today’s best employment practices and staying current on your employees’ rights in the workplace can help you avoid a potentially devastating lawsuit.

Learn More

Small businesses aren’t immune from potentially big lawsuits. AmTrust works with small businesses to help mitigate those risks.

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