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Jeff Rubin: Protecting business from employment practices liability


In our increasingly litigious society, the threat of a lawsuit hangs over every business, large or small. With the “Me Too” movement and the continuous stories of wrongdoings in the workplace flooding the media, it’s now more important than ever for an organization to protect itself financially against claims of harassment, discrimination and wrongful termination. 

Even employers who adhere to the law at all times are likely be sued by an aggrieved employee or customer at some point. 

Over the last decade, hundreds of workplace laws have been passed, creating a tremendous regulatory burden for employers across the country. And because of it, employers are now more likely to have an employment-related claim, even more than a property or general liability claim.

An employment practices liability (EPL) lawsuit, whether it’s valid or not can be extremely expensive and damaging to any business. Liability claims could be especially financially devastating for many small to midsize businesses that will take a disproportionate loss when it comes to these new edicts, let alone the unfortunate defamation  for a business that can come along with this. The Society for Human Resource Management reports that 41 percent of all EPL claims are brought against small employers with 15 to 100 employees.

Companies that fall into this category will be subject to a widening collection of federal, state and local employment laws, such as the Americans with Disabilities Act, the Civil Rights Act, the Age Discrimination in Employment Act and Title VII of the Civil Rights Act, just to name a few. The Equal Employment Opportunity Commission (EEOC) is now taking a more aggressive stance in investigating EPL claims and filing lawsuits for sexual harassment, discrimination, wrongful termination, retaliatory treatment and unfair hiring practices.

Create a fair work environment for everyone

As an employer, you must do everything in your power to treat your employees fairly and maintain a nonhostile, harassment-free environment for all. Ideally, this can happen through the formal creation of policies and procedures that the company — including senior managers — takes seriously and abides by. A critical piece of this policy will be to take all employee complaints seriously, following through to both make the employee feel comfortable and stop the behavior in its tracks. All staff should be mandated to undergo training on the company’s policies around this behavior and thoroughly educated on best practices for a safe and productive work environment. However, even if you do everything right and comply with all federal, state and local regulations, there’s still a chance you could be held liable by association for the actions of your employees, third-party vendors or even your customers. You could also be the subject of a discrimination suit if someone you interview but fail to hire feels that he or she was treated unfairly.

Put the necessary security blanket in place

Employment practices liability insurance (EPLI) can protect any business against claims made by potential hires, employees currently on your payroll and even previously-terminated employees. With EPLI coverage, your company is protected against claims including:

• wrongful termination;

• employment-related emotional distress and invasion of privacy;

• defamation;

• retaliatory/constructive discharge;

• sexual harassment and discrimination; and

• workplace torts such as slander.

But what happens if a customer or vendor sues you for discrimination or harassment? Are you protected? Many employers do not realize that they have a gap in their insurance coverage that leaves them vulnerable to discrimination and harassment lawsuits from customers, vendors and suppliers. 

Similar to a standard EPLI policy, third-party EPLI generally covers external claims of discrimination based on race, religion, sex, age, national origin, sexual orientation and disability. It also protects your company from allegations of sexual advances and other verbal or physical actions that create a hostile or offensive environment. While it is recommended for all types of businesses, third-party EPLI is especially vital for businesses that have a lot of interaction with the public, such as retail or hospitality.

As with all types of exposures, you must go beyond just buying coverage to protect your business from claims. Implementing policies and procedures that address discrimination and harassment issues, both from the standpoint of an employee’s actions and the actions of third parties are critical. In fact, insurers are increasingly requiring employers to implement these practices before they will issue any type of EPLI policy. Speak to your insurance broker about EPLI coverage options and ask for a review of your current policies and procedures.

Jeff Rubin serves as senior vice president and branch manager of HUB International Northeast’s Connecticut and Westchester operations. Based out of the Fairfield, Connecticut office, he has more than 30 years of experience providing businesses in all industries with comprehensive insurance and risk management solutions. He can be reached at 203-337-1872 or by email at jeff.rubin@hubinternational.com.

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