Strategies to Reduce Small Business EPL Exposures
Employment-related lawsuits are a growing concern for employers of all sizes. As costs for litigation and damage awards climb, experts predict that employment liability will only become more complex. As a result, it is critical for employers to understand strategies to reduce small business EPL exposures and options to manage the risk.
Use These Strategies to Reduce Your Small Business EPL Exposures
Two effective risk management strategies include solid human resources practices and employment practices liability (EPL) insurance coverage, a policy used to cover your risk due to the ever-changing legal and employment environment.
There are three common employment-related lawsuits today:
- Wrongful termination: The discharge of an employee for invalid reasons.
- Discrimination: The denial of equal treatment of workers who are members of a protected class.
- Sexual Harassment: When a worker is subject to unwelcome sexual advances, obscene or offensive remarks, or the failure to stop such behavior.
Employment Practices liability (EPL) insurance works hand-in-hand with your internal employment practices to provide the necessary resources to defend your company against a suit or to pay a claim. To best understand the strategies to reduce your small business EPL exposures and risk, it’s important to know the potential sources:
- Recruitment practices
- Employment applications
- Employment offers
- Employee orientation
- Annual conduct reviews
- Enforcing performance policies
- Termination
- Improper documentation of the above items
To limit your exposure, engaging in solid human resources practices is an important strategy in reducing your company’s liability.
To verify your HR policies and best practices, conduct a thorough HR audit:
- Verify that the Employee Handbook outlines all policies and terms of employment in clear and concise language
- Require employees to sign an acknowledgement form for receipt of Handbook.
- Develop training for supervisors including interview skills, performance reviews and a “zero-tolerance” policy.
Employment law is often complex and varies depending on the jurisdiction. Well organized and credible documents can demonstrate fair treatment, deter litigation, ensure employee honesty and—should litigation occur—demonstrate the employer’s actions.
In addition to having the appropriate employment policies and HR best practices in place, EPL insurance coverage is another useful risk management tool used to defend against a suit or pay a claim. In fact, evidence of desirable practices and policies will be required to obtain EPL coverage. Typically, the insurance underwriter will require a copy of your employee handbook, which should cover the following policies:
- Sexual harassment
- Discrimination
- Equal opportunity
- Disabled employees and accommodations
- Grievances
- Employee discipline
- Termination
- Performance evaluations
- Internet usage/employee privacy
- Pregnancy leave
- Internal job postings
- Hiring and interviewing
- Alternative dispute
- Resolution/arbitration
- Employment-at-will
- Employment application form
In addition, you are usually required to provide the most recent annual report or SEC 10-K, the list of entities proposed for the coverage, and most recent EEO-1 reports.
EPL insurance works hand-in-hand with your internal employment practices to provide the necessary resources to defend your company against a suit or to pay a claim. As with all of your risk-management needs, GDI Insurance Agency, Inc. is committed to assisting you in assessing your employment-related policies and helping you with strategies to reduce small business EPL exposures Call GDI Insurance Agency, Inc. today at 209-634-2929 to learn more about our effective risk management services.
Employment Practices Liability Insurance: Crucial for Small Businesses
According to a recent study, more than half of all claims filed for employment-related liabilities are against employers with fewer than 50 employees. Alarmingly, the study also reveals that not even 2 percent of small businesses have employment practices liability (EPL) coverage. This is why finding strategies to reduce small business EPL exposures is so important.
High Price Tag
Employment-related claims can be extremely costly, especially in cases that drag on for years. With a slow economy and increasing adoption of worker-friendly laws, these cases are on the rise—in fact, discrimination claims have increased significantly in the last 20 years. According to data from the Equal Employment Opportunity Commission (EEOC), most claims are based on race, sex, age and disability. Many small businesses cannot afford to pay these costs and keep their company afloat.
What Puts Small Businesses at Risk?
Understandably, it can be much more difficult for small businesses to defend themselves against employment-related claims because they tend to have fewer resources and a different work environment. Small businesses are particularly at risk for employment-related claims for the following reasons:
- Many have a minimal staff and lack of in-house counsel and/or full human resources department to rely on
- Overall lack of extensive recordkeeping on employee performance
- More intimate working environments may cause personal riffs during layoffs
An Affordable Solution
Fortunately, with employment-based lawsuits on the rise and the economy’s sluggish upward climb, EPL coverage is becoming more affordable. More insurers are beginning to offer EPL insurance policies with comprehensive coverage to smaller businesses to protect them in tough times. In fact, EPL insurance is becoming so important to the success of small businesses that it is being offered at more affordable prices and being tailored specifically for those smaller companies. With the average cost of an employment lawsuit exceeding $270,000, the potential return dwarfs the initial cost of EPL coverage. Talk to GDI Insurance Agency, Inc. to learn if this risk transfer option is right for your business.
California’s Leader in Insurance and Risk Management
As one of the fastest growing agencies in California, GDI Insurance Agency, Inc. is able to provide its clients with the latest and greatest of what the insurance industry has to offer and much, much more.
We are headquartered in Turlock, CA, with locations across the heart of California’s Central Valley, Northern California and beyond to provide a local feel to the solutions and services we provide our clients. We pride ourselves on exceeding our client’s expectations in every interaction to make sure that our client’s know how much we value and appreciate their business. Contact us today 1-209-634-2929 for your comprehensive employment practices liability insurance quote! #justaskgrant
