Whether you’re dealing with existing employees or prospective employees during the interview process, every time your business interacts with people it faces the risk of an employment claim. For these situations, you need Employment Practices Liability Insurance (EPLI).
Some of the typical claims brought against employers allege:
- Discrimination (based on sex, race, age or disability, for example)
- Wrongful termination
- Other employment-related issues, such as failure to promote
Numerous federal laws specify the types of claims that your business may potentially face:
- Title VII of the Civil Rights Act of 1964, which prohibits discrimination based on race, color, religion, national origin and sex. It also prohibits sex discrimination based on pregnancy and sexual harassment.
- The Equal Pay Act of 1963, which prohibits employers from paying different wages to men and women who perform essentially the same work under similar working conditions
- The Civil Rights Act of 1966, which prohibits discrimination based on race or ethnic origin
- The Immigration Reform and Control Act of 1986, which prohibits discrimination based on national origin or citizenship of persons who are authorized to work in the United States
- The Americans with Disabilities Act of 1990, which prohibits discrimination against persons with disabilities
- The Bankruptcy Code, which prohibits discrimination against anyone who has declared bankruptcy
- Equal Employment Opportunity Act of 1972, which prohibits discrimination against minorities based on poor credit ratings
- The Age Discrimination in Employment Act, which prohibits discrimination against individuals who are age 40 or older
Unlike large corporations which have high employment practices insurance coverage limits, large human resource departments and legal staff, small and new businesses are the most vulnerable to employment claims.
In addition to carrying employment practices liability insurance, taking these steps can also reduce your risk:
- Develop an employee handbook detailing your company’s workplace policies and procedures, including attendance, discipline and complaints. The employee handbook should also contain an employment at-will statement and an equal employment opportunity statement.
- Create a job description for each position that clearly defines expectations of skills and performance.
- Conduct periodic performance reviews of employees and carefully note the results in the employee’s file.
- Develop a screening and hiring program to weed out unsuitable candidates on paper before calling them to interview in person.
- Use an employment application that contains an equal employment opportunity statement along with a statement, that if hired, employment will be “at-will.” This means their employment can be terminated at any time, for any reason or for no reason at all, with or without notice. Also ensure that your employment application does not contain any age indicators, such as date graduated high school, as this could increase your risk for age discrimination claims.
- Conduct background checks on all possible candidates.
- Institute a zero-tolerance policy regarding discrimination, substance abuse and any form of harassment. Make sure you have an “open door” policy in which employees can report infractions without fear of retribution.
- Create an effective record-keeping system to document employee issues as they arise, and what the company did to resolve those issues.
- Review potential loss exposures with your insurance agent and purchase adequate employment practices liability insurance.
For more information on EPLI, please contact us.
[Adapted from Nationwide Insurance]