Employment Practices Liability Insurance (EPLI) is insurance that helps protect you against claims from your employees that result from the general conduct of your business.

Are you, the business owner, more likely to be sued by a third party or by an employee?
The answer in most cases by a significant and growing margin… is an employee.

According to the Equal Employment Opportunity Commission, the average number of Employment Practices Liability (EPLI) cases filed per year is a staggering 80,000 cases. According to a recent study, the average payout for an employee-related claim increased more than 30% to approximately $180,000.

This new wave of litigation is not limited to large corporations. Small and medium businesses are being devastated by EPL lawsuits. A recent case illustrates the problem.

A jury in Philadelphia found in favor of a plaintiff who worked at a water treatment company with fifteen employees. The plaintiff was the subject of national origin slurs and sued. After deliberating for only half an hour, the jury awarded the plaintiff $200,000 in back wages, $100,000 for emotional distress and $265,000 for the plaintiff’s attorneys, for a total of $565,000.

Other crazy prizes:

– A jury awarded $80.7 million to a UPS supervisor who alleged a supervisor touched her chest during an argument.

– A New York jury found the NBA sexually discriminated when it failed to make a woman a regular-season referee, awarding $100,000 in lost wages and $8 million in punitive damages.

– A large P&C insurance company settled a $157 million sex discrimination class action lawsuit

– Mitsubishi settled two sexual harassment cases stemming from the same incidents for $45 million

– Publix Supermarket announced an $81 million settlement for a sexual harassment lawsuit

Here are just a few of the ways employees can file laws against employers:

1. Wrongful termination of employment
2. Age discrimination
3. Lack of hiring or promotion
4. Breach of an implied employment contract
5. Negligent hiring or evaluation
6. Sexual or other harassment in the workplace
7. Retaliatory treatment
8. Imposition of emotional distress
9. Employment-Related Misrepresentation
10. Violation of employment-related laws
11. Adverse change in terms of employment
12. Improper reference (deprivation of career opportunity)
13. Failure to grant tenure
14. Invasion of privacy
15. Insult, calumny or defamation

Companies are being destroyed by employee demands. The cost to employers includes defense costs and payment of damages. A business has to defend itself in a lawsuit, whether or not there is a judgment awarded. It can cost thousands of dollars to simply respond to an EEOC charge without a lawsuit.

How you can protect your business

The best way to protect your business is to create an Employee Handbook.

Take the time to create employment policies and procedures for your company. The very act of researching and writing your procedures will allow you to assess how you run your business. Once you have written procedures in place and are careful to enforce those procedures, you will be better able to defend your company against accusations and employee laws.

Define hiring processes and create checklists for the entire hiring process to ensure all laws and procedures are followed.

Define disciplinary and/or dismissal procedures for employees.

Once you’ve written your employee handbook, have your attorney review it before posting it.

Once it’s published, meet with each employee, either individually or as a group, and go through the manual in detail. Ask each employee to sign, indicating that he has received a copy and that the Employee Handbook has been explained to him.

Next, be careful to strictly enforce employment procedures in the law and in your Employee Handbook. That also means you need to train your management team to follow the procedures in the Employee Handbook.

Insist on an exit interview for every terminated or terminated employee. At that interview, review all issues and have the employee sign off, saying the issues have been explained, whether or not the employee agrees.

Finally, the company must purchase labor practices liability insurance. EPLI policies generally cover wrongful termination, workplace harassment and discrimination claims. Key elements of coverage in an EPLI policy include defense costs for the business, as well as claims and jury verdict coverage.