Strategies To Reduce Your Companys Exposure to Wrongful Employment Practices

angry_letter_from_former_employee_epliEmployment-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 their exposures and options to manage the risk.

Strategies to Reduce Your Company’s Exposure

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.

The three most common employment-related lawsuits today are the following:

  1. Wrongful termination: The discharge of an employee for invalid reasons.
  2. Discrimination: The denial of equal treatment of workers who are members of a protected class.
  3. Sexual harassment: When a worker is subject to unwelcome sexual advances, obscene or offensive remarks, or the failure to stop such behavior.

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 how to cover your EPL 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 even further, 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 the handbook.
  • Develop training for supervisors such as interview skills, performance reviews, zero-tolerance policy and more.

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.

Why Consider EPL Insurance

EPL insurance coverage is the most useful risk management tool used in defending against a suit or paying a claim. In fact, evidence of desirable practices and policies will be preferable to obtain EPL coverage. Typically, Rue Insurance requires a copy of your employee handbook, which should cover the following policies:

  • Sexual harassment
  • Equal opportunity
  • Grievances
  • Termination
  • Internet usage/employee privacy
  • Internal job postings
  • Alternative dispute
  • Employment-at-will
  • Discrimination
  • Disabled employee and accommodations
  • Employee discipline
  • Performance evaluations
  • Pregnancy leave
  • Hiring and interviewing
  • Resolution/arbitration
  • Employment application form

In addition, you will be asked 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, Rue Insurance is committed to assisting you in assessing your employment-related policies and helping you to develop best-practice solutions. Contact us below to find out more.


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