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In business, an ounce of prevention is worth a pound of cure, especially when it comes to Employment Practices Liability (EPL) claims. As a business owner or manager, understanding your employees' rights is not good practice—it's essential for protecting your company's future. The Staggering Cost of EPL Claims Before we look at prevention strategies, let's take a moment to understand the potential impact of EPL claims on your business. These statistics aren't just numbers—they represent real financial risks that could threaten the foundation of your company. Imagine facing a legal battle that drags on for nearly a year, costs hundreds of thousands of dollars, and potentially results in a multi-million-dollar settlement. This isn't a far-fetched scenario—it's the reality businesses face when hit with an EPL claim. In 2022, class action settlements against employers reached almost $2 billion. The average cost to settle an EPL claim out of court is $75,000. If a case goes to trial, the average jury award skyrockets to $217,000. EPL claims are time-consuming, lasting an average of 300 days. The defense costs for an EPL claim average around $120,000. If your business loses an EPL claim, you're responsible for paying the claimant's legal fees, which average $200,000. Perhaps the most surprising statistic is that businesses are three times more likely to be sued by an employee than to experience a fire . And it's not just large corporations at risk—41.5% of employee lawsuits target private companies with fewer than 100 employees. 7 Steps to Minimize Your EPL Risk Given these sobering statistics, implementing a company-wide preventive policy is crucial. Here are seven steps you can take to minimize your employment practices liability risk: 1. Consult with Your Insurance Agent : Review potential loss exposures and acquire appropriate Employment Practice Liability coverage. Your agent can help you understand your risks and find the right protection. 2. Establish Effective Screening and Hiring Practices: Prevent discriminatory hiring by implementing fair and consistent screening processes. This not only protects you legally but also helps ensure you're hiring the best candidates. 3. Develop a Comprehensive Employee Handbook: Many insurance carriers offer compliance resources, including sample handbooks and HR form libraries. Ensure your handbook includes an employment-at-will statement and an equal employment opportunity statement. Also, consult with an HR professional to tailor it to your needs. 4. Create Detailed Job Descriptions: For each role in your company, clearly outline the required skills and performance expectations. This clarity helps prevent misunderstandings and provides a solid foundation for performance evaluations. 5. Implement a Zero-Tolerance Policy: Have a written clear policy that substance abuse, harassment, and discrimination have no place in your organization. Coupled with this, maintain an "open door" policy that encourages employees to report issues without fear of retaliation. 6. Display Company Policies: Reinforce your company’s position against unacceptable and illegal behavior by prominently displaying your policies in the workplace. This serves as a constant reminder of your company's values and expectations. 7. Document Everything: Keep detailed records of all employee complaints and your company's responses. This documentation can be crucial if an issue escalates to a legal claim. The Bottom Line While these steps may seem like a lot of work upfront, they will be infinitely preferable to dealing with a costly and time-consuming EPL claim. By prioritizing prevention, and fostering a fair, respectful work environment, you're not just protecting your business—you're building a stronger, more positive workplace for everyone. Remember, when it comes to EPL claims an ounce of prevention is worth a pound of cure. Implementing these strategies can be the start of taking significant steps to safeguard your company’s future.
Join IQRisk in reflecting back on 20 years in business. Thanking our clients, our business partners and our team.
You’ve seen it before – a good employee makes a horrible decision in his or her personal vehicle. What are the implications for your company if the employee’s license is revoked, cancelled, or suspended due to alcohol, controlled substance or felony violations? If the employee in question holds a Commercial Driver’s License (CDL), the driver will lose driving privileges for one year. But what if he or she doesn’t hold a CDL, but instead drives a sales car or pick-up truck? What if the incident involves excessive speed, reckless driving or bodily harm? What happens then? As an employer, you are caught in the balance between a good employee and the potential for vicarious liability, which holds you responsible for the actions or omissions of another person–and in this instance– your employees. As a result, you need to understand the “Doctrine of Negligent Entrustment” and the potential impact your employees’ decisions can have on your business. In its general form, the Doctrine of Negligent Entrustment states the following: “It is negligent to permit a third person to use a thing or to engage in an activity which is under the control of actor, if the actor knows or should know that such a person intends or is likely to use the thing or to conduct himself in the activity in such a manner as to create an unreasonable risk or harm to others.”1 The legal interpretation of the principle of “negligent entrustment” is not founded upon negligence of the driver of an automobile, but upon the primary negligence of the entruster, when supplying an automobile to an incompetent driver. In other words, the employer knew or should have known of the employee’s incompetence, but in spite of this knowledge, the employer entrusted the vehicle to the driver in the scope of his work. The employer may therefore be guilty of negligent entrustment. What can you do to protect your company? It is important to be proactive in managing your drivers, both as part of your fleet safety program and to effectively maintain your CDL files. Below are some helpful tips for making this process easier and more efficient: Develop a company policy for MVR evaluations (CDL and all other drivers) that must be signed by all driving employees. A minimum three-year evaluation period is effective and recommended. Evaluate MVR at time of hire and annually thereafter (using a minimum time standard). Establish guidelines for reporting major violations (such as DUI, reckless driving, chargeable accidents) immediately, regardless of whether the incident occurs in a personal or company vehicle. Develop a company policy for personal use of company vehicles that must be signed by the employee. Develop a company policy for “occasional” drivers (for example office employees who may drive to the bank or post office during the course of their work.) Develop a company policy for employees who may use their personal vehicles for company business (for example outside sales people). Establish minimum limits that employees must carry. Provide driver training programs. In addition to the above suggestions, other options may exist for managing an employee with a history of driving infractions, including placing that individual in a non-driving role. However, doing so may affect other roles and responsibilities within your organization. As an employer, it is important to remember that the consequences of allowing an employee with a less-than-perfect driving record extend beyond a possible traffic violation or accident. Due to the Doctrine of Negligent Entrustment, an employer must be aware of the potential liability to his or her company from allowing an employee with a poor driving history to operate any motor vehicles for work purposes. To learn how to best protect your company from negligent drivers and the potential devastating losses that can occur, call our experienced team at IQ Risk Insurance Services. We can help guide you in these not so black and white areas. —Bill McCloy, Managing Director and Underwriter with AmWINS Program Underwriters 1. Prosser, W. L. & Wade, J. W. (1965) Restatement of the Law Second, Torts. Philadelphia, PA: American Law Institute Legal Disclaimer. Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for the actual language.