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.