All organizations with employees could face claims of wrongful employment actions, leading to litigation, reputational damage and financial loss. To mitigate these risks, employers should implement robust risk management strategies to reduce the likelihood of these claims occurring and secure employment practices liability insurance (EPLI) that can provide coverage if these claims arise.
Many circumstances can lead to an employment practices liability claim. Typically, they occur when an employee, potential employee or former employee believes their workplace rights have been violated by their supervisor, co-worker or other third party. Examples include discrimination based on a protected class, sexual harassment, wrongful termination or demotion, failure to promote or hire, infliction of emotional distress, retaliation for protected conduct and breach of an employment contract.
Strategies to Prevent Employment Practices Liability Claims
Employers can implement several measures to proactively address exposures that may lead to employment practices liability claims. These actions can also improve employee morale and productivity and strengthen employee relationships. Strategies to consider include:
- Develop and maintain an employee handbook with thorough policies and procedures that define and address issues that can lead to employment practices liability claims. The handbook should be readily available, reviewed by the HR department and in-house counsel, and outline the organization’s standards of conduct, explaining the disciplinary measures employers will take if those standards are not met.
- Provide regular training on expectations for appropriate workplace conduct, applicable laws and workplace policies. These sessions should also detail how to report issues and emphasize that all allegations will be investigated and taken seriously. Employers should make sure the content, format and frequency of the training meet any specific requirements mandated by applicable laws, and new hires should receive this information during their orientation or onboarding program.
- Implement best practices to prevent discrimination during recruitment, such as posting job descriptions that identify essential job functions and comply with all applicable laws, including those that may require compensation transparency. Hiring managers should be trained in proper interviewing and hiring techniques and ensure background checks are conducted but not impermissibly utilized.
- Use best practices during the employment relationship by modeling appropriate behavior and ensuring all workplace policies are enforced (e.g., zero-tolerance policies regarding discrimination and harassment). Employers should also conduct regular performance evaluations where feedback is provided and employees feel comfortable bringing forward complaints.
- Investigate all allegations of misconduct and take them seriously. Policies should prevent retaliation against employees for reporting misconduct or participating in a misconduct investigation or lawsuit, protect the potential victims of harassment and provide resources to victims. Organizations should also rely on outside counsel when necessary. When unlawful discrimination, harassment or inappropriate conduct is found, appropriate corrective action, including disciplinary action, should be taken without delay.
- Create, maintain and securely store documentation related to employment practices and investigations of wrongdoing while complying with applicable privacy laws and regulations.
Securing EPLI
Even with robust preventive measures in place, employers may still face employment practices liability claims. EPLI is a specialized policy that can cover the costs associated with these claims and help fill in coverage gaps left by other insurance policies (e.g., general liability insurance). Obtaining EPLI can mitigate an organization’s risks and be an important part of its overall risk management plan.
Conclusion
Employment practices liability claims can be complex and costly, but employers can take proactive steps to reduce their exposure and improve their overall workplace culture.
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