As companies downsize and cut hours or lay off employees, most business owners are unaware of the increased exposure to employee lawsuits caused by such actions.
We have seen a recent rise in employee lawsuits against current and former employers related to employment practices, including wrongful termination, sexual harassment, discrimination and failure to promote. Although we could easily argue the validity of these types of claims, the actual or threat of litigation can be frightful to a business owner, especially when they believe they did nothing wrong to cause such a suit. Additionally, worker’s compensation claims can be broadened to include similar allegations related to CA Labor code section 132(a)
The best protection one can have against such allegations is proper and well documented HR practices including an employee handbook with employment-at-will language. Unfortunately, even the best kept records cannot fully prevent the suit or related allegations thereof. These suits are not covered under a worker’s compensation or general liability policy.
Employers are automatically “self insured” for these types of claims and many may not be aware they can transfer the financial risk for such exposures to an insurance company with a policy termed Employment Practice Liability Insurance (EPLI).
A business owner should evaluate whether to self insure or transfer the risk to an insurance company. We have assisted many employers with such decisions through the analysis of possible exposures. Analysis should include the company employee handbook, training program, and comparing them to the best practices of such internal controls and compliance with federal and state regulations.
As an insurance and business advisor with Walter Mortensen/ Guaranty Insurance (CA license 0D26317) I have 15 years insurance experience with a specialty in business insurance providing EPLI coverage, workers compensation, property & liability and health insurance. I am also a proud 13 year Santa Clarita resident.