Employment Practices Liability Risk Management

Following are some suggestions on various practices that have been shown to reduce both the likelihood and severity of EPLI claims.

Employee Attitude Surveys

Knowing how your employees feel about your company and the environment in which they work provides management invaluable information as to how best to stimulate and motivate employees to be more productive and less likely to file employment practices claims.

Supervisory Employment Law Training

A minimum of one hour per year personnel policy or employment law training for supervisors, managers and executives is an important element in this program. This training may be provided by your labor attorneys or through your other resources

Eliminate or reduce politically incorrect employee activities

"Boys will be Boys" and "Girls will be Girls" but their choices need not be your responsibility. Sensitivity training of employees helps prevent inappropriate behaviors that could lead to serious and expensive claims, thereby reducing your ultimate cost of doing business

Exit Interviewing

Employees leaving your company may often be the best source to determine if the company's HR policies are being followed

Employee Incident Reporting

Employees often are reluctant to report sensitive discrimination or harassment claims to senior management but instead will confide their concerns to an attorney who will commence legal proceedings. Make sure your employees are comfortable reporting any incident to senior management including the Dealer principal. An added layer of protection would be to secure the services of an outside firm that employees may report incidents to.

Binding Arbitration

Across our country the courts are supporting binding arbitration of employment related claims. Binding arbitration still provides employees with the same substantive legal rights, as does the traditional courtroom legal system. The primary differences are:

Legal defense costs are reduced by almost two thirds.

The time to finalize an employment claim is 6 to 9 months, thus allowing management and the company to maintain a focus on growing the business rather than being distracted by defending an alleged EPL claim.

The process is kept very private with a greatly reduced possibility of media fanfare.

In 1991, Congress amended Title VII (which is the principal federal anti-discrimination law) in several important respects.

Employment discrimination cases (which previously could only be tried before a judge) can now be tried before a jury.

And, damages in these cases are no longer limited to lost wages but now can include "compensatory" and punitive awards.

In the face of these developments, employment litigation took off in the 1990's -- and juries have played a big role in this trend:

A Michigan jury awarded $5.5 million to a former truck driver with epilepsy in an ADA case.

A New Jersey jury awarded $8.8 million to three employees laid off in a reorganization based on age discrimination.

A Missouri jury recently awarded $4.2 million to an insurance claims adjuster in an age case.

A jury awarded $80.7 million to a UPS female supervisor who alleged a male supervisor poked her breast during an argument.

A Manhattan jury found that the NBA sexually discriminated when it failed to make a woman a regular season referee, awarding $100,000 in lost wages, and $8 million in punitive damages.

The view from the jury box seems to reflect the perceptions of individuals who have been terminated or laid off. A recent study indicates individuals sue employers not only for economic gain but to vindicate feelings of injustice in the way they were treated during employment and termination.

Costly Settlements

The mere threat of jury awards -- and the sheer cost of litigating -- has had quite an impact on the frequency and the amount of settlements. Plaintiffs' lawyers and government agencies have learned that the news media is hungry to publicize the "facts" of a charge or complaint well before the judicial process has run its course. Trial in the court of public opinion has brought a number of corporate giants to the settlement table with offers to pay millions of dollars to claimants, open their internal records and practices to public scrutiny, and conduct diversity training and consciousness raising at all levels within their organizations.

Consider the following:

  • State Farm settled a sex discrimination class action for $157 million
  • Mitsubishi settled two sexual harassment cases arising out of the same incidents for $45 million
  • Publix Supermarkets announced an $81 million settlement of a sexual harassment lawsuit.

In light of the above, you may wish to review the level of coverage you currently have.

Many dealers don’t carry adequate EPLI coverage.

In this increasing litigious environment dealers really need a separate policy providing a full range of coverage including wrongful termination, prior acts, discrimination and harassment.

Make sure you’re covered for intentional and illegal acts, with no exclusions.

There should be no exclusions for layoffs. EPLI rates are based on your number of employees and history of prior EPLI claims.

Dealers with no prior EPLI losses can expect to pay $85 to $100 per employee for $1 million worth of EPLI coverage with a $10,000 deductible.

There is usually a minimum premium of $1,500 or more for small dealerships.

Employment Practices Liability Insurance Risk Management: Click Here

For EPLI Related Lawsuits: Click Here

For questions regarding Human Resources or employment regulations you may want to contact Jennifer McBennett of Seay Management Consultants at 407-426-9484 or email her.