Posted on October 19, 2017
Like many business owners, you’ve probably been required (at some point) to carry general liability, perhaps workers compensation insurance, and maybe business auto or liquor liability insurance depending on the size and type of business. But the largest risk exposure you face as a business owner, is actually managing your employee relationships.
That’s right, one of your past, present, or future employees at some point could sue the business for any number of reasons. For example, let’s take a service business which employs two people. Have you considered a scenario where an employee claims they work in a hostile workplace due to a manager’s or employee’s behavior? Or an employee who offered to do things on their personal time is now demanding to be paid. What if your business is shut down and you still have to pay your employees?
Mr. Z’s hard lesson
That is exactly what happen to one unsuspecting new attorney (whose name will be changed for privacy reasons). During hurricane Irma Mr. Z was forced to shut down his practice for nearly two weeks which kept his paralegal without work for that time. Upon the storm’s passing, Mr. Z’s paralegal advised that they would be taking a new position with another firm effective immediately for higher wages. Mr. Z, in an attempt to salvage his business, withheld the remaining pay because he believed work was not performed during those days. Three weeks later Mr. Z received a letter from another law firm advising that Mr. Z’s former employee is alleging back pay and is owed the withheld wages along with any attorney’s fees. The claim is currently pending litigation and could cost Mr. Z more than he realized.
The truth is in the numbers
According to the Trusted Choice (Independent Insurance Agents Association), 7 out of 10 business are without employment practice liability (EPL) and even scarier, 6 out of 10 think they are covered by another policy. There is no way to sugar coat it, it is twice as likely to have an employment related claim than a slip-and-fall claim. Florida courts typically favor an employee over an employer. With billboard signs flooding the highways, practically demanding to sue for uncollected wages, it’s inevitable that even the best business could be faced with an employment related claim.
Released by Advisen in a white paper regarding employment practices liability (EPL) insurance, defense costs top out on the high end at $300,000 and typically come to resolve between 18 and 24 months. Here is a list of the four most common employment related claims and one growing concern:
The sunshine state of employment liability
Based on an EEOC 2016 report, Florida had the second highest charge count in the country at 7,610 charges, far exceeding the national average of 1,528 charges. This means you are 5 times more likely to have an employment practice related claim in Florida than any other state, based on the national average. If an employee claims Wrongful Termination, Harassment, Discrimination (which can take on many forms), Breach of Contract, Emotional distress, or any number of employer related issues, an employment practices liability (EPL) policy will be your best form of defense. An EPL policy will often cover 3rd party claims in the event a customer, vendor, or applicant sues your company for discrimination or even harassment.
No two businesses are alike, which is why each policy should be tailored to meet specific needs of the company. For instance, restaurants and other industries with a higher than average turn-over rate, should strongly consider an employment practices liability policy including a wage & hour endorsement. Just like our example with Mr. Z, even having 1 or 2 employees could cost your company thousands so make sure your business is protected. Contact an expert who understands the coverages and more importantly the impact it could have on your business.
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