Emotions run high when companies downsize and reorganize to meet the demands of a tough economy. Some employees will do whatever it takes to raise cash if their financial situation is desperate or if they are disgruntled with their employer. In this litigious society, no business can rest easy, especially with the steady increase in employment practices allegations. With attorney fees alone averaging $200,000 per claim, businesses can’t afford to ignore potential lawsuits that employees can instigate — and today, filing employment practices claims is more common than ever before.
Michael Finn, account executive, GMGS Insurance Services, has noticed a sharp incline in employment practices cases. Presently, he is handling 12 claims whereas his clients had two claims in the prior decade.
“No business is immune to employment practices lawsuits,” Finn says, noting that the state of California in 2004 cracked down on workers’ compensation claims with tighter regulations. “Employment-related practices claims seem to be the new workers’ comp,” he says. “And business owners don’t have to do anything wrong. No one has to actually discriminate against or harass the employee. An employee may simply allege that they were treated wrongfully and the court doors will fly open.”
Smart Business spoke to Finn about how businesses can protect themselves in this litigious environment.
What constitutes an employment practices claim?
Employment practices covers the human resources spectrum, including sexual harassment, wrongful termination and employee discrimination because of race, religion, age or any other reason. It also includes wage and hour claims, which allege that a company did not abide by the Fair Labor Standards Act (FLSA). Employees may claim overtime violations, saying that they were not paid for hours worked, or they can claim failure to pay wages for hours of work. Wage and hour claims may also allege that a company didn’t allow the legally allotted meal or rest time.
The problem with all employment practices claims is that a business does not have to be in the wrong for an employee to make a claim. A claim is as simple as an employee ‘saying so.’ Even frivolous, unsupported claims are not quickly dismissed. Aside from claims being litigated in court, the U.S. Equal Employment Opportunity Commission (EEOC) is required to investigate all claims.
Why are employment practices claims more common today?
We can blame it on our litigious society, the present economy and people’s desperation to find money any place they can. And the fact is, word-of-mouth travels very fast. Employees talk. When they learn how relatively easy it is to make an employment practices claim, it becomes an attractive option for almost anyone. Many employees do not automatically assume they are hurting their employer (or former employer). Often their legal counsel convinces the employee that the insurance company is picking up the tab at no cost to the employer. However, for businesses that do not have employment practices liability insurance (EPLI), the cost of litigation can cause serious financial harm — especially with repeated or class-action lawsuits.