Employment Practices Liability

As we have become a more litigious society, employees, and former employees have discovered that lawsuits are a great defense for getting fired. As statistics become available, we are learning that a large portion of employment practices lawsuits are without merit, and knowing this, employers in the hospitality industry are at risk and should protect themselves.

Restaurants, bars, and nightclubs have increased exposure to employee lawsuits.

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The Risk

Bars, nightclubs, and restaurants are especially vulnerable to employment practices lawsuits because of the high employee turnover in the industry. Employers need to understand that former employees can be just as “action happy” as current employees. In fact, many actions are brought by people who have interviewed for jobs but were not hired after the fact.

Employees who have been terminated can be very vindictive and sometimes use employment practices actions or data theft as a way of getting even with a former employer. Knowing that attorneys will often work on a contingency basis, they understand that bringing an action can bring a nice payday with no upfront costs. Even a lawsuit that appears frivolous on its face must be responded to by a skilled attorney, and this can get significantly expensive without the proper insurance in place to mitigate this exposure.

The Numbers

The statistics provided by the EEOC for 2014 should be alarming for employers when you consider the statistical breakdown by category:

  • Racial discrimination including harassment 35%
  • Sexual discrimination including harassment 29%
  • Disability discrimination 28.6%
  • Age discrimination 23.2%
  • National origin discrimination 10.8%

Regretfully, those who have the most exposure, like restaurants, bars, and nightclubs, are the ones who can’t afford the financial damage that usually results from just one employment practices lawsuit. The answer for mitigating the financial impact is Employment Practices Liability Insurance (EPLI).

EPLI provides protection against most types of employment-related lawsuits including:

  • Sexual harassment
  • Discrimination
  • Wrongful termination or discipline
  • Failure to employ or promote
  • Breach of employment contract
  • Negligent evaluation
  • Infliction of emotional distress
  • Mismanagement of benefits
Cost is Significantly Outweighed by the Protection

Your EPLI policy will respond to defense costs (even if you lose), settlements, and judgments awarded by the court (excluding punitive damages or fines).

The annual premium is determined by many factors such as your number of employees, type of business you operate, history of employment lawsuits, and other various factors. For most employers, however, the cost of insurance is significantly outweighed by the protection provided in the policy. In fact, just having the defense coverage will make this valuable coverage well worth the purchase.

Having a solid EPLI policy is not the only method of protection that employers should utilize. Preventing lawsuits can also be reduced or eliminated by effective hiring and screening programs and continual education regarding employment practices for staff and management.

In short, employment practices liability is a complex coverage that is becoming harder and harder to procure, but with a proper insurance broker, you can effectively get the correct coverage for your risk.

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Andrew has a decade of experience with insurance, he can review your current coverage and tailor a policy specific to your needs.

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