In the past twenty years, the average employment practices liability claim has increased from $35,000 to $200,000.  That’s a lot of money for any business or non-profit.

Businesses and non-profit organizations have many risks to protect themselves from and Employment Practices Liability is one of the most common.  These claims can include wrongful termination, sexual harassment, discrimination, invasion of privacy, defamation, breach of contract, and failure to promote.  And those are just a few.

To cover your business or non-profit, an organization can purchase Employment Practices Liability Insurance (EPLI).  This covers an array of wrongful acts arising from employment practices and helps protect employers from lawsuits by employees.

Additionally, every businesses and non-profit should manage potential EPLI claims by proactively instituting a written Risk Management Plan.  By publishing guidelines and expectations, an organization is able to train managers and employees to adhere to written policies and procedures. By doing so, it is reasonable to expect that many EPLI claims can be prevented in the first place.

Take for instance, the hiring and firing of employees.  Do you ask yourself these questions?

Hiring Employees:

  • Is there a written hiring policy in place?
  • How and where are positions posted?
  • Is the procedure the same when hiring from within as it is when hiring from outside the organization?

Terminating Employees:

  • Does your organization have a policy for terminating an employee?
  • Are there written guidelines in place for management to follow?
  • Does all of management follow these guidelines consistently?
  • Has the organization consulted with their insurance agent and their insurance carrier to ensure that their termination policy is in compliance with current state and federal employment laws?

Once you’ve reviewed your current policies and procedures and effectively communicated them to your team, be sure to set aside a time of year on the calendar allows for next years planning.

Each year, you should review existing procedures with management and discuss the pros and cons of each, evaluate instances that have occurred in the past and whether they were resolved successfully.  If not, why weren’t they?  You should also ask yourself “Could they have been avoided and how?”

Moving forward, your policies and procedures in place should provide managers with the tools necessary to protect your employees and your organization.  By establishing this plan and working alongside your insurance agent, a business or non-profit organization can institute a working plan that reduces potential claims.