Protecting your business against employment related lawsuits

By Higginbotham on August 15 , 2018


GettyImages-Tired Employee

Lawsuits can come from many sources, including customers, competitors, vendors and partners. But in many cases, when a company faces litigation, the lawsuit is related to employment practices. To protect your business against these lawsuits, it’s important to understand why they occur.

Wage Laws and Worker Classification

Sometimes employees will sue over wage and hour laws. Although these lawsuits vary greatly, many of them hinge on worker classification.

For example, nonexempt employees must be paid overtime if they work more than 40 hours a week. This makes the correct classification of an employee as exempt or nonexempt very important. According to Top Class Actions, Bloomberg recently reached a $54.5 million settlement in an overtime lawsuit regarding this very issue.

Other lawsuits may involve the classification of workers as employees versus contractors. Employees receive many protections and benefits that contractors do not, and some companies have been accused of denying workers these protections and benefits by misclassifying them as contractors. The California Supreme Court recently heard a case on this issue. According to the Los Angeles Times, the ruling will likely make it more difficult for companies in California to classify workers as contractors without risking penalties.

Discrimination and Harassment

Many other employment related lawsuits stem from allegations of discrimination. The Equal Employment Opportunity Commission (EEOC) reported a total of 84,254 charges in 2017. Of these, 28,528 were related to race and 25,605 were related to sex, while many other discrimination claims were related to national origin, religion, color, age or disability. Some charges involve the Equal Pay Act, and since 2010, a small percentage of charges have involved the Genetic Information Nondiscrimination Act.

It’s important to note that retaliation often lands companies in hot water. In 2017, 41,097 charges involved retaliation.

Claims of harassment, especially sexual harassment, can also lead to lawsuits. Although this has always been a problem, recent high-profile incidents and the #MeToo movement have brought it into the spotlight.

Workplace Injury

Employees who are injured on the job may sue over their injuries. This could be the result of a workplace accident, but it could also stem from other events, such as workplace violence. According to the Occupational Safety and Health Administration (OSHA), there are close to 2 million victims of workplace violence each year, and the actual number of incidents is likely higher. Having the proper insurance coverage in place can significantly reduce your company’s exposures to lawsuits associated with workplace injuries and accidents.

Injuries don’t have to be physical, either. In some states, employees may sue over work-related mental injuries, including post-traumatic stress disorder, anxiety and depression.

Wrongful Termination

Sometimes employees need to be let go, but this is never an easy time for either side. If the termination is not handled properly, it may result in a lawsuit.

Employees may sue if they believe that the termination goes against the rights provided under laws such as the Americans with Disabilities Act (ADA) or the Family and Medical Leave Act. They may also sue if they believe their termination is connected to discrimination, harassment, or retaliation for whistle-blowing.

Protecting Your Company

While you may like to believe that your company is immune to the threat of employment related lawsuits, this is probably not a wise assumption. Whether or not the claims are valid, lawsuits are common, and companies must be proactive.

  • Understand both state and federal laws. Pay attention to new regulations, as well as new interpretations of existing laws and trends in litigation.
  • Create clear, written policies that are in line with state and federal laws and enforce these policies in day-to-day practice.
  • Maintain adequate employment practices liability insurance to help cover costs, including defense and settlements, in case an employment related lawsuit occurs.

Have questions? Your Higginbotham insurance broker has answers. Contact us for more information.

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Tags: Risk Management, Business Insurance


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