We can assume that today’s litigious employment environment makes it easy for agents and brokers to demonstrate the value of employment practices liability insurance (EPLI) to large employers, but is there value in purchasing EPLI for an employer that is not so large? Why should a small, local company that has never experienced employment litigation pay for insurance they have never needed and don’t expect they ever will?
Even harder than making that sale, agents should try raising the possibility for the long-time owner of a small company that a member of his “business family” could potentially engage in sexual harassment of another employer or might treat other employees differently just because of their race, marital status or sexual preference. They should try advising the business owner that an “innocent” question he poses to a potential employee could give rise to an action by the U.S. Equal Employment Opportunity Commission (EEOC).
As insurance professionals, though, agents know deep down that the broad coverage available today at a relatively low cost makes EPLI insurance a no-brainer for just about any size corporation.
While employment practices liability is not an easy subject to broach, there is a clear reason for doing so: You cannot afford to not talk to your clients about the need for EPLI, regardless of their size. Their financial well-being and your errors and omissions protection depend on it.
The large national cases may make for great headlines, but generally it’s the day-to-day allegations and lawsuits that could impact any of your clients. Size is no deterrent to actions since the laws governing employment practices apply to almost all employers.
For example, the Equal Pay Act of 1963, prohibiting sex-based wage discrimination between men and women in the same establishment performing under similar working conditions, applies to most employers with one or more employees. In addition, Title VII of the Civil Rights Act of 1964, prohibiting employment discrimination based on race, color, religion, sex and national origin, applies to employers with 15 or more employees, as does Title I of the Americans with Disabilities Act of 1990 which prohibits discrimination, in all employment practices, against qualified individuals with disabilities.
The EEOC, charged with enforcing these employment laws and others, counts all employees, including part-time and temporary workers, when determining whether the law applies to a business, so the result is that most companies, even smaller ones, are held responsible for meeting federal standards of employment.
Also, the majority of plaintiff verdicts are not the multi-million dollar headlines you read about. Jury Verdict Research’s 2006 report on “Employment Practices Liability: Jury Award Trends and Statistics,” indicates that between 1998 and 2004, 59 percent of all verdicts were for awards below $250,000, and more than 75 percent of all verdicts were for amounts below $500,000.
The world of employment litigation now reaches into every corner of the country and into every size company.
Risk management services
Thankfully the type of improper worksite behavior parodied in several television shows is rare in most workplaces, but workers will sometimes engage in behavior that offends co-workers, even though employees may not complain to management at the time. If you compound this behavior with the absence of human resource sophistication at many smaller companies, these firms are ripe for the picking by plaintiff lawyers.
Most small firms have a boilerplate anti-discrimination statement and language about not tolerating sexual harassment, which is fine. But does your client know how to implement training for supervisors? How to respond to a complaint from an employee? Or what to consider should an employee become physically disabled? If they are like most small to mid-size companies, the answer is no.
Employment practices risk management assistance is rapidly becoming available to these companies as EPLI insurers compete aggressively for their business. Many EPLI insurers now have free employment practices risk management Web sites that offer online training, sample policies and procedures and guidance on employment trends and new laws.
Other insurers may offer a policyholder limited time to consult with an employment attorney about a specific situation. The good news is that these services are often free once the business becomes an EPLI policyholder. The bad news is that the majority of EPLI policyholders do not take advantage of such free services, leaving them vulnerable to employment litigation.
Increasing chances of being sued by employees, rising verdicts that can severely damage a small firm’s financial well being, and lack of human resource sophistication can create the perfect storm for small companies when it comes to employment litigation. The good news is that broad coverage at a competitive cost and extensive risk management assistance can help your client weather the storm.
How can you sell employment practices liability to your small clients? The question you should be asking yourself is, “How can I not?”
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