Suzie worked for Dr. Jones for twelve years. Dr. Jones thought the world of her. Suzie was never sick and always volunteered to work late when a patient situation demanded it. She brought treats to the staff meetings and, most importantly, she never rocked the boat. Dr. Jones often wished he had ten Suzies working for him. Not anymore.
The position for head assistant came open nine months ago. Suzie, because of her length of service and impeccable work record, believed she was a shoe-in for the job. She was so busy planning what she would do with her pay increase she barely heard the doctor when he announced that Megan, someone he had just hired last year, was getting the promotion. Megan??? How could that be? Granted, she had more credentials than Suzie and had more experience in management, but how could a thirty year old girl get the job over a much more mature woman like Suzie? Suzie was angry, very angry.
It didn’t take long for the whole staff to understand just how upset she was. She began coming to work late and calling in sick. She was abrupt and rude with the patients, so much so that Dr. Jones was getting calls from several of them complaining about her behavior. He tried to reason with her, but Suzie was convinced that Megan got the job because she was younger and prettier than her. She wouldn’t listen to any of the factors that came into his decision because she knew she was right. Over the course of the next few weeks, her attitude became so poisonous that the doctor finally had to have a serious talk with her. She could either go back to being the Suzie he knew or she would have to find a job elsewhere.
The next day, Suzie left a voicemail saying she could no longer work with Dr. Jones and his staff. While they all missed the ‘old Suzie’ they were all relieved that she had made the choice to move on. In just five short weeks, however, this relief turned to disbelief when Dr. Jones received a certified letter stating that he was being sued for age discrimination. Having never been sued before, Dr. Jones was at a loss as to what he needed to do. Thankfully, his next patient, Sam Smith (who was also his Property and Casualty insurance broker) reminded him that at last year’s renewal he was finally able to talk the good doctor into an Employment Practices Liability Insurance (EPLI) policy. For years, Dr. Jones had refused to consider the coverage, feeling it was too much money for a practice with only ten employees. He understood the need for Malpractice insurance, but not EPLI. His employees were good people, they would never sue him.
Thankfully, he finally listened to Sam. While such situations are never easy, at least Sam had provided him with a safety net. Dr. Jones was lucky. Many small and mid-sized business owners would not be as lucky, however, if this were to happen to them. While a majority of large businesses have EPLI, smaller companies often do not. Citing the same reasons as Dr. Jones did for many years, they feel it is too expensive or their exposure to such employee risks is minimal.
In fact, smaller companies (those with 15 – 250 employees) are sued by employees more frequently than larger organizations. Experts cite the lack of a Human Resources professional on staff in smaller companies, along with little attention paid to risk management or training and the more ‘trusting’ culture usually found in small businesses. The vast majority of federal and state employment laws and regulations apply to companies with as few as ten employees and, like the IRS, the government doesn’t care if the employer was aware of the law or not – if they are found out of compliance, they will face the consequences.
In 2009, federal age discrimination suits resulted in $72.1 million in fines; in 2012, the fines amounted to over $91 million. Federal lawsuits for disability discrimination, under the Americans with Disabilities as Amended Act (ADAAA), awarded $67.8 million in 2009; in 2012, they were $103.4 million. The numbers of complaints continue to raise exponentially, as do the monetary awards when these suits go to court. Employees can file charges with no cost to themselves and, if the matter does get all the way to court, employees win the lawsuit over 70% of the time. Juries usually side with employees, not employers, no matter how strong the employer’s case may be. As Baby Boomers enter their sixties and seventies, age discrimination suits will continue to multiply. With the complexities of the ADAAA requirements along with the expanding definition of who is protected under anti-discrimination laws, the employer is more exposed to employment lawsuits and fines than ever before. An EPLI policy, together with professional HR advice and support and a strong risk management program, can better protect employers and their companies.
The chance of being sued by a disgruntled employee is 1000% higher than a fire. A fire can set a company back and cause some pain for the short term, but thankfully most have adequate coverage to get the business back on its feet quickly. However, if there is not an adequate EPLI policy in place, an employment lawsuit can bankrupt not only the business but the individual owners and directors as well. EPLI policies vary in cost and coverage, so even if you currently have a policy in place we urge you to contact your insurance broker to review the policy and assure that it covers your future and current needs. If you don’t have EPLI, today is the day to make that important phone call.
On page four, we have a sample of the questions you will be asked when filling out an application for EPLI.
As part of the enrollment process to obtain Employment Practices Liability Insurance, the employer is asked to complete a checklist identifying the HR policies and procedures currently in place. Along with answering questions such as the number of last year’s terminations, the total employee count, and the breakdown of those making under and over $50,000 per year, the employer must also complete the questions below. The more YES boxes checked, the lesser the exposure to employee suits and government fines, which can lower the premium. What is your risk score?
1. Is Human Resources personnel consulted prior to terminations? Yes____ No___
2. Does the employer have written guidelines, policies, or procedures related to the following:
- Employment at will Yes____ No___
- Discrimination Yes____ No___
- Sexual and other workplace harassment Yes____ No___
- Equal Employment Opportunity Yes____ No___
- Disabled Employees and Reasonable Accommodations Yes____ No___
- Reporting and Investigating and Resolving Employee Complaints Yes____ No___
3. Are employees required to acknowledge receipt of the above guidelines, policies and procedures Yes____ No___
4. Has employment counsel reviewed the above guidelines, policies and procedures Yes____ No___
5. Does the employer
- Utilize employment applications Yes____ No___
- Document employee performance Yes____ No___
- Conduct human resources training for management employees Yes____ No___
3. Does the employer have written policies outlining employee conduct when dealing with customers, clients, or other third parties? Yes____ No___
4. Does the employer conduct pre-employment criminal and credit background checks? Yes____ No___
If you need assistance in changing your NO answers to YES, please give us a call. We’d love to help you improve your score!