Employment Practices Liability Insurance – How It WorksFebruary 21, 2011 - Author: barnes
If you own a business and have employees, you need Employment Practices Liability Insurance. This insurance coverage typically complements or is part of your Directors and Officers Liability Insurance. Basically, Employment Practices Liability Insurance protects you, your company officers and your company in suits relating to employment practices.
Claims of discrimination and harassment are more common than you would think. When you are hiring, you may find that a marginally qualified candidate with physical disabilities may take offense that you hired someone else. The implication is that your company violated the candidate’s civil rights under the Americans with Disabilities Act. You may find yourself in court even if you followed the letter of the law.
Perhaps a middle level manager was accused of sexual harassment by someone she supervises. Even if the accusations are baseless, your company may have to deal with an expensive, time consuming court case. Possibly, your company may even have to settle. Liability Insurance for Employment Practices covers your legal defense and any settlement.
This Liability insurance pays for legal defense when law suits are brought against your company for employee hiring, discipline or firing practices. Commonly the insurance policy will require your company to select a lawyer from an approved list, much like a Preferred Provider Organization list on your medical policy.
If you have a large number of employees, you know it can be difficult to track the hours they work. An employee could easily claim they worked hours that they weren’t paid for. Wage and Hour claims have a way of becoming contagious. If one employee starts a suit, you may, before long, have half your staff on the other side of the courtroom. Again, Liability Insurance for Employment Practices covers your expenses when other policies specifically do not cover wage and hour claims under the Federal Labor Standards Act.
New technology has also created a wide variety of employee privacy concerns. Do you want to be a test case, getting sued by an employee because you read their Facebook page? What if you fire an employee for using Twitter to slander your company? What if someone is writing tainted reviews on Yelp? These are all huge grey areas in the law. The legal costs associated with being involved in the cases that define new rules can be excruciatingly expensive. And again this Liability Insurance covers your expenses.
Of course carrying Liability Insurance for Employment Practices does not provide carte blanche in hiring and firing. Your company still should have in place guidelines for employing new hires as well as letting go of employees when the need arises. These guidelines should specifically follow rules from the Employee Retirement Security Act, the National Labor Relations Act, the Worker Adjustment and Retaining Notification Act, and the Consolidated Omnibus Budget Reconciliation Act health benefit provisions. Being able to produce documented guidelines can reduce your exposure to liability. The guidelines don’t prevent you from being sued.
Protect your business and its principal officers. Talk to your insurance agent about adding Employment Practices Liability Insurance today.
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