Employment Practices Insurance
As an employer, you never know when your employees are going to make claims against you that require you to defend yourself. If there is any merit to a claim, then you may be held liable for specified damages. Sometimes, damages can be so extensive that a business can be compromised financially when having to pay those damages.
So whether your business is small or large, you need protection in the instance an employee files a lawsuit against your business for unfair employment practices.
When It's Needed
Employment practices insurance is a relatively new type of liability insurance (specifically, defense costs insurance) and can be used in case an employee makes claim against your business for sexual harassment, wrongful termination, discrimination, or any other type of activity that makes them feel as if they have been violated in some way. Even if you think an employee would not make such a claim, you may want to reconsider this assumption. Even when someone seems like the type to stay quiet, you may find that they are not.
You should acquire employment practices insurance the moment you start hiring employees for your business. This is because lawsuits are being filed against businesses more nowadays than ever. This is because companies are vulnerable from the moment they speak to an employee until long after the employee has lost the business. Even if an individual was never hired, they can still file a lawsuit against the business if they feel or know that they were not hired due to gender, race, political affiliation, age, sexual orientation, or any other reason.
New businesses are especially vulnerable because they are in the midst of establishing their business practices. This includes hiring, firing, employee discipline, and so much more. What's more is that a new business cannot afford to have a lawsuit filed upon them so early. Actually, no business can really afford a lawsuit, bit the more established businesses tend to be able to survive. Take large department store chains, for instance, they have a variety of lawsuits filed against them frequently. When you hear of multi-million dollar settlements, it is most likely their insurance that is taking care of the monetary amount. The same applies to municipalities.
You can create defenses against employee claims of bad employment practices. The first way to do this is to start from the first time you interact with a potential employee. Create hiring practices that rule out any chance of discrimination. Utilize screening programs, such as Q&A programs that help to identify quality candidates. You also want to create policies that are posted out in the open and made available in instructional materials that are given to employees.
You can also make sure that you and your management are aware of any practices occurring within the workplace. Most lawsuits occur because a complaint has been made, but no action is taken. Documenting complaints and any harassment situations that you observe means you are not trying to hide anything. Always keep a heightened awareness in order to identify a current or potential situation so that you can stop it before it starts. Not being silent and taking action when something is observed can avoid a lawsuit.
When you do what you can to avoid a claim that you are performing unfair employment practices, you are reducing your chances of a lawsuit. Nevertheless, you as a business owner can do all that you can to avoid a lawsuit and it still occur. All you can do is your best. However, having employment practices insurance can help you absorb the financial blow successfully if you are ordered to pay damages.