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With a potential recession on the horizon, we know you want resources to help your business master the moment. We've put together our Agility & Excellence Resource Center to bring you strategies and solutions with a finger on the pulse of what's ahead.
Economic downturns force many leaders to make highly scrutinized decisions. To remain operational, companies may implement layoffs or reorganize, which could lead to lawsuits and claims. Even during strong economic periods, employers face employment practices liability (EPL) litigation. Regardless of the claim’s legitimacy, these charges can be financially and emotionally draining. Successfully avoiding an EPL claim requires a proactive and consistent approach to employee policies, recordkeeping and partnership with your legal counsel and insurers.
- Disability discrimination
- Racial discrimination
- Gender discrimination (including pregnancy)
- Age discrimination
Utilizing Employer Options to Settle Employee Disputes
A third party can save your business from excessive litigation costs by hearing claims and mediating a resolution. Plaintiffs often take legal action for damages and losses that exceed amounts they would have settled for during an alternate dispute resolution (ADR). Swift mediation or arbitration resolutions can lower the expenses from employee-requested lost wages, company preparation time, and the financial and emotional cost of a trial.
An ADR isn’t a one-size-fits-all approach to managing EPL claims. Mediation and arbitration won’t protect against discrimination charges brought on by the U.S. Equal Employment Opportunity Commission (EEOC) or other regulatory branches. Additionally, mediation and arbitration often conclude with the accused company awarding the claimant, regardless of if the company’s legal at fault. Compared to attorney and litigation costs, these awards are significantly lower than a successful court defense.
How to Respond to an EEOC Investigation
The EEOC will issue an administrative charge prior to an actual lawsuit when a former employee or applicant seeks a discrimination or harassment charge. Initially, the EEOC communicates a notice of the charge that itemizes details of the complaint and justification for the investigation. Should the EEOC uncover a violation has occurred and the employer refuses to settle, it will litigate and seek indemnification for the affected employee and impose alterations to make the company compliant. When the EEOC determines a violation did not transpire, the employee who filed the complaint will be notified and given 90 days to organize a lawsuit on their own.
An EEOC formal charge will identify documents it requires to initiate its investigation. Regardless if your company believes the charge is credible, quickly and professionally respond to the EEOC and provide as much detail as reasonable. Your company may be able to avoid a full EEOC investigation if you can immediately provide sufficient evidence that the claim is unfounded. An immediate EEOC claim dismissal can significantly lessen an employee’s decision to litigate.
Defensive Steps to a Labor Dispute
If your business faces an EPL lawsuit, immediately seek advisement from legal counsel and your insurance broker to properly investigate the incident and gather facts. Time is critical for attorneys and brokers to formulate a defense strategy and collect essential information, such as:
- Witness statements from employees who were involved in or witnessed the event.
- Company records on the plaintiff.
- Timeline of events.
- Insurance policy and coverage availability.
The Importance of Record Management
Paperwork is the most compelling evidence to bolster your defense against an EPL claim. Well-established company policies (e.g., employee handbooks, employee training records) set the standard for all company conduct and are a major advantage in court.
Robust employment practices can influence an investigator or jury to find your company innocent. Alternatively, neglecting documentation could be evaluated as an effort to conceal or evade evidence. Any attempt to intentionally misfile or hide company records could cause your business to be prosecuted for obstruction of justice.
Reasons a Claimant May Avoid Litigation
When the EEOC or other regulatory body determines there is ample evidence of discrimination to litigate, both parties will be provided with any information collected and offered an informal settlement suggestion. The traditional resolution recommendation involves mediation by an EEOC investigator-managed council.
Employers can request mediation at any time during the investigation. Meeting the demands of the EEOC and the employee filing the complaint may be more desirable than litigation. However, if your company is confident of its innocence or determines the mediation settlement is unreasonable, litigation may be a preferable option.
Employment Practices Liability Insurance (EPLI) Explained
Regardless of your attempts to prevent an EPL claim from going to court, some cases can’t avoid litigation. Once a claim goes to court, your attorney, employment records and broker are responsible to protect your company from potential damages. In addition, defense fees alone can create an incredible financial strain on your organization. An EPL insurance policy can protect you from these litigation consequences.
Tips to Prevent the Risk of EPL Claims
Use these tips to protect your business from costly EPL claims:
- Investigate candidates for employment during the hiring process but guard their private information closely.
- Require employees to sign an employment-at-will policy.
- Certify all new and current employees receive proper training (e.g., safety) for their roles.
- Establish and enforce a strict zero-tolerance policy regarding workplace discrimination and harassment.
- Immediately investigate all claims of harassment and administer discipline and training as necessary.
- Verify your workplace policy provides at least two different options to report harassment.
- Generate an employee handbook and thoroughly document all evaluations, employee complaints and situations that lead to termination of employment.
- Ensure consistency in workplace policies to offer justification for employment actions.
- Maintain documentation for employment terms and conditions (e.g., discipline, grievances, reviews) for each employee.
- Stay up to date with federal and state laws and regulations regarding employment.
- Partner with your broker for risk mitigation opportunities and to secure EPLI.
We’re Here to Help to Protect Against Employment Litigation Exposures
Don’t wrongly assume your company isn’t at risk of an employment practices claim. Employment-related claims impact organizations of all sizes and industries. An employee dispute can disrupt businesses, affect employee morale, damage your business’ reputation and be financially devastating. Connect with a member of our team to evaluate your company’s risk and how to secure an EPL policy.