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Responding to Employment Practice Liability Claims

By July 15, 2021April 8th, 2022Business Insurance
Legal counsel

Any business is a potential target for an employment practices liability (EPL) lawsuit. These lawsuits can be financially and emotionally draining for your company, even if you’re found not liable.

Preventive Mediation and Arbitration

Businesses can often save thousands of dollars in litigation costs by having a third party mediate a resolution. Many times, plaintiffs sue for amounts they would have settled for during alternate dispute resolution (ADR). While ADR isn’t a one-size-fits-all approach to handling EPL claims, speedy mediation or arbitration can:

  • Reduce the amount of lost wages an employee requests
  • Limit the amount of time a company spends preparing a case
  • Spare both sides the financial and emotional costs of going to trial.

Good Recordkeeping

Paperwork is the most powerful evidence a company can use when fighting an EPL claim. Established company policies, such as an employee handbook and records of employee training, can be a major advantage in court.

An investigator or jury is less likely to find you guilty if you have records illustrating sound company employment practices. Alternatively, the absence of any documentation could be seen as an effort to cover up or avoid evidence.

Any company facing an EPL lawsuit should seek advice from legal counsel to properly investigate the incident and gather as many facts as possible. Time is essential for your attorneys and insurers to gather information and formulate a defensive strategy.

[Asses your risk with this EPL Scorecard.]

Responding to EEOC Charges

If a former employee or applicant seeks a discrimination or harassment charge with the EEOC, the commission will issue an administrative charge before the actual lawsuit takes place. If the EEOC determines a violation has taken place and the employer decides not to settle, litigation will move forward. The EEOC will also impose changes to the company’s regulations to make it more compliant. If the EEOC does not feel a violation has occurred, it will give notice to the individual who filed the complaint. They then have 90 days to file a lawsuit on their own.

When issued, a formal charge typically lists a number of documents that the EEOC requires to begin investigating. Whether or not it feels the charge has credibility, an employer should respond to the EEOC professionally and quickly, with as much detail as possible. If an employer can immediately provide sufficient evidence that the claim is unfounded, it may be able to avoid a full EEOC investigation. An immediate dismissal of a claim by the EEOC can greatly reduce the employee’s desire to litigate on their own.

[Did you know that over 50% of EPL claims are against employers with fewer than 50 employees?]

EPL Insurance

No matter how many attempts are made to prevent an EPL claim from going to court, some cases must eventually be litigated. Once a claim goes to court, it is up to an employer’s attorney, employment records, and insurer to protect the company from huge damages.

Even if an employer is able to avoid punitive damages, the defense fees alone can cause incredible financial strain. An EPL insurance policy can protect employers from the financial consequences of such litigation. Contact RiskSOURCE Clark-Theders to determine the risk level your company faces and how you can build a more secure employment practices policy.

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