What to know to protect yourself against employee-related claims

Note: This post was provided by Pascale Abou Moussa at CoverWallet. Learn more at coverwallet.com.

Starting and running a business may be a dream come true for most people, but that doesn’t mean that it’s all sunshine and roses. Regardless of industry and type of business, entrepreneurs are, and should be, aware of the risks. One of these is employee-related claims. In addition to protecting your employees at work with a Worker’s Compensation insurance, it is essential to protect your business against any claim coming from your employees.

There is a wide variety of reasons why employees file complaints, and no matter how simple their claims are, these can all add up and push your company to shell out a huge amount of money. Big or small businesses, the reality is that employment litigation can happen, so make sure to keep your company protected.

Some common employee-related lawsuits include:

  • No overtime pay for employees who worked over eight hours a day, or more than 40 hours in a week
  • No breaks for eating and/or resting
  • Workplace discrimination

As for claims and lawsuits, it really does not matter if you win or not. The bottom line is, they’re both costly and take so much of your time when you’re supposed to be running your business. The good thing is, there are ways to shield your company from huge financial losses due to claims related to your employees. Here are some of the things that you need to know to minimize the risks involving employment litigation. 

Remember this is not official legal advice. If you have any concerns, it’s best to consult an employment lawyer. 

1. Create a comprehensive set of guidelines informing employees of company policies, particularly on discrimination and harassment. Make sure that all employees know and understand the different policies and procedures of the business including tardiness, attendance, and how to file a complaint. It is also essential to inform them that the company has the right to terminate the contract of any employee at any given time, except for illegal reasons including discrimination.  

2. Set up an end-to-end sourcing and hiring process that enables you to identify only the candidates who are suitable for the company consistently. If you invite candidates for an interview and you do not hire them, they may file a complaint about alleged discrimination of any form.

3. Clearly define the tasks and responsibilities of each role. Make sure that each employee knows what is expected of them by defining what the job involves and the skills and knowledge required. This will help avoid any misunderstanding, not only in the deliverables but also in the employees’ expectations as a whole.  

4. Maintain good record-keeping of all employee-related documents. This is especially true for those employees who were terminated. It is likewise essential when reviewing how the business handled claims or complaints of employees. If you use a team management app like Homebase, we’ll store employee time cards — with any edit history — for four years, automatically, on paid plans.

5. Offer a training program for employees. One way to ensure that your staff members are aware of the existing policies and procedures is by providing training courses or programs related to workplace conduct, anti-discrimination, anti-harassment, integrity, attendance and tardiness, discipline, and work ethic. It is also important to make sure that all departments are aligned with the company’s code of conduct.

What to Do When an Employee Files a Lawsuit

What do you need to do when one or more employees file a lawsuit against your business? Keep these guidelines in mind:

1. Do an investigation. Just as an employee has the right to file a complaint, the company can also delve into it. In fact, it’s their legal responsibility to do some investigation. While some involve the HR manager in looking into the complaint, many business owners find it better to hire an external firm or team to avoid any conflict of interest which can lead to inconvenience later on.

2. Identify the employment status of employees. If the complaint is about not paying for overtime rendered, make sure to determine the employment classification of those who filed a complaint. If they’re considered non-exempt, they have the right to receive overtime pay. Otherwise, the business does not have to pay for overtime.

This scenario highlights the importance of making sure that all details of the employees are accurate. If there’s a lawsuit concerning overtime pay and the employees are classified incorrectly, the business will face more troubles. And even if there are no employment-related lawsuits, it’s good practice to keep employee information correct and up-to-date.

3. Seek professional advice. Conducting a workplace investigation may not be enough, so an audit facilitated by an expert in employment law will greatly help in mitigating further risks and resolving the situation.

Aside from implementing proper guidelines and procedures and promoting a positive, welcoming, and friendly workplace environment, more and more business owners purchase insurance.

Employment Practices Liability Insurance (EPLI)

There are different kinds of insurance products available in the market nowadays, each catering to the specific needs of businesses. Large businesses usually have comprehensive coverage in place, protecting them from almost any type of employment litigation. But for small business entrepreneurs or those who are just starting up with their operations, they usually buy coverage for general liability and property. What they don’t realize is that these are not enough to protect the business against employment-related lawsuits, making them still vulnerable to claims.

What they need is Employment Practices Liability insurance.

EPLI is a type of insurance that is designed specifically to provide coverage against claims related to retaliation, wrongful termination, discrimination (of age, sexual orientation, race, etc.), sexual harassment, and other issues related to the job or workplace. Another great thing about EPLI is that whatever the result of the lawsuit is, it will cover all fees and costs of damages and settlements, if any.

These are some of the things that you need to know to keep your business protected against  lawsuits related to employment. Keep in mind that any business, regardless of size, nature, or industry is likely to encounter potential risks at some point, so it is crucial to be prepared for anything to avoid leaving a huge dent in your business finances. It is also wise to consult a reputable insurance agent who has experience in dealing with employment claims, so you will better understand how you can protect your business.

It is better to have an EPLI policy in place than to deal with lawsuits that can eat up a lot of your time, energy, and money.     

Remember this is not official legal advice. If you have any concerns, it’s best to consult an employment lawyer.   

By Pascale Abou Moussa at CoverWallet

Pascale Abou Moussa is on the marketing team at CoverWallet, a tech company that makes it easy for businesses to understand, buy and manage insurance – all online and in minutes. The company provides everything from general liability and workers compensation to directors & officers and commercial auto, and everything in between.

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