In the 21st century, employees want much more than just a salary from their company. Positive company culture has become a crucial part of a business and a must to retain employees.
Company culture is how employees are thought of and represented in the workplace. There has been a change in work culture in recent years as it’s more than just working; it’s about keeping employees happy and improving relationships in the company. There needs to be a balance of formal and informal behaviours and attitudes.
Fair Employee practice is a part of a positive company culture. If an employee feels mistreated and is a victim of poor employee practice, they can take legal action against the company.
An employment practice lawsuit can ruin a company’s reputation and credibility, even if it was not their fault or just a misunderstanding. Hence, employment practices liability (EPL) insurance is crucial to purchase when starting a business.
The article will explain common employment practice lawsuits that can occur which are covered by EPL insurance.
What Is Employment Practices Liability Insurance (EPLI)?
No matter your business size, your company could be a victim of employment practice lawsuits. It may start with a director or manager making a bad joke or losing their temper during an argument.
Employment practices liability (EPL) insurance provides coverage to employers and a company against claims made by employees due to allegations of wrongful employment practices.
Employment practice lawsuits can be very costly and damaging to a business, from legal to settlement costs. The insurance will help the company financially to fight the case and move forward.
Top Employment Practice Lawsuits
One of the most common employment practice lawsuits is discrimination. Discrimination is treating a person or group differently due to a certain detail. Workplace discrimination can be due to age, sex, race, religion, disability, or certain preferences. For example, discrimination could involve not paying the same amount due to gender or having a different attitude towards a certain person or group. Company directors must take discrimination in the workplace very seriously, as it is unfair and illegal.
There have been many discrimination lawsuits against huge brands that have made the headlines. For example, recently, a Starbucks employee claimed her manager treated her differently due to her skin colour and allowed the use of racial slang. As a result, she has sued the huge brand and seeks around USD150,000.
Employees deserve to be treated equally, no matter who they are. However, such claims can ruin a business due to the action of one or a group of poor managers. The lawsuits can be extremely costly, and small-medium companies may struggle to afford the legal and settlement costs. In addition, such cases can ruin the brand image and may reduce the number of applicants.
Sexual Misconduct or Harassment
Sexual misconduct and harassment are one of the most serious employment practice lawsuits. Any form of sexual misconduct or harassment at a workplace is appalling and should be reported instantly. Sexual misconduct and harassment can include unwanted verbal and physical attention.
Any business can be part of a sexual harassment case due to the action of a manager or another employee. For example, Google was sued when a head employee sexually forced another employee. The company tried its best to keep the news hidden, but when it got out, more women stood up to being sexually abused at the firm. As a result, the company spend USD 310 million on settlements.
Employee cases like this are disheartening and disgusting and deserve actions to be taken instantly. But sadly, when hiring, CEOs and founders never know the hidden character of some employees and then have to take the burden of their actions. No matter how management powerful the abuser is, there should be a form of reporting the practice and taking action.
Another common reason for employment practice lawsuits is wrongful termination. Wrongful termination lawsuits are when employees feel they have been fired for an unfitting or unlawful reason. Employers can terminate contracts and fire employees if their motives are justified. However, there has to be a specific notice period and formal report for terminating and firing an employee.
For example, Twitter has been sued over Elon Musk’s plan to lay off nearly half of the popular social media workforce without enough notice period and reason. A lawsuit like this can affect the work culture and bring fear among employees, as no one will know who is next.
There are also many cases where the termination was, in fact, correct, and the manager did his duty. In such cases, employers must investigate and prove the reason for termination through records, evidence, and reports. These documents can help you save settlement costs and reputation damage.
Breach Of Employment Contract
Another common employment practice lawsuit occurs when employers breach the employment contract. The breach could be anything from not providing what was promised to overworking the employee. If employees can’t solve the problem with the employer, they can decide to take legal action against the company.
One of the most common breaches of employment contract lawsuits is due to unpaid employees. Even if your business is bankrupt, you are still entitled to find a way to pay back salaries. For example, Jet-Airways, the popular airline, was sued by a group of employees who demanded the company pay their compensation. The owner had to pay the wages from his personal account or risk imprisonment.
Breach of employment contracts can result in costly lawsuits and terrible brand damage. Even if it is a miscommunication or misunderstanding, companies may still be liable and have to pay a large settlement amount instead of a quick conversation.
How EPL Insurance Covers These Employment Practice Lawsuits?
Employment practices liability insurance (EPLI) is essential when facing any of the above employment practice lawsuits. These claims can affect any company worldwide. The insurance will financially assist your company by covering legal, settlement and compensation costs.
The lawsuits are typically due to one person’s action or a misunderstanding; either way, the entire company is damaged. The insurance will help with the damage related to the case and also help the victim affected.
The insurance allows the company to provide the accurate settlement cost when the company accused (employee/manager) is proven guilty.
However, companies should try their best to avoid employment practice lawsuits by setting rules and regulations and creating a detailed employee handbook. Each employee should feel safe, and there should be a proper system for them to report poor employment practices before taking legal action.