Protect Your Biz from Employment Lawsuits

It’s no secret that the Obama Administration is very “pro-labor.” Just look at the stimulus package that was passed and you will see the first signal from this administration that more protections and securities are going to be put into motion for employees. In fact, employment law is the fastest growing area of litigation, so how do you protect yourself from employee-related law suits?

Many firms get insurance, known as Employment Practices Liability Insurance, to protect themselves from employee related lawsuits. The only problem with EPLI is how unaffordable it is for small and medium size businesses. Deductibles are usually considerably high, and the main protection that you seek (punitive damages) is hard to get into an EPLI policy at an affordable rate. Just like buying insurance for your car or home, EPLI policies vary in protection and underwriting policies.

One alternative many companies will choose is looking into the “Employee Leasing” or “Co-Employment” model as a way to hedge some of these risks. How does this work? A professional employer organization (PEO) will enter into a co-employment relationship with your company, and some PEO’s offer EPLI coverage as a part of their service package. This is can be a very cost-effective way to get EPLI coverage without paying the large premiums yourself. The PEO may still charge a small fee to your business for this coverage, but at a fraction of what the actual policy costs.

What else can you do? Employment law is the primary responsibility of your HR department. Some companies hire on internal general counsels to oversee risks such as employee related lawsuits. Other firms search for a “Trusted HR Advisor,” to call on for employee related issues. You should not assume that 1-10 internal HR managers will be able to stay on top of 100% of the growing changes in employment related laws. Most HR managers have enough on their plate to start with, that staying on top of FMLA, ADA, COBRA, EEOC and all of the other employer related statutes and laws is simply overwhelming. In fact, some companies have one individual who’s sole purpose is overseeing FMLA changes and administration, 40 hours a week!

There are some very cost effective ways for you to protect your business. With the average employee related lawsuit averaging $120,000 to $150,000 for initial court costs alone, it is definitely worth your time to research some additional protection to your business. Its not “if” but “when.”

If you are curious about how much of this is true, in terms of rapid changes moving forward in employment law, go ahead and Google it. You will be surprised to see how much is already in the pipeline for 2009 and this is only the first year under our new administration.

Stay informed, stay protected & stay profitable.

Jake Hesse