Employment Practices Liability


While many business owners take the time to protect themselves and their businesses from outside risks, these are not actually the largest risks you face. In many cases, you are far more likely to be sued by an employee than an outsider. Because of this, it’s important for you to think about employment practices liability.

Causes of Action

There are many possible danger areas when it comes to employment practices liability. Here is a list of some of the common causes of action; as long as it is, it is not exhaustive!

  • Wrongful termination of employment
  • Breach of an implied employment contract
  • Employment related misrepresentation
  • Violation of employment laws
  • Sexual harassment, or other workplace harassment
  • Unjustified failure to hire or promote
  • Wrongful reference
  • Adverse change in terms of employment
  • Failure to grant tenure
  • Retaliatory treatment
  • Negligent hiring or evaluation
  • Invasion of privacy
  • Infliction of emotional distress
  • Libel, slander, or defamation

At What Cost?

Lawsuits stemming from employment practices liability can be quite costly for your business, both in terms of defense costs and the actual damages awarded. In fact, the defense costs are far heavier in most cases, because you have to pay them no matter what happens in the case, even if there is no judgment. On the whole, defenses cost employers three times as much as damages. In even a simple EEOC claim, the defense can cost thousands of dollars. But that doesn’t mean damages can’t also be quite extensive when the court rules in the employee’s favor. Employee plaintiffs are more likely than any other kind of plaintiff to receive costly punitive damages.

Protect Your Business

Protecting your business in employment practices liability cases requires you to be proactive. Develop firm employment policies and procedures. Taking the time to fully write out your business’s procedures gives you the opportunity to think carefully about them and your plans for handling risks. When the procedures are all available in writing and are strictly followed, it also gives you an affirmative defense if anyone ever makes a claim against you. Here are a few of the steps you should take to protect your business:

  • Have an employee handbook
  • Make sure employees know what is in the handbook, and that you follow it
  • Properly train supervisors
  • Prepare checklists and instructions for hiring
  • Complete employee evaluations
  • Follow procedures for disciplinary actions and terminations
  • Hold exit interviews for terminated employees

These business practices should help to add a level of protection against many claims. However, you should still look into purchasing Employment Practices Liability Insurance, a policy specifically written to cover just these kinds of claims. It’s affordable for small businesses.

[latest_posts header=”More Like This” limit=”” category=”6″]

Angela Cordle

Angela Cordle

Angela Cordle is the EVP of GoSmallBiz and Tarkenton Financial. In this role, she serves as the Human Resources Director, overseeing the provision of HR services, policies, and programs for the company. She brings practical and experiential knowledge of HR best practices to small businesses. Angela is also an Investment Advisor Representative and Executive Vice President of Tarkenton Financial, LLC. In addition to working with advisors throughout the United States, Angela works with clients exclusively in the Atlanta area to educate and assist them in preparing for retirement. Angela holds a BBA from the Terry College of Business at the University of Georgia, her Series 65 investment license as well as being insurance licensed in all 50 states.