Business owners have many responsibilities, including taking care of staff. Employment laws, minimum wage and compensation requirements are continually changing. [gap height=”15″]
At your salon, employees are fundamental to your guests’ experience. Due to the nature of the business, staff turnover is high. When it’s busy season, you may need to increase staff, and then during the slower months, need to let some seasonal staff go. As a business owner, you must be very careful; employees can sue employers for wrongful termination, discrimination, “wage and hour,” or other issues arising from the employment process. [gap height=”15″]
Employment Practices Liability (EPL) is one of those exclusions typically found in your General Liability policy. Sometimes, you can get an endorsement to include EPL, but it typically has a small sublimit and may not cover things like Third Party or Wage and Hour.[gap height=”15″]
So, what is the purpose of EPL? If the name isn’t clear enough, it provides coverage for the range of claims listed above along with others, such harassment and retaliation. [gap height=”15″]
You might be surprised, but it doesn’t have to be a current employee; it could be a former or potential employee who claims they were wrongfully treated during the employment process. Minimum Wage and the Fair Labor Standards Act are getting a lot of attention these days. [gap height=”15″][gap height=”15″]
Here are some examples of claims:[gap height=”15″]
The Equal Employment Opportunity Commission (EEOC) filed gender discrimination and retaliation lawsuits against a business on behalf of a former female employee. Allegedly, the business paid her significantly less than a similarly qualified male employee who performed the same duties. She claimed that she was subject to different terms based solely on her gender. She spoke with management about her concerns, but no action was taken and she was let go. This case and many others like it went to trial, and a jury found that the business acted with malice and reckless indifference to her federally protected rights. This claimant was awarded over $100,000 in compensatory damages (the amount necessary to replace what was lost and nothing more) and $2.1M in punitive damages (punishment for a reckless or willful act).[gap height=”15″]
Another example: two employees filed a lawsuit alleging they should have been paid overtime, having worked nearly 70 hours per week. The U.S. Department of Labor investigated and found that their employer violated the Fair Labors Standards Act (FLSA) by failing to pay appropriate overtime wages. In addition to being heavily fined, the business incurred defense costs of $100,000. Maybe your staff doesn’t work that much; but if they are hourly, you need to know your state’s requirements.[gap height=”15″]
These examples are considered First Party Claims – there are also Third Party Claims. Third Party Liability coverage is for claims brought by customers for discrimination and/or harassment. So, when you are looking into EPL coverage, check to see if it covers Third Parties – if it doesn’t, see about adding it.[gap height=”15″]
Here are some numbers:[gap height=”15″]
- Every year, there are over 100,000 charges reported to the Equal Employment Opportunity Commission (EEOC).
- The average cost of an EEOC lawsuit is over $270,000.
- The average cost of an EPL claim for a business with <250 employees is around $80,000.
- The claim frequency for a company with <250 employees is about 25% (a company with 250-750 employees is about 55%).
- Studies show that a company is more likely to have an EPL claim than a General Liability, or even a Property claim.
Our suggestions: stay on top of the law and work with the legal experts who specialize in small business. Documentation is key. Keep records on all your employees – of course, in a locked or secured environment.[gap height=”15″]
I know it sounds simple, but be fair to your staff! We always joke, “happy people don’t sue” – that goes for your staff, too.[gap height=”15″]
We always joke, “happy people don’t sue” – that goes for your staff, too.
