Business owners have many responsibilities, including taking care of an often changing and rotating staff. At your salon, employees are fundamental to your guests’ experience – and due to the nature of the business, staff turnover is high.
[gap height=”15″]
Employment laws and minimum wage and compensation requirements are also continually changing. And today, the Minimum Wage and the Fair Labor Standards Act are getting a lot more attention. Therefore, it is imperative that you stay abreast of any changes in the law.
[gap height=”15″]
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) provides coverage for such claims as well as harassment and retaliation.
[gap height=”15″]
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 sub-limit and may not cover things like Third Party or Wage and Hour.
[gap height=”15″]
You might be surprised to learn that current employees as well as former employees can sue; claiming that they were wrongfully treated during the employment process.
[gap height=”15″]
[gap height=”15″]
Stay on top of the law and work with the legal experts who specialize in small business.
[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.
[gap height=”15″]
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.
[gap height=”15″]
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 Labor 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 staggering 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.
[gap height=”15″]
Our suggestions: stay on top of the law and work with the legal experts who specialize in small business. Documentation is key.
[gap height=”15″]
And remember to always keep records on all your employees in a locked or secured environment.
[gap height=”15″]
I know it sounds simple, but you need to be fair to your staff! We always joke, “happy people don’t sue” – that goes for your staff, too.
