In this important, three-part G&A Partners series, we explore why employment lawsuits are on the rise and the steps your business can take to protect your company. The series includes:
- Part 1: Labor Landscape: How Evolving Federal Labor Agency Priorities Can Impact Your Business
- Part 2: Proactive Compliance: Safeguard Your Company with Current Policies and Insurance
- Part 3: Employee Claims: How to Effectively Manage a Labor-Related Investigation
Part 2: Proactive Compliance—Safeguard Your Business with Current Company Policies and Insurance
Compliance policies provide a robust framework of guidelines and standards and can help your company manage employment liability risk while creating a safe, secure work environment built on equality and respect. As a business owner, you’re tasked with staying abreast of current local, state, and federal laws—and revising company policies as needed and required. When implemented and enforced effectively, company policies allow you to proactively address issues and avoid errors, injuries, or potential intervention from regulatory agencies.
While company policies offer necessary safeguards, they do not provide complete immunity from potential employee claims and litigation.
The costs associated with employee lawsuits can be high, so adding an extra layer of protection through employment practices liability insurance or EPLI is worth considering for your organization. EPLI offers coverage beyond a general professional liability plan by protecting your company if current, past, or prospective employees sue for alleged wrongful treatment.
"With the increased number of employment claims we have seen in recent years as well as a significant increase in premiums, employers should be doing everything they can to mitigate the financial effect of employment claims,” says Andrew Scott, G&A Partners’ Director of Risk Management. “Effective policies can do a lot to help mitigate those costs by building a stronger defense against employment claims."
7 Steps to Audit and Update Your Company Policies
Laws and regulations are subject to change because of new legislation or interpretations. That’s why it’s a good idea to conduct regular audits of your company policies and procedures to help identify areas that need to be updated to comply with state or federal laws or to encompass new company processes and best practices.
Following is a proactive, seven-step policy audit process:
- Determine the Scope of the Audit
If this is your company’s first audit, begin with a comprehensive review of all company policies and procedures. Moving forward, you may conduct audits on specific areas, such as workplace safety policies or compensation and employee benefits policies.
- Create a Plan
Identify goals, assemble an audit team, and create a timeline for completing the audit.
- Gather and Analyze Data
Gather all applicable company policies, documents, and forms under the audit’s scope and review current and pending laws and regulations that apply to your business and workforce. Make sure each policy has a clear objective, outlines examples of acceptable and unacceptable behaviors, and provides compliance information (i.e., consequences for violating the policy).
- Produce a Report
Create a report with audit findings, which should include strengths, weaknesses, and recommendations for updates and corrections. Then, have your legal representative or a team of human resources experts, like G&A Partners, review the report and recommendations to ensure they are in tandem with laws in the jurisdictions in which your business operates.
- Create an Action Plan
Once the audit is complete, company leaders should meet with the audit team to discuss the findings and formulate a plan to address each problem or concern identified in the report. Action items should include changing policies, implementing procedures, and training practices.
- Train Employees
A robust training program is instrumental in communicating information about policy changes, updates, and clarifications to employees. During training sessions, emphasize your company's commitment to applying all policies fairly and consistently across all levels of the organization. Also, distribute your policies (including updates) to employees, update your employee handbook, and provide opportunities for Q&A sessions.
- Evaluate Progress
Once corrective measures have been implemented, continuously monitor and review your company's new processes or procedures to ensure they comply with current laws and regulations.
“G&A has a team of compliance experts whose focus is to monitor and interpret changes in laws and regulations. They notify our clients when changes occur and can help them determine which laws and regulations apply to their business, allowing clients to adequately prepare and implement changes.”
— G&A Partners’ Client Success Manager Deanna Bretado
EPLI Adds a Protective Layer of Insurance
Each year, U.S. companies spend billions on employment litigation. Industry analysts expect this trend to continue, impacting businesses of all sizes and across various industries, even those that prioritize legal compliance in all aspects of their business.
According to Business.com's "Lawsuits on the Rise: Small Businesses Need EPLI" by Nicole Urbanowicz, employment-related claims of discrimination, harassment, or other forms of unfair treatment are on the rise. Equal Employment Opportunity Commission claims statistics (for fiscal year 2021) showed that retaliation was the most frequently cited claim in charges filed with the agency, followed by discrimination based on disability, race, sex, and age.
Employment practices liability insurance (EPLI) provides your company protection against the following types of claims made by a current or former employee:
- Sexual harassment
- Wrongful termination
- Breach of employment contract
- Negligent evaluation
- Failure to employ or promote
- Wrongful discipline
- Deprivation of career opportunity
- Wrongful infliction of emotional distress
- Mismanagement of employee benefits plans
The cost of EPLI coverage depends on business type, the number of employees, and various risk factors such as whether your company has been sued over employment practices in the past. The policy covers legal costs involved with defending a lawsuit in court and for judgments and settlements, whether your company wins or loses the suit. However, there are standard exclusions to EPLI coverage, which vary from state to state.
A Proactive Approach to Lowering Your Employment Practices Liability Risk
The following recommendations can help lower your business's employment practices liability risk:
- Encourage your organization's recruiters to seek candidates with diverse backgrounds and skills and monitor the hiring process for signs of discriminatory practices.
- Create a job description for each position that clearly defines skills and performance expectations.
- Post company policies and your code of conduct throughout the workplace and in employee handbooks.
- Train managers and employees about the proper procedure to follow if they (or their employees) are the object of sexual harassment or discrimination. Make sure everyone knows where the company stands on what employee conduct is not permissible.
- Provide employees with a hotline where they can safely and anonymously report their grievances.
- Consistently communicate steps your company takes to prevent and solve employee disputes.
- Create an effective record-keeping system to document employee issues as they arise, steps taken to resolve those issues, and any necessary disciplinary action.
- Conduct periodic performance reviews of employees and carefully note the results in the employee's file.
- Institute a zero-tolerance policy regarding discrimination, substance abuse, and harassment.
- Adopt an open-door policy that allows employees to report infractions without fear of retribution.
Read the full Claims & Investigations series:
Coming Soon: Part 3: Employee Claims: How to Effectively Manage a Labor-Related Investigation
How G&A Can Help
G&A Partners offers access to HR experts with years of experience helping businesses develop their employees, improve their workplace cultures, implement new HR processes and procedures, and more. Schedule a consultation with one of our trusted business advisors to learn more.