Terminating an employee is an unpleasant, time-consuming and expensive process that no sensible employer would undertake lightly. In order to avoid wrongful termination lawsuits, employers must tread lightly.
Even in the best-run businesses, layoffs and other employment terminations are unavoidable. It’s only prudent to take precautions to protect yourself against any adverse financial or reputational consequences.
Two Key Steps to Avoid Wrongful Termination Suits
Today’s employees enjoy a wide range of state and federal legislative and regulatory protections and terminating anyone while your business may be in breach of any of these laws is practically an invitation to a wrongful termination suit.
The allegation that termination was motivated by retaliation for a complaint of discrimination is also one of the most common causes of claims.
So your first essential step in self-protection is to ensure that you comply with all relevant regulations, particularly as they relate to any kind of workplace discrimination.
It’s also vital that your contracts of employment are as simple, clear and watertight as possible. You should then, of course, ensure that you carry out to the letter your duties under the contract. This is especially important in relation to any disciplinary proceedings which might occur before a termination.
But no matter how careful you may be, the unfortunate reality is that you are likely, sooner or later, to find yourself in receipt of a wrongful termination claim. And if you are a small business, without a specialist HR department or in-house lawyer to call upon, the cost of defending even wholly baseless claims can be ruinous.
Employment Practices Liability Insurance (EPL)
Fortunately, this is a potential business risk against which you can insure.
EPL policies cover employers against claims for a variety of alleged wrongful acts, usually including wrongful termination and various kinds of discrimination. This coverage is often found in general business owners’ insurance policies. But if it’s not included in yours, it may be wise to consider buying a separate policy.
What to Look for in an EPLI Policy
Most EPLI policies work on a “claims made” basis, meaning that they will cover you for claims received during the term of the policy. But coverage will only apply for actions that also occurred during the life of the policy. Buying insurance because you’re worried a disgruntled former employee might be about to file a suit isn’t going to protect you.
Perhaps the most important benefit most EPL policies offer small businesses is “coverage for defense.” This means that your legal costs are covered and, depending on the wording of the policy, the insurer may also take over the conduct of the defense, including the appointment and briefing of counsel.
So you need to check exactly what coverage you are getting for your money, and you should pay particular attention to what the policy says about the “right to agree settlement“. Most policies will need your consent to any settlement agreed by the insurer, but you may find your payout restricted if you refuse to consent to a settlement accepted by the claimant.
Finally, you need to be aware of any exclusions from your insurance. These will normally include criminal acts, failures to comply with relevant employment laws and any breaches of contract on your part.
Talk to the Experts to Avoid Wrongful Termination
It should be clear from the above that business insurance is a complex field, and in today’s increasingly litigious world it’s never been more important to ensure that you have the right liability cover to meet every eventuality.
So if you’d like to learn more about EPLI insurance, whether as a standalone policy or an addition to your existing cover, Brashears Insurance is here to help.
You can call us today on 805-564-7645 or send us a message here.