Posts Tagged ‘employees’

PROTECTING A BUSINESS FROM SEXUAL HARASSMENT LAWSUITS

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By now, employers should all realize and understand that sexual harassment is illegal. However, what employers might not be aware of is that the U.S. Supreme Court issued two rulings in June of 1998 that expanded what is termed sexual harassment; expanded the responsibility that employers have to provide a work environment that’s non-hostile; and did away with harassed employees having to prove that their company holds some responsibility or that their career suffered from lack of promotion, firing, demotion, or such. Employers are now directly responsible for employee behavior, thereby giving harassed employees more recourse in bringing about legal actions against employers. Work-related harassment and discrimination cases have been climbing steadily since the Civil Rights Act of 1991 allowed for trial by jury, compensatory damages, and punitive damages in legal cases involving discrimination. In fact, according to the Equal Employment Opportunity Commission, the amount of annual employment harassment and discrimination cases being filed grew by more than 13% between 1997 and 2009.

Any employer that’s ever been involved in a sexual harassment suit can attest that the cost to settle or defend a sexual harassment lawsuit can be jaw dropping. The average award for damages in these types of lawsuits is around $650,000, and that isn’t even including the secondary cost from workplace disruption, bad publicity, and those involved in the suit being absent from work.

What Constitutes Sexual Harassment?

The first step in protection is understanding what is defined as sexual harassment. State and federal law prohibits behavior that involves an employee in authority basing professional expectations or decisions regarding a subordinate employee being willing or unwilling to exchange sexual acts. The following are examples of such behavior:

  • Altering expectations of job performance when a subordinate repeatedly refuses advances for a date or sexual encounter.
  • A superior demanding sexual acts in order for a subordinate to receive a raise or promotion.
  • Disciplinary action, including termination, of a subordinate that refuses sexual advances or ends an existing romantic relationship.

However, sexual harassment doesn’t always involve a subordinate/authority figure relationship. An offender can be anyone from a coworker to a customer or business vendor. The offender can be male or female, as can the victim. Furthermore, the victim doesn’t even need to be the employee actually harassed. Anyone that’s affected by the harassing or offensive behavior can be termed a victim; for example, an employee that overhears two other employees discussing a taboo subject. The two employees directly involved might not be offended, but if the overhearing employee is offended, then it can constitute sexual harassment.

Verbal, visual, physical, or written behavior that causes another employee to view the work environment as hostile, are unwanted, or focus on the sexuality or gender of another person may constitute as sexual harassment. Specific examples of such would be teasing, suggestive objects or pictures being displayed, and repetitively requesting sexual acts or dates verbally or in writing.

Protection with Employment Practices Liability Insurance (EPLI).

After knowing what constitutes sexual harassment, businesses can further financially protect themselves with Employment Practices Liability insurance (EPLI). This is an insurance to protect employers when an employee makes the claim that their legal rights have been violated. Although policies vary, EPLI generally doesn’t cover criminal or civil penalties and punitive damages. EPLI does generally cover settlements, judgments, and incurred legal costs arising from an array of incidences – wrongful termination, employment contract breaches, employment and promotion failures, wrongful disciplinary actions, wrongful emotional distress infliction, negligent employee evaluations, employee benefit plan mismanagement, discrimination, and sexual harassment.

Coverage is specific. So, before purchasing a policy, decide who should be covered. For example, should full and part-time employees, contracted persons, supervisors, department heads, subsidiaries, company divisions, and so forth be covered or not? One other note about EPLI is that it’s mandatory for employers to report incidents within a reasonable amount of time. Some policies might feature an ERP (extended reporting period) or prior acts. The length, cost, and availability vary by carrier.

Purchasing EPLI has been challenging for small companies in the past. However, the 2004 rate increases have somewhat plateaued. Some rates have even decreased. Keep in mind that EPLI cost is figured based on the business type, employee numbers, and past lawsuits associated with the business.

Prevention of Harassment Lawsuits.

Prevention is the cornerstone in decreasing the risk of a sexual harassment lawsuit. Prevention steps include the following key elements:

  • If the business has EPLI, any incident should be reported immediately.
  • Create, communicate, and enforce a zero-tolerance policy for workplace sexual harassment.
  • Have an effective harassment complaint process in place and take immediate, consistent, and appropriate action when a complaint is made.
  • Thoroughly document all complaints and the following investigation and actions.

Employment Practices Liability: The Coming Plague

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EPL articleEmployment Practices Liability (EPL) differs from other professional and management coverage since it protects the company from acts which violate the employees’ legal rights of employment.

What are these rights?

1. Sexual Harassment

2. Discrimination (sex, race, national origin, age religion or color)

3. Wrongful Termination

4. Constructive Discharge

5. Infliction of Emotional Distress

6. Violation of the Family Leave Act

The meaning of the laws regarding these rights and insurance coverage for these acts is fairly well established.  Policy language and court cases have hammered out some of the conflict.

From a risk management perspective, sensitivity training and the development and implementation of strict behavioral guidelines greatly reduces the risk of claims.

Three factors in this risk change almost daily and must be addressed.  State laws may expand the protected classes (sexual orientation) covered by employment law.  These suits are massively expensive to litigate.  Thirdly, outsiders like contractors, customers, and suppliers are now claiming under this tort.

Although States regulate insurance, insurance companies tend to be regional and national; therefore, policy language does not always represent state law or the conditions under which the laws apply.

Have your state-licensed insurance agent read policy language to assure proper coverage in each state your company operates.

The policy limit includes litigation costs and claim payouts.  Legal fees are not add-ons as in other liability policies.  So, as the insurance company lawyer negotiates at length, your available funds to settle dwindle.  This process can become a very dangerous game of chicken for your assets.  Increase limits accordingly and keep informed as to the progress of any negotiations.

Customers, suppliers and contract labor are beginning to avail themselves of this course of action.  Train all employees and implement strict behavioral protocols at all levels and duties.

Most important, assure your managers spot poor or reckless behavior early, and correct it.  Zero tolerance policies work in this area.  You wouldn’t want to work in a truly hostile environment.  Don’t turn your back on these behaviors.