If you had an 11 percent chance of winning the lottery, you’d probably feel pretty good about those odds and might even buy a few extra tickets. In 2014, U.S. companies had better than an 11 percent chance of being sued by a current or former employee, according to the 2015 Hiscox Guide to Employee Lawsuits.
For employment matters that end up in court, the median judgment is approximately $200,000 and about 25 percent of cases result in a judgment of $500,000 or more. Those costs are in addition to legal defense fees, explains Hiscox, the top underwriter of small business insurance in the U.S.
In spite of the relatively high risk of lawsuits and the costliness of litigation, many businesses fail to protect themselves with adequate insurance coverage.
While it is not always possible to avoid employee litigation, employers often put themselves at risk by acting inappropriately or by not complying with federal or state employment regulations. Here are some of the more common mistakes employers make that prompt lawsuits by disgruntled employees.
Being too kind
It’s tough to give bad reviews to an employee, so many supervisors try to spare workers’ feelings by providing mostly positive feedback. Unfortunately, if an employee is later terminated, he can point to those reviews as evidence the firing was unjustified.
Not following your policies
Employers who provide written guidelines and policies can get in trouble if they fail to adhere to them, explains Brent Gleeson in an article for Forbes. “You can have the best policies and training in the world — and indeed some companies have used that as a defense against a complaint. But you better be able to show that your supervisors followed those policies and applied the training.”
“You can have the best policies and training in the world — and indeed some companies have used that as a defense against a complaint. But you better be able to show that your supervisors followed those policies and applied the training.”
Illegal pre-employment questions
It’s illegal to discriminate against workers based on race, gender, nationality, religion, military status and age (40 and up). Employers who ask questions related to those topics put themselves at risk of a lawsuit. For example, it would not be legal to ask an obviously pregnant applicant about her due date, reports monster.com.
When a worker violates a workplace policy, a supervisor sometimes reacts emotionally when taking disciplinary measures, according to hrdailyadvisor.com. In such cases, an employer should do a thorough investigation including, reviewing the employee’s file, gathering proof he received a copy of the policy violated and providing an opportunity for the employee to tell his side of the story.
Not paying overtime
Non-exempt employees “must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay,” explains the U.S. Department of Labor. Even though it is federal law, some employers try to avoid paying overtime rates by improperly classifying employees, by changing workweek definitions or by trying to make some other type of payment arrangement with employees.
When a supervisor decides it is time for an employee to go, he often just wants to get it over with. Especially when dismissing someone for cause, a careful review process is essential. The worker’s deficiencies should be documented and the person doing the severance should not make any statements of apology, hrdailyadvisor.com notes.
While sexual harassment gets most of the media attention, any type of workplace harassment is a violation of labor laws. The U.S. Equal Employment Commission reports harassment is illegal anytime it creates a hostile work environment. Furthermore, the harasser does not need to be in a supervisory role.
“The harasser can be … a supervisor in another area, a co-worker, or someone who is not an employee of the employer, such as a client or customer,” the commission states.
Prevention is the best defense against discrimination claims. Employers should follow proper practices for hiring, firing, anti-discrimination and harassment, etc. Even so, because of the frequency of litigation, any business is at risk even if everything is handled correctly. As a result, even small businesses should protect themselves against the risk of lawsuits by maintaining sufficient insurance coverage.
About CopperPoint: Founded in 1925, CopperPoint Insurance Companies is Arizona’s premier provider of workers compensation insurance. For over 90 years, CopperPoint has been a trusted partner for Arizona companies to protect what matters most: their businesses and employees. As a leading advocate of workplace safety, CopperPoint is proactive in building a culture of safety throughout Arizona and in keeping the state’s workers compensation insurance rates affordable. In doing so, CopperPoint delivers peace of mind to more than 12,000 businesses and their employees.