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New Insurance Study Reveals “Riskiest” States for Employment Practices Suits


New Insurance Study Reveals Riskiest States for Employment Practices SuitsCA, IL, AL, MI and DC Top List in Employment Practices Liability Claims

A recent insurance industry study reveals those states that are the riskiest when it comes to employee-related lawsuits. Toping the list is California, Illinois, Alabama, and Mississippi along with the District of Columbia. Compared to the national average, the study reports that businesses in these states and jurisdictions face a significantly higher risk of being sued by their employees.

Employment practices liability (EPL) claims involve allegations of workplace discrimination, sexual harassment, wrongful termination, and unfair pay, among others. Employees can file claims under the Fair Labor Standards Act (FLSA) and its state counterparts, Title VII (Civil Rights Act of 1964), ADEA Age Discrimination in Employment Act), ADA (Americans with Disabilities Act), FMLA (Family and Medical Leave Act), state FEP (Fair Employment Practices) statutes, public accessibility under ADA Title III and state laws.

The Golden State leads the way with the most frequent incidences of employment practices liability charges in the U.S. California businesses with at least 10 employees have a 42% higher chance of being involved in a lawsuit than the national average. Why the increased litigation in California? One clear reason is the state’s laws, which have a significant impact on risk. For example, California’s employee-friendly posture in the area of disability discrimination may be a contributing factor. The study cites that “discrimination cases filed at the state level in California are brought under the Fair Employment and Housing Act (FEHA). FEHA applies to a broader swath of businesses, covering any company with five employees, versus a 15-employee minimum for cases brought under federal law as outlined in Title VII of the Civil Rights Act.”

Mark Ogden, a managing partner at employment and labor law firm Littler Mendelson, who was cited in the report, also notes that in addition to higher frequencies, the likelihood of catastrophic verdicts is significantly higher in these [riskier] states. “Unlike their federal counterparts, where compensatory and punitive damages combined are capped at $300,000, most state employment statutes impose no damages ceilings.

The other “risky” states cited in the study stack up as follows: District of Columbia (32% above the national average), Illinois (26%), Alabama (25%), Mississippi (19%), Arizona (19%) and Georgia (18%). West Virginia, Massachusetts, Michigan, Kentucky and Washington were ranked as the lower-risk states for employment-related charges.

No matter which state you’re in, it’s important for all employers to ensure that their workforce is properly trained regarding workplace discrimination, harassment and retaliation. Also, policies forbidding such conduct must be strictly adhered to, with a no-tolerance stance throughout the company.

Axis Insurance Services specializes in securing Employment Practices Liability Insurance (EPLI) for all types of businesses, including nonprofits. EPLI is designed to reimburse an employer for the costs of defending an employment lawsuit, including legal fees, judgments and settlements. EPLI covers claims brought by employees, former employees, or potential employees alleging discrimination, workplace harassment, or wrongful discharge. Policies can also cover claims alleging invasion of privacy, defamation and intentional infliction of emotional distress, wrongful failure to employ or promote, or negligent supervision, among other acts. Please give us a call at (877) 787-5258 to find out how we can help you protect your business against the many risks arising from employment practices issues.

Sources: Advisen, Carrier Management

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Blogged on: April 14, 2014 by Mike Smith
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