Addressing Risk as a Business
There are a thousand and one things for a business owner to think about. Arguably one of the most critical issues is business liability and ensuring that you understand and are prepared for all types of pitfalls that may occur in the running of your company – in other words – you need to know how you are addressing risk as a business.
A report by Hiscox in New York found that the owner of a business in California is 46% more likely to be sued by an employee than in most other states (In case you’re wondering, New Mexico and Nevada are also high on the list). And small or new businesses can be extremely vulnerable to employment claims.
To avoid facing an employee lawsuit, many business owners in California elect to purchase employment practice liability insurance (EPL insurance).
Employment laws guard against discrimination in the workplace, and every business owner should be aware of the state and federal laws.
A claim of discrimination can result in countless hours of depositions, investigation and litigation preparation… not to mention the expense and the potential decrease in productivity for individuals at the business. This can have a major in impact on the finances of the business, along with marring the reputation and credibility of the company.
What is EPL insurance?
Employment practice insurance is a policy that can shield business owner from claims or lawsuits filed by employees, former employees, and potential hires stemming from their employment relationship with your company.
A business owner could be hit with a claim of harassment, wrongful termination, breach of contract, discrimination, or several other work-related issues. This type of insurance can be a wise purchase, given the country’s litigious nature and the risk that any type of employment claim could cause to your business.
The Hiscox research found that retaliation was the most prevalent charge category. It was listed in almost half of all charges. Some of the other common actions include:
* Discrimination or Harassment: this is unfair treatment of an employee or applicant based on age, race, creed, financial status, disability, sexual orientation, physical and mental health, religion, or other socio-economic factors. Included in this is creating or promoting a hostile work environment.
* Wrongful Termination: firing an employee based on some discriminatory pretext.
* Breach of Contract: breaching an employment contract without valid rationale.
* Personal Injury and Workers’ Compensation. An employee is harmed by some work-related activity that’s found to be caused by the employer’s negligence.
* Whistleblowers: Retaliation against an employee who exposes some illegal or unethical activity at the company.
Plus, in the State of California, there are several other statutory protections from which a suit can arise. They include the California Equal Pay Act, the California Family Rights Act, the California Occupational Safety and Health Act, the Family Medical Leave Act (FMLA) and California Family Rights Act (CFRA), and many others.
Employee Lawsuits are Expensive
A representative study of more than 1200 closed claims reported by small- to medium-sized enterprises (SMEs) with fewer than 500 employees revealed that 24% of employment charges resulted in defense and settlement costs that averaged $160,000. On average, these cases took nearly a year to resolve.
In addition, the average employer’s self-insured retention deductible for these charges was $50,000. Without EPL insurance, it would have cost each of these companies on average an additional $110,000.
Contact a Business Expert
Andrew is a business expert and has worked with business owners and those seeking to buy and sell franchises in cities throughout the Sacramento Region, including Rocklin, Citrus Heights, Rancho Cordova, Folsom, Elk Grove, Roseville, Davis, El Dorado Hills, and Cameron Park. Andrew can help you with deciding on an appropriate opportunity in the Sacramento region, competitive intelligence, financing, in addition to providing answers to all of your franchise agreement questions.
Take the time to speak with Andrew about buying a business. Please visit our website. You can also get in touch with Andrew via email or call him at (916) 570-2674.