Businesses located in Washington, D.C., Nevada, Delaware, New Mexico and California face the highest risk of being sued by their employees when compared to the national average, according to a new study released by global insurer Hiscox. The study revealed that US-based companies have just over a 10 percent chance of having an employment charge filed against them.
The 2017 Hiscox Guide to Employee Lawsuits identifies the total impact of employee administrative charges and litigation, and exposes the markets where employee lawsuits are most prevalent. The report was compiled using the latest data on employment charge activity from the Equal Employment Opportunity Commission (EEOC) and its state counterparts across the US.
“Recent public accusations of discrimination and harassment are a stark reminder of the importance of creating an army of vigilant employees who can recognize the warning signs of unlawful behavior,” said Patrick Mitchell, Management Liability Product head at Hiscox USA. “It’s also critical to be acutely aware of your state’s laws. We found that many of the higher-risk states have laws in place that go beyond federal legislation. Varying state laws can impact the risk business owners face and play a role in the number of employee lawsuits in a given state. Business owners must stay aware as legislation evolves, and ensure that their businesses are compliant and that they have a plan in place should a lawsuit be filed.”
States with the Highest Risk
According to the study, businesses based in Washington, D.C., face the greatest risk of being sued by their employees, 81 percent higher than the national average. Other states where employers are at a high risk of facing employee charges when compared to the national average include Delaware and Nevada (+55%, respectively), New Mexico (+50%), California (+46%), Mississippi (+43%), Alabama (+39%), Illinois (+35%), and Connecticut and Georgia (+19%, respectively).
Claims against an employer can occur when an employee or job applicant feels they have been discriminated against in the workplace for reasons including, but not limited to, their age, disability, religion, race or color. Unlawful retaliation against job applicants or employees, who had alleged that they had been punished for asserting their rights to be free from employment discrimination, is the most common claim asserted in federal employment cases.
State laws can also have a significant impact on the risks businesses face from employee lawsuits and are drivers of increased employee charge activity. According to the study, this is because some state laws are more stringent than federal statutes. The following states, according to the report, allow employees the ability to go to court with filing a federal or state charge. These include: Alaska, Washington, D.C., Kentucky, Louisiana, Michigan, Maine, Nebraska, New Jersey, New York, Ohio, Oklahoma, Oregon, Vermont and Washington.
The Cost of Employee Lawsuits
Discrimination can be perpetrated by management, another employee, or even someone outside the organization. Collectively, Hiscox claims data for small and mid-sized enterprises (under 500 employees) indicates that one in 10 businesses will face an employee charge. On average, it will take these businesses 318 days to resolve a claim. Without employment practices liability insurance, each of these companies would face an average $160,000 payment for defense and settlement charges. This payment can potentially be avoided by preventing the behavior that could cause a lawsuit through training or routine enforcement of employment policies, detecting discriminatory behavior even if it’s not reported, and mitigating the impact on your business in the event of a charge.