OUR PERSPECTIVE - AUGUST 2007
What are the Emerging Trends in Employment Related Claims?
Q&A with Liz Horn
What is Employment Practices Liability (EPL)?
The fastest growing area of litigation in the country is employment related. Discrimination, wrongful termination, defamation, breach of contract and harassment claims have captured the headlines and crowded the dockets of state and federal courthouses around the country.
In today’s business environment, it is critical for employers to understand the importance of sound, strongly enforced policies and procedures surrounding their employment practices.
Who needs to be concerned about EPL?
Any business or organization with employees should be concerned about EPL. EPL affects all types of businesses including large multinational corporations, government agencies, educational institutions, small businesses and locally based non-profit organizations.
What are the risks of not addressing EPL issues?
Based on the 2006 D&O Survey prepared by Tower Perrin, 61.3% of the number of claims brought against surveyed companies were employment related. Following is a highlight of the major types of employment claims:
- 23% of all claims were for Wrongful Employee Dismissal or Termination;
- 16% of all claims were Employee/Trade Union issues
- 7.2% of all claims were brought on the basis of Discrimination (age/race/sex/religion, etc.)
- 4.2% of all claims were for Failure to Hire or Promote
- 3.5% of all claims were for Breach of contract/breach of employment contract
- 1% of all claims were for harassment/humiliation
In 2005, the U.S. Congress enacted The Class Action Fairness Act of 2005 (CAFA). Since the enactment of CAFA employers have seen an explosion in class action and collective action litigation over workplace issues. The stakes in such litigation can be extremely significant, as the financial and operational impact of such litigation can be extremely expensive. More often than not, class actions adversely affect the market share of a corporation and prejudice its reputation in the marketplace.
What are the settlements like?
Recent statistics from the Equal Employment Opportunity Commission (EEOC) show that the number of discrimination charges filed have increased to almost 80,000, the highest number of charges filed since 2002.
The 2006 Jury Verdict Research Report provides the following median settlements for employment practices claims:
- If an employer is sued by an employee, there is a 63% chance that the employee will win;
- The percentage increases to 67% if the suit is brought in federal court.
- The average single plaintiff verdict in an employment suit is $603,376;
- The number rises to $808,337 if the suit is brought in state court.
- For discrimination claims, the average verdict is $656,072;
- That number increases to $1,016,566 if the suit is brought in state court.
- For whistleblower claims, the average verdict is $616,039;
- There is a 33% chance of a verdict of $500,000 or more
- There is a 55% chance of a verdict of $250,000 or more
Consider that these figures do not include defense costs.
Experts predict employment law class action and collective action litigation will become ever more sophisticated and continue to be a source of significant financial exposure for employers. Settlements in EPL class action suits can cost an employer anywhere from thousands to millions of dollars in losses.
How can my company prevent being the target of an EPL lawsuit?
An employer can take steps to reduce the threat of EPL litigation by positioning its company with a strong defense in the event a complaint does hit. Woodruff-Sawyer will work with you to review your operations, identify exposures, and develop a proactive EPL loss control/prevention program to meet your needs.
What products/risk management solutions are available to me?
In recent years, the focus of the employer has turned not just to litigation strategy, but risk management and insurance. A wide variety of options are now available to help your company manage EPL issues. These solutions include customized EPL loss control/prevention programs, insurance solutions, compliance training for supervisors and other employees and specialized EPL products such as EPL Intelligence™ an internet-based H.R. management and compliance service that helps employers solve routine H.R. management issues quickly and easily, in order to help prevent claims before they happen.
How Can Woodruff-Sawyer help me with my EPL needs?
Whether your company is going through a merger or acquisition, or simply conducting “business as usual,” we can help identify your exposures and create a customized EPL solution aligned to your corporate policies and budgetary concerns. Once your policy is in place, we will also provide you with expert claims management services for the quick and fair resolution of claims and serve as your advocate throughout the entire process.
For additional information, please contact Liz Horn, EPL & Fiduciary Team Leader, Woodruff-Sawyer & Co. at 415.399.6326, or email lhorn@wsandco.com.
© 2007 Woodruff-Sawyer & Co.