Is Your Company Prepared for a Wrongful Termination Claim?

Wrongful termination of employment can cost companies millions of dollars. If an employee can prove unlawful termination, they can sue for lost pay, lost benefits, emotional distress, legal fees, and punitive damages.

Even smaller settlements can cost anywhere from $50,000 to $250,000. While you may think you can protect yourself simply by following the law, the truth is that innocence is not enough. Any employee can choose to sue, and there’s no guarantee the case will go your way.

When has an employee been wrongfully discharged?

Certain laws govern the reasons why an employee may be terminated. An employee cannot be lawfully terminated if:

  • They are being harassed or discriminated against.
  • The termination violates a written or oral employment agreement.
  • They’re being terminated because they spoke out against a violation of labor laws, or refused to perform work that would violate labor laws.
  • In retaliation for a complaint or claim that the employer was violating laws.

It’s easy to see how the reasoning behind a termination can be construed as unlawful under the right circumstances. For example, even employment contracts that seem clear cut can create vast, complex lawsuits when challenged.

While there are certainly steps an employer can take to create a stronger case in court, there is no way to deliver policies or procedures which offer 100% protection from a lost lawsuit. In addition, there is also a chance management-level employees will take actions the business owner or board would never have condoned, but which ultimately expose the company to liability.

What kind of insurance protects you from an employee who is suing for wrongful termination?

Employment Practices Liability Insurance, or EPL, will give you the coverage you need. This insurance policy will help you cover settlement costs and legal expenses associated with defending your company in court.

Look for a policy that provides express coverage for wrongful termination claims. EPL policies also cover lawsuits stemming from sexual harassment claims or false representation claims. You want to be sure your EPL policy covers all of the employment practices that might cause your company problems.

Choosing the Right Amount of EPL Coverage

The amount of coverage you’ll need will depend on the size of your company and the number of employees you have. Ask your insurance agent to help you determine appropriate policy limits and deductibles for your situation. Your broker may also be able to help you determine how to lower your premiums. Sometimes premiums can be lowered by simple measures, like distributing an employee handbook.

If you have been neglecting this coverage you can rest assured the cost of the coverage will pay for itself the first time an employee accuses you of unfair termination. In today’s litigious world, it’s bound to happen sooner or later.

Contact us to make sure your business is prepared.