Employment practices liability claims involve work-related suits stemming from allegations of discrimination, harassment, wrongful termination, wage-and-hour disputes, retaliation, and other issues. These may seem as the type of claims only larger companies face. But this is far from true and just as with any industry, independent and franchise truck dealerships – big and small – are exposed to workplace lawsuits. In fact, small operations as with any size firm face an increasingly higher level of employment liability risks due to a tougher regulatory landscape over the last several years.
For example, legislation such as the Americans With Disabilities Act (ADA), which was enacted in 1990, prohibits, under certain circumstances, discrimination based on disability in the workplace, in the same way the Civil Rights Act of 1964 made discrimination based on race, religion, sex, national origin, and other characteristics illegal. In 2009, the ADA Amendments Act of 2008 (ADAAA) became law and made a number of significant changes to the definition of “disability” under the original legislation. Ultimately, it’s now easier for an individual seeking protection under the ADA to establish that he or she has a disability within the meaning of the statute.
An Aggressive Stance by the EEOC
Moreover, the Equal Employment Opportunity Commission (EEOC) in 2012 stepped up its game with its Strategic Economic Plan (SEP) to undertake a more proactive approach to “stop and remedy unlawful discrimination.” Under the SEP, the focus of the EEOC is to coordinate its programs in order to “have a sustainable impact in reducing and deterring discriminatory practices in the workplace.” Its priorities over the last couple of years have been to eliminate barriers in recruitment and hiring; protect immigrant, migrant and other vulnerable workers; address emerging and developing employment discrimination issues; enforce equal pay laws; preserve access to the legal system; and prevent harassment through systemic enforcement and targeted outreach. As a result, we have been seeing a rise in several types of claims, including discrimination and retaliation cases.
The Use of Background Checks
Another issue at the forefront of employment practices that impacts business owners is in the area of background checks when hiring employees. Background checks are used by many employers to screen applicants. And, while employers are permitted, under certain circumstances, to rely on the information about an applicant or employee from a criminal history and/or consumer report in making employment decisions, employers must take certain precautions to ensure they do not violate federal laws. Indeed, earlier this year in March, the EEOC and the U.S. Federal Trade Commission (FTC) issued guidance documents on how their agencies’ respective laws apply to background checks performed for employment purposes. Among the guidelines, employers must:
- Tell an applicant or employee of his or her right to a description of the nature and scope of investigative reports conducted by third-party providers.
- Get an applicant’s or employee’s written permission to perform a background check. This can be part of the document you use to notify the person that you will get the report.
- Certify to the company from which you are getting the report that you notified the applicant and got his or her permission to get a background report; complied with all of the Fair Credit Reporting Act requirements; and won’t discriminate against the applicant or employee, or otherwise misuse the information in violation of federal or state equal opportunity laws or regulations.
- Before you take an adverse employment action (not hiring an applicant or firing an employee), you must give the applicant or employee a notice that includes a copy of the consumer report you relied on to make your decision and a copy of A Summary of Your Rights Under the Fair Credit Reporting Act.
A Rise in Wage-and-Hour Disputes
Wage-and-hour disputes are also a rising concern for employers. According to recent numbers released by law firm Seyfarth Shaw after analyzing reports by the Federal Judicial Center, federal wage-and-hour lawsuits filed under the Fair Labor Standards Act (FSLA) reached a record high in 2013-2014. Between April 1, 2013 and March 31, 2014, there were 8,126 federal wage-and-hour lawsuits filed, indicating nearly a 5% increase from the comparable period a year ago, when 7,764 cases were filed. Furthermore, this trend is likely to continue with the minimum wage debate and raising rates, which is putting greater emphasis on wage-and-hour laws and the availability of overtime pay.
As you can see, the employment practices landscape is continually evolving and becoming more difficult for business owners to navigate if one doesn’t keep updated on regulatory changes. This can impact your livelihood should your business be hit with an employee-related lawsuit. The attorney costs alone to defend a case can add up significantly. It’s critical to have someone within the organization or an outside resource who understands the laws and their impact on employment practices, and can implement robust Best Practices when it comes to hiring practices and employee relations, including fostering a zero tolerance policy on discrimination throughout the company.
In addition, in the event of a lawsuit, Employment Practices Liability Insurance (EPLI) is must-have coverage in today’s litigious environment. EPLI insurance safeguards one’s business against the high cost of lawsuits due to discrimination, harassment, wrongful termination, and other potentially devastating charges. It can cover your business for the cost of legal defense, settlements, and other court fees when your business is sued for violating a person’s or group’s civil rights or failing to provide a fair, acceptable environment for them to perform their work. What’s more, it covers claims brought against your business by former, current, or prospective employees.
EPLI coverage should be a component of an independent and franchise truck dealership’s insurance program. Be sure that your program is comprised of Employment Practices Liability coverage, and take care to ensure that you have the appropriate Garage Liability and other specific industry coverages. Check out when your renewal is set to come due so that you can have a professional assessment of your insurance program scheduled ahead of time to ensure you, your employees, and your assets are covered.
Quick Steps to Prevent Employment Practices Claims
- Maintain a clear, up-to-date and well-written employee handbook.
- Document employee supervision.
- Establish grievance procedures.
- Distribute written discrimination and sexual harassment policies.
- Establish prudent hiring, performance and termination guidelines.
- Understand and comply with the requirements for ADA and FMLA and other federal and state regulations.
- Secure coverage with Employment Practices Liability Insurance.
- Be sure to consult with an insurance professional to ensure that your business is covered properly.
Each month in this column, BOLT Insurance provides UTA members with insights into the various exposures and risks they face. If you have any questions regarding a particular coverage issue or a story involving any type of claim you’d like to share with BOLT Insurance, please contact Brian Lawlor at 860-777-2671 or via email at [email protected]