Sexual harassment isn’t only confined to large corporations; small businesses are at risk too. Some companies think that “it can’t happen to us”, but unfortunately, it can. Legally, a small business is responsible for the actions of its employees, whether management has knowledge of the incident or not. A form of sex discrimination, sexual harassment violates Title VII of the Civil Rights Act of 1964, which applies to employers who have 15 or more employees.
In 2008 only, the U.S. Equal Employment Opportunity Commission recovered $47.4 million for sexual harassment claims. While large corporations may have resources and infrastructure to handle a sexual harassment lawsuit, a small business is particularly vulnerable. Without the financial resources or personnel to handle such a lawsuit, a small business could become crippled when faced with a claim.
In order to be protected, a small business should obtain sexual harassment insurance coverage as part of Employment Practices Liability insurance it covers such costs as legal defense costs and court fees from clams made from current and past employees — and even prospective employees — against the company, other employees or its officers and directors. Additionally, if the judgment is found in favor of the plaintiff, the cost of the settlement will be covered (up to the liability limit). Even if a sexual harassment lawsuit is settled out of court, it comes with a hefty price tag.
In an economic downturn, businesses often try to cut costs. One of these ways is to cut back on coverage such as sexual harassment insurance. Most experts agree that this is a dangerous path to choose that comes with a slippery slope.
As the number of sexual harassment claims rise and corresponding lawsuits increase, it’s critical for a small business owner to protect himself against such claims. Business should take a two-prong approach to sexual harassment. First, they should educate themselves and their employees to sexual harassment in the workplace. Second, they should seriously consider sexual harassment insurance coverage as part of his overall business insurance portfolio.