In the event of an employment practices claim made against your business, what kind of financial pain might this represent?
The insurance underwriter website propertycasualty360.com offers ballpark figures. Even if a charge is baseless, the legal discovery costs to simply secure a dismissal average about $50,000.
If an EPLI case isn’t dismissed? For businesses of all sizes, the average jury award is about $250,000; if a case settles, the judgment averages $75,000. And the cost of defense averages about $120,000 per claim. If a business loses its case, it must also pay for the claimant’s legal fees – averaging $200,000.
Limits on compensatory and punitive damages for small businesses
If you are the owner of a small business, the EEOC sets out limits on the amounts of compensatory and punitive damages a person can recover. These depend on how many people you employ:
- If you employ 15-100 employees, the limit is $50,000
- If you employ 101-200 employees, the limit is $100,000
But remember, these limits don’t include the costs of legal representation.
Potential damages vary according to the charge
Damages awarded to victims of employment discrimination will also depend on the type of complaint and the severity of the discrimination.
According to the EEOC, the goal of employment discrimination laws is to place a victim of discrimination in the same, or nearly the same, position that he or she would be in if the discriminatory practices had never occurred. If a court finds against an employer, the judgment will reflect both the discrimination and its impact.
For example, if someone is denied a promotion or refused a job because of discrimination, the remedy would be back pay and benefits and/or job placement. In addition, that person would also be eligible for reimbursement of costs like lawyers’ fees, expert witness fees, and court costs.
Compensatory and punitive damages
If an employer is found to have intentionally discriminated against an employee or job applicant, compensatory and punitive damages may also be awarded. Compensatory damages are assessed to help pay for expenses caused by the discrimination, like the costs associated with a job search and/or medical expenses. Compensation may also be awarded for emotional harm. Punitive damages could be awarded in the case of a particularly malicious or reckless act of discrimination.
Where you practice business matters
Not surprisingly, some localities and states have tougher employment practice laws on the books. And some states tend to see more cases than others. In 2017, Texas, Florida, and California topped the list of employment practices charges with the EEOC at 8,827, 6,858, and 5,423, respectively. That’s not surprising, since these states represent three of the four highest U.S. populations. But Georgia – at 4,894? Those numbers might give Georgia business owners pause.
The point is, you need to know what EPLI laws govern your business practices, along with the claims trends where you conduct business, and how they may impact your EPLI coverage costs. California, for example, has seen several new laws passed in recent years that impact employers’ labor-related responsibilities, including a social media privacy law. As a result, many insurance carriers are writing more restrictive policies and/or sharply raising their coverage rates in certain areas.
Recent EEOC cases
What do these employment practices claims and cases actually look like? Here’s a few recent real findings leveled against small businesses by the EEOC:
- A store in Muncie, Indiana, was ordered to pay $47,500 and furnish other relief to settle a disability discrimination lawsuit. The store failed to reasonably accommodate an employee's disability – dyslexia – and demoted him.
- A pizza restaurant in upstate New York settled a $35,000 sexual harassment lawsuit with seven women employees for being subjected to sexually explicit acts and propositions by the restaurant’s owners.
- In Elk Grove, California, a car dealership settled a religious discrimination lawsuit against an employee. The dealership failed to accommodate the employee’s religious practices as a Seventh-Day Adventist; instead, he was harassed, disciplined, and discharged. The settlement: $158,000.
- A 53-year-old property manager in Tulsa, Oklahoma won a $140,000 settlement for age discrimination after she was fired – and the CEO characterized her as “too old and ugly.”
- A Detroit-area inn was ordered to pay a housekeeper $27,500 for pregnancy discrimination after she was fired for reporting her pregnancy.