Lawsuits brought by current and former employees are a litigation growth area. Prospective employees who feel they have been wrongfully passed over for an employment opportunity are also potential litigants.

Identification of Risk

Here is a list of exposures to employment practice lawsuits common to most businesses:

• Hiring decisions
• Promotion, discipline and termination
• Discrimination
• Sexual harassment
• Invasion of privacy

This is not by any means an all-inclusive list but it is a good place to start.

Inconsistency in handling decisions in these areas and a lack of a documented policy regarding these practices creates a vulnerability to financial loss.

Many smaller businesses, who do not have a dedicated human resource or loss control function or in house counsel, are often more at risk because of this lack of dedicated focus.

Insuring Against Financial Loss

Even the most well managed business, with sound, well executed employment practices and excellent overall employee morale can still wind up in court. As a final layer of risk management Employment Practice Liability Insurance (EPLI) is becoming a standard part of many business insurance programs. Broadly speaking, this type of insurance covers claims by employees and job applicants who believe their legal rights have been violated.

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