How EPL Insurance Can Protect You from a Wrongful Termination Suit

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Wrongful termination, also referred to as wrongful dismissal or discharge, is a situation in which an employee’s contract of employment was unlawfully terminated by an employer. To be considered wrongful termination, the firing must have breached one or more terms of the contract of employment, in addition to certain public policies and laws of the jurisdiction.

Although many individuals who were terminated from their job feel that they have been ‘wronged,’ in some way, the legal definition of wrongful termination is quite specific. Learn more about wrongful termination and how employment practices liability (EPL) insurance can help protect your business.

How Wrongful Termination Is Defined

Getting terminated from your job can stir up a lot of emotions. While it is not unusual for workers to feel that a firing was unexpected or unjustified, this does not equate to wrongful termination. Whether or not a case can be associated with wrongful termination will depend on a variety of factors, such as if the employment was “at will.” When engaged in at-will employment, an employee can be fired at any time and for any reason – or for no reason at all with the exception of reasons deemed unlawful. However, there are always exceptions to the rule.

If you provided an employee with a written contract or another document that promised job security, the employee has a strong argument that he or she is indeed not an “at-will” employee. For example, if you provided an employee with a written promise that he or she would not be fired without good cause, you may be required to uphold this contract in court. In some cases, you may deal with implied promises. However, these are more difficult to prove.

Benefits consultants discussing how to avoid wrongful termination casesIf an employee believed that you acted unfairly in your firing, a claim for breach of a duty of good faith and fair dealing may be made. Under this claim, the employee must prove that you made a breach by firing or transferring him or her to prevent the collection of sales commissions, mislead through the enticement of wage increases or promotions, or fabricated reasons for firing when the real reason for termination was to replace the worker with another willing to accept lower pay.

An employee may also claim that you repeatedly gave dangerous, remote, or undesirable assignments to coerce him or her into quitting without benefits or severance pay.

An employee may also have a claim of wrongful termination if he or she can prove that an employer violated public policy during firing. Violations of public policy relate to firing for reasons that society recognize as illegitimate. For example, an employee cannot be lawfully fired for taking time off work to serve on a jury, disclosing a business’s practice of refusing to pay employees their earned vacation pay or commissions, taking time off of work to vote, notifying authorities about a public wrongdoing (whistle-blowing), or serving in the National Guard or military.

Negative Effects on Businesses

If you have ever had to deal with a wrongful termination suit, you know just how negatively your business can be affected by the allegations. As an employer, you may become reluctant to terminate problematic employees for fear of experiencing a retaliation claim. These lawsuits also take up a great deal of time. On average, it can take up to three years to resolve a wrongful termination claim. Wrongful termination suits are also expensive. Awards in these types of suits typically range between $1 and $43 million, with the medium award being $134,000. Even if you are successful, you will still be out attorneys’ fees, administrative cost, and lost revenue.

Just as important, a wrongful termination suit can have a powerful impact on the culture in your workplace. You may find that your employees’ trust in management is lost and their engagement at work has dwindled. If you are hiring, you may find it difficult to attract quality candidates. As most job seekers today seek companies who provide transparency, having a bad mark on your record may turn great talents away. However, this does not mean that an employer has to hold on to bad or difficult employees.

How EPL Insurance Can Help Protect

Benefits Consultant reviews the benefits of EPLIEmployment practices liability insurance, otherwise known as EPL or EPLI, provides insurance coverage to employers for certain claims. With EPLI, employers can help protect their business from claims of discrimination, harassment, wrongful termination, and other employment-related problems. While many larger businesses have safeguards in place to protect against employment lawsuits, new and small businesses may not be as lucky. Having employment practices liability insurance in place can save these types of businesses a lot of time, money, and headaches when dealing with wrongful termination suits.

The cost to insure your business with EPLI is based on a variety of factors, such as the percentage of employee turnover, the number of people you employee, whether or not you have established rules and regulations in place that govern these employment issues, and whether or not there has been prior suits against your company. Employment practices liability coverage is commonly written on a claims-made basis, meaning that the incident had to have occurred during the coverage period. As many claims are made several months or even years later, it may be difficult to maintain coverage for certain events.

Learn More About EPL Insurance

Employment practices liability insurance is an essential component of any company’s insurance package. No matter the size of your business or the number of people you employ, keeping yourself protected from wrongful termination suits can be invaluable if or when the time ever arrives. EPLI typically covers claims brought by part-time and full-time employees, as well as seasonal and temporary employees, applicants, recognized volunteers, leased employees, and independent contractors. This ensures that you are fully protected against all types of claims. For more information about employment practices liability insurance or to acquire about the next step to purchase this insurance, contact a professional benefits consultant today.