Introducing the 2017 Hiscox Guide to Employee Lawsuits

November 15, 2017

The recent news has been filled with reports of harassment and discrimination, many of which include high-profile personalities. As a business owner, you may think you’re not affected, that these issues are limited to Hollywood and Capitol Hill. In fact, small to mid-sized businesses across the country face just over a 10% probability they will be on the receiving end of an employment charge of discrimination of some kind. In some states, the likelihood is significantly higher.

According to the 2017 Hiscox Guide to Employee Lawsuits™, Washington, D.C. businesses face the greatest risk of being sued by an employee, as companies there are 81% more likely to be accused of discrimination than the national average. Delaware and Nevada, (+55% each), New Mexico (+55%), and California (+46%) round out the top five.

These charges represent all kinds of discrimination as identified by the Equal Employment Opportunity Commission (EEOC). This includes discrimination based on sex, race, national origin, disability, age, religion, and more. A charge can also be filed by someone who feels they have been retaliated against because they made or corroborated a discrimination charge. Some states have enacted laws that are stricter than the federal statutes, which may result in more claims from those states.

Discrimination or harassment can be perpetrated by a business owner, a manager, an employee, or even someone outside the company such as a customer or vendor. If the business does nothing to stop the behavior they may be liable, and that liability can be expensive. The average time it takes to resolve a claim is 318 days. The average cost for a small business to defend and settle a claim is $160,000, according to Hiscox’s representative claims data.

These costs can be avoided or reduced by following these three steps:

1. Prevent discriminatory and harassing behavior by educating your employees on what constitutes such behavior. Put your anti-discrimination policies in writing and make them accessible to all employees. Make your employees aware that discrimination will not be tolerated in your company.

2. Detect any discrimination by observing employee interactions and carefully reviewing hiring and promotion decisions. Address any questionable behavior immediately. Ensure that employees feel comfortable bringing their concerns to management.

3. Mitigate the impact on your bottom line by insuring your company against employee lawsuits. The right insurance will cover defense costs as well as any settlement or judgment. If you are sued, consider settling the case to reduce distractions and potential damage to your company’s image.
Even if your business isn’t located in one of the riskiest states, you need to be aware and vigilant. An employee charge or lawsuit for discrimination can damage your company culture, your reputation and your bottom line.

The 2017 Hiscox Guide to Employee Lawsuits analyzed recent employment discrimination charge receipts by state at the federal and state commission levels focusing on establishments with more than ten employees in each state or jurisdiction. Charge frequency was determined by the number of charges divided by the number of establishments with more than ten employees. To compare the states, Hiscox analyzed credibility-weighted frequency relativities and compared each state to the national average. The results are based on frequency of charge receipts, but the receipt of a claim is not limited to only those claims that result in a settlement or other meritorious resolution.