The #MeToo movement is making a major impact across industries, small businesses included. From reviewing internal policies to getting the right kind of insurance, these steps can help small business owners protect their companies and employees.
It's been less than a year since the birth of the #MeToo movement, and its impact on American business and culture continues to grow. Its lessons have extended beyond the entertainment industry and into the employment practices of organizations across America.
For those who think small and midsize businesses are immune, think again. A 2018 study by SourceMedia found that respondents at organizations that employ fewer than 100 people are more likely to say that sexual harassment is highly prevalent in their industry than those at larger firms. Harassment claims are on the rise, which could mean significant financial consequences for your business, especially if it's small. According to a 2015 study by Hiscox, the average damage of a discrimination claim among small and midsize companies is $125,000, with 25 percent resulting in judgments that exceed $500,000.
What type of coverage do I need?
Confusion about the nuances of different types of employment-related coverage is one reason many smaller businesses don't buy enough coverage. The mistaken belief that training and ironclad policies can prevent or manage harassment and discrimination is another. And then there is the rising cost of EPLI as claims rise.
Here's a breakdown of the three most common types of coverage.
- EPLI: Employment practice liability insurance policies generally cover claims made by workers who sue your business for violating their legal rights. Examples include sexual harassment, wrongful termination and retaliation.
- D&O: Directors and officers liability insurance policies provide insurance on behalf of directors and officers who are sued for misleading statements, omissions or negligent acts.
- E&O: Errors and omissions insurance (also known as professional liability and malpractice insurance) protects professionals who give advice, expertise or recommendations that may prove to be incorrect (errors) or have neglected to do something otherwise necessary (omissions).
How much do EPLI policies cost?
EPLI coverage costs depend on a variety of factors, including deductible amounts (which can range from $25,000 to $250,000), business size, industry, hiring and firing practices, and employee turnover rates. Scope of coverage is also a factor. For example, some policies have bodily injury exclusions and others do not. It seems like a lot of money, but employment dispute lawsuits can be expensive.
Are there additional ways to protect my business?
Legislation has been proposed to end the overwhelming use of mandatory arbitration agreements, which leaves workers whose rights are violated unable to pursue their claims in court – which in turn means an even greater onus of responsibility on employers to create safe workplaces.
But proactive employers aren't waiting for the government to weigh in. Savvy small business owners make it a point to get to know their employees and cultivate strong relationships.
In addition, industry experts recommend the following strategies to mitigate risk:
- Be aware of the laws that affect your business and your employees, and stay up to date on changes in employment law.
- Review internal policies and procedures.
- Ensure your managers and employees know what the laws are and that they will be upheld in your company.
- Provide ongoing training on employment practices at all levels.
- Establish a realistic reporting procedure, and take every complaint of discrimination seriously.
- Immediately address any action that could be interpreted as discriminatory, whether a claim is made or not.
- Launch an investigation immediately if an accusation of discrimination is brought to your attention, and empower HR to investigate all claims.
- Insure your company against employee lawsuits. The right insurance will cover the cost for your company to defend itself, as well as any settlement or judgment.