Is your small business at risk for employee lawsuits? According to a new study by Hiscox, the following states are the riskiest states for employee lawsuits: California, Illinois and Alabama. A new study of employment practices litigation (EPL) data by Hiscox, the international specialist insurer, found four states – California, Illinois, Alabama and Mississippi – along with the District of Columbia, to be the top five riskiest areas of the US for employee lawsuits. Businesses in these states and jurisdictions face a substantially higher risk of being sued by their employees compared to the national average.
According to the study, on average, a US-based business with at least 10 employees has a 12.5% chance of having an employment liability charge or employee lawsuits filed against them. However, businesses in several states face a much higher level of exposure to litigation and employee lawsuits. California has the most frequent incidences of EPL (employee lawsuits) charges in the country, with a 42% higher chance of being sued by an employee for establishments with at least 10 employees over the national average. Other states and jurisdictions where employers are at a high risk of employee suits include the District of Columbia (32% above the national average), Illinois (26%), Alabama (25%), Mississippi (19%), Arizona (19%) and Georgia (18%). Lower-risk states for EPL charges include West Virginia, Massachusetts, Michigan, Kentucky and Washington.
“Federal level information on employee lawsuits and charges is generally available, but state specific information is more difficult to aggregate,” said Bert Spunberg, Senior Vice President, Practice Leader – Executive Risk at Hiscox. “Understanding employee litigation risk at a state level is a crucial step for an organization to establish the processes and protections to effectively manage their risk in this changing legal environment.”
State laws can have a significant impact on risk. For example, the employee-friendly nature of California law in the area of disability discrimination may contribute to the high charge frequency in the state. Discrimination cases filed at the state level in California are brought under the Fair Employment and Housing Act (FEHA). FEHA applies to a broader swath of businesses, covering any company with five employees, versus a 15-employee minimum for cases brought under federal law as outlined in Title VII of the Civil Rights Act.
“Not only are employee lawsuits more likely in those states, but the likelihood of catastrophic verdicts is also significantly higher. Unlike their federal counterparts, where compensatory and punitive damages combined are capped at $300,000.00, most state employment statutes impose no damages ceilings,” noted Mark Ogden, a Managing Partner of Littler Mendelson, the largest employment and labor law firm in the world. “Consequently, employers in high-risk states must ensure that their workforces are adequately trained regarding workplace discrimination, harassment and retaliation and that policies forbidding such conduct are strictly enforced.”
In the US, Hiscox provides Executive Risk insurance coverage, including Employer Liability insurance, along with a diverse portfolio of professional liability and other commercial insurance to US businesses. Hiscox has offices in New York, NY; Atlanta, GA; Chicago, IL; Los Angeles, CA; San Francisco, CA and White Plains, NY.
About the Employee Lawsuits Study
The study analyzed recent employment discrimination charge receipts by state at the federal and state commission levels focusing on establishments with more than 10 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 countrywide average. The results are based on frequency of charge receipts, but the receipt of a claim is not limited to only those claim that result in a settlement or other meritorious resolution.
Additional information can be found at www.hiscoxbroker.com