Common Employment Law Claims - Part 1

The cost of employment related lawsuits can be staggering. If you own a practice and have employees, learn more about employment law claims.

Insurance

Common Employment Law Claims - Part 1

Owning your own practice can reap great rewards. But, as any business owner will tell you, there can be headaches as well. One of the ways you can be prepared for the unexpected is to understand the risks you face. Below is the first of a two-part series about common claims made by employees.


If you have questions or would like information about employment practices liability insurance (EPLI) to help offset the cost of employee claims, be sure to contact one of our agents.

In the meantime, here's part one:

By nature, being an employer is filled with challenges and ever-changing risks. One of the biggest concerns to any organization, regardless of size, is the well-being of its employees. Skilled employees are the backbone of a successful organization. In the past, these valuable employees did not always get the fair treatment they deserved. As a result, Congress passed numerous laws to ensure that every person gets treated reasonably when at work.

Significant changes to past employment laws placed whole new areas of risk on employers, leaving them to redesign workplace policies in an attempt to limit their exposures. Employers today don’t just need to make sure that they follow all the rules, employees need to follow them as well. To manage this risk, most companies create a human resources team that is able to give advice and look out for the well-being of workers.

The landscape of employment law is continually evolving. With every new piece of legislation or court decision, employers learn about workplace discrimination and employee rights that previously may not have been relevant. To protect both employees and the company, management must stay up to date on the risks and issues inherent to the employer-employee relationship.

Employment-at-will Clause

A majority of U.S. workers today are hired under the agreement of an “employment-at-will” clause. This clause states that either the employer or employee can terminate the employment at any time and for any reason (or no reason). This serves both parties by preventing long-term contracts from restricting either side’s future.

Since the 1960s, the employment-at-will agreement has steadily grown to favor employee rights. Anti-discrimination laws and various other laws have broken the idea that an employer can truly fire an employee at-will. Managers who hire or fire employees must realize the limitations of the employment-at-will policy, and that such a clause does not offer protection if any discrimination or bad faith can be proved in court.

Firing an Employee

“Wrongful discharge” is a claim made by workers whose employment was terminated because their government-protected rights interfered with the function of the company. Whistle-blowing, assisting a government investigation, using workers’ compensation and missing work for civic duties are all actions that employers have mistakenly tried to use to fire employees. Since these claims are eligible to collect punitive damages as well as lost wages, the HR team should make sure no employee is being fired out of revenge or convenience.

Similarly, there is the issue of firing employees without “just cause.” While the employment-at-will statement is meant to cover employers, everything from handbooks to workplace conversations can imply a contract of employment to workers. If employees have evidence that employers historically have only ever fired workers because of just cause, they could make a case that their own employment cannot be terminated without reason. To avoid such claims, employers need to make it perfectly clear that all positions are at-will and never promise or speculate specifics of future employment.

A final point to note is that many state courts have ruled that employment implies a contract of “good-faith” between the company and the employee. This contract is meant to help determine blame in a situation where no legal misdoings were technically committed. For these cases to reach court, the actions taken by either party must be very unscrupulous; a possible case could include the firing of an employee in order to ensure a different employee gets a promotion or sales opportunity.

The Hiring Process

Often reported as one of the most dangerous times for employers, the hiring process can be a drawn-out event where an inappropriate question can lead to expensive litigation for a company. The Americans with Disabilities Act and the Civil Rights Act promise all potential employees that no employer is allowed to discriminate against them for any reason.

Extensive in detail, the two acts comprise a vast number of rules and implications for the questions asked on applications and in interviews. No inquiries concerning race, religion, gender or family are to be asked; additionally, no questions about health or physical condition are to be asked unless pertinent to the requirements of the job. Reasonable accommodation must be made for applicants with special needs and no test that tends to discriminate against a protected class may be issued (unless the test is related to job requirements).

The best method to avoid the appearance of discrimination is to be as clear as possible about job requirements. When doing interviews, only ask questions directly related to the position and make no implication that the interview is a job offer. Small talk can be essential for getting a feel for an employee, but conversational questions posed during this time can be as much of risk as any official question. Interviewers should always prepare a list of official questions for an applicant to answer.  

Non-criminal Action

Offensive and litigation-worthy actions against employees are not just limited to termination of employment. Ranging from assault to defamation of character, there are any number of civil offenses, or torts, that can land a company or a co-worker in a courtroom. The following are the most common:

Claims of Negligence 

Though it comes in several specific forms, negligence is usually the suit that follows an incident the employer was indirectly responsible for. Negligence is typically claimed by employees who were affected by the actions of another worker. Affected employees blame employers for being irresponsible in their decision to hire (or continue to employ) an individual who is a known threat in the workplace. Alternatively, employees can also claim they were falsely fired or punished for actions the employer did not fully investigate.

Harassment is possibly the biggest source of negligence claims. Employers are held responsible for the workplace environment. If direct acts of harassment from co-workers, vendors or customers are not dealt with immediately, claims could be made that manager negligence led to a hostile work environment. Any vendors and contractors should fill out signed agreements to abide by company harassment policies.

In all situations of reports of misconduct or punishment, it is essential that managers thoroughly investigate the situation and respond quickly and appropriately. Since litigation could be the result of punishing or not punishing the alleged offender, managers should document everything and discuss the situation with others only as necessary. 

In the next blog, we'll address:

  • Personal Facts
  • Lies
  • Attacks Against Individuals
  • Mistakes

Content provided by ZyWave, Inc.


The information in the NCMIC Learning Center is offered solely for general information and educational purposes. It is not offered as, nor does it represent, legal or professional advice. Neither does this information constitute a guideline, practice parameter or standard of care. You should not act or rely upon this information without seeking the advice of an attorney familiar with the specific legal requirements of the state(s) in which you practice. If there is a discrepancy between the site and an insurance policy you have with NCMIC, the policy will prevail.