With so much on a small business owners mind, it’s easy to get overwhelmed. Costs can add up quickly, so it’s easy to put somethings on the back burner. But just like getting insurance on your home or car, you need to think about the variety of insurance needed for your business. You’ll want to insure any physical assets you have; inventory, vehicles and buildings. You want to protect your company in case there is a mishap or accident related to your business and location. Also, if you have 2 or more employees, it’s very important to get employment practices liability insurance.
What is Employment Practices Liability Insurance?
Employment Practices Liability Insurance safeguards your small business when a worker sues over employment-related problems.
This type of policy covers your legal costs when an employee or group of employees claim their civil rights were violated or they were unable to perform their work in a fair environment.
Even when you’ve done nothing wrong, a frivolous lawsuit can become extremely costly.
What Sort of Employee Issues Might Be Covered?
The problems below, whether caused by you, one of your employees or even a vendor can be reasons for a lawsuit.
Breach of Contract
Discrimination
Invasion of Privacy
Mental or Emotional Distress
Mismanagement of Benefits
Sexual Harassment
Slander
Wrongful Discipline
But That Won’t Happen to Us…
The dilemma with a small business is that many are just like “family”, but that will NOT keep someone from suing when something goes wrong.
One sexual harassment or discrimination lawsuit could cost you between $300,000 to a million-dollars for the legal settlement plus attorney fees. I don’t have to tell you this could bankrupt any small business.
Steps To Obtain Employment Practices Liability Insurance
- Confirm Your Human Resources Practices Are All Documented
- Contact a Business Insurance Carrier
Why is That First Step Needed?
In order to obtain the needed coverage, the insurance company will require a copy of your HR materials. If you are not adhering to specific legal standards, you are setting yourself up for multiple problems. Having the correct hiring and management processes reduces the insurance company’s and your risk.
NOTE: If you don’t have a Human Resources department to help you create these documents, then look for a Human Resource Consultant.
(See our blog on the importance of HR in a small business.)
Needed Documents
The first step is to develop an employee manual or personnel policies for your company. The policies should include:
- Benefits Information
- Disciplinary Process
- Employee Work Schedules
- Methods to Report Problems
- Non-discrimination Policy
- Proper Performance Guidelines
- Safety Rules
- Sexual Harassment Prevention Policy
- Workplace Violence Prevention Policy
Final Details Prior to Getting Employment Practices Liability Insurance
Once you have established the appropriate procedures for your firm, you need to set up a recruitment process that is fair and equitable to avoid discrimination. (See our tips on recruiting).
To recruit the right talent for your organization it is important to develop job descriptions to inform employees of their duties, responsibilities, proper qualifications, experience or certifications, etc. (See our tips for job descriptions).
Finally, you need to make sure you have an onboarding process that educates employees about all the policies. (See our onboarding blog).
If your organization needs help with any of these systems call or email Randi Frank Consulting, LLC. We have detailed check-lists for these procedures and have developed appropriate policies for many small businesses. [email protected] 203-213-3722
