Top 5 Employment-Related Lawsuits [and How to Avoid]

The pandemic—and the consequent mass relocation of office workers—complicated matters in the employment-related lawsuit department. New social codes emerged between employees and employers as workers moved to their cluttered kitchens and cramped bedrooms to work. Let’s review some common employment-related lawsuits that frequently surface and how employment practices liability (EPL) insurance can help protect your company from such costly litigation.

Understanding the New Landscape for Work

Employees are demanding reimbursement for expenses incurred at their makeshift home offices, from internet fees to high energy bills and new furniture. And employment-related lawsuits are on the rise since less than 10% of employers have reimbursed workers for such costs.

The #BlackLivesMatter and #MeToo movements that have exploded recently have also made their mark on sexual harassment and discrimination litigation. This is a move in the right direction, and employers will undoubtedly have to face more scrutiny.

Therefore, employment practices liability (EPL) insurance has increased in popularity—a type of liability insurance for businesses covering wrongful acts arising from employment processes. Understanding what causes EPLI claims to rise is crucial for businesses to navigate the current landscape effectively.

With the expected recession and companies expected to cut costs, companies should keep an eye out for these types of lawsuits. For example, many leaders have learned from others’ experiences, like Meta cutting free services, such as laundry, and getting pushback from employees.

In light of the current workplace environment, here are the top five employee lawsuits and how companies can avoid them.

1. Discrimination

Employees file discrimination lawsuits when they feel their employer has mistreated them due to a protected characteristic: race, gender, nationality, disability, religion, sex, age, pregnancy, veteran status, citizenship, or age.

Federal anti-discrimination laws protect most employees. So, with clear evidence of unfair treatment or discrimination, an employee can file a claim with the US Equal Employment Opportunity Commission (EEOC).

Pay disparity is a common discrimination occurrence. Sometimes, equally-qualified employees in the same position can earn completely different salaries. And if the employees find out about this, the employer quickly has no leg to stand on.

Another example is an 89-year-old NHS secretary, Eileen Jolly, who was the oldest person in the UK to win an age discrimination claim. Her team fired her, stating she was stuck in her “old secretarial ways.” But ultimately, Eileen didn’t need to be let go; she just couldn’t use a modern computer and needed extra training.

To avoid these distasteful cases, check out your employee handbooks and policies to ensure there is no discriminatory language and review any employment law changes as regularly as possible.

As an employer, you should also be particularly aware of cases like this arising if an employee has recently missed out on a promotion or their contract has been terminated. They can sometimes retaliate by filing a lawsuit.

2. Wrongful Termination

Employees can file a wrongful termination lawsuit if they feel they have been fired for an illegitimate reason.

Most workers are employed on an “at-will” basis, meaning they can be dismissed by their employer for any reason, as long as it’s legal and without warning. Having employees sign an acknowledgment of at-will employment is the first line of defense against this type of lawsuit.

Employers must prove they have not breached the employment contract to avoid wrongful termination lawsuits. Therefore, your company records—like performance reports, contracts, and employee-employer communications—must be up-to-date, accurate, and detailed. This evidence can help employers prove the termination was legal and fight against any claims.

Employers can feel bitter about being fired. So, consider offering these employees help with job hunting to minimize the impact of contract termination and give them time to process the change. If you soften the blow, employees are less likely to file a lawsuit.

At Founder Shield, we believe that to do better, you need to know better. An insurance broker partner can shield you from potential risks like this and proactively ensure you are covered, helping you avoid a risk before it becomes a problem.

3. Harassment

Workplace harassment can be either verbal, physical, or sexual. It can happen in the form of jokes, innuendos, offensive comments, slurs, name-calling, unwanted physical advances, and requests for sexual favors.

Even if the harasser is another employee, a lawsuit could be brought against the employer if they don’t deal with the situation properly or give an inappropriate response. Actions such as demoting or penalizing a harassed employee after they make a claim can be considered retaliation.

Workplace harassment is commonly associated with members of protected classes. Therefore, discrimination charges are sometimes added to harassment cases, creating additional issues for employers.

According to a report from Good Jobs First, since 2000, 99% of Fortune 500 companies have paid settlements in at least one discrimination or sexual harassment lawsuit. Companies like Amazon, Google, Uber, and Coca-Cola have paid multimillion-dollar settlements or been sued. Therefore, unfortunately, it is still a reality in the “modern-day” workplace.

That’s why you must build a strong, zero-tolerance attitude towards harassment to create a safer space for all employees.

4. Wage Violations

The Fair Labor Standards Act protects workers against wage violations. And employees who are denied minimum wage, overtime pay, or proper time off for rest periods can file a lawsuit against their employer.

Sometimes, it’s not so obvious when there’s wage theft: Changes to overtime, bonuses, payroll taxes, retirement plan contributions, and insurance benefits can all adjust a worker’s paycheck, leading to employees being underpaid.

A recent example is when United Airlines flight attendants successfully found their employer had violated California’s wage disclosure law by giving incomplete wage statements.

Partnering with a professional employer organization (PEO), knowledgeable about federal and local laws, can help companies stay on top of wage laws and avoid these lawsuits. High-growth companies also need a seamless and intuitive insurance purchasing experience, which is where our experienced team comes in. We take the stress out of buying insurance in a one-stop shop with a full suite of insurance products.

5. Personal Injury

No matter the industry, personal injuries are common at work. But for the incident to snowball into a lawsuit, employees must prove that the employer knew about a dangerous situation and failed to do anything to prevent accidents.

Employee negligence is typically the culprit too. As a result, employers must cover themselves from all angles with workers’ compensation and EPL insurance. Insurance is vital, but employers can also take other precautions to avoid injury, like inspecting equipment regularly, ensuring all safety equipment is working, and giving employees the necessary training to do their jobs safely.

Workers increasingly turn to courts to hold employers accountable for breaking laws and demand companies fix outdated work environments. Therefore, understanding the details of what liability coverage your company needs for each potential lawsuit is essential. At Founder Shield, we specialize in knowing the risks your industry faces to make sure you have adequate protection if any of these situations arise.

Insurance Rebuilt, End-to-End

We've supported startups from stealth mode to huge funding rounds.

Get a Custom Quote