The small business guide to avoiding workplace discrimination and harassment

Insureon Staff.
The best way to avoid lawsuits related to employee discrimination is to create a work environment that is free of discrimination and harassment.
Pregnant woman at her desk.

Equal Employment Opportunity laws are no joke. According to the Equal Opportunity Commission’s Enforcement & Litigation Statistics for fiscal year 2021, employers paid out $350.7 million in monetary benefits related to employment discrimination allegations – and that number doesn’t even include payments awarded through litigation!

Most small businesses can’t afford the cost of any legal claim, let alone an employment practices liability claim, one of the most costly disputes around. Luckily, there are ways for you to stay on the right side of the law. Below, we explore the best ways to create and maintain a work environment that is free of discrimination and harassment.

Where can workplace discrimination and harassment occur?

Before we delve into risk mitigation, let’s explore where in the workplace discrimination and harassment can occur. Here are a few common situations that are ripe for EEO issues:

Recruitment and hiring

It is illegal to bar certain individuals or groups of people from employment based on race, color, sex, national origin, religion, age, or disability. Sometimes, the tools you use to recruit people could implicate you in discrimination allegations. In other cases, pre-employment screening tests may break anti-discrimination laws.

Additionally, your job postings cannot contain discriminatory language. Let’s say an employer posts a job ad that reads, “U.S. citizenship required.” Unless the employer can prove that U.S. citizenship is necessary for the job, they could be hit with charges of discrimination.

Dismissals and restructuring

Obviously, there is nothing inherently wrong with dismissing an employee if you’re doing it for legitimate reasons, such as poor work performance or the restructuring of your business. But “wrongful termination” cases can turn up if an employee feels the dismissal is a front for discriminatory practices.

Let’s say that someone owns a successful pet grooming shop. After 30 years in the business, she’s decided to scale back, sell her brick-and-mortar shop, and only keep a few clients (and, unfortunately, employees) at her new home-based business.

She decides to keep on the employees who have worked the longest with her business. Unfortunately, many of the newer employees are minorities. She says that her neighborhood has diversified over the past few years, giving her the opportunity to hire employees of many races. The newer workers say they’ve been wrongfully terminated, citing the fact that the older workers tend to come in late and cut corners.

Compensation, promotion, and training opportunities

When it comes to salary, promotion, and skill-advancement decisions, employers can be charged with allegations of discrimination. This area of employment is tricky because these decisions are often subjective.

For example, let’s say a female employee who’s been with a business for seven years is passed up for a promotion in favor of a male colleague who’s only been around for two years. After noting that there hasn’t been a female manager in this business in the past 20 years, she files a sex discrimination claim with the EEOC.

Maternity issues

If your place of business does not have any accommodations in place for mothers (including maternity leave and breastfeeding breaks), your business could face a sex discrimination case. Let’s say that a female employee at a business finds out she’s pregnant. The establishment doesn’t include time off for maternity leave and this employee doesn’t have any personal days to use. Because she misses several weeks of work, she is fired. She then files a complaint with the EEOC.

Workplace harassment

When there are gender, racial, religious or other tensions are present at work, harassment can occur. Historically, sexual harassment has been a particularly big issue for women in the workplace. For example, let’s say that a new hire is making advances to one of your female employees. He says the flirting is mutual, but she says it’s not welcome. As soon as you are made aware of this kind of harassment, it is your responsibility as an employer to intervene.

Solutions to help stop workplace discrimination

Now that you understand the most common situations that trigger workplace discrimination suits, let’s take a look at how to avoid them:

Create written criteria. Before you make any major decisions – hiring, firing, promotions, etc. – make sure you write out objective criteria to establish how you plan to evaluate applicants and employees. That way, you’ll have a physical document to guide your decisions and help you justify your choices if someone questions your motives.

Follow written criteria every time. It’s not enough to simply have hiring protocol in place. You must follow it – the same way, for every applicant, every time. That means that if it’s not part of your written procedure to administer an English proficiency test, then you can’t ask non-native speakers to take the test when they apply.

Make sure your criteria are directly related to the position. Examine each criterion and describe how it relates to the open position, promotion, or dismissal at hand. This will solidify your strategy in your head, keep you on point during deliberations, and come in handy if anyone ever questions your process. This is particularly important when it comes to requiring individuals to take tests.

Train your managers. As a small business owner, you may not be involved in the beginning stages of a promotion. You rely on your managers to get the process started and make good decisions. Therefore, your managers should be properly trained in how to follow anti-discrimination laws. You are still responsible for any biased decisions a member of management might make.

Solutions to help stop workplace harassment

Under EEO law, all employees have the right to a safe, healthy work environment, free of harassment based on race, color, age, sex, national origin, or disability. Employers who allow harassment to go unchecked risk low productivity, low morale, and lawsuits.

That’s right: employees who are made to feel upset, afraid, or otherwise uncomfortable in the workplace have the right to sue their employer. Here are some things you can do to promote a welcoming work environment:

Adopt clear harassment policies. You can’t enforce your business’s harassment policy if it’s not written out and documented. Your policy should clearly state that harassment of any variety won’t be tolerated. (You may want to delineate policies for each type of harassment. For instance, sexual harassment is more common and may need to be dealt with accordingly.) Policies should explain disciplinary procedures, instructions on how to file a claim, and details about how an investigation will be conducted. Emphasize your zero tolerance for retaliation against employees who file claims.

Train your employees. All employees should undergo workplace harassment training. Some employees might not even realize what constitutes harassment. For example, a new employee might not realize that his “jokes” are a form of harassment because they disparage a certain group of people in the workplace. When you train your employees, emphasize that anyone can be the victim of harassment.

Train managers. Managers should be experts in you business's harassment policies and procedures. They should also understand their obligations to report workplace harassment and intervene when the situation calls for it.

Intervene immediately. Harassment issues can usually be resolved before they escalate into a formal claim or an EEO lawsuit. As soon as you become aware of a workplace harassment situation, you should take steps to resolve the issue immediately.

Respond to customer bias. Workplace harassment does not end with employee-to-employee interactions. Customers and clients can create a hostile work environment for your employees as well. Let’s say that one of your clients is visibly uncomfortable with one of your employees who wears a hijab. After a meeting, you explain that your employee will go over the details of the project over lunch, but your client refuses the offer and makes some hateful remarks about the employee’s national origin in front of her. If this behavior persisted without your intervention, you could face a harassment suit.

Small business safety net: employment practices liability insurance

Sometimes, the above best practices aren’t enough to prevent an employment practices liability lawsuit. That’s when you’ll need your employment practices liability insurance (EPLI) policy. This is a special type of errors and omissions insurance that helps pay for lawsuits related to workplace discrimination and harassment.

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