As small-business owner, it’s essential to be aware of situations where your business could be sued by an employee. Whether you own a car wash or for a hip coffee shop bursting with customers clamoring for pumpkin flavored lattes, you want to be prepared for whatever risks may come your way – and that starts with reviewing the basics.
So when can an employee sue you? It depends on many factors, but we’ll outline the most common occurrences and how you can avoid them. The fact is, no matter how close you are with your staff or work crew, situations may arise in which you’re required to combat litigation.
Read on for details on how to avoid employee lawsuits and handle any that crop up.
How Can My Workers’ Compensation Insurance Help with Employee Lawsuits?
By all means stay up to date with your state’s Workers’ Compensation laws. Even if you’re not required to carry Workers’ Compensation Insurance, there are benefits to purchasing this essential policy.
Remember: there’s a reason most states require that any business with W2 employees carry Workers’ Comp—it puts both employees and employers at ease as it pertains to potential injuries on the job. Even if you run a retail store that’s statistically at low risk for workplace injury, that’s not a good enough reason to go without Workers’ Compensation Insurance. You never know what risks your employees face on any given day until it’s too late.
For instance, imagine an employee cuts their hand open with an X-Acto knife putting up a new display. Now they’re taking you to court for creating an unsafe environment, and besides cobbling together a legal defense, you have to hire a new employee to cover their hours.
If you have a Workers’ Compensation Insurance policy, though, you’ll only have to worry about paying for the established deductible. After that, your policy will cover the employee’s medical expenses. What’s more, there’s a portion of the Workers’ Comp policy known as Employer’s Liability Insurance that covers your court-related costs when an employee decides to sue you over your role in causing an injury.
What Other Types of Employee Lawsuits Might I Face?
Another group of potential lawsuits involve Employment Practices Liability. These are the kind of lawsuits most small-business owners think about when they imagine being sued by an employee. Potential Employment Practices lawsuits include…
- Sexual harassment.
- Pregnancy discrimination.
- Discrimination based on race, sex, gender, or sexual orientation.
- Invasion of privacy.
- Wrongful termination.
The issue with these instances is that they, too, can creep up and bite you out of nowhere. Remember that, while some people will come to you directly with complaints, others will turn to the legal system with little or no warning. While it’s not always possible to avoid Employment Practices lawsuits, you can avoid surprises by checking in regularly with your workers and asking them directly whether they have any concerns or complaints you can address.
The best way to protect yourself from being adversely affected by these types of lawsuits is to carry Employment Practices Liability Insurance. That way you won’t have to worry about paying out of pocket for court fees and potential settlement costs. These expenses can be tens of thousand of dollars, which can present a dire financial situation for any small business.
Want to read more about how to avoid risks presented by employees? Read the post “How To Manage Risks From Wildcard Employees (and Interns!).”