Bad Economy Makes Business Owners Targets of Employee Lawsuits

Eric Patrick
September 25, 2008 — 2,168 views  
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It's no surprise that when the economy takes a nose dive, people get extremely anxious about money. And what do we do in this country when we are low on cash? That's right, WE SUE! All of a sudden seemingly normal people start paying closer attention to all those lawyer ads on TV. After all, somebody must be responsible for this. Since most lawyers know that suing the government is a big waste of time (and money), who is the most logical choice? Why employers, of course.

For example, the last period of meaningful economic slowdown in this country was 2001 to 2002. In 2001 GDP grew an anemic .8%. In 2002 it grew at only 1.6%. These numbers are much lower than the approximate 3% growth we have experienced over the last 15 years. As the economy stumbled, guess what spiked? Charges filed with the US Equal Employment Opportunity Commission (EEOC) grew by over 6%.

As the economy is currently stumbling along at a historically diminished growth rate, guess what is spiking? EEOC charges! Do we see a pattern here?

According to the EEOC, the total number of charges filed in 2007 was a 9% increase from 2006. This is the largest annual increase since 1993 (even eclipsing 2001-2002). Here is the breakdown taken directly from a March 5th 2008 EEOC press release. In 2007 there were:

30,510 Race Charges filed. Up 12% to highest level since 1994. 26,663 Retaliation Charges filed. Up 18% to a record level, double since 1992. 24,826 Sex/Gender Charges filed. Up 7% to highest level since 2002. 19,103 Age Charges filed. Up 15%, largest annual increase since 2002. 17,734 Disability Charges filed. Up 14% to highest level since 1998. 9,369 National Origin Charges filed. Up 12%, above 9,000 for second time ever. 2,880 Religion Charges filed. Up 13% to record high level, double since 1992.

Guess what, we're not done yet. These numbers DO NOT include the hundreds of thousands of charges filed each year with state and local authorities. So despite the dramatic increase in the number of EEOC charges, we haven't even scratched the surface.

So what is a business owner to do? You MUST make sure you are properly protected with the right kind of insurance. Think about it, during times of economic hardship your employees may be desperate for money. Increases in pay (if they are given) are quickly eaten away by rising fuel and food costs. Guess who they think is rich? They guy driving to work each day in the new car who has the audacity to go on vacation once a year!

I can hear the chorus now. "At my company, we're one big happy family", "I've been in business for 47 years and we've never been sued.", "We don't do anything wrong.", and my personal favorite, "If we get sued, I'll just pay for it out of pocket." Ever hear the song Money Changes Everything? That pretty much knocks out objections one and two. In addition, it really doesn't matter if you've never done anything wrong because it's going to cost you a fortune in time and money to prove it.

So let's face the facts. The chances of you being sued for an employment practices issue increases every year despite the economic environment. Add to that the fact that the economy is a little unstable these days and you've now poured gasoline on the fire. Whether you think we're in a recession or not, your employees may think so. And they may be getting worried.

It is a fact that during an economic slowdown, companies cut expenditures. One of the ways they do this is to cut the fat out of any of their fixed costs. Therefore, an organization's insurance program often is first under the knife. While understandable, be a surgeon NOT a butcher. Don't eliminate the recession sensitive coverages that protect your business from economic disaster! In other words, you need Employment Practices Liability Insurance (EPLI) NOW more than ever.

About the Author

Eric D. Patrick is an attorney and Chief Operating Officer of Consumers Insurance Agency Inc. http://www.consumers-insurance.com . He also engages in insurance consulting and legal work through The RiskAssure Consulting Group. Please contact him for further information. 

Eric Patrick