New Mexico, Washington, D.C., Nevada, Alabama and California are the top states (or district) for employee lawsuit risk in the U.S. according a recent study.
Businesses in these markets face a substantially higher risk of being sued by their employees when compared to the national average.
According to a new study of employment practices litigation by Hiscox, the global specialist insurer, companies based in the U.S. have at least an 11.7% chance of an employment charge filed being against them.
This is another reason why employer compliance with California labor laws is an increasingly critical issue.
According to their study, businesses with at least 10 employees have a 12.5 percent chance, on average, of having an employment liability charge filed against them. But in the states mentioned above, businesses face a much higher level of possible litigation.
The Cost of Employee Litigation
Hiscox said that for small and mid-sized businesses (under 500 employees) one in five will face employment charges with an average cost to defend of $125,000. This includes expenses such as attorney's fees and settlement costs. For those that have insurance coverage, the average deductible cost was only $35,000, compared to the $90,000 balance paid out by their insurance company.
The median judgment for cases that go to trial is approximately $200,000 for employment lawsuits adjudicated by the courts, while one-in-four cases resulted in a judgment of $500,000 or more.
Employers and California Labor Law Compliance
California has the most frequent cases of Employment Practices Liability (EPL) charges in the country. In fact, employers in California with at least 10 employees face a 42 percent higher chance of being sued by an employee over the national average.
State laws can increase the risk of litigation, as well. In California, for example, the nature of California disability discrimination law may be a contributor to the higher frequency of charges in the state. Discrimination cases filed at the state level in California are brought under the Fair Employment and Housing Act (FEHA).
This is significant in that FEHA applies to a broader range of businesses by covering any company with at least five employees, compared to cases brought under federal law as outlined in Title VII of the Civil Rights Act, which apply to companies with a 15-employee minimum.
“Unlike their federal counterparts, where compensatory and punitive damages combined are capped at $300,000.00, most state employment statutes impose no damages ceilings,” said Mark Ogden, a managing partner of Littler Mendelson, a California-based employment and labor law firm. “Consequently, employers in high-risk states must ensure that their workforces are adequately trained regarding workplace discrimination, harassment and retaliation and that policies forbidding such conduct are strictly enforced.”
10 Top Compliance Mistakes That Can Lead to Lawsuits
(image by calchamber.com)
Stay Informed, Stay Compliant
An updated and streamlined compliance strategy will help your organization meet its obligations, while providing accuracy and timeliness. So take time to understand the laws and prioritize employee and manager training, and maintain accurate record keeping. In this way, you will make compliance a sure thing.
Another key step in maintaining HR compliance and increasing your company's cost-effectiveness is to consider outsourcing. A professional agency such a Accuchex can provide much-needed help with Human Resources needs and questions. Accuchex is a full spectrum Payroll Management Services provider offering expertise in Time Management, Insurance and Retirement issues, as well.
If you are looking for reliable resource for your HR issues, we can help. And you can get your free California Labor Law Guide to help you make an informed decision, or call Accuchex Payroll Management Services at 877-422-2824.