Insurance solutions by Rutledge and associates

Employment Practice

Liability insurance which covers acts deemed wrongful occurring during the employment process. Examples include breach of employment contract, wrongful discipline, wrongful termination, sexual harassment, wage and hour law violations, violations of the FMLA (Family Medical Leave Act), mismanagement of employee benefit plan and discrimination. Additionally policies can cover a variety of employment related inappropriate conduct, such as defamation, failure  to promote, deprivation of employment opportunity, negligence during the evaluation process, and invasion of privacy. The policies can be written to cover officers, directors, employees and management staff. The cost of the coverage will depend largely on if your company has a history with a employment 3rd party liability claim, the number of employees, the percentage of turnover and if you have established rules and practices in place.


To significantly lower your employment practices liability risk, do the following:

  • Review any loss exposures with your insurance agent and purchase adequate amounts of employment practices liability insurance.
  • Develop a handbook detailing your company's employment policies and procedures for disciplining or terminating an employee. Make sure all employees read the handbook and sign a statement to that effect.
  • Create a job description for each position that clearly defines expectations of skills and performance.
  • Conduct periodic performance reviews of employees and carefully note the results in the employee's file.
  • Develop a screening and hiring program to weed out unsuitable candidates on paper before calling them to interview in person.
  • Conduct background checks on all possible candidates and avoid hiring workers with a history of alcohol or substance abuse.
  • Institute a zero tolerance policy regarding discrimination, substance abuse and any form of harassment. Make sure you have an "open door" policy in which employees can report infractions without fear of retribution.
  • Create an effective record-keeping system to document employee issues as they arise, and what the company did to resolve those issues.