Employee lawsuits spurred by broad worker protection laws

Entrepreneurs in Maryland often worry about being sued by customers or members of the public, but an October 2015 report from a leading specialty insurance provider indicates that they should also be concerned about lawsuits filed by their employees. The study, which was prepared by Hiscox, found that small and medium sized companies had about a 12 percent chance of facing such a lawsuit in 2014, and the likelihood was even higher for businesses in states with employee protections that go beyond those provided by federal law.

The study reveals that companies located in the 10 states with comprehensive fair employment or anti-discrimination regulations were sued far more often by their employees. New Mexico topped the list of states for employee lawsuits with businesses in the state facing such litigation at a rate 66 percent higher than the national average. Laws requiring employers to screen all job applicants for work eligibility and make allowances for pregnant employees were also associated with an increased rate of employee lawsuits.

The cost of employment litigation can be high. According to the Hiscox study, businesses spend an average of $125,000 to pay their attorneys and settle these cases. While those with insurance coverage had an average deductible cost of $35,000, uninsured business owners who lost such cases in court faced judgments that averaged approximately $200,000.

Attorneys with experience in this area could advise business owners to put comprehensive policies and procedures in place to reduce their chances of being sued by employees. These policies could help to avoid disputes by clearly defining roles and responsibilities and establishing procedures that allow unhappy workers to settle their grievances without having to resort to litigation. Attorneys may also review employment contracts and hiring policies to identify problem areas that could give rise to disputes.

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