Business meeting, portrait and woman writing with team for planning, strategy and marketing idea in office. Design, collaboration and face of designer with notes for group project, vision and mission

Managing Employment Practices Risk: What Every Business Should Know

/in

Every business with employees faces some level of exposure to employment practices-related risks. However, certain industries are more vulnerable than others due to workforce dynamics, wage levels, and turnover rates. Understanding these risks and taking proactive measures can help businesses avoid costly legal disputes.

High-Turnover Industries Face Greater Risk

Businesses with high employee turnover and large workforces—such as restaurants, hospitality, retail, and janitorial services—are at a greater risk of employment-related claims. The sheer volume of hiring increases the likelihood of bringing in problematic employees who could create legal issues.

“Any company with high turnover, low-wage earners, and high headcount workforces—like the restaurant industry, hospitality, retail services, and janitorial—are more exposed simply because they have a higher churn rate.” — Peter Katkov, CEO, Apex Risk & Insurance Services

In contrast, professional services firms with more stable, high-earning employees may face fewer claims related to turnover. However, their risk remains significant due to the financial impact of wrongful termination claims. A highly paid executive’s lawsuit could result in significantly larger losses than a claim involving a minimum-wage employee.

Hidden Risks in Large Workforces

One of the biggest challenges in managing employment practices risk is unseen exposure. Business owners and top executives may not personally engage in any wrongful behavior, but middle management and lower-level supervisors might. This creates a hidden liability for companies, especially when inappropriate behavior goes unnoticed or unreported for years.

“You as the management team or the business owner may never be involved in any sort of discrimination or harassment, but if you have a lower or middle management team managing a larger workforce, you may never know about abuse that’s been going on for years.” — Peter Katkov

Even well-structured businesses can face unexpected claims, making Employment Practices Liability Insurance (EPLI) a crucial safeguard. Policies can help cover legal costs related to wrongful termination, harassment, discrimination, and other employment-related claims.

Protecting Your Business from Employment Practices Risks

To mitigate exposure, businesses should implement the following strategies:

  • Robust Hiring Practices: Screen candidates thoroughly to minimize risks associated with high turnover.
  • Clear Policies & Training: Regularly educate employees and managers on workplace conduct, discrimination, and harassment policies.
  • Whistleblower & Reporting Systems: Create safe avenues for employees to report issues before they escalate.
  • Employment Practices Liability Insurance (EPLI): Protect your business from unforeseen claims and legal costs.

By proactively managing employment practices risk, companies can safeguard their reputation, financial stability, and workforce morale. their reputation, financial stability, and workforce morale.