A new study of employment practices litigation (EPL) data by Hiscox found four states — California, Illinois, Alabama and Mississippi — along with the District of Columbia, to be the riskiest areas of the U.S. for employee lawsuits. Businesses in these five jurisdictions face a risk that is substantially higher than the national average for being sued by their employees.
According to the study, a U.S.-based business with at least 10 employees has a 12.5% chance each year of having an employment liability charge filed against it. California has the most frequent incidences of EPL charges in the country, with a 42% higher-than-average chance of being sued by an employee. Other high-risk jurisdictions include the District of Columbia (32% above the national average), Illinois (26%), Alabama (25%), Mississippi (19%), Arizona (19%) and Georgia (18%). Lower-risk states for EPL charges include West Virginia, Massachusetts, Michigan, Kentucky and Washington.
Bert Spunberg, a colleague at Hiscox who is a senior vice president and the practice leader for executive risk, says: “Federal level information on employee charges is generally available, but state specific information is more difficult to aggregate. Understanding employee litigation risk at a state level is a crucial step for an organization to establish the processes and protections to effectively manage their risk in this changing legal environment.”
State laws can have a significant impact on risk. For example, the employee-friendly nature of California law in the area of disability discrimination may contribute to the high charge frequency in the state. Discrimination cases filed at the state level in California are brought under the Fair Employment and Housing Act (FEHA). FEHA applies to a broader swath of businesses, covering any company with five employees, vs. a 15-employee minimum for cases brought under federal law as outlined in Title VII of the Civil Rights Act.
Mark Ogden, managing partner of Littler Mendelson, the largest employment and labor law firm in the world, says: “Not only are employment lawsuits more likely in those states, but the likelihood of catastrophic verdicts is also significantly higher. Unlike their federal counterparts, where compensatory and punitive damages combined are capped at $300,000, most state employment statutes impose no damages ceilings. 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.”
For more on the study, click here.