Lawsuits against a business are already common in this heavily litigious day and age. Typically they come from consumers, but employment claims have seen a sharp increase in recent years. When a lawsuit stems from an employee it can be incredibly costly for employers, and also put the employer at risk of a retaliation claim if they take any negative action against an employee after a claim has been filed.

While employment claims may be viewed as more of a “large corporation” problem, smaller businesses are not immune to these types of claims, especially in California. State laws allow workers at smaller companies to file lawsuits when they feel their legal rights as employees have been violated and protect them from retaliation from their employer, supervisors or colleagues. Common causes of these lawsuits are discrimination, harassment, wrongful termination, wage and hour violations and personal injury.

California ranked third out of all U.S. states for the amount of employment lawsuit risk to small and medium sized businesses, according to the “Guide to Employee Lawsuits,” report from Hiscox. The report found that smaller businesses in California had a 46% chance of having an employment charge filed against them – the national average is just 10%. 

The average total cost of defense and settlements for these types of cases (nationally) is $160,000 for small-to-medium enterprises. In California, those costs are often much higher. In January, a small Bay Area restaurant chain settled a Labor Commissioner claim involving only 300 employees for $4 million to avoid going to court and taking the claim further.

Employers can help reduce their chance of being caught up in an employment claim by ensuring that their policies and procedures are compliant with current state, municipal and federal law. Employment Practices Liability Insurance (EPLI) is also a must for employers, as it provides reimbursement for the costs of defending against certain suits from employees or investigations from government agencies. Partnering with a PEO like Emplicity, that offers EPLI protection with Employer Shield™ can provide employers with the controls and measures to insulate them against the perils of employment related claims.

About Emplicity:
Since 1995, Emplicity has provided a smarter, more secure, and integrated platform of employer services to its 300 business clients and their 8,500 employees. As a Professional Employer Organization, or PEO, the California-based HR outsourcing firm simplifies the compliance, administration, and support businesses need in the areas of employee benefits, payroll, and human resources technology.

For more information about us, visit or call us at (877) 476-2339. We’d love to make your employee management more simple—and secure.

NOTICE: Emplicity provides HR advice and recommendations. Information provided by Emplicity is not intended as a substitute for employment law counsel. At no time will Emplicity have the authority or right to make decisions on behalf of its clients.

Share This