The high cost of an employment or hiring discrimination lawsuit
The Equal Employment Opportunity Commission states that it is illegal to discriminate against someone in the workplace due to their age, race, gender, disability, religion, genetic information and sexual orientation. The EEOC strictly enforces this law and encourages employers across the country to be wary of their hiring and employment practices to avoid encountering a discrimination lawsuit.
These discrimination laws protect applicants during every step of the hiring, onboarding and employment processes. Employers are specifically forbidden from discriminating in job advertisements, recruitment efforts, applications, interviews, promotions, discipline and employee termination. Should any applicant or employee feel that they are being treated unfairly, they may choose to sue the company to earn compensatory damages, gain punitive damages or many other court-ordered actions.
What are the costs of a hiring or employment lawsuit?
The 2015 Hiscox Employee Lawsuit Handbook found that in a study of 446 closed claims – cases that are settled before reaching court – for small-to-medium-sized enterprises (SMEs) with less than 500 employees, 19 percent amassed legal fees and settlement charges averaging around $125,000. Meanwhile, these suits took an average of 275 days to resolve.
For those cases that do end up in court, the report found that the median judgment was an additional $200,000. Meanwhile, 25 percent of these cases have judgments amounting to $500,000 or more. For the vast majority of SMEs, even with an employment liability insurance policy, this high cost is too much to bear in a highly competitive marketplace.
Everyone loses in a hiring or employment discrimination lawsuit
While hiring and employment discrimination is deplorable in the workplace today, the bottom line is that no one truly wins in the vast majority of these cases. NationSearch writes that both the company and the plaintiff will have steep attorney fees and suffer losses due to the vast amount of time spent in court. Meanwhile, some plaintiffs could even wait for years or indefinitely before receiving their compensation, which may not even offset attorney fees. Finally, some businesses simply do not have the time or money to handle a court case, causing them to settle.
“The company and the plaintiff will have steep attorney fees and losses.”
Many of the other hidden costs of a discrimination suit can be workplace distractions, a loss in company reputation and a loss of company-wide productivity levels, according to HR Morning. Another key aspect that is overlooked during these lawsuits is the effect it may have on employee morale. Employees may feel conflicted about the situation and even leave the organization as a result of working in a high-pressure, stressful environment. Meanwhile, companies may have to lay off workers to offset litigation costs, further lowering morale levels.
What should you do to prevent these lawsuits at your business?
The ideal way to prevent a lawsuit is to implement best practices from the ground up regarding acceptable hiring and employment processes. All hiring managers should be aware of state restrictions that outline hiring and employment policies and develop a comprehensive employee handbook containing the company’s guidelines and standards, according to Law360. Meanwhile, all hiring applications and postings should be free of any discrimination issues and all interviewers should be cautious during the interview process.
To take these strategies one step further, employers can implement pre-employment tests at their company. This way, the tests will easily weed out unqualified candidates before they ever step in the room for an interview. You want to hire the best possible applicants for your open positions, but not at the risk of a costly lawsuit. Conduct a comprehensive risk management assessment and call EmployTest today to learn more about how our skills tests can support your organization!