Lawsuits A Way Of The Workplace, Firms Say

NU Online News Service, May 25, 3:45 p.m. EDT?Testifying to the American culture of litigiousness, a survey of private companies has found that nearly half the firms expect to be sued this year by one or more employees or ex-workers.[@@]

And 50 percent of the executives answering the Chubb Group of Insurance Companies' poll said they expect a discrimination complaint.

This is not surprising considering the research found that in the past few years one in four privately held companies has been sued by an employee or former employee.

Executives at as many as half the firms surveyed say it is likely that an employee may sue them, their board members and their companies and/or lodge a discrimination complaint with federal or state authorities in 2004, the Warren, N.J.-based Chubb reported.

Meanwhile, nearly one-third believe that an allegation or actual case of wrongful termination, discrimination or harassment has the potential to inflict financial or other serious damage to their company, the poll found.

A total of 44 percent of executives said it is likely that an employee or former employee will sue their company in 2004, and 50 percent said it is likely that an employee will file a complaint with the federal Equal Employment Opportunity Commission this year, according to Chubb's research.

The Chubb 2004 Private Company Risk Survey found 26 percent of executives at privately-held companies reported that their firm had been sued by an employee or former employee, and 22 percent reported having an employee file a discrimination or harassment complaint with the EEOC or state agency during the past few years.

"Executives at many private companies realize that they are vulnerable to lawsuits from employees and former employees," said Lisa McGee, a vice president at Chubb & Son and Private Company Customer Group manager. "They are concerned?and rightly so?about the cost to defend against these lawsuits and the potential losses."

More than half the executives surveyed estimated it would cost more than $100,000 to settle an employment discrimination or harassment lawsuit. Ten percent said it would cost at least $1 million.

Private company executives said they are also concerned about lawsuits from retired employees, according to the survey. Nearly one-fourth of the executives queried reported that it is likely a retiree will sue the company, its directors and officers, and/or its benefits plan administrators and fiduciaries in 2004.

Under the Employee Retirement Income Security Act of 1974, fiduciaries are personally liable for losses to benefit plans incurred as a result of their breach of duties. Past or present employees or their families bring the majority of fiduciary claims, but another fiduciary or the U.S. Department of Labor may also bring claims.

The most frequent allegations against fiduciaries include denial or change of benefits, administrative error, incorrect benefit calculation, improper advice or counsel, misleading representation, and wrongful termination of plan, Chubb said.

The survey found many private companies taking steps to lower their risks and reduce potential losses. Forty percent of private companies surveyed purchase employment practices liability insurance and 24 percent purchase fiduciary liability insurance, the carrier reported.

Additionally, 72 percent of the companies surveyed have written policies banning employment discrimination and sexual harassment, and 52 percent offer employment discrimination and/or sexual harassment training.

"Companies that do not prudently manage these risks leave themselves and their directors and officers vulnerable," warned Ms. McGee. "In particular, smaller firms, which are less likely to be able to withstand the financial shock associated with a lawsuit from an employee or retiree, should consider loss control measures and possibly insurance."

The survey was conducted by Impulse Research Corp., a market research firm in Los Angeles. The firm interviewed the chief executive officer, chief financial officer and other top officers at 300 privately held companies.

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Lawsuits A Way Of The Workplace, Firms Say

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