Posts Tagged ‘Wrongful Dismissal’

Employment Law, Wrongful Termination/Dismissal & Employment Practices Liability Insurance

August 7, 2013

Often, writing a blog can be very challenging.  What should I blog about?  So, I procrastinate – doesn’t everyone when a task seems tedious?  This time, however, I have to admit that I can hardly wait to write – just trying to arrange my thoughts in an orderly fashion so you will better understand me.

An opportunity arose during this past year whereby a client purchased, upon our advice, an insurance policy for Directors’ & Officers’ Liability (D&O) AND Employment Practices Liability (EPL) – a very wise decision.  Why?  Well, first I’ll explain that a wonderful online acquaintance of mine, a legal expert whose sole practice is devoted to Employment Law, tells me that “defending any claim will easily involve tens of thousands of dollars in legal fees” so I have been targeting those businesses who can least afford this type of event taking place, small to medium sized incorporated entities. 

Now, it is time for me to tell you about my client.  The employer/owner, upon seeing a long-term employee abuse his trust, stealing inventory from him, decided to suspend the employee until all circumstances were properly investigated, documented and, seemingly, took adequate steps to terminate or dismiss that employee.  Guess what?!  The employee met with legal counsel and has now presented his former employer/my client with a lawsuit for $100,000!  YES, that’s right – the former employee is now suing for Wrongful Dismissal/Termination for this shocking amount.

How many of you business-owners could continue to operate your firms if faced with this type of lawsuit?  Even if the case is dismissed, how many of you can afford the “tens of thousands of dollars in legal fees” you might face?  Will your bankers be happy if you have to use your lines of credit or approach them for additional financing?  As a former banker, you might not actually be able to obtain affordable credit for a request of this sort or you may be in violation of loan agreements where you already have, in place, approved lines of credit should you lose a suit for this amount and lack adequate liquid capital.

Let me further explain a few additional details.  The client is typical of many or most small businesses that I know, having fewer than 20-25 employees, no legal counsel on retainer (how many of us do?), inadequate Human Resources personnel/training to handle situations like this, slim operating margins AND be aware that they can AFFORDABLY purchase insurance to protect against a potential claim of this sort.  There is a time limit to respond to a legal suit or you will be found to be guilty and how many of you know of proper legal counsel – assuming you don’t have insurance of this kind – who can, adequately, defend you?

What do I mean by “affordably”?  Let me run some examples for you Accountants!  In many cases I can prepare for you within two minutes through an online portal to one of my exceptional insurance carriers for this class of business.

#1 – Company with $500,000 Annual Revenues, 4 Full-time Employees in Canada, $1,000,000 D&O, $500,000 EPL – ANNUAL COST $840 + PST;

#2 – Company with $3,000,000 Annual Revenue, 12 Full-time Employees in Canada, 1 Full-time Employee in USA, $1,000,000 D&O, $1,000,000 EPL – ANNUAL COST $1,470 + PST;

#3 – Company with $5,000,000 Annual Revenue, 10 Full-time Employees in Canada, 3 Full-time Employees in USA, $2,000,000 D&O, $1,000,000 EPL – ANNUAL COST $2,228 + PST;

#4 – Company with $30,000,000 Annual Sales, 25 F/T Employees in Canada, 5 F/T Employees in USA, $3,000,000 D&O, $2,000,000 EPL – ANNUAL COST $4,620 + PST;

#5 – Company with $50,000,000 Annual Sales, 75 F/T Employees in Canada, $5,000,000 D&O, $3,000,000 EPL – ANNUAL COST $8,125 + PST

These examples are only that – we will still need to verify some information to ensure a firm qualifies but, when comparing the annual cost vs the “tens of thousands of dollars in legal fees” (provided you don’t lose a lawsuit), it is easy to see why I believe this insurance protection is now affordably priced for any incorporated business.

Can you sleep easier at night by investing two minutes in following-up with me?  I can be reached easily by e-mail – larryewinsurance@gmail.com