It's no surprise that when the economy takes a nose dive, people get extremely anxious about money. Historically, that anxiety has led to an increase in lawsuits filed by employees against their employers. All of the sudden, seemingly normal people start paying closer attention to all those lawyer ads on TV. Because most lawyers know that suing the government is a big waste of time and money, who is the next most logical choice? Employers.
For example, the last period of meaningful economic slowdown in this country was 2001 to 2002. In 2001, gross domestic product (GDP) grew an anemic .8 percent. In 2002, it grew at only 1.6 percent. These numbers are much lower than the approximate 3 percent growth we have experienced over the last 15 years. As the economy stumbled, guess what spiked? Charges filed with the U.S. Equal Employment Opportunity Commission (EEOC) grew by more than 6 percent. As the economy is currently stumbling along at a historically diminished growth rate, guess what is spiking again? EEOC charges.
According to the EEOC, the total number of charges filed in 2007 increased 9 percent from 2006. This is the largest annual increase since 1993. Here is the breakdown taken directly from a March 5, 2008, EEOC news release. In 2007:
- 30,510 race charges were filed; up 12 percent to highest level since 1994
- 26,663 retaliation charges filed; up 18 percent to a record level and doubled since 1992
- 24,826 sex/gender charges filed; up 7 percent to the highest level since 2002
- 19,103 age charges filed.; up 15 percent, the largest annual increase since 2002
- 17,734 disability charges filed; up 14 percent to highest level since 1998
- 9,369 national origin charges filed; up 12 percent and above 9,000 for second time ever.
- 2,880 religion charges filed; up 13 percent to record high level, and doubled since 1992.
Unfortunately, we're not done yet. These numbers do not include the hundreds of thousands of charges filed each year with state and local authorities. So, despite the dramatic increase in the number of EEOC charges, we haven't even scratched the surface.
What is a business owner to do? You must make sure you are properly protected with the right kind of insurance. During times of economic hardship, your employees may be desperate for money. Increases in pay (if they are given) are quickly eaten away by rising fuel and food costs. Guess who they think is rich? They guy driving to work each day in the new car, who also has the audacity to go on vacation once a year.
I can hear the chorus now: "At my company, we're one big happy family," and "I've been in business for 47 years, and we've never been sued." Even: "We don't do anything wrong.” Unfortunately, just like the song, money changes everything, and it really doesn't matter if you've never done anything wrong because it's going to cost you a fortune in time and money to prove it.
So, let's face the facts. The chances of you being sued for an employment practices issue increases every time the economic environment dwindles. Add to that the fact that the economy is unstable these days, and you've now poured gasoline on the fire. Whether you think we're in a recession or not, your employees may think so. And they may be getting worried.
It is a fact that during an economic slowdown, companies cut expenditures. One of the ways they do this is to cut the fat out of any of their fixed costs. Therefore, an organization's insurance program often is first under the knife. While understandable, be a surgeon, not a butcher. Don't eliminate the recession-sensitive coverage that protects your business from economic disaster.
Eric D. Patrick is an attorney and chief operating officer of Consumers Insurance Agency Inc. He also engages in insurance consulting and legal work through The RiskAssure Consulting Group. Please contact him for further information by visiting www.consumers-insurance.com.
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