Businesses in California, Illinois, Alabama, Mississippi and the District of Columbia face a markedly higher risk of being sued by their employees compared to the national average, according to a study by Hiscox.
“Not only are employment lawsuits more likely in those states, but the likelihood of catastrophic verdicts is also significantly higher,” Mark Ogden, managing partner of Littler Mendelson, employment and labor law firm said in a statement. “Unlike their federal counterparts, where compensatory and punitive damages combined are capped at $300,000.00, most state employment statutes impose no damages ceilings. Consequently, employers in high-risk states must ensure that their workforces are adequately trained regarding workplace discrimination, harassment and retaliation and that policies forbidding such conduct are strictly enforced.”
The study found that a U.S.-based business with at least 10 employees has a 12.5% chance of having an employment liability charge filed against it. Businesses in several states, however, face a much higher level of exposure to litigation. California tops the list with establishments with at least 10 employees having a 42% higher chance above the national average of being sued by an employee. Other states and jurisdictions include the District of Columbia (32%), Illinois (26%), Alabama (25%), Mississippi (19%), Arizona (19%) and Georgia (18%). Lower-risk states for EPL charges include West Virginia, Massachusetts, Michigan, Kentucky and Washington.
State laws can have a significant impact. For example, the employee-friendly nature of California law in the area of disability discrimination may contribute to the high charge frequency in the state. Discrimination cases filed at the state level in California are brought under the Fair Employment and Housing Act (FEHA). FEHA applies to a broader range of businesses, covering any company with five employees, versus a 15-employee minimum for cases brought under federal law as outlined in Title VII of the Civil Rights Act, according to Hiscox.