Workplace Conflict: The Prevalence & Cost of Employer Lawsuits

Published: June 21, 2017 | Last Updated: April 23, 2024by Jeremy Pollack

Small and medium-sized companies in the United States face nearly a 12% chance of being hit with an employment lawsuit. In some states, the potential for encountering an employee-driven claim is quite higher and much of the time, the charges arise from workplace conflict issues that could have been prevented.

Specialty insurer Hiscox recent conducted a study that focused on employee lawsuit trends in the U.S. It found that Alabama, California, Nevada, New Mexico and Washington, D.C. were the top states where businesses were at risk of an employment lawsuit. In these markets, employers with at least 10 employees face a substantially greater risk of lawsuit by their employees, as compared to a national average.

Nearly 100,000 Workplace Charges Filed in the U.S. in 2016

The United States Equal Employment Opportunity Commission (EEOC) stated that for fiscal year 2016, there were 91,503 workplace discrimination charges in the US. This number rose for the second year straight, and overall it cost employers $482 million in damages for victims in private, state, and federal places of employment. The average cost to a company for defense and settlement was $125,000.

In 2016, the EEOC responded to more than 585,000 calls to a toll-free number it had set up for workplace discrimination reports. More than 60,000 inquires came into field offices, which reflects the demand on the government system to handle conflicts at work.

The High Chance of Employment Charges Filed As a Result of Workplace Conflict

The Hiscox study reported that companies throughout the U.S. have at least an 11.7 % possibility of having employment charges brought against them. This number, accumulated in 2015, is actually down a bit from a 2014 study that Hiscox ran, and Hiscox says that the 2015 numbers may represent more comprehensive data including benign employee suit activity. But, the percentage is still cause for alarm for business owners.

New Mexico companies face the biggest risk of employer-related lawsuit in the nation, with a huge 66% higher chance of being sued by employees than the national average. Washington, D.C. followed close behind (65% more than the national average), and Nevada (47%), Alabama (41%) and California (40%) came in third, fourth and fifth, respectively.

In Mississippi, businesses face a 39% higher risk of being sued by employees than the national average. Delaware companies have a 35% higher risk and those in Illinois face a risk of 34% greater than the national average.

State Laws Contribute to Higher Risk of Lawsuit for Companies

Bertrand Spunberg, a practice leader working for Executive Risks at Hiscox, says that state laws can contribute to risk and have a significant impact on companies when it comes to lawsuits in the United States. He states that the variation in lawsuits seen across the U.S. directly relates to laws in various states that go beyond the laws set at the federal level.

Many high-risk states that were analyzed in the Hiscox study, according to Bertrand, have laws on the books that create additional risk and obligations for employers in those states. Companies operating in high-risk U.S. markets must be vigilant in staying attuned to legal developments and complying with appropriate state laws.

Anti-Discrimination and Fair Employment Laws Drive Lawsuit Activity

The Hiscox study offered that 10 states have unique anti-discrimination and fair employment laws that typically provide fuel for lawsuits coming from employees. The states’ employment practices are generally broader than laws governing on a federal level, such as is the case with New Mexico’s statue for fair employment practice.

In states like Alabama, Mississippi, and Georgia, laws requiring employers to use the e-verify federal system to make sure employees are legally able to work in the country affect the lawsuit environments there. Delaware, Washington, D.C., and Illinois have laws that mandate employers to make reasonable accommodations for employees who are pregnant, and these laws affect the number of charges filed.

Preventing Workplace Conflict

Given the number of lawsuits, it pays companies to keep an eye on their policies as related to hiring transgender, immigrant, and same-sex marriage employees. Minimum wage issues are also something to keep up to date on and abide by, if businesses don’t want to be hit with lawsuits. Often, discrimination charges are not valid charges, but merely misunderstandings. Companies should use dispute prevention techniques for managing conflict in the workplace. This means, in part, handling potential discrimination-related conflict – and possible lawsuits – by maintaining proper hiring procedures, an up-to-date policy manual for employees to abide by, and correct training on discrimination for all employees at every level.

Dealing with conflict in the workplace is sometimes challenging, but it’s easier and cheaper than dealing with a lawsuit. Pollack Peacebuilding Systems works with companies to create a cooperative workplace environment, where employees and management teams are able to communicate effectively regarding policies, and possibly solve workplace conflict before it leads to lawsuits. See our conflict management services or contact us today to learn more about consulting services.

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Jeremy Pollack

Jeremy Pollack is the Founder and CEO of Pollack Peacebuilding Systems.