All in the Family - Family Businesses Are Sued by Employees, Too

January 17, 2018| By Mindy Pollack | Commercial Umbrella, EPLI | English

Region: North America

Family-owned and operated businesses hold a special place in our economy and social fabric.1 They occupy a large place as well, accounting for nearly 20% of all businesses. One common perception is that this distinct place is safe from employee lawsuits and the need for Employment Practices Liability Insurance (EPLI).

However, the reality told by EEOC litigation and reported settlements is far different. Family businesses are as vulnerable as any other type of organization, for a number of reasons.

1. Most family businesses employ one or more non-relatives to fill a specific need in their shop, restaurant, contracting or other business. Assistants, waiters, drivers and cashiers often supplement the family members on staff, whether seasonal, part-time or full-time.

2. When times get tough with layoffs looming, chances are that the outsider is removed before any family member. This can lead to discrimination and wrongful termination claims.

3. Family members tend to shy away from disciplining relatives for poor behavior. How comfortable could it be to tell a spouse to stop bothering the attractive new employee, or a sibling to refrain from using offensive language?

4. When the family patriarch or company founder is the wrongdoer, it is even harder for the staff to speak up. Relatives may opt to stay quiet or pressure the victim to drop any complaints.

Family businesses are in fact sued for discrimination, harassment and wrongful termination, even those with as few as three employees. Sometimes a family member claims wrongdoing, more often a non-relative files a suit. Here are just a few examples from around the U.S.:2

These workplace scenarios and settlement amounts mirror those we see for all businesses. Discrimination and sexual harassment - as well as wrongful termination, violations of privacy and other employment wrongdoing - are not limited to any type, place or structure of business.

When it’s time to evaluate insurance for the family business, be sure that Employment Practices Liability insurance is not overlooked. The chances of needing EPLI protection are no less than for a slip and fall or fire loss. It’s all relative.

  1. This statistic applies to small business, which the Small Business Administration defines as having fewer than 500 employees.
  2. All claim examples are taken from EEOC website, LexisNexis or other public information sources.


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