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What Childcare Centers Can Do to Reduce Wrongful Termination Lawsuits

February 21, 2017

Negligence is a legal concept that most childcare center operators know all too well. They fully understand they can be sued for liability if they fail to supervise and educate children in a safe and clean environment. But what about the liability that centers have to their staff?

CCIG’s Joaquin Escobar.

Childcare and early-education employees today expect a more professional work environment than they have in the past. When workers feel they are not being treated fairly, they hire attorneys and file Employment Practices Liability claims against the center.

These aren’t claims covered by a center’s general liability policy. We’re talking about wrongful termination, sexual harassment, disability, race and pregnancy-related discrimination.

Common wisdom holds that EPLI claims increase during economic downturns. But employees today are more aware than ever of their rights and so claims remain at or near record levels, regardless of the economic recovery.

Economic condition aside, even the best childcare center owners find it difficult to keep up with all of the rules about how they should hire and fire, what can be said in the workplace, and how they should treat their employees.

Moreover, 75 percent of EPLI claims are made against small businesses, those with 50 or fewer employees, so the risk can be high even for childcare centers that employ a handful of staff members.

The cost can be high, too. Defense costs alone can top out at $300,000 and the timeline for resolution can be anywhere from 18 to 24 months.

Aware of the risks, a growing number of franchisors are requiring franchisees to purchase EPLI to protect themselves from such claims.

EPLI coverage covers a business against lawsuits or claims filed by prospective employees, by current employees and contractors, and by former employees, including those who have resigned or who have been laid off or terminated.

Although it’s important to have the right insurance policy in place, there are several commonsense steps your center can take to reduce the possibility of claims. Below are the top tips to prevent an EPLI claim against your childcare center.

Pay employees for hours worked

Fair pay for hours worked is crucial to prevent a large claim. Oftentimes, if this type of claim catches wind, you will have multiple employees joining in on the claim, and your business will ultimately spend more defending against this claim then what the employees should have been paid.

  • Pay employees for all of their time training.
  • Pay employees for overtime worked. You have a right to restrict your employees from working overtime. But if an employee is on the clock and works overtime, they need to be properly paid.

Maintain a comfortable work environment

Many childcare centers will hire a few men to balance the traditionally female workforce at the center. Sexual harassment complaints from both female and male employees must be taken seriously.

  • Never discount complaints about sexual harassment to prevent gender alienation.
  • All employee complaints must be listened to, investigated, decided upon and followed up on in a timely manner to assure the offensive behavior has stopped

Employment termination

As an employer, you will need to make the tough decision of employee termination at times. If an employee is to be terminated, they should not be surprised about what is about to happen.

  • Maintain a professional, employer/employee relationship.
  • Follow progressive disciplinary policies and follow the policies’ disciplinary actions.
  • Document all previous disciplinary actions, including meetings, to reduce claim potential.

Finally, make sure your EPLI policy explicitly includes claims made by the EEOC and other government agencies.

Cracker Barrel learned that lesson the hard way a few years ago. It had been sued by the EEOC after a group of Cracker Barrel employees went to the agency with charges of race and sex discrimination. Despite the company’s strenuous protests, the court held that Cracker Barrel’s policy covered claims made by employees, not the EEOC.

Oh, and one other important note: Employers covered under an employment practices liability insurance policy should remember that late reporting of claims could jeopardize, or even void, coverage.

Joaquin Escobar, an Insurance Advisor at CCIG, handles the risk management and insurance needs of commercial childcare and school accounts. Reach him at 720-212-2054 or

CCIG is a Denver-area insurance brokerage with the full-service capabilities of a national brokerage. We do more than make sure you have the right policy. We also help you manage your long-term cost of risk with our risk and claims management expertise and a commitment to service excellence.

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