Employers are most likely to face employment practices litigation in California, Illinois, Alabama, Mississippi and the District of Columbia, said Hiscox Ltd. in a study released Monday.
Businesses in these states and jurisdiction face a “substantially higher risk” of being sued by their employees compared with the national average, said New York-based Hiscox, in a statement on the study.
The study found that on average U.S.-based businesses with at least 10 employees have a 12.5% chance of having an employment liability charge filed against them. But employers with at least 10 employees in California have a 42% higher over the national average chance of being sued by employees.
Other states and jurisdictions where employers are at high risk of employee suits include the District of Columbia, at 32% above the national average, Illinois, 26%, Alabama 25%, Mississippi and Arizona, 19% and Georgia, 18%.
“Not only are employment lawsuits more likely in those states, but the likelihood of catastrophic verdicts is also significantly higher. Unlike their federal counterparts, where compensatory and punitive damages combined are capped at $300,000, most state employment statutes impose no damages ceilings,” said Mark Ogden, a Phoenix-based partner at Littler Mendelson P.C., in a statement.
“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,” Mr. Ogden said.
According to the statement, state laws can have a significant impact. “For example, the employee-friendly nature California law in the area of disability discrimination may contribute to the high charge frequency in the state,” Hiscox said in its statement on the report.
Lower-risk states for employment practices liability charges include West Virginia, Massachusetts, Michigan, Kentucky and Washington, according to the study.