Your Ex-Employees Want to Bankrupt You & Your Franchisor

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The Department of Labor is keen on inflicting heavy penalties on franchise brands for their collective failure to pay fair wages.  

"Under Solis, the amount of back pay Labor collected for workers in wage and hour enforcement actions rose to $250 million in fiscal 2013, up from $173 million in fiscal 2009 -- an increase, after inflation, of more than a third. Since the start of the Obama administration, Perez crows, the agency has "recovered over $1 billion" in lost wages.

Meanwhile, the number of man-hours spent on enforcement rose nearly half, to 1.3 million, up from 880,000."

And employment lawsuits are expensive, even if you win the costs of defense can be very high.  

Sometimes just the threat of a employment lawsuit is enough to bankrupt a franchise owner.  The underlying complaint could be baseless, but you cannot afford to defende the employment lawsuit.

As reported at the website Agents and Broker, a couple of years ago, 

"Workplace discrimination claims are at an all-time high, and small-business owners feel vulnerable.

With a difficult economy, Employment laws are making lawsuits more likely, employment practices employment liability insurance, EPL, is evolving from a high-priced option to an affordable necessity for smaller companies.

A recent survey of small-business owners conducted for Hartford Steam Boiler found that 66 percent were concerned their employees would file an employment-related charge against them, 2010."

This number has probably increased since then!

At the same time, a recent industry study by MarketStance in Middletown, Conn., indicates that only 1.1 percent of small businesses have purchased EPL insurance

"One of the chief advantages of purchasing EPL is that the insurer has a duty to defend, even when the insurer is not going to indemnify you - the insurance may not pay the legal damages, if you are found liable."

The cost of defending even an ordinary employment lawsuit could run well over $100,000, which is beyond the reach of most franchise owners.

One possible solution is to purchase EPL at an affordable rate, which will give you the piece of mind that should you be sued even for a frivolous claim, your insurer pay to defend you.

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1 Comment

Many franchise owners don't look at insurance as a business strategy to protect their business but as a necessary & expensive evil.

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This page contains a single entry by Michael Webster published on October 30, 2014 10:01 AM.

Five Problems with Onboarding Your New Hires - Which Ones Do You Want to Overcome? was the previous entry in this blog.

The Franchise Sales Process Trick that Makes All the Difference is the next entry in this blog.

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