The average cost of defense and settlement of an employee charge of discrimination is $125,000, according to a recent study by insurance provider Hiscox. The study focused on 446 claims reported by small and medium-sized businesses with fewer than 500 employees. Here are some of the key highlights from the study:
- The average duration of an employment matter from start to finish was 275 days.
- The average cost of both defense and settlement was $125,000.
- The average self-insured retention deductible for companies with employment practices liability insurance was $35,000.
- Only 19% of the matters resulted in both defense costs and a settlement payment. That means that 81% of the charges (or about 4 out of 5) were nuisance suits that did not result in any settlement.
- The median judgment for employment matters that ended up in court and resulted in a finding of liability was $200,000, in addition to defense costs.
Takeaway: Employment litigation can be expensive, even if the employer wins. Working proactively to prevent problems from occurring in the first place is the most effective strategy for avoiding the potential costs of employment claims.