Thanks to a growing clientele, Sammy’s Gentlemen’s Club in Fort Walton Beach, Florida, was looking for another bartender. One applicant turned out to be a tease that cost the strip club dearly.

When a man with previous bartender experience came in person to apply for the job, he was immediately turned down by the manager who admitted the club doesn’t hire male bartenders. Subsequently, two female bartenders were hired.

Later, the Equal Opportunity Employment Commission (EEOC) filed a lawsuit against Sammy’s for violating federal law by refusing to hire the applicant because of his gender and, after further investigation of the club, for failing to maintain federally-required employment records as well.

Workforce expansion opened Sammy’s up to employment practices liability (EPL) – and additional regulatory liability - even before they hired anyone. Sammy’s isn’t unique. Claims of EPL discrimination are just one type of exposure to look out for when expanding your workforce.

Congrats! You’re expanding into unchartered territory

As your business grows, it can be difficult to maintain the same, effective control over a larger employee base. This is precisely what opens your business to increased liability, and requires new or updated limits in several coverage areas, including: EPL, Directors & Officers, Fiduciary, Crime and Worker’s Compensation.

While most businesses are required by law to have a Worker’s Compensation (WC) policy, workforce growth can inflate WC claims, which can impact your business’ bottom line, especially if policy limits haven’t been increased accordingly. Since WC laws vary by state, consider all relevant state laws with each workforce expansion.

Every time your workforce grows, a new work environment will emerge, which could be cause for new EPL claims, including discrimination, wrongful termination, harassment or wage-and-hour violations. Make sure your EPL policy is up to date.

A Directors and Officers (D&O) policy will safeguard your business from claims against the organization’s leadership and employees or regulatory scrutiny, should your growth lead to claims of overspending on payroll and more.   

Administering more employee benefits and ensuring compliance for a larger employee base increases fiduciary risk. A Fiduciary policy will protect you from claims of benefits errors and ERISA regulatory sanctions.

When  you undergo workforce expansion, there’s more opportunity for a gap in internal controls that can lead to employee theft. A Crime policy is essential to safeguard your business from crime, which happens at every level of an organization.

Additionally, insurance underwriters will want to know if you’re adequately training these new employees, and where they are based. Employers in California, for example, are at a greater risk of lawsuit because of the nature of the state’s litigious environment.  

Before expanding your workforce, talk to your broker about the right coverage to protect your business from the financial impact of lawsuits by shareholders, potential and new employees and more.

Download, Own Your Business Risk, The Insurance You Need to Make Bold Moves to understand the right coverage you need at each business milestone.