5 Hidden Costs Business Organizations Incur When A Discrimination or Harassment Claim Is Filed By An Employee

Aside from a jury’s award to a charge of discrimination or harassment, what are the other costs to an employer when a lawsuit is filed?

1.  Re-directing employee resources and hiring additional employees to gather, review and prepare documents. Depending on the size of an organization, this process can last anywhere from 6 months to two years;

2.  The loss in employee morale negatively impacts the productivity;

3.  The loss to a business’ reputation regardless of the outcome of an investigation;

4.  The loss of competent employees who move on for fear the instability could result in job loss;

5.  The high cost of legal fees associated with defending a claim of harassment or discrimination;

From an employer’s perspective, settlement costs to resolve an EEOC claim fade in the face of these additional, often unrecorded, costs to the employer’s organization.

In addition to these hard-to-quantify costs, the average single claimant lawsuit results in average defense costs of $250,000 and average jury verdicts of $350,000.

Class action lawsuits, which are also increasing, generally result in lower per claimant awards but can cost an employer millions of dollars in cash and untold millions in the above employee costs listed.

On the plus side, if an employer has properly trained its management and employees, has a defined system set up to address complaints of discrimination and/or harassment filed by an employee, and clearly provides positive recourse for individuals who utilize the system, then it can resolve most complaints in-house, and greatly mitigate any potential loss for those complaints taken to the EEOC or similar state agency.