In a Chubb 2010 Private Company Survey, executives were asked what one event would cause the most financial damage to their organization. The top two answers were employee theft and an employment practices liability (EPL) lawsuit.
Findings in the Chubb survey show that fraud is common. The Global Economic Crime Survey by PWC at the end of 2009 showed that 30% of companies experienced one or more financial fraud incidents within the previous year. On average, according to the Association of Certified Fraud Examiner surveys, companies on average lose anywhere from 5-7% of their revenue to fraud. These surveys also show that receiving a tip, such as through a hotline, is the single most effective way to identify such incidents. Per the 2010 Report to the Nation tips are “catching nearly three times as many frauds as any other form of detection. This is consistent with the findings in our prior reports. Tips have been far and away the most common means of detection in every study since 2002, when we began tracking the data.”
One in five of the companies surveyed experienced an EPL lawsuit in the previous five years. In the Employment Practices Liability: Jury Award Trends and Statistics, the median award for EPL lawsuits in 2008 was $326,640. Retaliation has become the second most common type of EPL charge according to the Equal Employment Opportunity Commission.
The sooner a company knows about an EPL situation, the more likely the situation will be addressed before an award is required. Employee ethics hotlines are critical in identifying these situations early and helping reduce the likelihood that retaliation will occur.