EEOC Compliance for Small Businesses: What Every Employer Needs to Know
An EEOC charge is one of the most expensive things that can happen to a small business. Here is how to minimize that risk.
EEOC charge defense costs average $125,000 before settlement. Here is what triggers a discrimination charge and how to reduce your exposure.
What the EEOC covers
The EEOC enforces federal laws prohibiting employment discrimination based on race, color, religion, sex, national origin, age, disability, and genetic information. Title VII of the Civil Rights Act applies to employers with 15 or more employees. The Age Discrimination in Employment Act (ADEA) applies at 20 employees.
Discrimination under these laws covers hiring, firing, pay, job assignments, promotions, layoffs, training, and any other term or condition of employment. It also includes harassment based on protected characteristics and retaliation against employees who report discrimination or assist in an EEOC investigation.
What triggers an EEOC charge
An EEOC charge is filed by an employee or former employee who believes they were treated differently because of a protected characteristic. Common triggers include terminations that the employee perceives as discriminatory, failure to promote, pay disparities, harassment complaints that were not handled properly, and retaliation after an internal complaint.
You do not have to have actually discriminated to face an EEOC charge. The charge can be filed based on the employee's perception. The investigation then determines whether there is reasonable cause to believe discrimination occurred. Charges that reach the mediation or litigation stage cost significant money to defend even when the employer ultimately prevails.
Your most important preventive measures
The single most important thing you can do is document everything. Employment decisions that are documented with contemporaneous, business-reason-based records are significantly easier to defend. Terminations without a paper trail are your highest exposure.
Second: have and enforce an anti-harassment and anti-discrimination policy. Third: train your managers. Most EEOC charges arise not from company policy but from individual manager behavior. A manager who makes a comment about an employee's age or who handles a harassment complaint informally creates liability regardless of your written policies.
How to respond if you receive a charge
If you receive an EEOC charge, do not ignore it. You will be asked to submit a Position Statement explaining your version of events and providing documentation. The quality of your Position Statement is often the deciding factor in whether the investigation proceeds.
Engage an employment attorney or experienced HR professional to help you prepare the response. Preserve all documents related to the charging party immediately. Do not communicate with the employee about the charge outside of formal channels, and do not take any adverse action against them that could be characterized as retaliation.