What Do EPLI Claims Look Like?Insurance Explained
Employment practices liability insurance (EPLI) has recently seen a huge spike in popularity as a result of the changing social and cultural landscape of the modern workplace. Over the last several years, there have been many very highly-publicized employee liability lawsuits in the media, spearheaded by the #MeToo movement, which has caused the number of companies purchasing EPLI to skyrocket.
Today, EPLI is a recommended coverage for just about any business that has more than a handful of employees and has also become a staple coverage when putting together insurance programs for high-growth startups, given the often sensitive nature of interaction in companies that often employ a younger workforce.
But to understand why EPLI has become essential management liability coverage, we need to understand what a typical EPLI claim looks like, which types of workplace behaviors are most commonly flagged as inappropriate, and what the policy will cover and protect against in the event of an employee-filed claim against your company.
Why Businesses Need EPLI
As mentioned earlier, employee lawsuits have been steadily and quickly on the rise. The Equal Employment Opportunity Commission (EEOC) recorded 72,675 charges of workplace discrimination in the fiscal year 2019 alone.
Not only are employee lawsuits frustrating for your management and bad for your company’s reputation, they are also often financially devastating. According to a recent report, the average cost of defending and settling an employee claim is roughly $160,000, which can be a crippling loss for most small and medium-sized businesses.
And let’s not forget about the consequences employee harassment and similar claims can have on your workforce in general. Decreased productivity, a lack of trust in the organization, and lower employee morale across the entire company are very common side effects of such stressful workplace situations.
Obviously, not all of these potentially-adverse effects can be solved with insurance, but having the right EPLI policy in place can definitely help your company survive such circumstances financially by providing coverage for legal costs and possible settlements.
Understanding EPLI Coverage
At its core, employment practices liability insurance will protect your business in the case of employee lawsuits that allege either unfair or inappropriate acts committed against them by someone who represents your company.
Both current and former employees can file lawsuits against your business if they believe that their rights have been violated at any point in their employment with your company.
It’s also important to know what costs EPLI covers since it’s not an all-encompassing policy. Most EPLI policies will cover defense costs, judgments, and settlements. Legal costs will usually be covered regardless of the outcome of the lawsuit.
EPLI policies will usually exclude criminal fines and civil fines, as well as damages that other insurance products are designed to cover, such as bodily injury and property damage claims (commercial general liability insurance) and workers compensation claims (workers compensation insurance, obviously).
Examples of EPLI Claims
One of the main reasons EPLI is important is because employee claims tend to be very involved and complex, meaning that it usually takes a long time to resolve them. This means that employee claims against their employers tend to be very expensive, and recent studies and expert analysis tend to agree that both the number of employment-related claims and the cost of these claims will inevitably continue to rise.
Let’s take a look at some of the types of EPLI claims that companies most commonly face:
Harassment: Claims related to workplace harassment have increased significantly over the last several years. While there are many forms of harassment, sexual harassment is the most prevalent, with claims related to unwanted sexual advances, verbal or physical harassment of a sexual nature, and requests for sexual favors at work steadily rising.
Whistleblower and Retaliation: In these types of cases, an employee usually alleges harassment or discrimination at an earlier junction and claims that because they spoke out about these behaviors at work, they were punished in some way. Retaliation claims are often related to demotions or cuts in pay that employees believe had nothing to with their performance, but rather, was directly related to the fact that they spoke out about something at work or shed light on a situation that the employer didn’t want to become known.
Failure to Hire or Promote: While the reasons behind these claims can vary greatly, they are often related to protected classes of workers that are listed under the Americans with Disabilities Act (ADA). If an employee believes that they are not being promoted or that they were not hired because of a disability (diabetes, epilepsy, deafness, blindness, etc.), they can file a claim against the business.
Discrimination: If an employee believes that he or she is being discriminated against at work because of their age, race, gender, or ethnicity, they could file a claim against their employer. Considering that America’s workforce is aging rapidly, many expect that the number of age-related discrimination employment practice claims will continue to rise.
Wrongful Termination: Employees who feel that they were fired unlawfully could file a wrongful termination claim. In order to qualify as wrongful termination, the contract of employment must be considered unlawfully terminated, meaning that one or more terms of the employment contract were breached. Even though it might not be easy for employees to win wrongful termination claims, that doesn’t mean that the legal process won’t be a long and expensive one for the employer regardless of the outcome.
Invasion of Employee Privacy: This is another type of claim that companies are seeing more and more commonly. Employees can argue that their rights to privacy are being violated in many ways at work, via their computer or security cameras in the office, for example.
Illegal Background Check: There are national standards for employment screening (set by the Fair Credit Reporting Act (FRCA)) that employers need to abide by. While employers do have the right to request criminal background checks and credit reports when screening potential employees, they must make sure that the candidate has given written consent before doing so.
Pregnancy and Lactation Accommodation: According to the Pregnancy Discrimination Act, a pregnant employee must be allowed to work as long as she is able to perform her duties. If an employee believes that they were fired because of their pregnant state, they can sue the company. Also, there is a federal Break Time for Nursing Mothers law that requires employers covered by the Fair Labor Standards Act (FLSA) to provide accommodations for breastfeeding mothers at work. Breastfeeding mothers who are not provided time to express milk and a private area of the office that is not a bathroom to do so can file claims against their employers.
Highly-Publicized Examples of EPLI Claims
Coworking space giant WeWork was sued for age discrimination and for gender pay inequity. See: WeWork Sued For Age Discrimination–Learning Lessons For Companies
Claiming a culture of sexual harassment and gender bias at Nike that left women demeaned and underpaid, two former employees sued the sports apparel giant, demanding more equitable policies. See: Ex-Employees Sue Nike, Alleging Gender Discrimination
A former McDonald’s employee who said a manager grabbed her breasts and buttocks sued the fast-food restaurant chain, blaming her mistreatment on what she calls a culture of sexual harassment at the fast-food company. See: McDonald’s Lawsuit Targets ‘Pervasive’ Culture of Sexual Harassment
An Alaskan mining company agreed to pay $690,000 to settle a sex discrimination lawsuit brought by the EEOC on behalf of a female miner. The company denied promotions to a female miner while men with less seniority or training were promoted. See: Gold mine pays $690K to settle allegations it failed to promote female miner
What Your Company Can Do to Prevent EPLI Claims
In order to protect your business from potential EPLI claims, it’s important to, firstly, understand the rights of your employees. Having a clear understanding of your employees’ rights will help you to protect your business from potential lawsuits by promoting awareness and education.
If you want to reduce your company’s employment practices liability risks, the first thing that you should do is work towards creating, adopting, and communicating a prevention policy. Companies that invest in training their staff to prevent harassment and discrimination show that they are truly concerned about making their working environment a positive one, which can aid in the hiring and retention processes as well.
Here’s what your company can do to increase awareness and prevention in order to decrease the risks of facing (and potentially losing) EPLI claims.
Create a Policy
First, you need to create a policy that is going to identify and describe all of the possible types of discrimination and harassment that could potentially occur at the workplace, providing possible scenarios and making sure that everyone within your company clearly understands which types of behaviors are not going to be tolerated.
Make sure that you are involving your lawyers in the process as well because they will be able to help you put together a policy that’s in accordance with federal, state, and local employment laws in order to minimize the chances of employment liability claims.
Your human resources team should be leading the process and making sure to educate your employees while also being ready to field any questions that people within the organization might have pertaining to the policy.
These training sessions need to specifically address the types of behaviors that you have talked about in the policy that you have written and distributed to your team. Make sure to make this training appropriate for everyone, from the executive team to interns.
In the training, make sure to cover not only what types of behaviors are not permitted, but also how to identify them and what employees should do when they need to report behavior that violates your company policy.
It’s a good idea to include these training sessions in every new employee’s onboarding program and to continue the training on a regular basis, adding new sessions and discussions as your policy evolves over time and reminding your employees on a regular basis of the importance of the policy to the company.
Your HR team should also ask your employees to sign a document that confirms that they are aware of your policies regarding harassment and discrimination in the workplace and have completed all of the training sessions that were assigned to them.
Immediately and Thoroughly Investigate Complaints
The importance of being quick to investigate any employee complaints related to harassment and discrimination cannot be overstated. If an employer sits on a complaint and does not fully investigate it as soon as it is submitted, this is something that will certainly be brought up by the suing employee’s legal team if and when the case does go to court. Obviously, your company’s slow or non-existent response to such a situation would put your legal team at a strong disadvantage.
Another point that needs to be made clear during your training sessions is that all employees must be ready to fully cooperate in an investigation related to a harassment or discrimination case at the workplace, which includes both the alleged harasser(s) and all possible witnesses to the event(s).
As you can see, EPLI coverage can be very complex, which means that businesses need to have a broker in their corner who is not only specialized in putting together strong EPLI policies but is also well-versed in the specific types of risks that are most commonly associated with your industry.
Anyone interested in learning more about EPLI can reach out to one of our experienced brokers at any time to gain a better understanding of their insurance needs.
How can you protect your business from potentially complex and incredibly expensive wrongful termination claims filed by former employees?