Work-related lawsuits are on the rise, and a single claim against your company could be financially devastating if you’re not adequately insured. Employment lawsuits have jumped 400% in the past 20 years. In fact, companies with as few as 100 employees can expect to receive employment practices’ claims once every three years. Defense costs can top out at $300,000 per case, and a resolution may take 18 to 24 months.
Legal fees are not the only cost to your company, you may have to cover the expenses of investigating an allegation – audits, data collection, record production – which can rack up big bills. If the complaint involves sexual harassment or discrimination, you will also need (or may wish to have) help paying for a media response and reputational damage control.
EPLI Offers Lawsuit Protection
Some acts that can be covered by EPLI include:
- Wrongful termination
- Discrimination
- Sexual harassment
- Retaliation
- Defamation or libel
- Invasion of privacy
- Misrepresentation
- Failure to promote
- Breach of employment contract
- Negligent evaluation
- Mismanagement of benefits
- Violations of various leave laws
Despite EPLI coverage’s relatively low premium, many employers refrain from purchasing it because they mistakenly believe other types of insurance cover such complaints. In fact, the overwhelming number of employers with fewer than 50 employees pass up this important protection.
EPLI is generally a separate coverage from your BOP but sometimes there is a possibility of adding it to your insurance policy as an endorsement. Alternatively, you may prefer a stand-alone policy with higher financial protections than the ones offered when the coverage is combined in a BOP.
Keep in mind that EPLI policies have exclusions. Most do not cover bodily injury, property damage, contract disputes, intentional acts, unpaid wages, rest and meal times, unemployment benefits, COBRA and ERISA. Wage and hour violations are usually excluded, as are punitive damages.
Also, EPLI is a “claims-made” coverage, meaning claims are covered only when both the incident in question and any claims related to it occur while the policy is in force. If you’re sued after the policy has lapsed, you won’t be covered.
Choose the Right Coverage
It’s best to work with an insurance professional who has experience in the employment practices area and who can design a policy tailored to your needs. Your coverage and premiums will be determined by the type of business you are in, the number of employees you have, your HR practices and claims experience, and the limits and deductibles you choose.
Most EPLI policies provide defense coverage, but you may be required to use an insurer-approved attorney, so inquire about a carrier’s litigation record when deciding which one to place your business with. Also, ask if your coverage applies beginning with the first dollar you have to spend on legal response, and if costs associated with regulatory inquiries about an employment practices’ complaint are included.
Your EPLI coverage should be coordinated with other types of coverage you may have, these include directors and officers (D&O) liability, cyber liability, crime and fidelity, and fiduciary insurance.
Follow HR Best Practices
During the underwriting process, the insurer will review your employment policies and procedures. Most insurance companies will work with policyholders to help them manage risks and improve their human resources practices. Many provide additional client services designed to prevent claims, these include helplines, sexual harassment and ethics training classes, legal services, and employee handbook assistance.
These are employment safeguards you should have in place::
- Written hiring procedures that meet federal and state requirements Employee handbook
- Orientation for new employees, including anti-discrimination and anti-harassment policies
- Regular, consistent, and fair performance reviews, with policies for addressing and documenting unacceptable performance
- Safe/confidential reporting procedures for employee feedback
- Specific guidelines for terminating employees, with consideration given to whether they may be a member of a protected class or under contract
Protect yourself by being proactive in your employment practices. Hire a good HR administrator and consider retaining outside counsel familiar with labor law to keep your company in compliance.
For example, does your employee handbook clearly explain the types of employee conduct that are prohibited? Do you have procedures in place to investigate and promptly act on complaints? Do you have policies for email, social media, privacy, and sexual harassment?
Top Trends in Employment-Related Claims
Employers face many risks in the workplace today. Staying on top of EPLI claims trends can help reduce your exposure to wrongful acts. Here are seven recent trends you should consider when designing your insurance coverage:
- Sexual harassment. The #MeToo movement has spurred an increase in harassment claims, including LGBTQ-based sexual harassment charges.
- Retaliation. More than half of all EEOC claims filed in 2019 involved claims of retaliation. And employers can be on the hook for retaliation even if it turns out there was no underlying harassment or discrimination.
- Pay equity. The Bureau of Labor Statistics reports that women continue to trail men in earnings, making about 81% of what men are paid. In the last few years, a number of states have enacted pay equity laws that impose stricter standards on employers and lessen the legal burden for employees alleging wage discrimination.
- Marijuana legalization. At least 11 states now allow recreational marijuana use, and even more allow medical marijuana use, creating legal complications for employers who test for drugs (especially those with zero-tolerance policies).
- Worker classification. The gig economy has made it imperative that you properly classify your employees. If an independent contractor or unpaid intern is performing the duties of a regular employee, you may be in violation of the Fair Labor Standards Act and corresponding state law. You could also be in violation if you’ve denied overtime to employees by misclassifying them as exempt.
- Website accessibility. Plaintiffs’ attorneys continue to sue businesses with public-facing websites. These suits allege that a company’s website is a “public accommodation” under Title III of the Americans with Disabilities Act. If you conduct commerce online, make sure your site is compliant with the ADA.
- Pregnancy and lactation accommodation. Nearly half the states have passed laws that protect pregnant workers by requiring employers to provide reasonable accommodations. Some of these laws also require employers to accommodate lactation for a certain period after an employee gives birth.
Following HR best practices and having the right insurance coverage are the best ways to defend against employment claims. Contact Clyde Paul Agency to discuss proper risk management and crisis response services available under some EPLI policies. You will have a peace of mind knowing you are protected against the high costs of an employment practices complaint.
