Employment Practices Liability Insurance (EPLI): Top Trends for 2020
Policywire by AmTrust
Offered on a stand-alone basis or combined with an existing policy, employment practices liability insurance (EPLI) helps safeguard businesses against employee lawsuits alleging inappropriate or unfair acts. Even when done unknowingly, violating an employee's (or contractor's) rights can have devastating consequences. Former, current or potential employees who believe the employer has violated their legal rights can file lawsuits for a variety of reasons.
What Does EPLI Cover?
Available as a policy endorsement or stand-alone coverage, a few EPLI claims examples include:
Sexual harassment. The harassers can be senior managers, supervisors, co-workers or even non-employees.
Discrimination. This includes unfair treatment based on religion, age, ethnicity, gender, disability, skin color, sexual orientation or race.
Wrongful termination. According to the Equal Employment Opportunity Commission (EEOC), this is the most common claim brought against employers.
Other EPLI claims examples covered are a breach of an employment contract, negligent evaluation, failure to employ or promote, wrongful discipline, deprivation of a career opportunity, wrongful infliction of emotional distress and mismanagement of employee benefit plans.
While an essential coverage tool, EPLI policies are not all-encompassing. They commonly exclude criminal or civil fines, penalties or punitive damages, bodily injury and property damage claims, state unemployment insurance claims, workers' compensation claims, and claims filed under the Fair Labor Standards and Occupational Safety and Health Acts.
Most EPLI policies will reimburse a company for the costs of defending a lawsuit in court, as well as for judgments and settlements. The policy usually covers legal fees, regardless of the suit's outcome.
Trending Employment Practices Liability Claims
According to industry experts, retaliation and sexual harassment claims, gig worker classification, the gender pay gap and medical marijuana usage are among the top trending employment practices litigation cases in 2020. Moreover, the average cost of employment-related claims is rising, along with the length of time it takes to resolve a claim.
Let's take a closer look at the above trending EPLI claims and the actions employers can take to reduce them.
Full-time salaried women earned 81% of what men earned in 2018, according to the U.S. Bureau of Labor Statistics.
Action plan for employers:
Create policies that help women succeed, such as flexible hours and parental leave
Develop mentorship opportunities for women
Provide equal pay
EPLI Trend #5: Marijuana Legalization Impacts the Workplace
As of January 2020, at least 11 states allow recreational marijuana usage and more allow medical marijuana.
Action plan for employers:
Keep up with new legislation on marijuana usage in your state
Review relevant laws before firing or not hiring workers over marijuana usage
Create drug policies that focus on maintaining a safe workplace
The Repercussions of an EPL Insurance Claim
The costs of an employee lawsuit can be emotionally and financially devastating. Beyond damaging a company's reputation, an employment claim can lead to lower morale, diminished productivity, lost trust and thousands in legal expenses. In fact, the average cost for defending and settling employment law cases is $160,000 – enough to stagger any small business.
EPLI Coverage Statistics: A Big Concern for Small Businesses
Understanding your employees' rights is paramount to protecting your business. During FY 2018, the EEOC resolved 90,558 charges of employee discrimination, securing $505 million for victims in both the private sector and government workplaces. More than 40% of EPLI-related lawsuits are filed against private companies with fewer than 100 employees.
Other notable employment practices liability statistics illustrate the importance of EPL insurance:
In FY 2018, the EEOC fielded over 200,000 inquiries regarding potential discrimination claims.
The EEOC received more than 7,600 sexual harassment charges in FY 2018.
The average cost of settling out of court for an employment claim is $75,000.
The average jury award for an employment-related case is $217,000.
The average duration of an employment claim spans more than 300 days.
Adopting a Policy of Prevention
Taking the following steps will help reduce your employment practices liability risk:
Review potential loss exposures with your insurance agent and purchase suitable EPLI coverage.
Create and implement effective screening and hiring programs to avoid discriminatory hiring practices.
Develop an employee handbook. AmTrust offers our insureds access to an array of compliance-focused resources, including a dedicated website, sample employee handbooks and an HR forms library. For your protection, be sure your handbook includes an employment-at-will statement and an equal employment opportunity statement.
Create a detailed job description for each role. Each job description should clearly define the required skills and performance expectations.
Institute a zero-tolerance policy regarding substance abuse, harassment and any form of discrimination. Additionally, have an "open door" policy in which employees can report infractions without fear of retribution.
Post company policies in the workplace reinforcing your stance regarding unacceptable – and illegal – workplace behavior.
Document all employee complaints as well as what your company did to resolve those issues.
Disclaimer: WorkersCompensation.com publishes independently generated writings from a variety of workers' compensation industry stakeholders. The opinions expressed are solely those of the author and do not necessarily reflect those of WorkersCompensation.com.