The Facts:

· Employer Defendants Loose 60% of all litigated cases

· The Average Amount Paid for out-of-court settlements is $60,000

· Defense of the average EPLI case through trial costs over $45,000

· The median compensatory award in EPLI cases is $218,000

If an employee sues you for wrongful employment, you can expect to pay on average $122,400.

 

I once had a client tell me that they didn’t need employment practices liability insurance. After all, they thought of and treated employees like family. Sometimes though, the most vicious lawsuits can be between family members. And it’s not only employees you have to worry about. The interview process is ripe with ammunition for lawyers. Any personal questions you ask are potential cannonballs, even a simple question like how many children do you have?

The reality is that even businesses and organizations with only one employee face wrongful employment claims. One small investment in employment practices liability insurance could protect you and your business from such a catastrophe. The key is to find a policy that matches the needs of your organization.

What are the causes of employment practices liability claims?

Five broad categories of conduct typically give rise to employment practices claims. These are:

• Discrimination
• Wrongful Termination
• Sexual Harassment
• Retaliation
• Workplace Torts

Discrimination claims involve illegal, deliberate actions (such as failing to promote) taken against an individual or group because of their race, age, sex, or national origin. Disparate Impact discrimination claims result from neutral company policies that have the effect of discriminating against a certain class of person, even though it may not be deliberate. For example, a town requirement that all firefighters be a minimum of 6 feet tall might inadvertently discriminate against women because most women are shorter than 6 feet.

Wrongful termination is a generic term for a claim made by a former employee based upon violations of contract and/or tort theories. Wrongful termination claims typically find merit in one of three areas: violation of public policy; breach of an express or implied contract to discharge only for good cause and breach of an implied covenant of good faith and fair dealing. Wrongful termination also includes constructive dismissal, a situation where an employee resigns because of their employer’s behavior.

Sexual harassment is unwelcome attention of a sexual nature and includes the entire range of behavior from minor transgressions such as a slightly off color joke to serious abuses such as forced sexual activity. Types of sexual harassment include:

· Quid Pro Quo Sexual Harassment

· Hostile Environment Sexual Harassment

and as an employer, you can be held liable for harassment that occurs within your organization even if you are unaware of what is going on.

In a retaliation claim, an employee will typically allege that their employer treated them unfairly or allowed unfair treatment by fellow employees when complained of discrimination. Retaliation claims include “whistle blower” claims.

Commonly asserted workplace torts include defamation, intentional interference with contractual rights, fraud, misrepresentation, invasion of privacy, negligence, intentional or negligent infliction of emotional distress and interference with business relations. The use of workplace torts as an allegation of wrongful employment practices is growing because these actions typically have larger damage awards.

Federal Laws that Result in Employment Practices Claims

In the USA, employees, former employees and prospective employees typically bring employment practices claims under federal statutes written to protect employees against discrimination. These laws include:

· Age Discrimination in Employment Act (ADEA) of 1967

· Americans with Disabilities Act (ADA) of 1992

· Older Workers Benefit Protection Act of 1990

· The Civil Rights Act of 1871 (and the 1991 amendment)

· The Equal Pay Act of 1963

· The Family and Medical Leave Act (FMLA) of 1993

· The Pregnancy Discrimination Act of 1978

· The Rehabilitation Act of 1973

· Title VII of the Civil Rights Act of 1964

Many state laws may also apply.

What to Look for in an Employment Practices Liability Insurance Policy

There are no standardized policy forms for employment practices liability insurance. A vast number of different insurance companies now offer this coverage and each company has different policy language and services. When you are in the market for an employment practices liability insurance policy consider that it should be written on an all risk basis. Many insurers’ policies list only those hazards they protect against (for example the Americans with Disabilities act.) An all risk policy reduces the chance for a gap in coverage. Here is a checklist of policy features to look for:

o a comprehensive definition of a “Wrongful Employment Practice” that includes:

o Workplace Harassment

o Retaliation

o Failure to Promote

o Demotion

o Invasion of Privacy

o Defamation

o FMLA

o USERRA

o FLSA

o a definition of “Wrongful Termination” that includes constructive discharge

o coverage for punitive damages where insurable

o a “pay on behalf of” policy

o prior acts coverage

o vicarious liability coverage for intentional torts

o worldwide coverage

o availability of defense outside the limits

o availability of third party discrimination coverage

o a loss prevention/risk management hotline staffed by experienced employment practices attorneys

o access to web based loss control/Human Resource services

Your Choice of Insurer

If the insurer is not capable of indemnifying you when you have a loss, then the premium paid for the insurance was wasted. There is more to consider than just financial stability when choosing an insurer. The insurer’s experience and reputation with the specific class of business is important. You want an insurer that can understand and respond effectively to the unique circumstances of an employment practices claim. You want an insurer with a good reputation for paying claims promptly. Most importantly, you want an insurer that is accessible.