R&R Insurance Blog

Harvey Weinstein, Roger Ailes, Charlie Rose, Mike Cagney, David Guillod, Michael Oreskes and the growing list of executive sexual harassment scandals have dominated headline news over the past few months. The rising awareness of workplace misconduct, in an increasingly litigious society, may have employers quaking at the cost of defense. Regardless in size of the company, every business should consider putting the proper coverage in place to respond to this type of event.

Management fearful of costs associated with allegations ranging from sexual harassment to retaliation would best find relief with proper employment practice liability insurance (EPLI).

EPLI Overview

For most businesses, EPLI would not rank highest on a list of insurances to obtain such as general liability, property & casualty, and workers’ compensation. That said, EPLI should be an enticing insurance since, by a wide margin, it is the least expensive of the aforementioned.

EPLI coverage can be summed up as settlements, judgements, and the defense costs associated with claims against improper acts in the employment process. Common claims include harassment, defamation, discrimination, a hostile work environment, breach of contract, emotional distress, wrongful termination, and denial of career opportunity.

Not all EPLI polices are the same and it is best to discuss with your agent the proper coverage. One difference is the way policies may respond to 3^rd party claims.

Many EPL policies will only cover 1^st party claims. These are claims made by your employees or independent contractors. John Doe claiming wrongful termination would be covered in this scenario, but a customer receiving a harassing comment from your staff would be excluded from the policy. In short, if you deal with vendors, clients, or anyone from outside your organization, you have a 3^rd party exposure. Certain classes of business are at a greater risk - think restaurants, bars, and retail.

To address this exposure, make sure your EPLI carrier includes 3^rd party claims. In this scenario the company would also have coverage with vendors, customers, service providers, or business invitees.

A comprehensive summary of the legal environment and coverage practices of EPLI can be seen for free in R&R Insurance’s Employer's Practices Liability Insurance by Brian Bean. The 80 minute video is an excellent introduction for the information seeking executive wearing many hats.

EPLI Increasing Need

The elephant in the room is increased media attention around sexual harassment. Every day it seems a new celebrity or high profile executive has an allegation brought forth. A cursory glance at the trending #MeToo on Twitter would suggest a growing movement to callout organizational harassment of women.

EPLI not only mitigates sexual harassment risk, but a wide range of trending risk in the employment process.

In the last 20 years America has seen a 12% uptick in individual charge filings with the Federal Equal Employment Opportunity Commission. While Race and Sex discrimination make up the majority of cases, they have only risen slightly in number going year by year. The largest percentage increase in discrimination cases since 1997 have been Age (24% increase), Disability (36% increase), Religion (55% increase), and Retaliation (57% increase).

It may be surprising that 41.5% of these complaints were filed against companies with less than 100 employees – and these numbers only count filings at a federal level.

Media attention and rising awareness should be a major concern for a business lacking proper EPLI coverage. Its cost, relative to other business insurance, is low and mitigates a financially disastrous risk to the company. Executives would do well to, at the very least, inquire about the proper EPLI coverage from their agent.

This effort should be combined with proactive harassment training for your employees along with and proper procedures to respond to a claim situation.

Employers have a 1 in 3 chance of being the target of an employment related action for every 100 employees. Private and small companies are even more vulnerable as many have less HR resources, think of themselves as “family”, and generally pay less attention to potential risk areas. In 2012 the EEOC received more complaints than any previous year. They have increased their budget by 20% to increase staff to handle the pure volume of complaints being filed. Regulators have become more aggressive in enforcement at both the federal and local level.

The top four complaints being filed against employers:

1. Age related discrimination
2. Retaliation (at an all-time high)
3. Sexual Harassment (account for 25-30% of all complaints)
4. Wage and Hour

It is important for employers to realize that the EEOC is looking at every charge for a pattern of behavior. A single complaint can easily balloon into a much bigger problem. Recently, St. Mary’s Hospital in Madison, WI agreed to settle a class action lawsuit alleging that the hospital failed to pay 1,400 nurses for meal breaks when they had to stay at the hospital on call.

In the broad context of wage and hour issues, allegations include misclassification of employees as exempt to avoid overtime pay (i.e. sales personnel), not paying for the time spent donning or removing of gear, booting up computers, preparing for the work day, etc.. and the use of mobile devices to access voice mail or email off hours without compensation. The 4^th district Court Appeals ruled recently that Tyson Foods must pay back wages for the time spent putting on and taking off gear that can include hair nets, hard hats, shoe covers, safety glasses and frocks. The back wages could top more than $1 million.

Looking into the future, employers should be aware of the potential claims concerning obesity and corporate wellness programs. The American Medical Association recently classified obesity as a disease. Is this a precursor to becoming a protected class? The challenge for employers is being able to show that an applicant or employee cannot perform the job duties rather than the impact that an obese person can have on health insurance, sick time, and productivity. With regard to wellness programs employers are advised to be careful that individual’s privacy is protected, that they are not being judged /monitored and that employment decisions are not being influenced by an employee opting out of participation or following recommendations.

The average cost to defend against an employment action brought by a single plaintiff that is ultimately dismissed is $150,000. Costs for complex and class actions can skyrocket and have a huge financial impact to any employer regardless of industry. Employment Practices Liability insurance should be a part of the insurance program for all employers. Taking time to understand the policy, the obligations of both the employer and carrier, and what to do in the event of a claim is time well spent. Odds of becoming the target of an employment action are on the rise.

For more information about Employment Practices Liability Insurance for your Wisconsin company, contact a knowledgebroker.

Related topics:
Corporate wellness programs