Top 10 Employee Liability Concerns
Not all policies affording coverage for employment-related liabilities are the same. By knowing exactly which liabilities are covered by which policies, is critical to maximizing your insurance recovery as an employer. There are three different areas of coverage.
- Commercial general liability (CGL)- a staple in many companies’ insurance, but it is broad so most of the policies offer limited coverage for employment-related liabilities
- Directors and officers liability insurance (D& O)- Provides coverage for the company along with individual directors and officers.
- Employment practices liability insurance (EPLI)- created to bridge any gaps from claims by current or former employees.
Wage and Hour Claims
Violations of the Fair Labor Standards Act, and wage and hour claims are on the rise. For example, employers have altered time records to avoid paying overtime, failing to provide proper breaks for employees, and misclassifying exempt and nonexempt employees and independent contractors. If a lawsuit is brought on, especially a class action, the defense costs can be substantial.
Wage and hour and other claims have the potential to affect large groups of employees, especially in a large company. If a class action lawsuit is brought on, it could involve up to hundreds of millions of dollars in liability. In the past, EPLI excluded coverage for class-type claims, but now as they are becoming more frequent, insurers are starting to introduce endorsements which are designed to cover defense costs.
Now that the workforce is aging, employers are faced with many employees deferring their retirement, so more employees are putting in requests for medical leave. Some of these requests are legitimate, where others may not seem as justifiable. If the medical leave request is denied, it presents the opportunity for the person to put in a claim against the employer, or even against the individual who denied it. If one of these claims comes in, the insurers should look to their EPLI and D&O coverages to respond.
Whistle Blower Actions
The number of whistle blower and retaliation cases seems to continue to rise. Coverage for these claims, and the cost for defense is available under EPLI.
With corporate data breaches becoming more common, for example the recent Target and Home Depot data breaches, the employers and executives are incurring the liability. The suits that come from this can be either shareholder derivative actions to ordinary lawsuits seeking damages. Claims against corporate boards and executives are usually covered in most D&O policies. Claims against negligent employers are typically covered under CGL or EPLI.
In 2014, Facebook reported nearly a billion users, and sites like Twitter and Linkedin have large numbers of users, and are growing on a daily basis. Social media can be a problem legally for example if a boss posts a disparaging comment about an employee, or if an employee harasses a co-worker. Currently EPLI does not cover these disparaging comments made by an employee against another, but it could protect the employer if the co-worker claims that nothing was done to prevent the harassment.
Alternative Work Arrangements
Alternative work arrangements, like working remotely, staggered hours, and shorter work weeks are becoming increasingly common and popular. These arrangements can place liabilities on the employer to comply with the rules. For example, an employer may face FLSA violations for nonexempt employees working longer days, discrimination in the selection of employees who may get the alternative arrangement, and even claims of missed promotion opportunities. These ‘wrongful acts’ may entitle the employer under EPLI. Also, liability may occur offsite from an employee working remotely, which may implicate coverage under the CGL policy.
The litigation landscape has been changed recently due to the Equal Employment Opportunity Commission (EEOC), who has filed two lawsuits challenging transgender discrimination under the Civil Rights Act of 1964. EPLI policies typically cover employment related discrimination claims based on the violation of any federal, state or local law that prohibits discrimination on the basis of race, sexual orientation, color, marital status, creed, national origin, religion, gender, military service, disability, or pregnancy.
Most of the EPLI policies contain provisions which are general, and extend coverage to ‘other protected classes. D&O policies would be applied if the discrimination is from corporate mandates. GGL policies come into effect when discrimination results in personal injury.
Sexual harassment claims are covered under EPLI policies. The facts of the claim determine if there is any personal injury, which would be covered under CGL. Usually these claims will allege failures at the corporate level, like with social media, in preventing such incidents.
Gender and Sexual Orientation Claims
In recent years, more protections have been awarded to those who identify as gay, lesbian, bisexual, or transgender. With the increase in states recognizing same-sex marriages, providing insurance that covers discrimination is important. New EPLI policies explicitly cover discrimination based on sexual preference or orientation, although older policies are not as clear, so it is important to continually review and update their EPLI insurance policies.
For more info, visit: http://www.shrm.org/publications/hrmagazine/editorialcontent/2015/070815/pages/070815-employment-liability.aspx