EPLI for Employee Claims
If you have employees then you should consider adding Employment Practices Liability Insurance, otherwise known as EPLI to your coverages. Whether your business is big or small, any business can face costly EPLI claims. Keep in mind that General Liability policies exclude EPLI claims, and Commercial Umbrella policies often exclude EPLI claims. EPLI coverage safeguards your business against employee lawsuits alleging inappropriate or unfair acts.
EPLI Provides Defense Costs
Expensive employment litigation is costly for business. A wrongful claim can disrupt your business and resulting in expensive defense costs. Even if it is done unknowingly, violation of an employee or contractor’s rights can have devastating consequences for your business. Did you know that even if you win an employment lawsuit you could still accrue significant legal fees?
What EPLI Covers
EPLI insurance provides coverage for defense costs, judgements and settlements related to various employment-related claims including allegations of Wrongful Termination, Discrimination, Workplace Harassment, Retaliation, Privacy Rights and Negligence.
Each EPLI policy has specific coverages, so it is important to review your needs. Examples of what EPLI may cover include:
- Employment status claims: when an employee claims wrongful termination, discipline, demotion, evaluation, failure to promote or deprivation of a career opportunity for an employee.
- Discrimination claims: when an employee claims an employer has discriminated against them as a member of a protected class or that supervisors engaged in harassment or unfair treatment based on religion, age, ethnicity, gender, disability, skin color, sexual orientation or race.
- Sexual harassment claims: when an employee claims they were harassed by senior managers, supervisors, co-workers or even non-employees.
- Privacy rights claims: employment-related defamation lawsuits or alleged employee privacy rights violations, including unlawful disclosures of employee’s medical or financial information.
- Negligence claims: when an employee alleges that an employer was negligent in failing to adopt or implement employment-related policies and procedures, including the failure to train employees.
- Wrongful infliction of emotional distress
- Mismanagement of employee benefit plans
What EPLI Excludes
EPLI policies commonly exclude criminal or civil fines, penalties or punitive damages, bodily injury and property damage claims, workers’ compensation claims and claims filed under the Fair Labor Standards and Occupational Safety and Health Acts.
Who can bring an EPLI Claim?
An EPLI claim can be brought by employees or contractors and by current or former workers.
Current Trends in EPLI Claims
Amongst the top trending employment practices litigation cases are retaliation and sexual harassment claims, gig worker classification, gender pay gap and medical marijuana usage.
Trend #1: Retaliation Claims
Retaliation claims are increasing and have accounted for approximately half of all EEOC claims in recent years. A retaliation claim may occur when an employee has engaged in a protected action such as filing a discrimination claim or alleging corporate misconduct and subsequently faces an adverse action like termination. Action steps you can take as an employer to reduce these claims may include:
- Establishing a policy against retaliation and educate teams
- Implement a confidential process for managing complaints and communicating the anti-retaliation policy to complaining employees
- Document everything
Trend #2: Sexual Harassment Claims
Sexual Harassment claims account for approximately 30% of EPLI claims. This includes LGBTQ+-based sexual harassment charges, which have been increasing steadily since 2015. Action steps you can take as an employer to reduce these claims may include:
- Create a company culture that does not support sexual harassment
- Develop clear policies against sexual harassment
- Provide training to prevent sexual harassment
Trend #3 Gig Economy Worker Claims
Growth in the Gig Economy has increased the number of worker classification disputes. Keep in mind the main factor in classifying a worker as an independent contractor versus employee is the amount of control the employer has over the worker. Action steps you can take as an employer may include:
- Be ready to prove your workers are classified correctly
- Use the FSLA Handy Reference Guide
- Keep up with new laws
Trend #4: Pay Gap Claims
Pay Gap claims are on the rise. Pay gaps for female employees remains an issue with full-time salaried women earning approximately 80% of what men earned in recent years. Women, particularly women of color as well as individuals with disabilities are more likely to face pay gaps. New pay transparency laws in several states like New Jersey and New York are also triggering more lawsuits as pay transparency may reveal unlawful pay discrimination.
Action steps you can take as an employer may include:
- Create policies that will help employees succeed in the workplace like flexible hours and parental leave
- Offer mentorship opportunities for women
- Provide equal pay
Trend #5: Medical Marijuana Use Claims
As state marijuana laws continue to evolve, EPLI Claims related to employee rights regarding medical marijuana use have increased. As an employer you need to know if your state allows medical marijuana use. While marijuana use during work hours is still illegal, marijuana use alone may not be a justification for termination and can result in a wrongful termination claim. Action steps you can take as an employer may include:
- Stay informed about new legislation on marijuana usage in your state
- Review relevant laws before firing or not hiring workers over marijuana use
- Create drug policies focused on maintaining a safe workplace
- Document evidence of poor job performance and/or on-the-job accidents rather than relying on marijuana use as justification for termination
Trend #6: Artificial Intelligence Related Claims
This is a new area of EPLI claims. As the use of AI grows in the workplace, employers may face claims related to unfair hiring practices and/or discrimination from the use of artificial intelligence in the workplace. For example, a successful lawsuit in August of 2023 showed that artificial intelligence software excluded applicants between the ages of 55-60 from being considered for employment. Read more about this first-of-its-kind AI Bias in Hiring Lawsuit. Action steps you can take as an employer to reduce these claims may include:
- Assessment of AI Algorithms to prevent bias
- Maintain Cybersecurity
- Maintain Regulatory Compliance
Trend #7 Biometric Privacy Claims
Claims related to biometric privacy are a new source of EPLI claims in 2024. As more employers use biometric data, the laws for how businesses should track, inform and seek employee consent when collecting these identifiers are evolving. Biometric data can include data taken from people’s facial imaging, fingerprints, voiceprints, retina scans and other types of imaging. Currently only a handful of states and cities have biometric privacy laws in place and there is no federal biometric privacy in place. Illinois is one such state where the Illinois Biometric Information Privacy Act (BIPA) has led to an increase in lawsuits brought by employees alleging privacy violations, although the Illinois Supreme Court ruled in November 2023 that health care worker finger scans are excluded from BIPA. one recent case ultimately determined that health care workers are excluded. As this area of claims develops it is important to know that there is a growing trend
for insurers to add biometric exclusions to EPLI coverages and an effort to assign biometric privacy claims to cyber policies for coverage. Action steps you can take as an employer may include:
- Know when you are collecting biometric data
- If you are collecting biometric data then implement a system to obtain informed, written consent prior to collecting such data
- Know what laws are in effect in your city and state and what if any new laws are under development
Review EPLI Before You Face a Claim
Although EPLI coverage may be an additional expense for your business, it will protect your business from disruption should you face a claim down the road. We are more than happy to review your insurance needs.
Resources
Forbes.com: 2024-state-by-state-pay-transparency-laws-key-insights-for-employers/
Grange Insurance: EPLI Insurance
Travelers Business Insurance: Employment Practices
https://www.regulatoryoversight.com/2023/12/illinois-supreme-court-rules-that-health-care-worker-finger-scans-are-exempt-from-bipa/
https://www.legaldive.com/news/class-action-lawsuits-illinois-biometric-data-law-privacy-corporate-counsel-law-arent-fox-freeman/699258/
https://www.ajg.com/us/news-and-insights/2023/sep/artificial-intelligence-risk-to-business-and-insurability/
The information in this blog was compiled from sources believed to be reliable and is intended for informational purposes only. Any and all information contained herein is not intended to constitute advice (particularly not legal advice). Accordingly, persons requiring advice should consult independent advisors when developing programs and policies. We do not guarantee the accuracy of this information or any results and further assume no liability in connection with this publication and sample policies and procedures, including any information, methods or safety suggestions contained herein. We undertake no obligation to publicly update or revise any of this information, whether to reflect new information, future developments, events or circumstances or otherwise. Moreover, we remind you that this cannot be assumed to contain every acceptable safety and compliance procedure or that additional procedures might not be appropriate under the circumstances. The subject matter of this publication is not tied to any specific insurance product nor will adopting these policies and procedures ensure coverage under any insurance policy.
