From the moment you start the pre-hiring process until an exit interview, you’re vulnerable for a lawsuit. It sounds harsh, but it’s true. In 2014 alone, the Equal Employment Opportunity Commission (EEOC) received more than 88,770 charges for discriminating or unfair employment-related practices. Because of the influx of charges, Employment Practices Liability insurance (EPLI) has become a mainstay insurance product.
EPLI covers damages and associated defense costs arising from wrongful acts in the employment process. The most frequent types of claims that are covered by EPLI are wrongful termination, discrimination, sexual harassment and retaliation, although policies typically cover a variety of other types of inappropriate workplace conduct, such as failure to hire, failure to promote, and deprivation of a career opportunity.
EPLI claims are brought primarily through the EEOC, in addition to suits made in state and federal court. Even companies with as few as 100 employees can expect to receive a claim once every three years, according to the 2012-2013 Edition of Jury Award Trends and Statistics.
Numerous factors are contributing to the rise in claims.
The EEOC has made the process for filing a claim easier. They’ve also lowered the barriers for bringing class action litigation in addition to filing class action suits of their own accord without naming anyone who’s been harmed by an alleged violation of employment law; they previously focused only on supporting suits brought by specific individuals.
Beyond developments within the EEOC, state and federal court decisions have contributed to expanding exposure for employers. Further, additional lawsuits have been filed as employees become more aware of their rights, partially due to media coverage publicizing high-profile cases. Carriers also report a rise in claims involving multiple claimants. As a result, EPLI rates have been increasing consistently since 2011 within the staffing industry particularly and in specific states like California.
In addition to rate increases, EPL insurers are re-underwriting accounts from the perspective of coverages and the level of self-insured retentions offered. Minimum retentions are now typically $25,000 and can be higher depending on the loss experience, type and location of business, and coverage offered. Requests for the insured’s choice of counsel or a sublimit for defense costs for wage & hour claims can result in higher retentions and/or premiums, if those coverages are even available.
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To protect your staffing company, enact the following practices:
- Review any loss exposures with your insurance broker and understand what’s covered by your EPLI policy
- Develop a comprehensive handbook complete with company and employment policies and procedures, as well as rules for disciplining and terminating an employee; all employees must be required to read the handbook and sign a statement
- Create a detailed job description that clearly defines expectations of skills and performance
- Develop a screening and hiring process that involves background checks to weed out unsuitable candidates
- Make a job offer in writing specify position, duties, salary, vacation accrual and stipulations of any bonus or incentive pay
- Conduct periodical performance reviews and require self-assessments carefully noting the results in a well-kept employee file
- Institute a zero tolerance policy for discrimination, substance abuse and any form of harassment; there also needs to be an open door policy, in which employees can report infractions
As the cost of claims and the duration of disputes continue to rise, it’s important now more than ever to mitigate this risk.
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