If your company has employees, it has employment practices liability exposures. To protect your company from uncovered lawsuits, you need to keep up with the trends in employment practices liability exposures and employment practices liability insurance (EPLI). Let’s take a look at what’s happening now with EPLI risks and rates.
EPLI Rates and Basics
Employment practices liability insurance (EPLI) provides coverage for the legal costs, settlements, and judgments stemming from certain employment-related claims, such as discrimination, sexual harassment, wrongful termination and more. A general liability insurance policy does not typically provide EPLI coverage, but you can add coverage as an endorsement in a Business Owners Policy or Commercial Package Policy or purchase it as a standalone policy.
EPLI rates have been increasing, but so have the rates for most insurance lines. According to MarketScout, EPLI rates were up 3.7% in the first quarter of 2023. This rate hike is lower than the 5% average increase seen across all commercial property and casualty lines.
Lawsuits Are Costly – And They May Increase
EPLI coverage is important because employees have various rights under federal and state laws. Employees can file a lawsuit if those rights are violated or if they believe their rights have been violated. When this happens, employers may incur significant legal costs – and that’s in addition to any settlements or awards. As a result, employee lawsuits can be expensive for companies, regardless of whether they win or lose.
According to TechTarget, the EEOC is gaining additional employees and enforcement capabilities under the Biden Administration. This means we could see increased litigation against employers.
New Laws and EPLI Claims
New state laws could open the door for more employment practices lawsuits.
In New York, Assembly Bill A7101 prohibits employers from releasing personnel files as a retaliatory action against employees who complain about unlawful discrimination or assist in proceedings against employers involving unlawful discrimination. The bill was signed into law in 2022.
Meanwhile, many states have been passing new laws requiring pay transparency. According to the Center for American Progress, at least eight states have enacted salary range transparency laws and 15 more are considering such laws. New York’s new pay transparency law goes into effect on September 17, 2023, and will apply to employment agencies and employers with four or more employees. Under these laws, workers will have the information they need to compare their own salaries to those of their coworkers. Discrepancies could lead to claims of illegal discrimination.
The Impact of Technology on EPLI
New technologies have also created additional EPLI exposures.
For example, some employers have adopted time clocks with fingerprint logins. Laws like the Illinois Biometric Information Privacy Act (BIPA) create protections regarding the employee data this produces. BIPA has been around since 2008, but Business Insurance says recent court decisions (including the first jury verdict) could impact litigation under the law. Other states are beginning to introduce similar laws, meaning this is not just an issue for Illinois employers. Additionally, some insurance carriers have started putting exclusions for BIPA claims in their terms. Employers who use employee fingerprints or other biometric identifiers need to pay attention, regardless of their state.
Artificial intelligence can also lead to EPLI risks. For example, AI programs used to screen job applications may lead to claims of bias. New York City has introduced a new law that will create restrictions for employers using AI in their hiring. According to SHRM, enforcement is currently scheduled for July 5, 2023, after some delays.
Social Movements and Discrimination Awareness
The EEOC says sexual harassment charges increased in the two years after the #MeToo movement went viral in 2017. Sexual harassment remains a top concern. Now, the transgender rights movement is creating new employment liability exposures.
According to Bloomberg Law, the EEOC recently filed a lawsuit on behalf of a transgender plaintiff for the first time in six years. This may signal a commitment to protecting the rights of transgender workers. However, as Law 360 explains, employers can find themselves in tricky situations when transgender workers claim the right to use their preferred pronouns or names and religious employees claim faith-based objections. Missteps can be costly. According to the Sacramento Bee, Shake Shack has to pay $20,000 to a transgender employee who decided to quit due to ongoing misgendering.
Will Your Insurance Protect You?
Do you need help securing coverage for your EPLI risks? BNC can help you obtain the coverage your business needs, including EPLI. Learn more.