Employment Practices Liability (EPLI) Claims: Trends, Stats & Examples

Topics: EPLI Coverage

Summary: Employment practices liability insurance (EPLI) covers sexual harassment claims, discrimination claims, wrongful termination claims and more. In this article, we discuss some of the top trends in EPLI claims, and what employers can do to help reduce them.

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Offered on a stand-alone basis or combined with an existing policy, employment practices liability insurance (EPLI) helps safeguard businesses against employee lawsuits alleging inappropriate or unfair acts. Even when done unknowingly, violating an employee’s (or contractor’s) rights can have devastating consequences. Former, current or potential employees who believe the employer has violated their legal rights can file lawsuits for a variety of reasons.

What Does EPLI Cover?

Available as a policy endorsement or stand-alone coverage, a few EPLI claims examples include:
  • Sexual harassment. The harassers can be senior managers, supervisors, co-workers or even non-employees.
  • Discrimination. This includes unfair treatment based on religion, age, ethnicity, gender, disability, skin color, sexual orientation or race.
  • Wrongful termination. According to the Equal Employment Opportunity Commission (EEOC), this is the most common claim brought against employers.
Other EPLI claims examples covered are a breach of an employment contract, negligent evaluation, failure to employ or promote, wrongful discipline, deprivation of a career opportunity, wrongful infliction of emotional distress and mismanagement of employee benefit plans.

While an essential coverage tool, EPLI policies are not all-encompassing. They commonly exclude criminal or civil fines, penalties or punitive damages, bodily injury and property damage claims, state unemployment insurance claims, workers’ compensation claims, and claims filed under the Fair Labor Standards and Occupational Safety and Health Acts.

Most EPLI policies will reimburse a company for the costs of defending a lawsuit in court, as well as for judgments and settlements. The policy usually covers legal fees, regardless of the suit’s outcome.

Trending Employment Practices Liability Claims

According to industry experts, retaliation and sexual harassment claims, gig worker classification, the gender pay gap and medical marijuana usage were among the top trending employment practices litigation cases in 2020. Moreover, the average cost of employment-related claims is rising, along with the length of time it takes to resolve a claim.

Let’s take a closer look at the above trending EPLI claims and the actions employers can take to reduce them.

EPLI Trend #1: Retaliation Claims on the Rise

One of the more startling employment practices liability insurance statistics is that more than half of EEOC claims filed in 2020 involved claims of retaliation.

Action plan for employers:
  • Establish 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

EPLI Trend #2: #MeToo Movement Results in Spike of Sexual Harassment Claims

Sexual harassment claims represented roughly one-third (31.7%) of all EEOC claims filed. This includes LGBT-based sexual harassment charges, which have risen steadily for the past five years.

Action plan for employers:
  • Develop clear policies against sexual harassment
  • Provide training to prevent sexual harassment
  • Create a company culture that does not support sexual harassment

EPLI Trend #3: Gig Economy Leads to Increased Wage and Hour Litigation Threat

Fair Labor Standards Act (FLSA) lawsuits increased dramatically over the last decade. Many of these lawsuits involve worker classification disputes.

Action plan for employers:

EPLI Trend #4: The Gender Pay Gap Remains

Full-time salaried women earned 80.7% of what men earned in 2020, according to the U.S. Bureau of Labor Statistics.

Action plan for employers:
  • Create policies that help women succeed, such as flexible hours and parental leave
  • Develop mentorship opportunities for women
  • Provide equal pay

EPLI Trend #5: Marijuana Legalization Impacts the Workplace

As of January 2020, at least 11 states allow recreational marijuana usage and more allow medical marijuana.

Action plan for employers:
  • Keep up with new legislation on marijuana usage in your state
  • Review relevant laws before firing or not hiring workers over marijuana usage
  • Create drug policies that focus on maintaining a safe workplace

The costs of an employee lawsuit can be emotionally and financially devastating. Beyond damaging a company’s reputation, an employment claim can lead to lower morale, diminished productivity, lost trust and thousands in legal expenses. In fact, the
average cost for defending and settling employment law cases is $160,000 – enough to stagger any small business.The Repercussions of an EPL Insurance Claim

EPLI Coverage Statistics: A Big Concern for Small Businesses

Understanding your employees’ rights is paramount to protecting your business. During FY 2020, the EEOC resolved 70,804 charges of employee discrimination, securing $439.2 million for victims in both the private sector and government workplaces. In 2020, the economic fallout from the COVID-19 pandemic disproportionately impacted people of color, women, older workers, individuals with disabilities and other vulnerable workers, resulting in serious implications in the workplace.

Other notable employment practices liability statistics illustrate the importance of EPL insurance:
  • In FY 2020, the EEOC reported over 470,000 calls and more than 187,00 inquiries in field offices regarding potential discrimination claims.
  • The EEOC received more than14,000 age discrimination charges in FY 2020.
  • The average cost of settling out of court for an employment claim is $75,000.
  • The average jury award for an employment-related case is $217,000.
  • The average duration of an employment claim spans more than 300 days.

Adopting a Policy of Prevention

Taking the following steps will help reduce your employment practices liability risk:
  1. Review potential loss exposures with your insurance agent and purchase suitable EPLI coverage.
  2. Create and implement effective screening and hiring programs to avoid discriminatory hiring practices.
  3. Develop an employee handbook. AmTrust offers our insureds access to an array of compliance-focused resources, including a dedicated website, sample employee handbooks and an HR forms library. For your protection, be sure your handbook includes an employment-at-will statement and an equal employment opportunity statement.
  4. Create a detailed job description for each role. Each job description should clearly define the required skills and performance expectations.
  5. Institute a zero-tolerance policy regarding substance abuse, harassment and any form of discrimination. Additionally, have an "open door" policy in which employees can report infractions without fear of retribution.
  6. Post company policies in the workplace reinforcing your stance regarding unacceptable – and illegal – workplace behavior.
  7. Document all employee complaints as well as what your company did to resolve those issues.

EPLI Coverage from AmTrust

Like their larger counterparts, small businesses can be the target of a potentially devastating lawsuit. Helping protect thousands of small businesses like yours, AmTrust can customize our coverage to safeguard your business against any employment-related risks.

For more information about EPL insurance and other small business insurance solutions from AmTrust, please contact us today.

This material is for informational purposes only and is not legal or business advice. Neither AmTrust Financial Services, Inc. nor any of its subsidiaries or affiliates represents or warrants that the information contained herein is appropriate or suitable for any specific business or legal purpose. Readers seeking resolution of specific questions should consult their business and/or legal advisors. Coverages may vary by location. Contact your local RSM for more information.



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