COVID-19 Wrongful Termination Insurance Coverage

Topics: Coronavirus (COVID-19)

Employers must cope with a variety of extraordinary challenges during the COVID-19 outbreak. Stress and anxiety related to the coronavirus pandemic have become a regular occurrence for employees and their management teams. Small business owners who provide essential services worry about providing safety precautions to their staff to help stop the spread of coronavirus. On top of that, they are also concerned with staying afloat and what will happen once states start to re-open businesses.

Robert Pizarro, vice president of Commercial Specialty at AmTrust, shares this sentiment, “Employees may be hesitant to return to work after this pandemic. Employers should be cognizant of potential mental and/or emotional disabilities that rise to the level of an ADA-defined disability. Such disabilities must be analyzed to determine potential reasonable accommodations, which, in some circumstances, include additional time off and telework.”

Wrongful Termination in the Time of Coronavirus

In this time of uncertainty, small business owners have an additional worry of employee-related lawsuits. For example, some employees might think they have been wrongfully terminated for taking time off to take care of a family member with the virus. Or, some may fear they could get fired for not going to work if they are required by their state or city to stay at home or shelter in place. Employers can’t fire workers for taking family or medical leave under state or federal law. Any employer who does so can risk a wrongful termination lawsuit.

Federal coronavirus laws have set requirements for family and medical leave. The Families First Coronavirus Response Act requires businesses of 500 employees or less to provide 80 hours of paid sick leave and give employees up to 12 weeks of paid family and medical leave (FMLA). The FMLA is available to any employee who has been employed for at least 30 days if:
  • They have to quarantine because of exposure to COVID-19
  • They have symptoms of coronavirus
  • They must care for a family member
  • They must care for children if schools are closed or their daycare is unavailable
Employers should be careful to scrutinize employment decisions so as to not to retaliate against employees that take emergency sick leave or expanded FMLA leave under The Families First Coronavirus Response Act. Business owners should communicate with outside employment counsel on an adverse employment actions such as a reduction in force.

What Can Business Do to Try and Reduce their Exposures to an Employment Claim?

The Harvard Business Review shared, “For legal and practical reasons, companies need to be able to show that they have given employees accurate information about ways to prevent the spread of infection — and that they have provided people with the means to act on that information.” Also, employers must implement measures to reduce the risk of workplace transmission by ensuring easy access to handwashing facilities or hand sanitizers and that public surfaces are regularly disinfected, amongst other safety procedures.

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Businesses should regularly follow the workplace safety guidelines put in place by The Occupational Safety and Health (OSH) Act. The regulations of this act are administered by the Occupational Safety and Health Administration (OSHA). The OSH Act requires employers to keep the workplace free of the following:
  • Chemical hazards
  • Physical hazards
  • Biological hazards
  • Ergonomic risk hazards
COVID-19 is a unique challenge because it is unlike anything businesses faced previously. The OSH Act does not directly address a coronavirus pandemic, but recently OSHA has issued guidelines that employers and employees can take to minimize the spread of the virus and to keep their workplace safe. The guidelines for preparing workplaces for COVID-19 help determine the risks of exposure to the virus based on the type of employment. The risk of worker exposure ranges from “very high risk,” such as healthcare workers, to “low risk,” for those who have limited to no contact with others in their daily work. If an employee fails to report work based on their risk level and is terminated, they might feel they could sue their employer for wrongful termination.

In some cases, such as when a business is deemed essential, employees are still required to report for work. The OSH Act states that employers cannot fire, discipline, or take other negative actions against employees who complain about workplace safety. However, even with employee protections put in place, some workers might be afraid of going into work, causing strain in employee relations and ultimately productivity. The OSH Act does give an employee the right to refuse to work if they feel that there is an imminent danger or a serious safety threat in the workplace, and nothing was resolved after confronting their employer with that issue.

Wrongful Termination Insurance and Other Employee-Related Claims - EPLI

Small businesses are under extreme pressure during normal times, but even more so during times of national crisis when emotions tend to run high. Employment Practices Liability Insurance (EPLI) is designed to protect small and mid-sized businesses in the event of employment-related claims. Insured events 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.
Also covered is 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. Most EPLI policies have resources for an insured to utilize including sample policies and procedures as well as a hotline.

Due to the coronavirus (COVID-19) pandemic, there are many discussions about workplace safety and its impact on employees. Having the proper safety precautions in place is important to prevent employee-related wrongful termination claims. Businesses should follow federal and state guidelines including OSHA recommendations to prepare and keep their businesses safe.


EPLI Insurance Coverage from AmTrust

AmTrust’s EPLI policy applies to all employees of an insured business, including temporary, part-time, full-time, seasonal, volunteers and independent contract workers. Enhanced coverage protects the policyholder against both punitive damages and inappropriate third-party conduct. 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. Contact us for more information about our small business insurance solutions, including EPLI.

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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