Protecting Your Business from Increasing EPL Claims

Topics: Small Business

Summary: As social justice issues and the pandemic continue to drive employment-related litigation, small, medium, and large businesses alike have seen an increase in the frequency and severity of EPL claims. Pay equity, race and disability discrimination, retaliation, and pandemic-related claims are among the hot-button issues facing businesses today. Find out how companies can minimize these EPL risks.

Employment Practices Liability Claims Are On The Rise

In a recent AmTrust webinar, Employment Practices Liability (EPL) Claims Are On the Rise (And Becoming More Costly). How Can You Protect Your Business? AmTrust’s Kelley Barnett, SVP, Corporate Litigation, Labor & Employment and Procurement Counsel, discussed how businesses can navigate the top five employment practices liability risks in the workplace and minimize EPL claims. Pay equity, race and disability discrimination, retaliation, marijuana usage in the workplace and pandemic-related claims are among the hot-button issues facing businesses. As we approach 2023, all businesses need to know how to navigate these ongoing and new risks in the employment landscape.

Answers to Employment Practices Liability Webinar Attendee Questions

We’ve compiled the questions webinar attendees had that we could not answer due to time constraints. Kelley took the time to review and answer the questions below.

How do insurance requirements in a contract with an independent contractor protect the business from an EPLI claim?

Requiring independent contractors to have acceptable insurance coverage could help your business avoid a claim of misclassification (that your independent contractor is truly an employee). Since employees don’t typically procure commercial general liability, worker’s compensation and other business insurance policies, including insurance requirements in your written independent contractor agreements weighs against a finding that the worker is an employee. Remember, if the worker is found to be an employee instead of an independent contractor and is determined to be a non-exempt employee, your business will owe not only back taxes (payroll and income taxes) and insurance premiums but also back pay for overtime and benefits, interest, penalties and other significant costs.

Other important provisions that should be included in independent contractor agreements are:
  • A statement that the parties intend the relationship to be that of an independent contractor, not an employee (although this statement alone is not dispositive);
  • A provision clearly explaining each party’s rights, obligations and responsibilities (and remember the “control” factors I mentioned during the webinar);
  • A statement that the contractor will not be eligible for medical, worker’s compensation and other traditional employee benefits and that payments for services performed will not include income or payroll tax withholding;
  • Indemnification and limitation of liability provisions, including with respect to the payment of taxes on any money received by your business as payment for the services rendered;
  • A provision making it clear that the contractor is responsible for complying with all applicable laws;
  • A non-exclusivity provision; and
  • The circumstances under which either party can terminate the agreement.

No “one size fits all” independent contractor agreement exists, and you should always check applicable state and local laws regarding independent contractor status. Since the agreement will be the first item a court examines if an independent contractor classification is challenged, the agreement will be important evidence. Careful consideration of these and other issues will help minimize the employment liability risk to your business.

How do you test/enforce a marijuana policy at the workplace for impairment at work when you cannot trace when they tested the product? Since you can prohibit them from being impaired from marijuana while at work…but can't identify when they used the product, how can you claim they are impaired?

Unfortunately, there is not yet a reliable test to determine when a worker ingested marijuana or an employee’s current level of impairment. In addition, there is not a commonly accepted definition of “impairment.” However, there are some signs of impairment that employers can consider to determine whether an employee is currently impaired (during work hours) due to ingesting marijuana. Signs of impairment include:
  • Changes in speech or demeanor
  • Impaired coordination
  • Red eyes
  • Unusual or irrational behavior (particularly if the behavior is not typical for the specific employee in question)
  • Negligence or carelessness when operating machinery
  • Odor of marijuana on or near the employee

An employee’s manifestation of any of these signs (specifically observed/witnessed and documented), along with a positive test, can constitute reliable evidence of impairment. A best practice for businesses that want the ability to test employees for marijuana is to have a written policy defining what constitutes “impairment,” what circumstances may trigger a drug test, and what the resulting consequences could be (e.g., discipline, termination) if the business determines that, based on the totality of the circumstances, an employee is impaired in violation of the written policy. Before taking further action, though, check with state law and consult with an employment attorney.

Employment Practices Liability Coverage from AmTrust

All businesses face the fact that employment-related risk and employment claims are increasing and getting more expensive. Small businesses are often named in employee lawsuits more than larger firms due to inadequate HR practices and lack of resources. Commercial general liability insurance or umbrella policies do not typically cover employment claims. An Employment Practices Liability Insurance policy covers the various risks we covered during the webinar. For more information about AmTrust small business insurance solutions, 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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