If your business has employees, those employment practices have liability exposures. To protect your business from disclosure lawsuits, you need to keep up with trends in employment practices and liability insurance (EPLI). Let’s take a look at what’s happening now with EPLI risks and interest rates.
EPLI prices and basics
Employment Practices Liability Insurance (EPLI) provides coverage for legal costs, settlements, and judgments arising from certain employment-related claims, such as discrimination, sexual harassment, wrongful termination, and more. General liability insurance does not usually provide EPLI coverage, but you can add coverage as an endorsement to a Business Owners Policy or Commercial Package Policy or purchase it as a stand-alone policy.
EPLI rates have increased, but so have interest rates for most lines of insurance. According to MarketScout, EPLI rates rose 3.7% in the first quarter of 2023. This rate increase is lower than the average 5% increase seen across all commercial property and casualty lines.
Lawsuits are expensive – and they can increase
EPLI coverage is important because employees have different rights under federal and state laws. Employees may file a lawsuit if these rights are violated or if they believe their rights have been violated. When this happens, employers can incur significant legal costs – and that’s in addition to any settlements or awards. As a result, employee lawsuits can be expensive for businesses, whether they win or lose.
According to TechTarget, the EEOC is gaining additional staff and enforcement capacity under the Biden Administration. This means that we may see increased litigation against employers.
New laws and EPLI requirements
New state laws may open the door to more hiring procedures.
In New York, Assembly Bill A7101 prohibits employers from releasing personnel files as a retaliatory measure against employees who complain of unlawful discrimination or assist in proceedings against employers involving unlawful discrimination. The bill was signed into law in 2022.
At the same time, many states have passed new laws requiring transparency in wages. According to the Center for American Progress, at least eight states have passed pay range transparency laws and another 15 are considering such laws. New York’s new wage 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 wages with those of their co-workers. Deviations can 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 clocks with fingerprint logins. Laws such as the Illinois Biometric Information Privacy Act (BIPA) create protections for the employee data this produces. BIPA has been in place since 2008, but Business Insurance says recent court decisions (including the first jury verdict) could affect litigation under the law. Other states are beginning to enact similar laws, meaning this isn’t just a problem for Illinois employers. In addition, some insurers have started to exclude BIPA claims in their terms and conditions. Employers using employee fingerprints or other biometric identifiers need to be vigilant, regardless of state.
Artificial intelligence can also lead to EPLI risks. For example, AI programs used to review job applications can lead to claims of bias. New York City has introduced a new law that will create restrictions on employers using AI in their hiring. According to SHRM, enforcement is currently scheduled for July 5, 2023, after some delays.
Social movements and awareness of discrimination
The EEOC says sexual harassment charges rose in the two years after the #MeToo movement went viral in 2017. Sexual harassment remains a major problem. 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 person for the first time in six years. This may signal a commitment to protect transgender rights. But as Law 360 explains, employers can find themselves in tricky situations when transgender people assert the right to use their preferred pronouns or names and religious employees assert faith-based objections. Missteps can be costly. According to the Sacramento Bee, Shake Shack must pay $20,000 to a transgender person who decided to quit due to ongoing misogyny.
Will your insurance cover you?
Need help securing coverage for your EPLI risks? BNC can help you get the coverage your business needs, including EPLI. Read more.