Employment disputes cost organisations an enormous amount in management time and defence costs. However good an organisation’s human resources practices and procedures, the risks cannot be eliminated.
February 18, 2016
According to the 2014/2015 UK Employment Tribunals Annual Report, the number of multiple claims received in July to September 2015 was 18,727, almost double the amount received the same quarter last year… Yet despite this scary reality, an alarming number of businesses remain exposed to grievances by employees and claims they have violated the myriad of employment practice laws.
10 Reasons to Buy Employment Practice Liability Insurance
An EPLI policy covers claims against directors, officers, employees, the company and its subsidiaries. The policy covers a long list of claims including wrongful dismissal/termination, sexual/racial/disability harassment, sexual/racial/disability/religious discrimination, employment related libel, slander, defamation and invasion of privacy, wrongful failure to employ or promote and retaliation.
It’s becoming harder to ignore the compensation culture which continues to gather pace in the UK. In the last two years:-
– Religious discrimination cases doubled to almost 700
– Sexual discrimination cases more than doubled to 28,000
Capped damages have been removed for many employment practice liability offences in the UK. Once a prima facie case has been established the burden of proof lies with the employer to show their innocence in a tribunal hearing. Damages awarded:
– Largest religious discrimination claim- £984,465 (average £30,361)
– Largest unfair dismissal claim- £4 77,603 (average £8,679)
– Largest sexual discrimination claim- £217,961 (average £10,807)
Word gets around. A company’s reputation in the marketplace can be severely damaged by employment practice claims. The negative publicity may be followed by potential reluctance of your clients and/or suppliers to trade with the company. In addition, the likelihood of attracting the best talent in the future could be diminished, threatening profitability and growth. The expert panel solicitors we have selected across the UK are tried and tested and work closely with our experienced claims team to pay defence costs promptly to help minimise the damage.
Damage to employee morale
Your staff are an invaluable asset. Employee-based grievances can impact morale and goodwill within the company and prove detrimental to productivity levels. As well as defence costs, damages and judgment sums, our EPLI policy pays for a public relations consultant to help protect the reputation of an individual involved in any claim [up to sublimit of £50,000].
Many of the large EPLI losses seen in the UK are as a result of claims brought in the US. If you have employees in the US the risk of employment practice claims is materially increased and the settlement sums are considerably higher than in the UK. Companies must comply with Federal and State laws, and Government agencies such as the Equal Opportunities Commission (EEOC) are particularly aggressive at overseeing compliance. Many of the claims brought by the EEOC against small and mid-sized companies have settled for over $1 mUSD.
US class actions
US employment practice violation class actions are increasing. Some US states are more inclined to grant class action status than others but if a class is formed the result can be extremely painful for the defendant company. Legal bills and settlements can spiral out of control unless you have insurance in place to protect your balance sheet.
- Retaliation claims
An employer may successfully defend an employment practice claim but may also be faced with a retaliation claim. Such claims are brought where the employee alleges that he or she has been refused promotion, been fired or been moved sideways as a direct result of the initial grievance. The two claims can be brought in tandem or separately but the awards for the retaliation claims can be higher than those for the initial complaint.
The European angle
Increased awareness by employees of their legal rights and increased globalisation of larger companies is leading to more EPLI claims in Europe. Large international claims in the press awaken potential claimants and may also attract the attention of regulators. The EPLI policy covers the costs and expenses of an individual insured in preparing for and attending investigations and enquiries by regulators and other Government agencies in scenarios where a formal claim has not been made.
- A Separate Limit
Given the high frequency of employment practice claims in comparison to other management liability claims it is a good idea to have a separate EPLI policy. D&O policies usually include cover for employment practice claims brought against individuals only. Crucially, buying a separate EPLI policy protects the company as well as the individual, and helps to ensure that the limit on your D&O policy is not eroded unnecessarily.