Is your business across its Employment Practices Liability Insurance? If not, you could be exposed to increased risk and potential costs.
Employment risks are a major concern for all business owners. This is because Employers could be held accountable for their decisions regarding employment, promotion, dismissal, procedures they follow, and the working environment they provide for employees.
Even in well-run businesses, mistakes, oversights, and miscommunications can occur and expose employers to liabilities for their responsibilities to employees. These issues can be costly and time-consuming to resolve.
Here we will examine what Employer Practices Liability Insurance is, what is covers, and some of the common risks that it can protect.
What is Employment Practices Liability Insurance?
Employer Practices Liability Insurance (EPL) covers actions taken by employees for discrimination, unfair dismissal, bullying, and sexual harassment.
The risks associated with your employment practices
In general, unless your business is run entirely by you and has zero employees, it is worth considering EPL. Employers should be prepared for the possibility of a lawsuit against them.
Risks include:
- Unfair wages, including underpayment,
- Failure to promote,
- Negligent evaluation,
- Unfair dismissal,
- Harassment or bullying in the workplace,
- Breaking of an employment contract,
- Discrimination,
- Manipulation of staff benefits plans, including superannuation or leave entitlements.
The Fair Work Act prohibits an employer from taking adverse action against an employee or a prospective employee for discriminatory reasons, marital status or sexual identity, mental or physical disability, colour, race, religion, political affiliation, or national origin. The Australian Human Rights Commission’s guide for avoiding discrimination and Work Logic have recent cases worth reviewing. There is also the Australian Fair Work Commission case history and the results.
It is important to regularly review and update human resources policies and contracts. This is especially important as you navigate post COVID-19 and other economic uncertainties. Many companies modify their employment contracts without seeking legal advice, leading to major liability. You may decide to modify the terms of your staff, such as laying off employees, cutting their hours, or paying them more. They could make a claim against you now or in the future if they don’t receive reasonable notice.
Often, small-to-medium-sized businesses that lack an in-house HR team opt to reduce their risks by taking out employment practices liability insurance (EPL).
What EPL Covers
Items typically covered
- Compensation and damages,
- Court judgements and applied interest,
- Settlements approved and approved by the insurer,
- The claimant’s costs,
- Advance payment for defence costs.
Items typically not covered
- An event that would lead to a claim or litigation, even though it happened before you signed your policy,
- Claims that your company was forewarned of under a separate policy,
- Industrial disputes,
- Violations or benefits from your workers’ comp, unemployment and disability policies, workplace security, safety, or fair labour standards laws,
- A court or tribunal orders your payment of back/front wages or compensation to an employee for future loss or damage,
- Fraud or dishonesty,
- Penalties and fines for criminal offenses, as well as civil penalties that do not compensate.
There are also many others not listed, so always check with your provider and don’t assume all of them will be in the exclusions’ section, they might appear in other sections.
What will Employment Practices Liability Insurance pay?
The policy will pay for legal defence costs, damages, and any other costs necessary to settle the matter up to the EPL sub-limit. It is important to note that the EPL policy won’t cover losses resulting from the underpayment or failure to pay employee benefits (such as redundancy and superannuation), as these are legally the employer’s responsibility.
It is vital that potential claims are reported to the insurer as soon as possible, as EPL policies usually require that claims be reported during the time the claim is made. Some policies provide you access to employment law specialists who can help you resolve disputes quickly and with minimal fuss.
Examples of EPL Claims
- A former employee claimed harassment and bullying after returning from maternity leave. The employer did nothing to resolve the issue or adhere to their bullying/harassment policy.
- A 62-year-old supervisor at a construction site claimed wrongful termination and discrimination after his position was made redundant but was later filled by a relative of the business owner.
- An employee claimed wrongful dismissal after their ex-employer labelled the employee “difficult” and used that as cause for terminating employment. Despite the employee consistently being late and being occasionally insubordinate, the court felt this reason was not cause for dismissal.
Get Covered Today
Every employer should be focused on reducing business risk, thanksfully Trident Insurance can arrange EPL coverage in order to help minimise the impact of any future disputes on your business.
For advice regarding any aspect of Employers’ Practice Liability Insurance, please get in touch with our specialist brokers.