Though employment practices liability insurance premiums have been fairly stable, changes in the economy and regulatory enforcement may increase risk for employers.
In fiscal year 2024, the Equal Employment Opportunity Commission (EEOC) filed 110 lawsuits alleging unlawful employment discrimination. In accordance with its Strategic Enforcement Plan for fiscal years 2024-2028, the lawsuits focused on what the agency sees as “persistent forms of employment discrimination, such as recruitment and hiring discrimination and systemic harassment, as well as emerging issues and vulnerable populations.”
The EEOC uses multiple strategies to prevent and remedy employment discrimination, including employer agreements to make workplace changes, and education and training resources. However, threat of litigation remains a key deterrent.
The number of employment-related lawsuits against employers has been rising, and no company is immune. Of the 110 lawsuits filed in fiscal year 2024:
- 48 allege violations of the Americans with Disabilities Act.
- More than 40 allege employer retaliation against employees, such as termination or failure to promote.
- 13 cases involve a systemic pattern, practice or policy of discrimination.
- Seven or fewer allege discrimination based on age or pregnancy; Title VII sex discrimination based on sexual orientation or gender identity; or sexual harassment of teenage workers
According to the EEOC, enforcement of the Pregnant Workers Fairness Act (PWFA) was an emerging issue for the agency this past fiscal year. The PWFA has been in effect since June 2023. It requires employers to provide reasonable accommodations for women who may face limitations due to pregnancy, childbirth or related medical conditions, including lactation.
The agency also expanded its traditional geographic parameters, bringing more cases in parts of the country that have been historically distant from an EEOC office. As a result, more new cases were filed in places like South Dakota, Utah and Wyoming.
Fines and penalties
Antidiscrimination laws are intended to return victims of proven discrimination back to the same or nearly the same position they were in before their claim.
While the EEOC has not reported the total fines assessed for FY24, there is a limit on the amount of compensatory and punitive damages an employee can recover. The limit varies by the size of the employer, as outlined below:
| Employer size | Limit on compensatory/punitive damages |
|---|---|
| 15-100 employees | $50,000 |
| 101-200 employees | $100,000 |
| 201-500 employees | $200,000 |
| More than 500 employees | $300,000 |
Another compensatory strategy the EEOC uses is to require the employer to place the employee in a specific job and/or provide back pay and benefits commensurate with the role they would have had if discrimination had not occurred. The employer must also stop the proven discriminatory practices and implement strategies to prevent future discrimination.
Insurance can protect your organization in a discrimination claim
Employment practices liability insurance (EPLI) can help if one of your employees accuses you of unlawful employment discrimination. Even if you’re absolved of any wrongdoing in the end, the costs of defending against a lawsuit can be significant.
Some insurance providers add EPLI coverage as an endorsement to your primary businessowners policy. Others issue it as a stand-alone policy.
What EPLI covers
Most EPLI policies cover the investigatory and legal expenses associated with employee claims of:
- Sexual harassment
- Discrimination
- Wrongful termination or discipline
- Failure to fulfill an employment contract
- Negligent evaluation or failure to hire or promote
- Denial of reasonable career opportunities
- Wrongful infliction of emotional distress
- Mismanagement of employee benefit plans
EPLI policies also reimburse you for judgments and settlements against you. However, they will not cover punitive damages or any civil or criminal fines.
Your premium for adequate EPLI coverage will depend on your industry, number of employees and recognized risk factors, including previous employment practices lawsuits.
EPLI policies exclude liabilities covered by other insurance policies, such as workers’ compensation.
Understand your responsibilities and policy restrictions
As EEOC claims continue to rise, you may see changes in EPLI policy requirements, exclusions and limits. When you purchase or renew your policy, review all expectations and details with your insurance professional.
- Many EPLI policies require you to notify your insurance company as soon as you learn of the potential for an employment dispute. Do not wait for a formal lawsuit. If you do, your EPLI coverage may be denied.
- Include limits to your EPLI coverage in your annual budget. EPLI policies can have deductibles of $25,000 to $50,000 or more. If you face a lawsuit, you’ll need to pay this amount before the policy coverage will take over.
- Most EPLI policies cover the types of discriminatory violations listed above. However, they often do not cover wage claims. If an employee files a lawsuit related to unpaid salary, overtime, bonuses or commissions, your EPLI policy might not respond.
- EPLI policies often require you to use the insurance provider’s preferred legal counsel for claims. When this is the case, you may want to retain your own independent counsel to ensure full consideration and protection of your interests.
If you are concerned about wage and hour claims, you may be able to “endorse” your EPLI policy, meaning add a clause to cover such claims. This will come at an added cost. Talk to your insurance professional about the value of such coverage.
If your business is under pressure to reduce head count and conserve resources, you may face additional employment practices risks. This makes it even more important to put discrimination, wage and hour protocols, and layoff decisions at the top of your risk management considerations.
Need more information?
For support on this topic contact OneGroup HR Consulting at HR Consulting at [email protected]. They can provide best practices on reassignment, including planning, training, communication, and compliance.
This content is for informational purposes only and not for the purpose of providing professional, financial, medical or legal advice. You should contact your licensed professional to obtain advice with respect to any particular issue or problem. Please refer to your policy contract for any specific information or questions on applicability of coverage.
Please note coverage can not be bound or a claim reported without written acknowledgment from a OneGroup Representative.
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