The ABCs of Employment Practices Liability Insurance

Today’s litigious landscape and evolving business regulations require that a comprehensive insurance program includes Employment Practices Liability Insurance (EPLI) to protect against employment-related claims. This is true for all types of organizations across all industry sectors, including home health and hospice providers. According to the insurance association Trusted Choice, employee lawsuits have increased by 400% during the past 20 years, with wrongful termination suits skyrocketing more than 260%. Also, it’s not only large corporations being hit with employment-related suits. About 41.5% of employee lawsuits are brought against private companies with fewer than 100 employees. The financial damage of employee lawsuits can be dramatic, with the cost of settling out of court averaging $75,000, and the average jury award hitting $217,000 if the case goes to court and the employer loses, according to Trusted Choice.

EPLI insurance is designed to respond to allegations involving employment-related issues from employees, job candidates, and former employers. These allegations include everything from discrimination (age, race, gender) and sexual harassment to wrongful termination, breach of employment contract, negligent evaluation, failure to employ or promote, wrongful discipline, deprivation of career opportunity, and wrongful infliction of emotional distress, among others. In addition, the home health care industry is also subject to third-party claims; for instance, if a client creates a hostile work environment for a caregiver by repeatedly making harassing comments.

An EPLI policy will provide coverage for legal costs, regardless of whether an organization wins or loses a case. The policy will also pay for judgments and settlements. Typically a policy will not pay for punitive damages or civil or criminal fines.

EPLI Claim Scenarios

EPLI claim examples run the gamut. For example, a recent case that is now in litigation involves a former chief information officer (CIO) of an in-home oxygen and respiratory services provider. The CIO claims he had been offered a significant compensation package to join the company, including a salary, signing bonus, annual bonus, and relocation expenses to move his family near the firm’s headquarters where he purchased a home. He was fired five months after joining the company and has now filed a wrongful termination suit, alleging the employer ended his employment after tapping into his “specialized knowledge” to help with an acquisition. The suit also alleges that he received positive evaluations of his work during his short time at the company and was told by management “everyone enjoys working with you.” The suit also says “he received no substantially or even marginally negative performance review or criticism during the duration of his employment.”

Other types of claims may arise from the following situations:  An employee handbook details a disciplinary procedure that requires two warnings with intervention prior to termination, but a caregiver is given one warning regarding late arrival and then terminated; an employment ad in a local newspaper states ‘English must be a first language,’ which is deemed discriminatory; or a highly paid nurse in the hospice industry is replaced by a younger, lower-paid nurse, and sues for age discrimination.

Loss Prevention Tools & Practices

In addition to offering EPLI coverage, some insurers also provide loss prevention tools to help insureds minimize the possibility of an employment-related lawsuit. These tools may include a free online resource for companies seeking assistance with employment issues; discounted loss prevention consulting services from pre-approved, top law firms; access to HR consulting firms; and a toll-free hotline to a nationally recognized law firm.

Employers should also take the following measures in their organizations to help mitigate employment-related claims. These include:

  • Revisiting and updating the employee handbook on an annual basis to ensure it is consistent with the actual policies of the company and reflects current employment laws. The handbook should contain the following policies: 1) “at-will” policy, 2) EEO policy, 3) anti-harassment policy, 4) reasonable accommodation policy, 5) workplace violence prevention policy, 6) discipline and termination policy, 7) immigration policy, 8) trade secrets/confidentiality/non-disclosure policy, 9) technology use policy, 10) leave of absence/benefits policy, 11) drug and alcohol policy, and 12) hours of work (including FLSA safe harbor language) policy. Once a handbook is updated, be sure to redistribute it and obtain acknowledgment forms from all employees that they have read, reviewed and agreed to the terms and conditions of the new handbook.
  • Reviewing and updating the new employee hire package to ensure it’s current and doesn’t conflict with any of the items outlined in the employee handbook or other personnel policies.
  • Review and update the anti-harassment policy. At a minimum, the policy should include: 1) a clear definition of prohibited conduct, 2) a statement that harassment is illegal, 3) a clearly described complaint process that provides accessible avenues of communication, 4) a complaint process that provides a prompt, thorough and impartial investigation, and 5) assurances that employees will not be retaliated against for making truthful complaints of harassment, or cooperating in an investigation of harassment. Additionally, employees should be periodically reminded of the policy and the reporting avenues.
  • Training supervisors and managers frequently about what conduct constitutes harassment, as well as methods to deal with, address, and report complaints of harassment.
  • Reviewing and updating federal and state labor law notices. In most states, employers are required to post state, federal labor and OSHA-mandated notices where visible to employees and applicants to inform them of their employment and labor law rights. In order to ensure compliance with the posting requirements, companies should routinely review the requirements and consult with counsel to ensure that the appropriate notices are posted.
  • Performing a wage-and-hour audit to ensure that under the FLSA and similar state laws employees are properly compensated for the hours they work. Class action lawsuits are being increasingly filed against companies for their failure to properly classify and compensate employees. An internal wage-and-hour-audit is an easy way to ascertain whether the company is properly classifying and compensating its employees consistent with the FLSA.
  • Reviewing performance evaluation and “write up” procedures. It’s critical that managers who conduct performance evaluations review their employees in a consistent and uniform basis. Supervisors and managers should also document instances of poor performance and behavior. Absent consistent documentation justifying an employee’s termination, any dispute results in a “he said/she said” debate, which, in many jurisdictions, can be a losing proposition for the employer. Any write up of employees should be dated, the reason for the write up specified, and the document shared with the employees to put them on notice of their poor performance. Finally, the company must be careful in any disciplinary setting to treat employees in a similar fashion, applying the same standards to similar situations.
  • Reviewing and updating exit interview procedures. Take all necessary measures to ensure that the exit interview is conducted in a fair manner. The individual conducting the interview should maintain his or her objectivity and avoid heated arguments over the circumstances of termination.

Keeping up with changes in employment regulations and changing public attitudes has created increased liability for businesses – even for the most diligent employer. A client may have strict employee guidelines in place, but it’s impossible to know how employees will react to their workplace environment. With EPLI coverage, a client can be better protected to sustain the costly expenses incurred for defending an employment-related claim.

About Manchester Specialty

Manchester Specialty provides the home health care and hospice industry with Management Liability insurance, including EPLI coverage. For more information about our products and services, you or your local agent/broker can contact us at 855.972.9399.

Sources: I.I.I., Trusted Choice, Law 360