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What Are the Big EPLI Trends for 2022?

Court of Law Trial: Female Judge and and Jury Sit, Start of a Civil Case Hearing. Proceedings in Motion to Rule Out a Sentence. Defendant is Not Convicted nor Not Guilty.

The lockdown didn’t stop employment practices liability insurance (EPLI) claims. Quite the opposite. Changing rules, social attitudes, and a shift in the workplace balance of power are creating new challenges for organizations.

Although the pandemic forced many people to work from home, that didn’t stop them from suing their companies over their allegations of unfair working practices. It’s a case of the same old claims, but with a COVID twist.

“While there have been a lot of changes in the work environment, we’re still seeing the same types of claims, they’re just taking place in a different setting,” says Michelle Gordon, Director of Management Liability Claims at Markel. “Whereas earlier there were claims of sexual or racial harassment or discrimination in the workplace, now many alleged instances are taking place virtually, through a chat or email group, or during an online meeting.”

While there have been a lot of changes in the work environment, we’re still seeing the same types of claims, they’re just taking place in a different setting… now many alleged instances are taking place virtually, through a chat or email group, or during an online meeting.
Michelle Gordon, Director of Management Liability Claims, Markel
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COVID threw up enormous HR challenges for companies. They have had to stay on top of the complicated (and continually changing) patchwork of federal and state regulations covering everything from lockdowns to mask wearing and mandatory COVID vaccinations.

Many organizations created multi-disciplinary taskforces to handle the crisis, as well as consulting with outside law firms; but the sheer complexity of the task has made it more challenging to strictly adhere to the rules.

Even when bosses felt it was safe for their employees to return to work, their decisions over who should come back to the office have proved controversial.

At the height of COVID, some employers decided not to bring back certain portions of their workforce because of concerns about the risk to these individuals,” says Victoria Edmonds, Senior Director of Employment Practices Liability at Markel. “But that has led to a rise in discrimination claims under the Americans with Disabilities Act as well as increasing age discrimination claims, alleging that those individuals didn't have the opportunity to make that decision themselves.”

Power to The Workers

Workers are increasingly flexing their muscles over flexible working. Many employees got their first taste of flexible working during the pandemic and don’t want to give it up. Some companies, including Apple, have faced a backlash over their demands for non-exempt workers to return to the office.

Employers are having to listen. According to LinkedIn, the number of job postings that mention flexible work environments has increased by 83% between 2009 and 2021. Organizations are also focusing more on their employees’ overall well-being, says Gordon.

“I've seen more companies consider a hybrid work environment that were strongly against it before the pandemic,” Gordon says. “They are also trying harder to meet employees’ expectations in terms of a better work/life balance, including instituting health and wellness programs for the first time.”

They’ve been helped by a tilt in the workplace balance of power in their favor during lockdown. With over 11 million job openings in the US in February, and the unemployment rate at its lowest in decades, workers “realize that they have significantly greater negotiating power than they did prior to 2020,” says Edmonds. “Employees are willing to use the extra leverage they have to negotiate in a way that they haven’t before, whether it’s for higher salaries and compensation, better benefits or flexible working.”

A Higher Purpose

Now, workers’ expectations go way beyond how often they must go into the office. Millennials want jobs that challenge them and give them a sense of purpose, working for companies who share their values, whether that’s tackling climate change or promoting greater diversity and inclusion.

“They don't want to see it in glossy corporate brochures; they want to have a real conversation with their company about what they’re doing to help shape the future for them and the next generation,” Edmonds says.

Race and sex discrimination allegations are responsible by far for most employment claims. I think that’s partly attributable to [the BLM and #MeToo] social movements. People feel more empowered now to come forward, and they feel more supported when they do.
Victoria Edmonds, Senior Director of Employment Practices Liability, Markel
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Employees are also now more willing to hold organizations accountable for their alleged lapses. That’s partly a result of the sea-change in attitudes brought about by two social movements. The Black Lives Matter campaign has shone a spotlight on the treatment of black people, while the #MeToo movement has highlighted the problem of workplace sexual harassment and violence.

“Race and sex discrimination allegations are responsible by far for most employment claims,” says Edmonds. “I think that’s partly attributable to these social movements. People feel more empowered now to come forward, and they feel more supported when they do.”

The influence of these social movements is shown in changes to the laws on arbitrating employment claims, at both the state and federal level.

In March 2022, President Biden signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, preventing employers from unilaterally imposing arbitration agreements on employees who allege sexual harassment or assault. Several states, including New York, have already created carve-outs to their own arbitration laws. From now on, for certain types of allegations, it will be the employees, not their bosses, who decide whether their case should be heard in court or behind closed doors in an arbitration.

This will have an impact on claims, says Gordon. “I think you're going to see more claims brought in court as opposed to arbitration, and that's going to have an impact on cost, as litigation is historically more expensive than arbitration. Also, we're going to see more employers settle, because they don't want these claims to be tried before a jury and subject to public scrutiny. It will also become harder to settle these types of claims, where claimants are looking for institutional changes to be made and want to have their day in court. So, settlement values are likely to go up as a result.”

Pay Equality

Another looming issue is equal pay. Most states have enacted equal pay laws, and the Equal Pay Act and Civil Rights Act have been on the federal statute books for 50 years. However, American women are still getting paid around 25% less than men, according to government statistics.

“I think this is one of the biggest potential trends in employment law,” says Gordon. “There have been several high-profile claims, but we're going to see more. There are now more rules and regulations requiring companies to turn over their internal records, to see if they’re paying their male and female staff the same amount for doing the same work. Although not all companies are mandated to turn over this information, many are increasingly publishing it voluntarily to be more transparent.”

Edmonds points to the new directive from the Office of Federal Contract Compliance requiring all federal contractors to abide by its strict rules on pay equity. “There’s an expectation that this same framework will eventually be enacted across all companies in the US, regardless of whether they do business with the federal government.”

Looking Ahead

The employment claims outlook for US organizations looks increasingly stormy, as the world tries to live with COVID, while the public increasingly demands that companies uphold high ethical standards and are prepared to call them to account for their behavior. Meanwhile, the balance of power is shifting towards workers as to how harassment and discrimination allegations are handled.

So, what should companies be doing to manage their risk? “My recommendation is to always retain external employment liability counsel,” says Gordon. “If a company has an internal general counsel, that’s great; involve them in the process too. But outside counsel should be guiding employers through the process of identifying and managing these emerging risks.” They can also assist companies with staying up to date with evolving state and federal laws.

Companies should also make sure their EPLI policy is up to scratch. Management liability insurance carriers often include risk mitigation tools as part of their policy, including a hotline which employers can call to get legal advice on an employment-related question before it becomes a claim. Some insurance carriers even offer online employment training and a digital repository for looking up federal and state employment laws.

Employers should also consider taking proactive steps to manage their employment liability risk, says Edmonds. “For example, they could complete annual pay equity reviews alongside counsel. Some employers choose to review compensation across race and gender lines, while others’ assessments include age, veteran status, or disability.”

They could also regularly review their employee handbooks to ensure they follow best practice as well as state, local and federal laws, Edmonds suggests. It’s worth remembering, for example, that all US employers with more than 100 employees are required to report the racial and gender makeup of their workforce to the Equal Employment Opportunity Commission (EEOC) on an annual basis.

Many companies are working to create employment equality both within their ranks, but also within the communities in which they operate. In 2021, Citi went a step further by completing a third-party racial equity audit with a focus on addressing the racial wealth gap in the United Sates.

“These steps demonstrate employers’ best efforts to support ethical practices within their environments, but they also reflect smart risk management procedures in this area,” Edmonds concludes.

Bigger Claims, Bigger Payouts — But Also Calls for Lasting Change

The public’s rising awareness of race, ethnicity and gender and their greater willingness to call organizations to account for alleged misdeeds are fueling a rise in both the number and cost of EPLI claims. In recent years, there has been a string of huge settlements.

In education, Penn State ($109m), UCLA ($313m) and Michigan State University ($490m) have agreed to make large payments to settle claims of sexual assault committed by employees against students. But these were eclipsed by the University of Southern California’s payment of $1.1bn to settle claims of sexual abuse going back to the 1990s.

In the cases against both UCLA and the University of Southern California, the settlements were increased because of evidence that the university sought to cover up the abuse. In addition, a former dean at Michigan State was charged with misconduct and neglect for not doing more to protect students from being abused.

But as well as demanding large restitution payouts, victims are calling on the universities to make systematic changes to help ensure others don’t suffer abuse. “A very interesting aspect of these cases is claimants’ desire for non-monetary change within organizations,” explains Edmonds. “They have asked universities to make very specific changes, including independent oversight of students’ complaints; for abusers’ employment to be terminated immediately if the allegations against them are substantiated; for victims to be given counselling and assistance; and for these institutions to work to create a culture of respect for human life and dignity.”

The attempt to bring about organizational change is an increasing feature of large employment class actions, Gordon suggests. Another example is the racial discrimination lawsuit being brought against the NFL and its teams by former Miami Dolphins coach Brian Flores, who says the suit aims to ensure “positive change is made for generations to come” against “systemic racism in the NFL.”