Rethinking EPL Insurance in a “Remote World”
Head of Claims
Head of Claims
With the world practically turned upside down by COVID-19, remote work has, to varying degrees, become the “new norm.” Many individuals have been working from home for years already, such as virtual assistants, travel agents, freelance writers, etc. However, a new wave of remote working arrangements due to the pandemic has caused employers to rethink their traditional operations. In this post, we take an honest look at employment practices liability (EPL) insurance and how this landscape is changing to fit a remote world.
EPL insurance, otherwise known as EPLI, is coverage protecting companies against employee lawsuits surfacing from their employment conduct practices. If an employee files a lawsuit against you — even if the allegation is baseless — EPL insurance covers your defense costs. Additionally, companies frequently couple EPL insurance with directors and officers (D&O) insurance for secure, 360-degree protection.
Some of the most common accusations in EPLI are:
It comes as no surprise that having employees creates more vulnerabilities for company leaders to manage. What’s more, government regulations provide employees with access to administrative claims and litigation. A successful plaintiff using the laws to back up their claims can have their legal costs paid by the employer even if they only win $1. Our litigious society usually accepts this approach without reserve.
Consider the recently trending employment claims, including gender discrimination, unequal pay, the #MeToo movement, and religious and other “freedom of expression” claims — heck, even the employers’ need to accommodate employees with disabilities like stress (and the use of medical marijuana) qualify. Add the strain on workers and employers caused by the coronavirus pandemic, and the workplace (remote or not) becomes even more complicated to navigate.
When COVID-19 hit our shores early in 2020, it shook the global economy. The pandemic touched every industry, forcing many companies to shutter, reduce their workforce, or send employees home to work. Naturally, not all industries had the option of remote work — but those that did, tried to tackle it head-on.
Some financial experts questioned whether the downturn was solely because of COVID-19 or if it was merely a long time coming. No matter who or what is to blame, the fact is that everything changed seemingly overnight, including how people handle issues with their employer.
Keep in mind that most companies tend to purchase or beef up their EPL insurance before a significant transformation. We feature a helpful article on the matter here: When Do Startups Typically Purchase EPLI Coverage? But this pandemic didn’t offer us the luxury of a heads up, per se. These unfortunate dynamics left most companies grappling with a harsh financial reality — and more work-at-home employees.
Interestingly, over half of Americans want to keep working from home after the pandemic. Furthermore, two-thirds of businesses intend to maintain a version of their remote policies permanently. Google, American Express, Airbnb are among the many major companies to extend their policies. Plenty more companies are following their examples or are offering their employees greater flexibility in their schedule.
A successful, remote-friendly approach to work has many positives, such as:
On the other hand, working from home isn’t rainbows and sunshine all the time. Collaborating with other team members and juggling childcare or eLearning are some of the most significant obstacles most employees face regarding remote work. And that’s just for starters. Many companies expect a barrage of employment claims because of the pandemic-induced shift from on-site work to remote work.
Unquestionably, remote work offers plenty of benefits to individuals, families, and communities. Employers and businesses can thrive more with a happy and satisfied workforce — but remote work isn’t for everyone.
Some employees have significant issues working from home, and these barriers can put them and their employers in a bind. Plus, some companies haven’t recovered fully from the pandemic’s impact, causing them to tighten their limitations. Both sides, employers and employees, have valid complaints and concerns about current dynamics. Here are a few of the most common issues experts predict will take precedence in the coming days.
In conjunction with COVID-19, a new overtime rule was changed and put into effect at the beginning of the year. It had been untouched for 15 years, so the transition has been complicated. Add in remote work, and employers are scrambling to keep up with the unprecedented shift.
“The Department of Labor estimates that 1.2 million additional workers will be entitled to overtime pay as a result of the increase to the standard salary level, while an additional 101,800 workers will be entitled to overtime pay as a result of the increase under the highly-compensated employee rule.”Insurance Journal
Employers are faced with several wage issues now, including accurate time-tracking, correct overtime compensation, proper employee categorization, and compliance with the Fair Labor Standards Act (FLSA). As more and more employees educate themselves on old and new laws, we expect to see an uptick in employment practices lawsuits. Plus, remote work often means employees feel “on the job” for more hours than usual — and they want compensating for it.
Some employers have announced pay freezes in reaction to the pandemic, and still, others have required pay cuts — a drastic measure designed to keep a struggling company from shutting its doors altogether. These scrooges argue that reduced wages don’t impact the bottom line if an employee saves commutation and related expenses. Bah humbug. Can you see the claims coming?
Most employers have tried to navigate the pandemic as best as possible. Hard-hit industries faced tough decisions and reduced their workforce significantly — which will likely spark a wave of wrongful termination claims. Companies can try to conduct a reduction in force (or “RIF”), but these have a bushel full of compliance requirements. Even companies that try to undergo a “neutral” (as to tenure, age, gender, etc.) RIF can get caught in the middle of an employment claim for wrongful termination.
For example, some employees were terminated after raising concerns about safety in the workplace. Others lost their jobs after obeying the shelter-in-place orders, refusing to go back to work, or working from home longer than an employer wanted. And still, others stayed home from work, battling the novel virus.
As you might imagine, wrongful termination during COVID-19 is a muddied area to address. Timelines and causes present multiple challenges. Nevertheless, This era will likely launch an onslaught of employment practices lawsuits.
As employers nationwide try to steer through the pandemic, they encounter challenges protecting their workforce’s safety and health. After all, safeguarding your employees isn’t always clearcut. Complying with federal laws, such as the Americans with Disabilities Act (ADA), makes any attempt to navigate that much more complicated.
The US Equal Employment Opportunity Commission (EEOC) has published, What You Should Know About COVID-19 and the ADA, the Rehabilitation Act, and Other EEO Laws to help guide employers through this complicated timeframe. But employment practice claims are still going to surface based on ADA discrimination charges. What an employer can and can’t do often seems like a shady area, mostly because of ever-changing rules — especially when it involves COVID-19.
When the virus hit, many people expected insurance carriers to update their policies swiftly by adding a pandemic-like exclusion on every policy known to humankind. Of course, enforcing an update of this caliber would have induced an “end of times” scramble. Most insurance carriers didn’t join the supposed exclusion wave, although some carriers rewrote their policies to include pandemics. It’s safe to say that this approach was not a widespread movement.
However, companies should expect the renewal process to move more slowly than usual. Applications will likely include virus-related questions as underwriters proceed cautiously. Public companies should prepare for more transparency, as well, focusing on public disclosures. Private companies should plan to have their financial stability thoroughly examined (i.e., debt management, funding preparation, etc.)
While this piece’s subject is the impact of more significant remote work on employment, EPLI insurers face increased claims relating to the general economic downturn, diversity and inclusion, BLM, and #MeToo.
Furthermore, there is so much uncertainty in the economy, that even usually trustworthy predictors, like the US Bureau of Labor Statistics (BLS) which offers its ten-year, three-year, and industry by industry forecasts has yet to amend its 2019-2029 statistics and surveys, despite the enormous impact COVID-19 has had on the economy.
Insurers who have written large books of EPLI for years are pulling back their capacity to issue EPLI policies due to prior losses and increased exposure in industries, such as hospitality (i.e., restaurants, hotels, sporting arenas, etc.). Those insurers who still have the stomach for EPLI will push rates up, add coverage limitations, and increase claim deductibles, to name a few ways the coverage will likely change.
EPL insurance coverage is essential, and usually comes with value-added services to make your company a “better risk,” including:
These value-adds usually cost nothing and, in the eyes of insurers, make your company less claims-prone.
Understanding the details of what coverage your company needs can be a confusing process. Founder Shield specializes in knowing the risks your industry faces to make sure you have adequate protection. Feel free to reach out to us, and we’ll walk you through the process of finding the right policy for you.
Lastly, check back in with us here as we will be updating the resources we provide and are generally available to employers.
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