Employment Practices Liability Insurance Overview

Employment law refers to a considerably broad range of legal issues associated with employees, employers, and safety conditions in the workplace. An example of this would be how some employment laws apply to a case that involves employment discrimination, while other employment laws can provide guidance when creating company policies or employee handbooks.

The overall purpose of employment law is to protect those who are part of the workforce, which includes but may not be limited to:

• Creating and enforcing protection for employees who are disputing with a colleague, an employer, or a company;
• Ensuring that businesses do not discriminate against both prospective job candidates and current employees while in the interviewing, hiring, promoting, or terminating processes;
• Providing specific rights to those who are self-employed, or who are considered to be independent contractors; and
• Ensuring that volunteers and interns are protected from sexual harassment, discrimination, and retaliation in the workplace.

Additionally, employment laws vary widely by jurisdiction; as such, the employment rights that are protected by one state may not be available as a protection under the laws of a different state. It is also important to note that some issues may be governed by both state and federal employment laws, such as pregnancy leave.

According to the federal laws Fair Labor Standards Act (“FLSA”) and Internal Revenue Code (“IRC”), there are many ways in which to classify employees. Specifically, these federal laws divide workers into two overall categories of employment: employees, and independent contractors. The groups that are contained within those categories can then be further broken down into various types of employment.

Some of the most common examples of the different types of employment classification include:

• Full time or part time employment;
• Seasonal or temporary employment;
• Independent contractors;
• Freelancers;
• Consultants; and/or
• Temporary workers, as this type of employment differs from that of a worker who is considered to be a temporary employee.

Knowing which category of employment that a worker falls under is important, because the kind of employment that a worker secures will determine:

• What benefits they can receive;
• What rights they have as a worker;
• Whether they qualify for specific additional benefits; and
• The types of tasks that their employer will legally be obligated to do, such as withholding income taxes.

What Is Employment Practices Liability Insurance?

As suggested by the name, employment practices liability insurance covers employee claims that are associated with the employment practices of the company that they work for. These claims most commonly arise when an employee feels that their legal rights have been violated by an employer.

Some of the most common examples of such rights include the following:

• Wrongful Termination: Wrongful termination, or unlawful termination, refers to when an employer fires an employee for illegal or unauthorized reasons. These include reasons that violate federal, state, or local laws; go against public policy; and/or breach the terms of an employment agreement.
  • Additionally, wrongful termination can occur when an employer fires an employee who has refused to obey work instructions that are illegal. An example of this would be unlawful activities, such as failing to adhere to safety regulations for a specific job task, or asking them to commit even more serious crimes, such as larceny or tax evasion;
• Sexual Harassment: According to the Equal Employment Opportunity Commission (“EEOC”), sexual harassment is a form of sex discrimination involving unwelcome sexual advances; requests for sexual favors; and/or various other verbal or physical actions that are of a sexual nature. All are considered to be illegal. Additionally, sexual harassment can refer to any offensive comments or remarks that are made about a person’s gender. However, this example is more commonly associated with gender discrimination; and
• Intentional Infliction Of Emotional Distress: Intentional infliction of emotional distress, or “IIED,” refers to when a defendant intentionally or recklessly behaves in such a way that is considered to be so “extreme and outrageous” that it causes another person to suffer severe emotional distress and/or trauma. When IIED occurs, the victim may be able to recover compensatory and punitive damages from the defendant. However, because of individual state laws and the challenges associated with proving mental harms, it is considerably difficult to bring a successful lawsuit based on a claim of IIED.
  • Also, it should be noted that not all conduct will qualify as an act of IIED, due to the fact that its definition is considerably specific. Further, there are some instances in which a person may be able to recover under a related tort theory which is known as negligent infliction of emotional distress, or NIED. Although NIED is similar to IIED, instead of intentional behavior, the defendant must have acted in a negligent manner. Unlike IIED, NIED requires that the victim prove that they suffered some kind of physical injury as well. Finally, both IIED and NIED are generally referred to using the umbrella term of emotional distress; that is why it is important to note that they are two separate actions, and as such they require different elements of proof.

Some other examples include:

• Breach of employment contract;
• Wrongful discipline;
• Failure to hire, employ, or promote;
• Discrimination; and
• Defamation.

Most employment practices policies will cover claims made by all full-time employees. Additionally, some plans may cover claims made by:

• Part-time employees;
• Past employees; and
• Applicants to the company.

What Is Not Covered By Employment Practices Liability Insurance?

It is important to note that this sort of coverage will not generally extend to claims that are associated with:

• Fair Labor Standards Acts: The Fair Labor Standards Act (“FLSA”) contains provisions for the requirements for various aspects of employment, including overtime pay; minimum wage; record keeping; and employing minors in both the private and public sectors. FLSA laws require employers to pay their employees at least minimum wage, and overtime pay for work exceeding 40 hours in one work week, among other things;
• Worker Adjustment and Retraining Act (“WARN”): The Worker Adjustment and Retraining Notification Act requires employers to provide sixty day’s notice before plant closings or mass layoffs that are covered by the act. WARN applies to employers of 100 or more employees, who work 20 or more hours per week, and have been employed for more than 6 months. Additionally, it applies to both salaried and hourly workers; or
• Occupational Safety and Health Act (“OSHA”): OSHA ensures safety at work for all employees, as well as a healthy work environment. OSHA’s mission is to prevent work-related injuries, illnesses, and deaths by requiring employers to provide their employees with working conditions that are free of known dangers.

Some other examples of what is not covered by employment practices liability insurance include, but may not be limited to:

• The National Labor Relations Act;
• Downsizing;
• Layoffs;
• Plant closures and/or strikes; and
• Workforce restructurings.

As An Employer Do I Need Employment Practices Liability Insurance?

While employment practices liability insurance is not required by law, most employers purchase this coverage because of the rising number of employment-related lawsuits.

Employment practices liability insurance can be a good way to protect yourself as well as your business, and employment practices liability may be purchased as a stand-alone policy or as an extension of an existing policy.

Do I Need An Insurance Attorney?

If your insurance company is unwilling to pay for claims under existing employment insurance that you believe covers employment practice claims, an experienced and local worker’s compensation attorney can help you understand your legal rights and options according to your state’s specific laws. Additionally, a local lawyer will also be able to represent you in court, as needed.