Since new legislation affecting employment practices is passed regularly, we can only broadly describe areas of concern.
Employers should document and write up employee behavior and follow consistent procedures when addressing performance or conduct issues.
Common claims and concerns
- Discrimination Claims come in three forms: overt discrimination, disparate treatment, and disparate impact. Overt discrimination is purposeful and observable behavior, like firing all employees of one sex, or applying age limits or race-based rules. Disparate treatment concerns unequal disciplinary actions for the same behavior; for example, women may be written up for lateness while men are not, which can block advancement. Disparate impact involves rules or conditions that affect one group more than others, such as placing the women's locker room far from the plant while the men's is nearby, strict limits on bathroom breaks, or height and weight requirements that disproportionately exclude a protected group. What's the cost? About $500,000 per settlement.
- Wrongful Terminations. Outside of for-cause terminations and strategic layoffs, firing employees has become more difficult. Even in at-will jurisdictions, courts may find implied employment contracts or require consistent documentation and cause for dismissal.
- Sexual Harassment. Unwelcome sexual advances, explicit or implicit, are unlawful. Disparate treatment and impact can apply here as well. Sexual harassment can be established by conduct that creates discomfort for observers; a bystander who objects can bring a claim even if not directly involved.
- Retaliation Claims. These arise when an employee is punished—such as by dismissal, reduced hours, or a wage freeze—for engaging in a protected activity like reporting discrimination or cooperating with an investigation.
Other disputes — for example, overtime pay, improper distribution of email content, or mass layoffs — can trigger discrimination or related suits.
For an overview of coverage options, see Employment Practices Liability Insurance (EPLI) — Overview, which explains common protections employers seek; some organizations also include related protections under broader policies, for example Directors and Officers Liability (including Employment Related Practices).
Get appropriate protection for these exposures — talk to an agent.
Frequently Asked Questions
What types of claims does employment practices coverage address?
It typically responds to claims of discrimination, wrongful termination, sexual harassment, and retaliation brought by current, former, or prospective employees.
Do small employers need employment practices coverage?
Yes—small employers can still face costly claims and settlements, so coverage is commonly recommended regardless of company size.
How can employers reduce the risk of claims?
Maintain clear written policies, consistent documentation, timely investigations, and regular training on harassment and discrimination.
What should I bring when discussing coverage with an agent?
Prepare information on payroll, number of employees, HR procedures, prior claims history, and any existing policies or training programs.