Emerging policies and practices being initiated by the Equal Employment Opportunity Commission may increase litigation and the costs of defending employment practices lawsuits down the road, EPL insurance experts say.

“The EEOC sets the tone of employment litigation,” said Cathy Padalino, vice president and Chubb Specialty Insurance Company employment practices liability product manager.

That being the case, “employers should be aware of the EEOC initiatives and other employment industry trends,” she said, expressing concern that there are still a great number of employers, both public and private, that don't purchase employment practices liability insurance.

In addition to recent, formally announced education and litigation initiatives that Chubb and other carriers are monitoring–like the federal agency's increased focus on “systemic discrimination” and its “E-RACE” initiative–even changes in employer reporting requirements could have EPL claims implications, according to insurance experts. (See related story, page 12, for more on systemic discrimination, E-RACE initiatives.)

For example, the EEOC has updated the EEO-1 form, a demographic report that many employers are required to file with the federal agency. The form is required to be filed by private employers of 100 or more and federal contractors with at least an annual contract of $50,000 or 50 or more employees.

This form requires a breakdown of work force by job category, race, ethnicity and gender. While the new format has a number of changes to the race and ethnic categories, a change that insurance experts believe is significant requires the reporting of job categories for executives, managers and supervisors.

This new division will make it easier for EEOC officials to quickly determine the percentages of women and minorities in executive positions and to ascertain whether “glass ceilings”–informal barriers to advancement–are in place.

The changes go into effect in 2007, and the first reporting period is July-September 2007.

Companies must submit the report to the EEOC by Sept. 30.

From an insurance perspective, “we need to evaluate potential exposure to class-action litigation of our existing and potential clients,” Ms. Padalino said.

“And it is important that our insureds are prepared to defend themselves against such allegations,” she added. “We have to focus on how they are staying ahead of the curve before they are investigated, particularly with respect to recruiting, hiring and maintaining a diverse workforce.”

At the same time, insurers are monitoring the potential of new rules of Civil Procedure the EEOC implemented last year dealing with e-discovery.

The changes provide guidance to employers and their lawyers regarding the retention and production of electronic information in litigation.

“It is likely that the impact of this is that it will increase defense costs down the road,” Ms. Padalino said. The new rules outline specific regulation dealing with retention of electronic information.

“The question employers are asking is, What is the potential impact of these initiatives from a best practices standpoint?” Ms. Padalino said. “It's critical that employers go beyond the minimum requirements when establishing employment practices programs.” This will help provide stronger defenses should they be faced with employment liability lawsuits, she said, noting that Chubb provides online tools to assist EPL customers in putting the best employment practices programs in place.

Asked why the EEOC has updated its form, Ms. Padalino said that it appears the agency changed the form “to reflect the workplace demographics of today.”

She explained that the new form, and the report provided by it, “may better enable the agency to monitor the advancement of women and people of color into upper management ranks.”

As underwriters, Ms. Padalino added, “we will be able to use this information to better evaluate any potential glass-ceiling issues.”

“We have to focus on how they are staying ahead of the curve before they are investigated, particularly with respect to recruiting, hiring and maintaining a diverse workforce.”

Cathy Padalino, VP, Chubb Specialty

Special Reports /

Revised Form Requirements Could Help EEOC ID More Suit Targets

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