Demand has been rising for employment practices liability insurance protection as layoff activity has increased employee claims, an insurance brokerage expert said.

Speakers during a Marsh Webinar last month said the Equal Employment Opportunities Commission reported that discrimination claims were up 15 percent in 2008, compared to 2007.

Laid off workers have filed suit under a variety of federal and state laws.

"During these financial hard times, one trend in coverage is an increase in the purchase of EPLI coverage," said Brian Elowe, managing director of Marsh's global risk management division, based in Boston, who moderated the Webcast.

Congress' passage of the Lilly Ledbetter Fair pay Act and amendments to the Americans with Disabilities Act also added to companies' exposure to EPL lawsuits, Marsh said.

Paul Siegel, partner with Jackson Lewis, LLP, in Melville, N.Y, advised during the Webinar, Marsh's New Reality of Risk Webcast--"Hot Topics in Employment Practices Liability," that layoffs, restructuring and discharging of employees are the most likely source of a lawsuit. Layoffs often become a "tsunami of discharges and therefore claims and threatened claims."

Mr. Siegel noted two aspects of this issue. First, there is the layoff that occurs, the claims that might arise from it and the protocol that was used. Second are the layoffs that didn't happen and the problems that will result from workers who won't retire because their prospects for retirement have diminished.

The EEOC's filings were up by about 29 percent for 2007 to 2008, he said, and are up again. He said the highest percentage of EEOC complaints, totaling 26 percent, relates to age discrimination charges. While there isn't a big rise in discrimination lawsuits at this time, he added, there will be.

"Because the commission has a period to investigate before it issues a right-to-sue letter," he said, meaning that EEOC charges filed in 2008 or 2009 might not have matured into lawsuits.

He cautioned that "employers are heading into a period when there will be a renaissance of lawsuits."

Highlighting another aspect of the layoffs taking place, he said companies often are losing the services of mid-management, "which tend to be excellent problem avoiders and have more institutional knowledge."

He added that companies' exposures are such that if "one doesn't consider risk management identification, appropriate use of releases and some form of EPL insurance, there will be more business failures. This means more jobs lost and displaced workers."

Elizabeth Grossman, regional attorney for the New York District Office of the EEOC, emphasized the importance of having "strong policies on the books."

She said these anti-discrimination policies need to be reviewed regularly, kept up to date, and they should cover the areas a company needs to cover.

"Make sure you're sending the right message," she emphasized. "I look at a lot of policies that don't mention the word pregnancy because the statute doesn't mention the word pregnancy. But I think employers want to send the message that they don't endorse pregnancy discrimination."

Another point Ms. Grossman made is that employers need to make sure the information ends up in the hands of employees. "I've seen lots of employers with beautiful policies that never got communicated to any of the employees," she cautioned.

Brian Levine, an economist with Mercer, said organizations want to know how, in the current environment of cost containment, they can rationalize making pay adjustments in the context of pay equity review.

His response is that "the risk is real."

Secondly, he said, pay adjustments are not made across the board, "but are focused adjustments to address risk looking at internal misalignments--people who aren't paid the norm. By moving to pay those people appropriately, the risk is being addressed," he said.

Mr. Levine added that budgets for such adjustments tend to be small--tenths of a percentage point on payroll budgets, as opposed to a standard merit adjustment budget of 3 percent to 4 percent in a typical year.

Adeola Adele, Marsh's employment practices liability practice leader, said risk management is key for both pre- and post-loss risk management. She advised risk managers to consult with outside counsel before making any significant employment-related decisions.

Ms. Adele advised risk managers to notify their broker of any planned employment activities, such as layoffs.

She said "if you're planning to lay off senior employees," for example, "there are ways we can help you to address these issues before you do get a claim."

Her recommendation to clients, she said, is to consider risk management both before and after a claim.

Special Reports /

Recession Creates EPLI Demand, Issues For Employers, Marsh Says

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