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

Speakers during a recent Marsh webinar said that in 2008, the Equal Employment Opportunities Commission reported discrimination claims up 15 percent compared to 2007, with a growing number of laid-off workers filing 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 webinar on “Hot Topics in Employment Practices Liability.”

Passage in Congress this year of the Lilly Ledbetter Fair Pay Act and amendments to the Americans with Disabilities Act has also added to companies' exposure to EPL lawsuits, Marsh noted.

Paul Siegel, a partner with Jackson Lewis LLP in Melville, N.Y., advised during the webinar that layoffs due to restructuring or downsizing are the most likely sources of an EPL lawsuit. Layoffs often become a “tsunami of discharges and therefore claims and threatened claims,” he said.

EEOC filings were up by about 29 percent in 2008, and are rising again this year, he noted.

He said the biggest share of EEOC complaints–26 percent–involve age discrimination charges. While there isn't a big rise in discrimination lawsuits at this time, there will be “because the commission has a period to investigate before it issues a right-to-sue letter,” he explained, meaning that EEOC charges filed in 2008 or 2009 might not have yet matured into lawsuits.

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

Another aspect of layoffs that are taking place, he said, is that companies often are losing the services of middle-managers, “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 and kept up to date.

“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 HR guidelines on employment practices end 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.”

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 big personnel plans such as layoffs, “or if you're planning to lay off senior employees, because there are ways we can help you to address these issues before you do get a claim.”

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

Special Reports /

Recession-Generated Layoffs Create EPL Hazards, Risk Managers Warned

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