Q: What is Employment Practices Liability (EPL) / Wrongful Dismissal Insurance?
A: Employment Practices Liability (EPL) / Wrongful Dismissal Insurance is protection against allegations of errors and omissions and “wrongdoing” in the management and administration of human resources (HR), it can be best described as a “HR malpractice policy”.
Employment Practices Liability (EPL) Insurance is specifically designed to respond to specific employment exposures including:
- Wrongful dismissal
- Sexual harassment
- Constructive dismissal
- Employment-related misrepresentation
- Breach of oral or written employment contract
- Wrongful failure to employ or promote
- Wrongful discipline
- Invasion of privacy
- Wrongful demotion
- Wrongful infliction of emotional distress
- Wrongful deprivation of a career opportunity
Good human resources practices can go a long way to mitigate risk, but research shows that 33% of employers have experienced an employment-related allegation in the past 3 years. Employers need to be aware that there are minimal barriers to employees or former employees suing employers as lawyers will work on a contingent basis and Human Rights Tribunal allegations can be made without the involvement of a lawyer. This area of law is also constantly evolving and becoming increasingly complex with new labour laws emerging regularly as affirmed by Benjamin Aberant, of McCarthy Tetrault LLP, in his recent article, Ontario Human Rights Commission releases new policy on gender identity and gender expression. When you combine increasingly complex and changing labour law with new regulation and legislation, an ageing and diverse workforce and add aggressive and effective advertising campaigns on the radio, internet and billboards paid for by law firms that are encouraging people to make claims against employers it becomes clear why so many employers have already and or are concerned about employment-related claims.
In addition to the potential damage to the reputation of the company employment-related claims are costly as confirmed by the 2013 Chubb Insurance Company of Canada Private Company Survey Some notable findings were that the average cost of an EPL claims has doubled since 2007 and now sits at $122,000 and the highest reported claim came is a shocking $5,000,000.
Below is a summary of the largest losses reported broken into various sizes of organizations:
|Employee Count||Largest Loss Reported|
|25 to 49||$350,000|
|50 to 99||$400,000|
|100 to 249||$5,000,000|
Real Canadian Employment Practices Liability (EPL) / Wrongful Dismissal Claims:
- A class action proceeding was filed against a company, its CEO and a number of its directors by 26 laid-off employees seeking damages for wrongful termination, along with amounts owing for accrued vacation pay. The matter was resolved prior to the certification hearing and the company Employment Practices Liability (EPL) insurance policy responded by paying the defence costs for all defendants, along with an $80,000 settlement.
- The President of a private Canadian company, whose annual salary was over $200,000, was told that following a restructuring, her position would be eliminated but she would be in charge of the company’s operating divisions. At the time, she was pregnant and took the position that she had been constructively terminated and discriminated against on the basis of gender. She filed a human rights complaint and also sought damages for wrongful termination. The EPL policy responded by paying the defence costs for the human rights complaint and the six-figure settlement which included $10,000.00 for damages for mental distress.
- A CEO of a private company with total compensation of over $1 M per year, was told that a retirement party was being arranged for him for the end of the calendar year since the company’s retirement policy imposed mandatory retirement at age 65. The CEO denied that the policy applied to executives and took the position that he was being constructively terminated and sued for damages. He also alleged that the company’s reduction of his, pension entitlement due to a calculation error, was an act of bad faith. The matter went to mediation and was ultimately settled for over $1,000,000.
- A CFO was terminated for cause following an internal investigation regarding accounting irregularities. Pursuant to the provision of his employment contract, he sought arbitration and claimed damages for wrongful termination. The matter was settled following mediation with the EPL Policy funding 90% of the six-figure settlement representing the covered loss.
To learn more about Employment Practices Liability (EPL) Insurance speak to an ALIGNED Insurance Advocate or connect with us today.