Coverage You Need: Employment Practices Liability

If you have watched the news in the past year, you have likely seen something about workplace harassment or discrimination.

According to a study Statistics Canada published in 2018, 19% of women and 13% of men experienced workplace harassment in 2016, and in December 2019, Global News reported that a recent survey indicated “a third to half of Canadians of colour” have experienced racism in their workplace. While many of us may think Canada is a particularly progressive country, the rates of workplace discrimination are higher here than in many other countries, says the Globe and Mail.

While the most common source of workplace harassment in Canada is customers and clients, according to Statistics Canada, supervisors, managers, and colleagues were frequently declared the harasser as well.

If discrimination or harassment in the workplace results in a lawsuit against the employer, a typical Commercial General Liability policy does not provide coverage. To have coverage for defense and settlement costs for these types of lawsuits, business owners need Employment Practices Liability Insurance (EPLI).

Often packaged with Directors and Officers liability coverage, Employment Practices Liability Insurance policies provide coverage for lawsuits arising from an array of claims, including:

• Discrimination – The Canada Human Rights Commission lists age, race, ethnicity, religion, gender, gender identity, sexual orientation, marital and family status, and disability, among other things, as grounds for discrimination that are protected under Canada’s Human Rights Act.
• Wrongful Termination, Demotion, or Discipline
• Failure to Enforce Workplace Policies
• Harassment – Defined by the Government of Canada as “improper conduct… that is directed at and offensive to another individual in the workplace… that the individual knew or ought reasonably to have known would cause offense or harm,” harassment in the workplace can be one incident or a series of incidents. Comments or acts that demean, belittle, embarrass, humiliate, intimidate, or threaten others are considered harassment.
• Failure to Promote & Failure to Hire
• Pay Disparity
• Retaliation Claims – If an employee alleges discrimination, and then is punished for it (loss of privileges, termination), this is considered retaliation by the employer, and could be the grounds for legal action by the employee.
• Breach of Employment Contract
• Invasion of Privacy

Did you know? In 2017, Canada passed a law prohibiting employers from requiring genetic tests or discriminating against someone based on the results of a genetic test. The fine for contravening the Genetic Non-Discrimination Act can be as high as $1,000,000.

The most common EPLI claims are for sexual harassment, wrongful termination, and discrimination due gender, age, and race.

EPLI policies do not cover costs associated with:

• Criminal conduct
• Punitive damages
• Bodily injury or
• Property damage

Litigation may be initiated by an employee, former employee, or potential employee. Sometimes, however, action may be brought against the company by other people, which is why EPLI policies also cover Third Party Discrimination Liability (sometimes called Third Party Employment Practices Liability). This provides coverage for legal action brought against the company by clients, vendors, and other non-employees, who allege harassment or discrimination by the company. This is a particularly important coverage for businesses that deal with the public a lot.

Regardless of whether the company is found at-fault, legal fees can mount quickly. Most Employment Practices Liability Insurance policies provide a minimum $1,000,000 coverage and this limit can be increased for added protection. The premium depends on the number of people employed by the business, the business’ procedures and protocols, the business’ history of liability claims, and the types and limits of coverage selected. EPLI premiums were high when the coverage was first introduced in the late-1980s/early 1990s, but have dropped significantly since then.

Organizations with 5 employees and those with 5,000 employees all have exposure to Employment Practices Liability lawsuits. To help reduce the likelihood of legal action by employees, businesses should:

• Understand and comply with all provincial and federal employment laws
• Provide job descriptions and clearly articulate expectations for all employees
• Maintain a clear procedures guide (handbook) that is provided to all employees and managers
• Document everything – employee complaints, performance reviews, disciplinary actions
• Use Progressive Discipline tactics to address misconduct
• Implement a policy prohibiting discrimination, and encourage employees to report violations of this policy
• Talk to your insurance broker!

Some insurance companies provide legal advice hotlines as part of their EPLI offering, which can be a great resource for business owners, and may help prevent claims.

It’s important to note that Employment Practices Liability Insurance losses are settled on a “claims made basis.” Essentially, this means that there is no retroactive coverage. If you purchase coverage today, and tomorrow someone sues you for an incident that occurred last year, you will not have coverage for that incident, only those that occur during the policy period.

To request an Employment Practices Liability Insurance quote, click here.

Further Readings:

For the BC Government’s definitions of discrimination and harassment, click here.

The Canadian Human Rights Act is available online, as is the Canada Labour Code (including information on Unjust Dismissal).

The BC Human Rights Tribunal has published case summaries, including award amounts, for those discriminated against in their jobs.

Morgan Thomas, BA (Dtn.)
Administration Coordinator & Personal Insurance Trainer