Employment Practices Liability Insurance Explained
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48646410335, AFSL : 327131 , AR Number: 1285127, CAR Number: 1285126
Employment issues are a key concern for business owners. As the legislation around employment law increases employment-related risk is becoming more complex and more common.
Employers are at risk of being held liable for the decisions they make regarding employment, promotion, and dismissal, the procedures they follow, and the type of working environment provided for employees.
What is Employment Practices Liability Insurance?
Employment Practices Liability insurance also known as EPL provides cover for actions taken by employees against employers. These could include a range of issues that relate to employment including alleged discrimination, unfair dismissal, constructive dismissal, sexual harassment, and bullying.
EPL insurance covers you for the legal cost to defend these allegations and claims as well as damages if the claimant is successful.
Why should I consider EPL insurance for my business?
An employment-related claim can be expensive to defend putting pressure on your cash flow. Mistakes, oversights, and miscommunication can happen in any business exposing employers to liabilities relating to their responsibilities to their employees. It is worth noting that these types of claims can come from perspective, past or current employees whether they have been employed on a full-time, part-time, or casual basis.
Employment-related claims against your business also have the potential to create substantial damage to your brand, reputation, or culture and may even spark media attention and public scrutiny.
What does EPL insurance cover?
Employment Practices Liability insurance covers allegations involving:
- unfair dismissal,
- harassment, bullying, and discrimination,
- wrongful dismissal,
- constructive dismissal,
- workplace defamation, and
generally covers you for damages and compensation, claimant costs, settlements, and defense costs. In some cases, the policy will respond to cover investigation costs and penalties.
What doesn't EPL insurance cover?
Losses arising from claims against you that relate to:
- Under-paying employees' wages or employee benefits or entitlements (i.e.: redundancy or superannuation payments)
- Bodily injury claims
- Criminal proceedings
- Fraud and dishonesty
- Prior or pending claims (i.e.: claim arising before the period of insurance)
Australian insurers cover and defend thousands of ELP claims each year and the numbers are increasing, as is the compensation being awarded by courts.
Below is a shortlist of actual claims that have occurred recently - all were covered under the business owner's EPL policy.
Bullying and Harassment
An employee alleged bullying and harassment by another staff member. The employer failed to address the complaint or comply with its own bullying and harassment policy. The court awarded damages totaling $77,000 to the employee.
An employee of an accounting firm alleged unfair dismissal and lodged a formal claim for compensation with Fair Work Australia. Although the business owner had strong grounds for dismissal due to gross misconduct the case was settled prior to court proceedings. The settlement was agreed at $15,000 for compensation, and the business owner incurred $40,000 in defence costs.
A senior employee was dismissed after making complaints of bullying, racial and disability discrimination, and aggressive conduct by the Managing Director. An action was commenced in the Federal Court and the matter was settled for a 6-figure sum.
A manager claimed he was forced to resign after being poorly treated by his employer. He claimed he was shouted at by directors, that his management capabilities and confidence were undermined in front of staff and that problems he escalated were ignored. The claim was successfully defended but cost $35,000 in legal fees.
A pregnant employee is dismissed for non-attendance. The manager who dismissed her says he was not aware of her pregnancy and the company fails to reverse this decision when the employee produces confirmation from her G.P. The case is settled for a 5-figure sum.
The above information is very general in nature and should not be considered as personal advice, for a more tailored discussion about your circumstances please call us for a chat.
Advisr does not provide advice and does not hold a financial service license (AFSL). All information above has been provided by Reef Insurance Brokers Cairns.