Staffing firms helped 13 million Americans find jobs or career opportunities in 2023, and they did so in a business landscape increasingly fraught with risk. Growing employee claims of harassment, discrimination, and wrongful termination - along with new federal rules and stepped-up federal enforcement - mean that staffing firms and their clients face mounting litigation risks. Employment practices liability insurance (EPLI) can be an essential tool for mitigating exposures of both staffing firms and your clients from costly claims and lawsuits.
What Is Employment Practices Liability Insurance?
EPLI provides coverage against claims made by employees who allege discrimination (age, sex, race, or disability), harassment, and wrongful termination. This coverage should also protect the client. EPLI first emerged as distinct specialty coverage in the 1990s as employment claims spiked, and it has evolved over the last few decades as a keystone of employment practices risk management. Simply put, an EPLI policy is a safeguard against costly and potentially ruinous employee-related claims.
Why Is EPLI Crucial for a Staffing Firm?
While employees may be recruited, employed, and paid by your staffing firm, those same employees perform their work for your client, regardless of the client's location, a company location, terms, and duration of employment. In 2023, the National Labor Relations Board (NLRB) established a new joint-employer standard wherein two or more entities (such as your staffing firm and your contracted client) can be considered joint employers if each has their own relationship with employees and if those entities share or co-determine one or more of the employees' essential terms. So, when an employee alleges their rights were violated by harassment or discrimination, the liability for that claim can fall on the shoulders of both staffing firm and client.
Such allegations are on the rise, too, as the U.S. Equal Employment Opportunity Commission (EEOC) has stepped up investigations and enforcement around workplace discrimination. During the fiscal year 2023, the EEOC reported 81,005 new discrimination charges, a 10% increase over the previous year (on the heels of a 20% jump from FY2022 to FY2023). The staffing firm also filed 143 employment discrimination lawsuits on behalf of alleged victims, a 50% increase over FY2022.
The costs to employers and staffing firms can be staggering: Through settlements, mediation, and conciliation, the EEOC secured more than $665 million for workers who were alleged discrimination victims, a nearly 30% increase over FY2022.
What Does an EPLI Policy Cover?
An EPLI policy does many things at once: It serves as sexual harassment insurance coverage, wrongful termination insurance, and financial protection against discrimination claims. EPLI covers the financial burden of both legal fees and judgments, providing a crucial safety net for staffing firms. Consider the following scenarios where employment practices liability coverage could come into play:
Sexual Harassment and Wrongful Termination
If a temporary worker files a sexual harassment claim against a staffing firm, the firm would bear the legal costs and settlement. For instance, when a few female employees complained that the company CEO had sexually harassed them, the firm's president began an investigation. The CEO then fired the president, leaving the company with both a sexual harassment suit and a wrongful termination suit whose ultimate cost was $1.5 million.
Age Discrimination
A 62-year-old sales representative was terminated for failing to meet his selling quota, yet there was no documentation showing the plaintiff performed poorly. Despite concurrent layoffs, the sales rep alleged he was wrongfully terminated because of his age, and he was awarded $540,000.
Racial Discrimination
A group of job applicants sued a retail shop for racial discrimination after learning they had been denied employment, and they were ultimately awarded $200,000.
Why Choose EPLI Coverage from World Wide Specialty?
World Wide Specialty, a division of Philadelphia Insurance Companies (PHLY), has over 55 years of experience and unparalleled insight in insurance for staffing firms. Our EPLI policy is specifically designed to protect not only the staffing firm employees, but also the staffing firm's clients, from applicant or employee claims of discrimination, harassment, and wrongful termination. Please note our tailored EPLI policy not only covers for discrimination, harassment and wrongful termination but also 24 additional employment practices violations. On our tailored EPLI policy, your contracted clients can also be included as insureds - not just "additional insureds" - and employees are covered globally for any U.S.-based insureds.
We'd love to tell you about how our EPLI policies can protect your staffing firm. To find out more about World Wide's employment practices liability coverage, call us at 800-245-9653 to speak with one of our representatives.