Based on the HUB International webinar Navigating Employment Liability Claims.
In
today’s complex corporate environment, any
company with employees – from a single worker to thousands– is at risk for an employment
practices liability (EPL) claim. Originating at every level of employee rank
and tenure, these claims can become a huge burden for any business. The majority of EPL cases are settled out of court, yet even meritless
claims that are eventually dismissed cost thousands and can take as long as two
years to resolve.
Some of the most common emerging EPL
claims include: fair pay, wage theft, worker classification, gender identity
and restroom access and effective compensation. Protecting your business from risks
begins with understanding how to spot a potential claim, avoiding common
pitfalls and creating formal policies and procedures as a first line of defense.
“A claim can be monetary or non-monetary
related, and come in the form of an email, voice mail or written letter. It
doesn’t have to be a lawsuit for it to be a claim. An employee could be upset
they didn’t get the corner office,” said Adrian Atilano, EVP, HUB executive
liability practice. “Don’t put yourself in the situation where you’re denied
coverage for late reporting. Know the potential issues. Understand what you
need to do. Create an affirmative defense.”
The
Top 5 EPL Trends
#1:
Fair Pay
The federal Equal Pay Act has tried to abolish
wage disparity based on sex since 1963. Because there’s still a wage
differential for “identical” work, states like California have passed
legislation to eliminate a company’s ability to classify like jobs differently
and therefore escape liability.
The California Fair Pay Act – the most
rigid and considered the industry standard – prohibits an employer from paying workers
of one gender less than those of another for “substantially similar” work, with
a violation resulting in a penalty of the wage differential plus interest and
liquidated damages. At the federal level, a proposal that echoes the California
Fair Pay Act is on the horizon.
Employers looking to avoid liability
related to fair pay must be proactive and self audit. Questions to ask to ensure
you’re compliant with the Fair Pay act include:
- Do
you have up to date job descriptions on the books, including established
criteria for assigning values such as skill, education, seniority and
responsibility?
- Do
you assign consistent compensation to similar jobs performed by individuals
with similar skill, education, seniority and responsibility?
- Are
men and women assigned projects or clients with commission/bonus potential on a
consistent basis?
#2:
Wage Theft
Wage theft – or the denial of wages or
employee benefits that are rightfully owed to an employee - costs U.S. workers
as much as $50 billion annually, and $2,634 on average annually per worker.
Some common wage theft violations include: forcing employees to work “off the
books,” not providing constant meal and rest breaks, failure to pay overtime,
and stolen tips. In any given week, two-thirds of low-wage workers experience
at least one pay-related violation. The most effective way to avoid wage theft is
to write clear and consistent policies and train managers and supervisors on
compliance with them.
#3:
Worker Classification
Uber and other technology companies have
made recent headlines for EPL claims made by the misclassification of contract
workers. When determining independent contractor status, the question lies in
the control of the individual by the company. Even where the control isn’t
exercised, workers can be deemed employees.
- The best way to avoid worker’s
classification (WC) contests is to be proactive. Review federal economic reality
and state labor tests as well as IRS, California’s Employment Development Department (EDD), and WC tests for
classifying workers. Then ask: Are we classifying workers performing similar
tasks consistently? Performing misclassification audits on a monthly or
quarterly basis is another way to ensure consistency. For
more information on worker misclassification read the article, Employee or Independent Contractor?
#4:
Gender Identity and Restroom Access
In order to avoid restricting employees from the use
of restrooms that are not consistent with their gender identity, or segregating
them from other workers when it comes to workplace restroom access, OSHA suggests
the following:
- Employees
should be permitted to use the restroom associated with their gender identity.
- Transgender
employees should not be segregated from other workers by requiring them to use
a gender neutral restroom.
- Don’t
ask employees to provide medical or legal documentation of their gender
identity in order to access gender appropriate facilities.
As a best practice, OSHA suggests
businesses provide additional options, including single and multiple occupancy,
gender neutral facilities with lockable stalls.
#5:
Effective compensation
As the number of millennials in
the workforce continues to rise– they currently make up 50% of the
U.S. workforce and will rise to 75% by 2025 – a dynamic shift in pay practices from
a merit-driven system to value-based system is taking
shape. Employers who create a performance management program built on a results-driven
culture that integrates compensation, rewards and performance will be well
positioned to avoid potential EPL claims.
The following practices will help
employers maintain transparency with regard to compensation and performance:
- Utilize performance
optimization tools to engage employees and drive results
- Build a career track of job
structures with clear descriptions that include progressive responsibilities,
training and education.
- Set goals and metrics for individual
employees
- Consider incentive plans
instead of commission plans
Translating trends into action
Navigating EPL risks to avoid potential claims is more critical than
ever in today’s volatile workplace environment. Staying on top of current EPL
trends will help your business maintain compliance and protect your company’s
reputation and revenue. Contact a HUB International executive liability agent for more information.