Lowering Employment Practices Liability Risks

Employment practices liability insurance (EPLI) is a critical type of cover that provides various protections for policyholders. Employers face a variety of risks related to employment practices liability claims. These claims have become increasingly more common in the UK since 2015. An EPLI policy can provide significant assistance to an organisation in offsetting the costs and losses of potential legal action.

There are a variety of laws in the UK that employers must abide by in order to ensure that they are providing and maintaining a suitable work environment for their workforce. These laws – such as the Employment Rights Act 1996 and equivalent NI Order, the Equality Act 2010 in GB and the respective anti-discrimination Orders in NI - are intended to hold employers accountable for unlawful or irresponsible behaviour.

An employment practices liability claim can have a devastating effect on not only an organisation’s finances, but also its reputation. This means that an EPLI policy is not only a valuable means of protection for an employer in the present, but also in the future.

Specific Protections

Employment practices liability claims can stem from many everyday workplace activities and behaviours. Fortunately, EPLI policies provide cover for a variety of claims, such as:

• Wrongful dismissal These claims stem from an employee alleging that the terms of their Contract were breached when the employer terminated their employment.
• Constructive dismissal —In this type of case, a former employee who has resigned from their position alleges that they were forced to resign due to their employer committing a repudiatory or fundamental breach of their Contract by virtue of its behaviour.
• Unfair dismissal – These claims relate to the dismissal of an employee in contravention of the Employment Rights Act 1996 (or equivalent Employment Rights (NI) Order 1996), such as where the employer did not have a fair reason for the dismissal, did not follow a fair procedure (or the 3-step statutory procedure in NI) or the decision to dismiss was not within the rage of reasonable responses open to the employer in the circumstances.
• Discrimination—These cases are based on allegations that an employee has been mistreated on the basis of a protected characteristic, such as gender, race, religion, sexual orientation, etc.

Reducing Risk

While an EPLI policy will provide valuable cover in the event of an employment practices liability claim being lodged, the best way for an organisation to mitigate losses is to minimise the chance of an issue occurring in the first place. Employers should consider these steps in order to assess, address and reduce their potential exposure:

• Implement zero-tolerance policies for inappropriate or illegal behaviour, such as harassment or discrimination.
• Compose and distribute an official employee handbook that includes all workplace policies and procedures and clearly sets out the standards of behaviour expected of employees. This handbook should be regularly reviewed and updated.
• Establish formal job descriptions for all positions that clearly detail expectations, requirements and performance standards.
• Document all employee issues and complaints, as well as any action, resolution or response by the organisation.
• Review employee performance regularly and be sure to properly document and address any problems.

In Conclusion

Employment practices liability claims are a legitimate and consistent threat for employers. Organisations should already strive to provide a healthy and safe environment for employees, but these claims make the potential consequences for not doing so extremely severe.

For more information on EPLI policies, contact us today.