Staffing Insurance: What You Need to Know Now!
 Article 3 in a Series 
What is Employment Practices Liability Insurance and Why Do I Need It?

 Employment Practices Liability has become a mainstream coverage in the staffing industry over the past few years. There are several excellent product choices for staffing firms, each with its own set of strengths.

First, what is Employment Practices Liability Insurance? Simply stated, it is coverage for allegations from your internal staff or temporary employees, that they have been victims of discrimination, sexual harassment, wrongful termination, or retaliatory acts by their employers.

For many years, it was the second most frequent claim reported to us by our staffing clients. It recently became the number one type of claim reported to us both in terms of frequency and severity (cost).

We see this as a continuing trend as workers, both temporary and regular full-time, become more aware of what constitutes inappropriate workplace behavior. The EEOC reports that it received 95,402 formal complaints of racial discrimination, sexual discrimination and retaliatory actions in 2008.

Employment Practices claims are generally the most expensive claims staffing firms experience, excluding workers' compensation.  A claim with very little merit will often cost $45,000 to $60,000 to defend and settle. A claim with merit can cost in excess of $100,000.

What are some examples of claims experienced by our staffing clients?

1. Two female temporary employees complained that a supervisor at the client site made sexually suggestive remarks to them, physically rubbed up against them, and “waggled his tongue” at them. Each temporary employee was awarded $100,000 in a settlement. The claims were filed more than one year after the alleged harassment took place, and both temps had moved to other assignments.
2. A branch manager at a staffing firm alleged that members of her staff “black-balled” her after she returned from a medical leave. The manager alleged that the workers were rebellious and disrespectful to her resulting in what she described as a hostile work environment. She resigned citing mental duress and received $128,000 in damages. 
3. A gay male temporary employee working at a law firm alleged that he was subjected to sexual orientation slurs by another employee at the client site. Although the alleged slurs were not witnessed, the employee was awarded $48,000.
4. An Employment Agency recruited and placed a female employee as an assistant editor of a new magazine that was to publish its first issue in six months. Shortly after taking the position, the employee reported that she was pregnant and would be on maternity leave when the first issue of the magazine, for which she was largely responsible, was to be published. She was fired when it was determined that she was aware of the pregnancy at the time of hire.  She filed a lawsuit against the Employment Agency and the magazine citing discrimination due to pregnancy. She lost the suit because it was determined that her pregnancy leave would cause an undue hardship to her employer. However the cost to defend the suit was in excess of $100,000.
5. A temporary employee filed a religious discrimination lawsuit because he was asked to work several Saturdays.  According to the claimant, working Saturdays was a violation of his religious beliefs, which he alleged that the staffing firm was aware of. Although he never complained or refused to work on Saturday, he was awarded $43,000 in a settlement.
6. A temporary employee filed a wrongful termination suit when a three month assignment was ended after only two weeks. The client of the temp firm complained that the employee was unproductive and late to work nearly every day and they requested that the staffing firm replace him. He alleged that he had been “guaranteed” a three month assignment.  Although the staffing firm insisted that there was no guarantee of employment, the claim cost in excess of $75,000 to defend and settle.

As you can see from these examples, a staffing firm can be burdened with the costs of a claim even though they did nothing wrong. Most staffing firms have excellent policies and procedures in place to prevent harassment and discrimination in the workplace. Unfortunately, employment practices issues most often occur at the client site, and often go unreported until legal action is taken. Plus, issues like religious and pregnancy discrimination are very complicated and difficult to sort through.

Employment Practices Liability Insurance is a product every staffing firm needs. Do you have the coverage?  It is a critical element in the protection of your most valuable asset, your business.

At CTK/INSURICA, we have the experience in your industry and product knowledge necessary to assist you in protecting your business.  Questions?  Please feel free to email me at RichS@ctkins.com and I'll make sure to get you an answer. 

 

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