How employment practices insurance is responding to COVID-19
The pandemic forced employers to make critical decisions on short notice with scant and often conflicting guidance.
A recent increase in coronavirus-related employment practices lawsuits has put employment practices liability insurance (EPLI) in the spotlight.
This escalation of litigation may come as a shock to the countless employers that willingly sacrificed profits to keep employees safe and employed, but it is not entirely unexpected. Unfortunately, litigation typically surges whenever confusion, desperation and opportunism combine.
It may seem odd to be thinking about EPLI in the midst of a pandemic, but COVID forced employers to make critical decisions on short notice, with scant and often conflicting guidance.
The Department of Labor gave employers just 30 days to integrate the Families First Coronavirus Response Act (FFCRA) into their operations. Employers were also required to apply existing employment laws in the unprecedented context of COVID-19. Those turning to the Equal Employment Opportunity Commission for a roadmap were cautioned to remember that guidance was likely to change as the COVID-19 pandemic evolved.
Inadvertent mistakes were and are simply unavoidable under these rushed circumstances, and many organizations are seeking clarification on what kind of complaints are being filed and whether or not EPLI policies will respond.
Given the range of complaints and variations in EPLI policy forms, a consultation with a qualified insurance advisor is suggested, but the following provides an overview of the matter.
Wage and hour: Remote workers, modified schedules and other operational changes prompted by COVID are expected to generate claims for unpaid or improperly calculated wages, including claims that employers failed to properly monitor, track or pay remote employees for all hours worked. Most EPLI policies do not cover claims for unpaid wages brought under any federal, state or local wage and hour laws, including the Fair Labor Standards Act (FLSA); however, many insurers will cover defense costs up to a specified sub-limit.
Paid sick leave: The Emergency Paid Sick Leave Act governs the payment of wages for employees missing work due to COVID. This law references and incorporates various provisions of the FLSA, so claims for unpaid sick leave are likely to be treated as claims for wages that are excluded under most EPLI policies, as stated previously. The Emergency Family and Medical Leave Expansion Act, like the Paid Sick Leave Act, requires paid leave to covered employees unable to work because of the closure of their child’s care provider or school. Although EPLI policies typically cover violations of the Family and Medical Leave Act, insurers may treat claims involving expanded FMLA as claims for wages that are not covered by the policy. It’s too soon to know precisely how insurers will respond to these types of claims, but defense costs for both types should nevertheless be covered if the policy provides for both violations of FMLA and includes a defense sub-limit for wage-and-hour claims.
Wrongful termination, demotion, failure to promote and other workplace torts: While employers may have reasonable business purposes for terminations and other lawful employment acts, employers need to be mindful of perceptions. Any adverse employment action taken after a COVID-related leave or sickness may be perceived as a violation of law.
Retaliation: Any adverse employment action taken by an employer in response to a COVID-related complaint or request may result in a complaint of retaliation. EPLI policies generally provide broad coverage for retaliation, including claims alleging violations of law that are otherwise excluded. For instance, violations of the Occupational Safety and Health Act are not covered by EPLI, but a claim alleging unlawful retaliation for reporting a perceived violation of the law is covered. Most policies include similar coverage carve backs for other laws.
Work-related exposures and infections: This particular risk, while not a subject matter of an EPLI policy, due to exclusions for claims involving bodily injury, sickness, disease and death, may result, nonetheless, in the tendering of legal defense and indemnity if an employer takes adverse action against an employee that results in emotional distress, mental anguish, humiliation or loss of reputation.
WARN Act. The Worker Adjustment and Retraining Notification (WARN) Act generally requires employers with 100 or more full-time employees to provide 60 days advance notice of plant closings or mass layoffs. Although COVID made compliance virtually impossible for some employers, most will likely be sued by their employees for WARN Act violations. The law’s “unforeseeable business circumstances” exception may apply in these cases, but employers will have to assert this defense on their own dime because violations of the WARN Act are not covered by most EPLI policies.
Employers can expect other types of claims as well, some old and some new. Attorneys will no doubt be creative in their complaints. Unfortunately, the limits and boundaries set by precedent simply do not exist in unprecedented situations. No one knows precisely how COVID-19-related employment claims are going to turn out, but time will tell.
Anita Byer is the president of Setnor Byer Insurance & Risk in Plantation, Florida.
Related: