New Employment Laws, Power Shift in Washington May Increase the Risk of Workplace Charges
As the economy continues to falter and a new Administration takes over in Washington, the workplace is being seeded with new legal hazards for business owners that could lead to an increase in employment charges and lawsuits.
Escalating layoffs, new worker-protection legislation and the expected removal of damage caps in employment litigation will create a more challenging climate for employers. The cost of defending against an employment complaint may increase and damages awarded to workers could soar to even higher levels.
Employment practices liability insurance (EPLI) — already a must for businesses and institutions of any size — will be even more critical. Now is the time for agents, brokers, risk managers and others to educate their customers about the changes underway and developing trends in the workplace.
Employers should be prepared for a range of employment claims, including allegations of discrimination, wage-and-hour violations, charges of unfair labor practices and retaliation issues. Class action suits and actions stemming from alleged systemic discrimination are also expected to increase.
EPLI More Available and Affordable
Even though EPLI often makes sense from a cost-benefit standpoint, many small and mid-sized businesses still do not purchase coverage. They understand the need — a study by The Hartford Steam Boiler Inspection and Insurance Co. found that 92 percent believed they would face an employment-related claim or lawsuit sometime in the future. Many mistakenly believe, however, that the coverage is expensive or onerous to obtain.
The reality is that EPLI has evolved from a high-priced option to an affordable necessity. EPLI coverage is now available in business owner policies or other commercial package policies. Today there is a much wider range of EPLI products available and a separate application and additional underwriting information may not be required. Policies may include specialized EPLI claim services and legal representation.
Outsized Risks for Small Businesses
Small businesses in particular face big risks from employment claims. Many don’t have internal resources, such as in-house legal counsel and a professional human resources staff, to establish risk-management policies and procedures. They may not have policy manuals or perform thorough background checks. Even when they do, groundless allegations can be made at any time and are often costly to defend.
The statistics are sobering. From FY 2003 through FY 2007, nearly 395,000 cases were filed with the Equal Employment Opportunity Commission (EEOC). Total payouts reached almost $520 million.
President-Elect Obama Pledges Support
Those numbers may rise as new laws and policies are enacted in the next Congress. Support is expected from the highest levels of government. Several critical bills were sponsored or co-sponsored by President-Elect Barack Obama. Many were passed by the House, but failed to win enough votes in the Senate. With the new Congress, they have a greater chance of becoming law.
The federal agencies responsible for workplace regulations, including the EEOC, Occupational Safety and Health Administration (OSHA), Department of Labor Wage and Hour Division, and the National Labor Relations Board are expected to become more aggressive. President-Elect Obama also will appoint new federal court judges and possibly U.S. Supreme Court justices who could have a long-lasting impact on employment law in the United States.
What should employers be concerned about? A key issue involves a change to the landmark Americans with Disabilities Act (ADA). An amendment effective Jan. 1, 2009, broadens the definition of “disability,” expanding the pool of people who can make a claim under the ADA. Employers may be compelled to make many more accommodations for workers.
With some limited exceptions, disabilities will now include conditions that can be treated, such as diabetes or carpal tunnel syndrome. Previously, “partial” disabilities or impairments that could be treated with medication or devices, such as hearing aids, had been exempt from the ADA.
Worker-Friendly Bills Abound
Another bill banning discrimination on the basis of genetic data has been passed and is expected to go into effect in November 2009. Other proposed measures would make it easier to establish unions; eliminate caps on punitive and compensatory damages; modify the statute of limitations on some discrimination lawsuits; expand workers’ rights; and establish new federally protected classes, such as sexual orientation.
One of the most contentious pieces of legislation is the Employee Free Choice Act. The EFCA makes it easier to establish unions; requires unions and employers to agree to binding arbitration if they cannot reach a collective bargaining agreement in a timely manner; and increases penalties on employers engaging in unfair labor practices. Another union-related bill expands the definition of a “supervisor,” making more people eligible to be part of collective bargaining units.
Some proposed legislation would expand workplace protections. A sampling of proposals includes expanding the Family and Medical Leave Act to include companies with fewer than 50 employees and mandating paid sick leave for employers with 15 or more employees. Others would make it harder to classify workers as independent contractors, rather than employees, and increase penalties for offenders.
Costlier, More Difficult Litigation
Several of the workplace initiatives would likely raise the cost and the likelihood of litigation. The Equal Remedies Act would eliminate the caps that Congress placed on punitive and compensatory awards under Title VII of the Civil Rights Act of 1964 (Title VII) and the ADA. This is particularly troublesome for small and mid-sized businesses, which could be faced with crippling judgments. The burden of proof could also shift, making it easier for employees to prevail in certain circumstances, such as gender-discrimination suits.
Other proposals take a new tack against long-running issues. For example, an amendment to the Immigration and Nationality Act would prohibit denying back-pay or other monetary relief for unlawful employment practices against undocumented immigrant workers.
Finally, the Ledbetter Fair Pay Act would overturn the Supreme Court’s controversial decision in Ledbetter v. Goodyear Tire and Rubber Co., effectively eliminating the 180- or 300-day statute of limitations for filing a wage-related discrimination claim.
Change Workers Can Believe In
While it is difficult to predict how many of these measures will prevail, particularly with the current economic crisis, employers are almost certain to face a more difficult legal landscape. Business and other interest groups will make their positions known on these issues, but the message for insurance professionals and their commercial clients is clear. Unless employers are prepared with formal employment policies, training programs and broad insurance protection, an employment charge or lawsuit could have significant consequences.