Article by latest.insure

Employment practices’ liabilities can be expensive, disruptive, and time-hungry to businesses. Claims are also rising. That’s because employment laws and regulations are complex and often change, so businesses can struggle to stay compliant. To help, we’ve compiled an update on the risks to your balance sheet and how to manage your practices more effectively.

The risks of your employment practices

You have liabilities whether you have one or many staff, whether they’re current or former employees. Any one of them could claim against you for an alleged or actual breach of employment practices. These include:

• Unfair wages, including underpayment
• Failure to promote
• Negligent evaluation
• Unfair dismissal
• Workplace bullying or sexual harassment
• Breaching an employment contract
• Discrimination, such as being deprived of a career opportunity
• Mismanagement of staff benefit plans, including superannuation and leave entitlements.

You can’t use any of the following reasons not to hire a qualified job seeker: mental or physical disability, marital status, sexual identity, age, colour, gender, political affiliation, family responsibility, religion or political affiliation, and national extraction. Check out the Australian Human Rights Commission’s guide to avoiding discrimination as well as Work Logic on recent cases. Get a sense of claims that have come before the Australian Fair Work Commission and the results.

Take time to ensure you audit and update your human resources contracts and policies to keep compliant, particularly as your business continues to navigate COVID-19 uncertainty. Too often, companies can tweak their employment contracts without a lawyer’s advice, opening up a major liability. You might decide to change staff conditions such as laying them off or permanently cutting their hours or pay. Not giving them reasonable notice means you risk them claiming against you. They may claim now or in the future.

Often, small-to-medium-sized businesses that lack an in-house HR team opt to reduce their risks by taking out employment practices liability insurance (EPLI).

What EPLI does and doesn’t cover

You might think you already have cover for your employment practices liabilities through your:

• General liability
• Professional indemnity
• Directors’ and officers’ insurance policies.

However, there are gaps that employment practices liabilities insurance (EPLI) will fill, though policies can vary.

Here’s an overview of what EPLI usually will cover your business for:

• Damages and compensation
• Court judgements as well as interest
• Insurer-approved settlements
• The claimant’s costs
• Advance payment for defence costs.

Exclusions to EPLI cover may include:

• Something that happened which would give rise to a claim or litigation that started before you signed your policy
• Claims your company was forewarned about under a different policy
• Industrial disputes
• Violations or benefits under your workers’ compensation, unemployment or disability policies, workplace health, and safety or fair labour standards laws
• A court or tribunal ordering you to back/front pay or compensate an employee, including for future loss and damages
• Your fraud or dishonesty
• Criminal fines and penalties as well as civil penalties that don’t compensate.

There are a few more, and don’t assume they’ll all be listed in the ‘exclusions’ of the policy because they may feature in other sections.

Who does EPLI cover?

EPLI usually covers the company or entity as the employer plus directors, officers, and employees – the latter can be past, present, or future. Most policies extend coverage to spouses and domestic partners, estates, heirs, and legal representatives in particular cases. That’s for claims against an insured individual’s spouse or estate. And it’s only for cases that result from the insured person’s wrongful act. As well, some policies will cover third-party claims such as from clients, vendors, (legal) partners, and independent contractors. But, usually, all employment practices policies protect you against claims made anywhere on the globe against an insured person in your policy.

At McKenzie Ross Business Insurance Brokers, we can customise an employment practices policy to your business type and the extensions you need. We’ll guide you on how the policy defines explicitly an insured person and claim – they can differ. We’ll be on hand if you need those amended. Your premium will depend on your business type, the number of employees, and claims history.