The employment practices liability (EPL) insurance market has been a challenging one for policyholders in recent years, with rising rates and limitations in coverage becoming the norm. As we look ahead to 2023, it appears that these market conditions will persist. In this blog post, we will explore the current state of the EPL insurance market and provide tips for employers navigating this complex landscape.
Rising Claim Severity
Employment charges and related EPL claims have been on the decline since 2016. However, their associated costs have been increasing, a trend attributed to various factors, including social inflation driven by public sentiment towards large corporations and pandemic-related allegations of inadequate workplace accommodations. Therefore, it is essential for employers to prioritize EPL risk management to avoid costly claims.
Increased Regulatory Scrutiny
The Biden administration and the U.S. Equal Employment Opportunity Commission (EEOC) are collaborating on regulatory initiatives to fight systemic discrimination in the employment landscape. This includes leveraging enforcement capabilities and education and outreach efforts to minimize discriminatory patterns in employment settings. With the administration’s plans to expand the EEOC’s workforce by 2023, businesses should prepare for even greater enforcement capabilities and associated EPL claims.
Marijuana Legalization Considerations
The legalization of marijuana at the state level has created numerous challenges for businesses across industry lines, particularly regarding EPL exposures. Employers must be aware of state-specific legislation related to marijuana legalization, including statutes that restrict employers’ abilities to conduct drug tests for marijuana or prohibit them from refusing to hire or taking adverse action against workers who use the substance recreationally while off-duty. Employers that fail to maintain compliance could face an increase in EPL claims.
Artificial Intelligence (AI) Concerns
While AI systems offer various benefits in the hiring process, such technology may also pose EPL exposures. Specifically, AI systems may contribute to discriminatory employment decisions if the algorithms and data sets entered into these systems are biased against specific groups. Employers should evaluate the algorithms and data sets for any AI systems utilized within recruitment and hiring processes to prevent discriminatory employment decisions and ensure compliance with applicable federal and EEOC guidance.
Tips for Employers
To navigate the complex EPL insurance market, employers should:
- Assess their employee handbook and related policies to ensure appropriate language on discrimination, harassment, and retaliation.
- Review state-specific legislation related to marijuana legalization and revise procedures related to conducting workplace drug tests for marijuana or basing employment decisions on an employee’s marijuana usage.
- Evaluate the algorithms and data sets for any AI systems utilized within recruitment and hiring processes to prevent discriminatory employment decisions and ensure compliance with applicable federal and EEOC guidance.
Employers must remain vigilant when it comes to EPL risk management, particularly in light of the challenging market conditions in 2023. By staying informed of regulatory changes and taking proactive measures to prevent EPL claims, employers can protect their businesses and employees. It is always recommended to seek legal advice or consult with an insurance professional for appropriate advice.
