Employment Practices Liability and Your Risk Profile

In the midst of the #metoo movement, it’s essential for companies to consider Employment Practices Liability. Ensure your policies and procedures are in place so you know how to respond if one of your employees is accused of misconduct, sexual or otherwise.  

Employment Practices Liability

Listen to the full episode here, or read the full transcript below.

Paul Martin: Welcome to Risky Business, Commercial Insurance with Butler Byers. This is Paul Martin, business commentator here on CKOM. And once again, I’m talking with Colin Rooke, the Commercial Risk Reduction Specialist with Butler Byers Commercial Insurance. And as always, we talk about issues that are really relevant or of importance in value to business owners, those in the commercial sector who, you have to deal with a lot of challenges and questions about, well, business in general.

Paul Martin: But then every once in a while, once year, your policy comes up. Colin and these people are, “Oh yeah, I guess I better deal with this thing and talk to my broker.” And you stop and pause for a second and you think, “What’s going on up there?” And you realize, “Woo, this landscape is changing so rapidly. The insurance industry probably having trouble keeping up with it so if the industry’s having trouble keeping up, how do I, as a consumer, who interfaces with the industry once a year, how do I keep up?”  

Paul Martin: And the latest one not so long ago we were talking about all the challenges around natural disasters, that kind of stuff, earthquakes, hurricanes in particular, fires. The one that’s been capturing all the headlines lately is conduct in the workplace. We’re seeing very high profile members of the media, the entertainment community being fired for misconduct, sexual impropriety, assault, misconduct in the workplace, and we’re seeing and hearing, Colin, a lot about the names of these celebrities that catches our eye and our ear, but what we’re not talking about, what’s going on behind the scenes for the employer? There’s an employer who have to take action here and can you walk me through what’s all this mean to a business owner, if you have to deal with this issue?

Colin Rooke: Yeah and this is a very, very important topic because you hear about the celebrity accusations. You hear about the terminations, the canceled contracts, the movie deals, but so far none of this has made it to court. Now, I’m not suggesting it did or did not happen but from a business owner, from the company perspective, there’s a lot of exposure there if maybe you are too quick to act, too quick to terminate, maybe your policies and procedures aren’t in place or aren’t where they should be. Did you consult your lawyer prior to making the termination and what is your responsibility as an employer to not only, the accuser, but the accused. And so it’s a pretty important topic today is something called Employment Practices Liability.

Colin Rooke: Now, this is an insurance coverage and usually we’re talking purely I guess about risk but with the rise of these accusations it’s something that for every business owner, if you don’t have the coverage you need to think about it and if you do, there’s still a lot of work behind the scenes that needs to be done from a proactive risk management standpoint. And I would argue, having the coverage isn’t enough, are you following proper procedures to mitigate your risk should someone or many they already have say, “I’ve been treated unfairly in the workplace.” Doesn’t need to be sexual misconduct but any sort of accusation.

Implication for Employers: Employment Practices Liability and Risk

Paul Martin: And I think that’s the part that being missed in this conversation. The headlines are clearly very, you know, they’re screaming out and I guess it’s because of the notoriety of the people the accusations are being leveled against.

Paul Martin: A couple of thoughts come to mind on this one is, I think you pointed out, none of this stuff’s really gone to court so that would have been traditionally the way an employer would have thought about it if there was a criminal investigation. Then I guess I have a decision to make about my worker. Now, it’s the court system, the legal system’s being bypassed and this is an employer decision and more and more employers are stepping up to the plate and just saying, “Accusations have been made. That’s good enough, you’re fired.” And you know, the landscape changed on that one, sort of the decision making process changed and I’m just wondering, you’re hinting that there is, not hinting but you’re saying that there is an implication for employers from a liability and a risk in the insurance side of it.

Colin Rooke: Yeah you know, again as you mentioned, there’s been accusations but again it has not gone to court and the reason why employers are acting, and it doesn’t have to be a top morning show or a movie producer but the reason why the employers are acting, is because of the social pressure to do something. I mean, if you have an accused that’s all over the media, and you say, “Well, despite the fact that 25 women have said such and such, we are going to wait for the court system,” You look like a monster to the public.

Colin Rooke: And so these employers are saying, “We have to do something. We need a distance ourselves,” and they’re taking a lot of risk. Then again, you don’t need to be NBC, CBS to have that same problem in your business on a much smaller scale, there’s still a lot of pressure to do something if someone has said, you know this person has been doing the following for a long time.

Colin Rooke: And again, you know Employment Practices Liability is in my opinion it’s not purchased enough and that’s because I don’t think there’s enough understanding of not only what it covers, why would I need this, but the real risks to the organization for not doing your due diligence on Employment Practices Liability. I mean it, you don’t have proper sexual harassment training for your managers for example, there could be problems. If you aren’t discussing with legal counsel prior to termination, there’s problems. If you aren’t documenting discussions about increased compensation, promotion, again, you’re at risk and the list goes on which is why thinking about your employment practices is so relevant right now especially.

“If you aren’t documenting discussions about increased compensation, promotion, again, you’re at risk.”

Paul Martin: In the part of, it’s not just building policies and procedures, I guess, filling your manual, your operating manual, there is the one thing you would encourage them to think about is, let’s talk about our insurance component that fits in the manual too. That is another part of the decision making process.

Interactive Questionnaire to Identify Employment Practices Liability

Colin Rooke: Yeah and before we get there, we need to know, okay what is your risk? How exposed are you? So what we’ve done is, we’ve developed an interactive questionnaire I’ll call it, where we can work the management group, we can ask these questions together, and it will basically rate your organization on both preparedness and risks. I mean, if it’s a low scoring you’re more prepared and equipped to handle an accusation or any really, any employment practices, dispute I’ll call it again ’cause it doesn’t have to be just sexual harassment in nature, but it’ll also point out where your weak or where you haven’t paid much attention.

Colin Rooke: And I have to be honest, it’s rare that we find an organization that I would say is bullet proof, completely prepared. There’s always something we can point out, we can address, that we need to work on. But in far too many cases, there is really … there hasn’t been much attention in this area. And again, I think with … If you think about you as an employee that’s been discriminated against or you feel like you have been, and you’re following the news, and you hear about all these A-list celebrities that are now being sort of called out and this has been your reality, I would argue you’re more likely to tell someone now that it’s a hot topic. And again, as an employer, you need to be aware and do your due diligence to make sure you come out of this thing okay.

Paul Martin: All right, we’ve got to take a little break. You’re listening to Colin Rooke the Commercial Risk Reduction Specialist with Butler Byers Insurance. You’re listening to Risky Business and Colin when we come back, I want to dig into that just a bit further. So stay with us, we’ll be back in just in a couple of minutes.

Paul Martin: Welcome back to Risky Business, Paul Martin here sitting in with Colin Rooke, the Commercial Risk Reduction Specialist with Butler Byers Commercial Insurance. And we’re talking today in today’s program, Colin, about what all the headlines I guess that have been coming about the celebrities that have been kind of been accused of impropriety, sexual misconduct, this kind of stuff, really all across the North America, and we’re looking at what does this mean to … we’re hearing about the celebrity, we’re not hearing so much about what’s going on with the employer. And that’s where your part of the world comes in where there’s some risk in all of this that can you buy an insurance policy against misconduct of employees? Is that something that’s actually available?

Colin Rooke: It is and like I said, I think it’s under utilized and I think it all comes down to education and really looking within and saying, you know just because this hasn’t happened in the past, doesn’t mean it won’t happen in the future? And I’m not trying to suggest that there’s a lot of bad businesses out there, not at all. But in all honesty, you’re one off colour joke, I say this all the time, but you’re one off colour joke away from being sued. So it is the belief that most organizations treat their employees well. But that doesn’t shelter you against a bad day.

“You’re one off colour joke away from being sued. So it is the belief that most organizations treat their employees well. But that doesn’t shelter you against a bad day.”

Colin Rooke: You know you have a bad enough day, maybe your disciplined for something, things aren’t going your way, you’re just feeling down in the dumps, what have you, it doesn’t shelter you from saying, “I feel like I’ve been wronged and I’m going to seek a remedy of some sort against my employer.” And that’s all it takes. And I don’t think there’s a single employer anywhere out there that could say, “I don’t have a single employee that’s ever had a bad day while working for me.” And so again, it’s something that needs to be top of mind.

Colin Rooke: Now, I mean the coverage itself. It covers things like discrimination, employment related libel or slander, misrepresentation, failure to enforce adequate workplace or employment policies, retaliation, sexual harassment, wrongful demotion, discipline, dismissal, or even failure to employ or promote. So if you think about it you could have a conversation with a prospective employee, failure to ultimately hire that employee and still have a court case on your hands.

The Real Risk is Financial and Reputation Loss

Colin Rooke: And I mentioned earlier, we want to make sure that the companies we work with come out okay in the end. And what I mean by that is, it is very, very costly to the organization once an accusation has been made. And having an Employment Practices Liability policy will help you with the defense costs. I mean, maybe you didn’t do anything wrong, maybe you did, but it’s going to essentially cost you the same to prove either way. And that’s again, where the real risk lies. It’s financial. It’s reputation as well.

Paul Martin: Now one of the things we’ve talked about in this program, time, after time, after time, is a step by step, your step by step risk assessment program and how you can walk an employer, or a business owner through a set of questions, and you will help to identity where their weak spots are and where their strengths are. I’m guessing you have kind of a step by step program on this particular topic as well.

Colin Rooke: We do. And we say this a lot, but we don’t know what we don’t know. So if we don’t understand your business, if we don’t understand your policies and procedures, how can we help you navigate the landscape of risk? So, if we’re just relying on applications, so we say, “Look, there’s this product called Employment Practices Liability, here’s a questionnaire. We’d like you to fill it out. We’ll go to the market, and come back with quotes.” You know we’ve only done part of our job.

Colin Rooke: One, you’re not going to buy it if you don’t see the need. But two, if we’re not helping you improve your practices, if we’re not working with you to ensure you never use this thing, that it’s something you can shelf and have there in case you need it. But if we can’t identify problem organizations, and again by problems I just mean loose policies and procedures, I don’t mean rampant, widespread accusations, if we can’t identify that together, and we sell you a policy that’s there’s a high likelihood that you’ll need and use, we’re not doing our job.

Colin Rooke: And quite frankly, and especially if you look at these public accusations once they are made public the damage is done. So do you a policy? Do you not have a policy? I mean that’s not going to help you if you don’t focusing on changing your practices. So again, our step by step approach is going to allow us to identify the need but also work with you to improve those practices and identify what you should or should not be doing in a really easy to understand way.

Paul Martin: This seems like this is getting to be a really complicated world, isn’t it? It’s way more than, you know when I started my business it was because I found a market opportunity and I saw a need in the market for some people, a customer had a need and I’m filling it. Boy, this is way more complicated than that.

Colin Rooke: You know, it’s a little bit … I mean it sounds like I’m kidding around but I mean, you can’t even have a closed door conversation with an employee about a potential promotion or wage increase without documentation because if that doesn’t come to fruition, mean that employee could make a claim saying, “I was promised something that wasn’t delivered on I’m now seeking damages, remedies.” It’s pretty scary.

Paul Martin: I’m assuming you have clients who hold this kind of insurance. They buy these types of policies, can you characterize them, are these the forward thinking ones, the ones that are just scaredy cat, I mean, what kind of businesses are buying these kinds of policies?

Be Aware of Your Risk Profile

Colin Rooke: Again I think it’s the companies that are … they’re aware of their risk profile. They’re aware of areas where they have to make sure, and if you think about … if you have three employees and you’re all pretty tight knit and the owner’s very involved in the business, and overseeing most things, I mean if there’s no sexual harassment that the owner is seeing, then chances are behind it’s not occurring. But I mean now you’ve got a 1000 employees, you know 1500 employees, 2000 employees, there’s no way you’re going to know what goes on behind the scenes. So if you’re acting like you do, you’re just being naïve. So when you say, “Look, this is a great company. I have no reason to think it’s not. But we want to make sure, I mean quite frankly, on paper through policies and procedures you’re also a great company, we’ve got some work to do and you know, this insurance policy should be in place to, again, ultimately protect you.

Colin Rooke: And I think when most companies find is Employment Practices Liability is not very expensive. And if you’re doing the work, it’s really inexpensive. Often I’m shocked at how little they charge for the limits they offer and quite frankly, the coverages but again, I find that it’s usually the companies that are putting in the word they are aware of the risks that buy the coverage. So I think if you’re an underwriter, it makes more sense to charge less.

Paul Martin: Cause they’re a good risk.

Colin Rooke: They’re a good risk, yeah.

Paul Martin: They’ve done the homework.

Colin Rooke: Exactly. They know that they don’t know everything. They know they can’t be everywhere but they’re going to take the advice and change things around and then they’re again, purchasing the coverage as well just in case.

Paul Martin: Colin, we’ve run out of time. Can’t believe how fast this slot’s gone by. So thank you for this and very timely topic and a difficult one. I mean, it’s obviously one of those things none of us like to hear any of these stories. I mean there’s nothing pretty about any of this stuff. But there is a business reality attached to it all as well. So thank you for taking the time to explain this.

Colin Rooke: No problem.

Paul Martin: You’ve been listening to Colin Rooke, the Commercial Risk Reduction Specialist with Butler Byers Commercial Insurance. This is Risky Business, commercial insurance with Butler Byers and I’m Paul Martin. Thanks for joining us.