15 Jan Insurance Talk – Why You Need Employment Practice Liability Insurance
Rex and Cheri have the answers. Listen here.
Why You Need Employment Practice Liability Insurance
Cheri Martinen – You are listening to Insurance Talk with Cheri Martinen and Rex Lesueur, the father-daughter team from Bancorp insurance. Bancorp Insurance is the locally owned independent insurance agency from La Pine, Oregon. We’re located in beautiful Central Oregon. We help all of our friends and family learn about insurance and its nuances.
The Importance of Having an Employee Manual
Rex Lesueur – Yeah, and today we’re going to talk about employment practices liability insurance. This is an area we’ve actually talked about before. We’re going to take it from a little bit different angle at this time. Talk about why in order to prevent employment practices liability lawsuits, you need to have an employee manual.
CM – And this is like an employee handbook at you. It’s one of the things you kind of put together and then you hand to people and then you forget about it and then they forget about it. But it really is a great tool again, like you said, to prevent any claims arising for employment, practice liability.
RL – Because first of all, you tell the employee what you want and what’s expected of them so that later on they can’t come back and say, well, you never told me that, that you never told me that isn’t a great defense or can be weaponized in the event that, you know, there’s a disagreement or a misunderstanding and they feel hurt. And, uh, of course, the, one of the fastest-growing areas of lawsuits in the country right now is employees suing their employers.
CM – And the employee handbook really is one of those documents, again, wrecks out. It’s right on the point and telling employees what to expect, what to expect for procedures, what to expect for vacation, what to expect for maternity leave, what to expect when they show up, what to wear when you show up, what to wear. I mean these, these are basic things that you need to have it in your, in your employee handbook.
RL – you would think you know that if you know, if you have a situation where someone needs to work with the public, maybe I’m facial tattoos and excessive piercings are, are not necessarily what you want to put to the face of your employee.
CM – But at the same time, depending on your culture, that might be exactly what you want to put towards your outward-facing customers. So it just depends. Like if you work at a tattoo parlor and you don’t have a single tattoo, they might not be your ideal front desk person. You never know. Thinking about that as well, it’s also a good idea for them to expect what management or owners are going to do. So if X happens, this is what we will do as the discipline. Like if you’re late four times in a row, this will be your discipline.
RL – So you’re not surprised if you get terminated. Yeah. One of those.
CM – If you don’t show up and never call five times in a row, the employee’s action will be termination. There you go. It helps also just have key policies and consistent communication, so it’s not the boss being like, yeah, yeah, yeah, it’s fine. You’re late. No, just stick with what’s in the handbook. Just if you’re like, Hmm, I’m not sure about that. Let me check our handbook. That’s always a really good answer. Have you read the handbook to get the answer to that? There’s a, there’s a good one that’s an answer that you can give your employees. Showcases the benefits that you offer. I think this is a no brainer. It tells your employees about all the good things and how awesome you are, right? You’re offering the 401k maybe or maybe health insurance or maybe you’re offering, oh gosh, what else? You’ve got vision, dental, health. You could be offering ground and air transportation with MASA.
RL – What days off. You can expect to have. How many vacation days? How do they apply? Do you have a vacation day plus personal days? All these things are important to what an employee gets and if you put it in writing to them, then when they asked for that fourth week of vacation, you’re going to say, eh, or they just tell you they’re going on vacation and you look at him and says there’s no vacation and you know, vacation.
CM – Another one and this is kind of one that I think we all think about with the employee manual is complying with federal and state laws. This is actually one of the biggest issues with an employee handbook is that these constantly are changing and updating and so you can’t just write it and forget it. This is one of those things that you’re revisiting this handbook year after year as new legislation has put into place to make sure that your handbook is up to date and that your employees know what to expect based on the federal and state laws. Ooh, is it a pain!
RL – Yes, it is a pain. I mean, I know we spend a lot of time on ours. Our employee manual when we first opened for business, while we didn’t have one for the first four or five years, and then, of course, we figured that we needed one after we had a cup full of disputes and then we got one and it was maybe 12 pages long.
CM – Oh, it’s definitely over 45, closer to 40 to 50 pages now. And that’s why they actually call an employee handbook, a living document. It’s because that’s a document that’s living. It’s constantly being changed and upgraded. It’s never just sitting on your desktop not being paid attention to, or I’m probably more often in your employee’s drawer, never being paying attention to. It’s kind of something you’re updating every year during maybe an annual meeting.
RL – Yeah, and one of the things that we do is whenever the employee manual changes, we actually give each employee a hard copy, advise copy of it, and we ask for a signature recognizing that they have received it, read it and understand it.
CM – Yup. That’s actually a big one. Yeah, you can see gave it to them, but if they don’t, well, I never got that. That’s a defense, right? Yeah. You need to make sure that they say, yep, I got it. I read it. I received this document, file that in the file. It also knows where, lets employees know where to turn if they do need help, so if they feel like they’re being bullied at work or maybe there was an issue with sexual assault.
RL – Well, and it’s not even just from other employees. It can be from the ups guy. I mean a vendor or a customer comes in and hits on somebody in the office. You have to have a policy for that and you have to enforce it. You do not allow that to happen. That kind of nonsense cannot access cannot exist in a modern professional office or workplace.
CM – No, you can’t have it. So just letting them know where to turn. Is that you, the owner? Is it maybe management first? Is it a hotline that isn’t even associated with the workplace?
RL – Yeah. Bigger companies do that.
CM – If you have any questions about your employee handbook, you can give us a call at Bancorp insurance at 1-800-452-6826.
Where Employee Liability Claims Come From
CM – So continuing that topic of employment practices, liability insurance, Rex, you had a pretty good story about maybe not a handbook but about how this kind of coverage, is important.
RL – Yes, you need to have this coverage and it’s surprising where claims can come from. One case we had, there was an employer and they were ramping up for a new project and part of what they did is they needed somebody to be the ups clerk and this person would take the product, put it in boxes and ship it. They were interviewing to ramp up for this new project. They were really low on employees at this point. They had been, you know, hadn’t any big orders for a while and they were, they interviewed this woman and the how you interview people and one of them, you know, asking her questions and better background and you know, checking to see her attitude and everything else. And they asked her if she could pick up a 40-pound box, which is pretty good, heavy box.
And she said, well, yes, but I did have a heart condition a while, a mild heart attack, but the doctors have released me and I’m good to go. Okay, well, this particular firm didn’t get the order, and the lady called up up three, four weeks later, said, ‘Hey, did I get the job?’ And they said, Nope, I’m sorry you didn’t get the job because we didn’t hire anybody. We have, we’re still waiting to hire and we’re hoping to get the order, but we haven’t and we’ll let you know if we do. Well. A couple of days later, the employer gets a demand letter from an attorney saying that they had discriminated against this person because by not hiring her because she was a member of a protected class, the class is a member of the Americans with disabilities act, you wait, ‘Whoa, we didn’t hire this person and you’re still saying we discriminated against him.’
The long and short of it, it was a shakedown by an attorney. The attorney was in compliance or in cahoots with this particular individual who had this heart condition. If she even had a heart condition, we never got to the point where we found out that this individual had a heart conditioned because there was no insurance. This, this individual, you know, turned it over to their attorney and the attorney ended up settling out of court. And not for a lot, no, not for a lot in a lot of terms, but did end up settling and it would’ve been nice if we could have had some insurance in this case and the, yeah, we’ll turn it over to and someone with deep pockets to defend. But this is the kind of thing that is, that that’s an unusual thing. But the typical thing that happens is, is an employee, and I don’t want to pick on employees, but what can happen is, is that you’ve had an employee for a while there, they’re marginal.
You push them, you push them, you try to make them better. Finally, you just throw your hands up and in a fit of, uh, I, I can’t take this anymore, look at them and send them away. Well, unless you have done your due diligence and every time you tried to work with them and there, you know.
CM – You just brought them in, he shows the training that you offered, talk to them about the improvements needed and give them the appropriate time to have it all in writing with signatures from the employee as well as the management, whoever is helping them improve, whether that’s like an online class online or like an on the job training or additional support for all of that.
RL – And if you don’t have that documented in the person gonna come in and say, ‘Nah, you, you fired me because I was a member of a protected group or a member.’ Are you discriminated against me or you treated me badly. Or any number of, um, different things that you can be sued for. It’s not easy. One of the things that you have to be very careful of and it needs to be specifically in your employee manual, is that anything to do with human interactions. Oh, I’m going here with sexual harassment or bullying. Harassment doesn’t necessarily have to be sexual in nature. I mean, it could just be bullying and if you, you know, wander into, your employees and you know, start screaming at them at the top of your lungs once a month because you know, the this and this isn’t that and that isn’t that done, then that creates a hostile workplace. And some people, some people thrive in a hostile workplace. Most of us don’t. Most of us would feel threatened and feel like we’re being put upon and that at some point, if you’re operating like that or have a supervisor operating like that, then yeah, someone’s going to leave and sue you. It doesn’t necessarily, harassment doesn’t necessarily have to be sexual in nature.
CM – I mean it could be over email, it could be in person. It could, it could be on social media.
RL – Yes. Oh, well yeah, that’s social media policy. We’ve heard of a case where the husband of a, an employee posted it on social media, how the coworker of the employee was not doing their job so that the spouse was being put upon and that all played out in social media and oh my God, what a mess that was for that employer.
CM – Yeah, so I mean again, life is messy, employees are messy. We try to best mitigate all of this when an employee handbook, really that living document, making it so that if there are clear cut lines on, if this happens, this is the consequence, but it doesn’t always work that way and that’s why there are employment practice liability.
RL – And we’re going to go into that in-depth in here it just a little bit.
CM – If you have any need or want to listen to this episode again of Insurance Talk, you can listen to it on your favorite podcast streaming station or you can find us online at wwwbancorpinsurance.com.
What is EPLI Coverage?
CM – You were listening to insurance stock with Cheri Martinen in and Rex Lesueur where the father-daughter team from Bancorp Insurance, a locally run independent insurance agency located in beautiful Central Oregon. And today our topic is EPLI. That’s what we call it because we shorten everything in our industry.
RL – It’s everything. Everything. Everything’s got an acronym, EPLI, employment practice liability insurance. Yes, that’s a mouthful.
RL – So what is this? This mysterious EPLI coverage. Basically, it’s liability coverage. It’s triggered when somebody threatens to sue you or does sue you. Most of the time when you’re in a situation like this, how do the claims come in? Well, a letter. Sometimes they’re registered mail. If you’re in business, you know, getting that letter where you have to go to the post office or the postman brings in a letter and makes you sign for it and it takes the little green card off the back and you know, hands you the letter and mails it back to the person who had sent it to confirming that you had received it. That’s one way to get them. The other way is this, someone walks in sometimes in a uniform and hands you a lawsuit and makes you sign for it. So that’s, that’s the middle of the process.
CM – It’s not a bad idea, a lot of times too if you get one of those letters, nothing has happened. You can always call your EPLI company. The first thing you do with a letter like that, did you send it to your insurance agent and let them know what’s happening? You have to be able to give you some help.
RL – Well, and there’s laws regarding mediation and all these other things. If you get a letter like that on it from any kind of business situation where there might remotely be insurance, whether it’s property and liability, liability coverage of any kind, jeez, get that to your insurance agent and don’t ignore it or at least give it to your attorney or any good attorney will tell you to turn it into the insurance company.
CM – Don’t email that past employee or whatever and leave a horrible voicemail. Don’t do that. Yeah. Yes. They hand it off to the professionals.
RL – That’s what the insurance is all about. And then what’ll happen is, we’ll start things in the process. If there’s a demand letter, then you turn it over to the insurance company and the insurance company will either attach an adjuster to it. Typically they’ll have something, some, they’ll look at the case and decide whether or not they, what they need to do. If it’s a demand letter, they may send a letter back asking for more information. May send a letter saying your case has no validity. If it’s an actual lawsuit with, you know, that comes in with the guy with the uniform. Well, they’re going to assign an attorney because they got 30 days to respond.
They have to get back to the court within 30 days to start talking about getting the lawsuit handled. And of course, typically what happens is, is once they respond to the court, we’d go into a period of discovery where the attorneys and $500 letters back and forth. And this takes forever because once they send one letter, the other guy thinks he has 30 days to respond and back and forth. And this’ll take months until we get to the point if it isn’t settled by then, where we get the depositions. And when you get to depositions, that’s when your attorney and their attorney bring everybody into the case in. And they tell their stories before the attorneys and this is recorded and there’s notes and everything else, and the attorneys will then determine whether or not there’s a case and if there’s a case against the employer, then maybe the employee and the insurance company will settle. Maybe they won’t. If we go to court, then you have to take all of the information that was in court that you had to, depositions go into court and everybody has to testify and it’s a mess.
Now, coverage for this. You should have it. If you have employees, you should have employment practice liability.
CM – Kind of like you get workers’ comp and then you turn around and you get this. You get this as soon as you get in place.
RL – Sometimes this coverage is included for a limited limit, a small limit in a business package policy sometimes calls a business owner’s policy. Sometimes there’s $50 or a $100 thousand dollars worth of coverage. That’s not a lot because those attorneys that are writing those $500 letters will go through that really quick. And then you’re going to end up having to pay whatever they doubt. So my recommendation is to never have less than a million dollars worth of coverage. If you want to keep the price down, get a fairly big deductible. Minimum $2,500 or $5,000 deductible is not unheard of and that deductible is oftentimes only applied to indemnity. It does not apply to indemnity and defense. So you have defense, which is one cost and indemnity is when you have to write a check to the individual who sued you. So you need to be aware that the deductible can be both on the fence and indemnity or it can be just on indemnity. So be aware of where that’s going.
CM – and check your quotes when you’re getting to know which line you’re actually getting.
RL – One of the things you need to include it should include is third party coverage. And what is third party coverage? Well, that’s when your biggest client is a real, I can say that on the radio.
CM – It’s when maybe when that third party is not treating your employees correctly or not treating your company correctly and they’re using ransom.
RL – If someone from outside of your company who has makes your employee feels so upset that they feel injured by what they’re doing and you have done nothing to protect them from this situation, that’s where you get sued by your employees. Say that person over there, injured me and you did nothing about it. It’s your fault. And it might be. If you don’t tell a customer to quit hitting on an employee, it is your fault.
CM – Or change who they’re working with or what happened.
RL – If the person is a customer and calls up and screams and that’s their way of communicating, it’s maybe time to get rid of that customer.
CM – No one deserves that. All right. If you have any questions about employment practice insurance, give us a call at 800-452-6826.