Running a business of any size can feel like you are going in a dozen different directions at the same time. You depend on the skills and efforts of your employees to help you maintain order, excel with customer care, and make strides towards the future.
The Australian workplace has been experiencing changes recently. While some changes are positive, others create veritable minefields for owners, managers, and staff. It is not only the workplace experiencing new norms, but workplace interactions and the level of a company’s responsibility for employee actions are also different than they were just a few years ago.
In general, employees are also more likely to take their employer to court over behaviours deemed unacceptable. Data from the Fair Work Commission point to the fact that an increase applies across the board and is happening to businesses of all sizes. Contrary to popular belief, large corporations are not the sole target of employee litigation, and likewise, small businesses are not exempt from lawsuits initiated by employees.
What is Employment Practises Liability Insurance?
The insurance cover known as Employment Practises Liability Insurance, also called ELPI, is cover an employer may purchase to protect themselves and their business from lawsuits brought against them by employees.
Who Needs Employment Practises Liability Insurance?
Generally speaking, unless you operate your business by yourself with zero employees, you should consider EPLI cover. As lawsuits against employers become more prevalent, employers must consider the reality of a suit coming against them.
Consider the following statistics gathered by the Fair Work Commission:
- In a single year, unfair dismissal claims increased 65 per cent
- The level of Stand Down Disputes filed is increasingly higher
- Since the beginning of the Covid-19 pandemic crisis, there have been 200 job keeper dispute claims filed
- In the span of a calendar year, there is a 200 per cent increase in adverse action/ wrongful termination lawsuits
What Kinds of Claims Can EPLI Cover?
There are numerous circumstances where employment practises liability insurance can help you. These situations include but are not limited to:
- Mismanagement of employee benefit plans
- Wrongful termination
- Sexual Harassment
- Discrimination
- Failure to promote
- Breach of employment contract
- Wrongful discipline
- Negligent evaluation
- Deprivation of career opportunity
What Are the Factors That Cannot Exclude a Qualified Job Candidate From Employment?
Across Australia, it is unlawful to use any of the following as a reason to not employ a qualified job seeker:
- Age
- Colour
- Gender
- Family responsibility
- Pregnancy
- Mental disability
- Marital status
- Sexual orientation
- Political affiliation
- Religion
- Social origin
- Physical disability
- Nation of origin
How Do I Get Employment Practises Liability Insurance?
In many instances, you are able to get EPLI through your insurance specialist’s management liability cover.
What is Management Liability Insurance?
A management liability policy can protect you, your directors and officers, and employees in the event of lawsuits. Many experts in the insurance industry call management liability insurance the fourth pillar of business cover. (The first three being cover for business interruption, fire, and public liability.) Unfortunately, management liability insurance is woefully underutilised by many businesses.
One reason that many businesses do not have this type of cover is that they wrongfully believe that management liability insurance is just for large companies. Once your business begins to employ others, handling money for others, or having shareholders and directors, it is time to look into management liability cover.
Believing that your business is too small to need management liability cover is a myth. Any person or persons who direct a company expose themselves to hundreds of edicts that govern operational protocols. Any misstep can result in a claim against the company, its managers, and owners.
The area that sees the most significant increase in litigation is employment practices. This trend will likely continue as managers, owners, and businesses are shouldering increasing amounts of accountability for actions that happen in the workplace. For this reason, experts strongly encourage owners of businesses small or large to consider a management liability insurance policy.
Is EPLI Expensive?
Your Employer Practises Liability Insurance price will depend on several factors, including:
- Your type of business
- The number of employees
- History of EPLI claims against you or your company
What is the Best Way to Protect Me and My Business From Litigation Related to EPLI Claims?
It should go without saying that prevention is far better than curing a problem. With that in mind, here are a few steps you can take to help create an environment where employment practices leave no room for any claims against you.
- Inform your employees and management team of your company’s policies regarding acceptable and unacceptable behaviours. Clearly spell out the consequences of violating these standards and include this information in the employee handbook. If applicable, post these rules in common areas at your place of business.
- Teach employee screening methods that will prevent discrimination during the application and interviewing process.
- Show employees what steps they should take in the event of a violation of the statutes outlined in the various human rights and anti-discrimination laws.
- If an employee approaches management regarding a violation, be sure to document everything your business is doing to help resolve the problem.
The Australian Human Rights Commission compiled a step by step guide to help prevent discrimination during the hiring process. You may find this information helpful for yourself and your managers.
Definitions of Key Terms
Frequently, in casual conversations, people interchangeably use similar terms when speaking about inappropriate workplace behaviour. When dealing with these behaviours on a professional level, it is necessary to be able to differentiate between the phrases. Familiarising yourself with these terms can assist you in clearly communicating with employees and peers regarding employment practices.
- Bullying – While most people equate the term bullying with activities that take place at the schoolyard, workplace bullying is surprisingly common. For legal purposes, the definition of bullying is: Unreasonable behaviour carried out repeatedly that results in damaging the victims mental or physical wellbeing or puts the victim’s health at risk.
- Discrimination – When an individual receives less favourable treatment because of an attribute. This can be overt, making jokes at the person’s expense. Or covert claiming not to discriminate yet not displaying accessibility.
- Harassment – While harassment can take several forms, the generally accepted definition of harassment is: Treating a person in a way that makes them feel intimidated or humiliated because of a particular attribute such as nationality or sexual orientation. It also includes behaviour that is purposefully threatening or intimidating for the same reasons.
- Sexual Harassment – There are a variety of instances that fall in the category of sexual harassment. These include, but are not limited to:
- Unwanted physical contact
- Questions of a sexual nature
- Requests for sexual favours
- Making comments that have either overt or underlying sexual meanings
- Physical gestures with sexual meaning
- Displaying offensive or unwanted sexual material to you
- Making sexually charged jokes at your expense
- Exposing themselves to you
- Sexually assaulting you
Case Studies
Often, employers believe their actions are justified and within the limits of existing statutes. This is particularly true with cases of wrongful dismissal. While, on the surface, the dismissal of the employees in these two case studies seems understandable, read on to see how the courts ruled in these examples.
Recently, the Federal Court opted to award an unfairly dismissed employee a sum of $614,000 in compensation. During the proceedings, the Court discovered the employer labelled the employee “difficult” and used that as a rationale for terminating employment. In this instance, if the business in question possessed a management liability policy protection would have been available against this claim.
An employer had to pay three months wages to a terminated employee after a court sided with him declaring the dismissal was unfair. The employer lost the case even though the former employee was late 16 times in six months, could not account for missing money on two occasions, engaged in the use of his mobile device on company time, and was occasionally insubordinate.
The Court justified their ruling by saying that while the employee’s conduct was irritating, it was not a cause for dismissal. The Court surmised that given the deteriorating relationship between the employer and employee, it was unlikely that employment would have continued longer than an additional three months.
The proper insurance cover would have helped the employer by covering the damages awarded to the former employee.
Proper Management Liability cover that features Employment Practises Liability Insurance can easily save your business in the event of a claim against you. The insurance pros at Grace Insurance can help you understand all of the finer points that pertain to this extremely useful insurance cover.
*Please Note* The material provided in this blog post is for informational use only. It does not nor is it meant to substitute professional advice from an expert in the field of business insurance cover. Always consult your insurance professional before altering your policy.
