Legislation, Litigation: Double Whammy for Employers’ Liability

New Laws on Genetic Information, Data Breaches, Pay Discrimination Increase Employers’ Exposure

New legislation has often brought new exposures to employers. This is also true of litigation. As 2009 proceeds, there is a “double whammy” for employers from both new legislation as well as rising employee claims alleging violations of existing laws.

Significant recent legislation affecting employers’ liability includes:

The Genetic Information Non-discrimination Act of 2008 (GINA)

Signed into law by President Bush in 2008, this new federal law becomes effective Nov. 21, 2009. It amends Title VII of the Civil Rights Act of 1964, placing significant restrictions on employers in the collection, use and disclosure of genetic information relating to employment situations. Already many states prohibit genetic information discrimination in health insurance, and almost as many states prohibit genetic discrimination in the workplace.

The Lilly Ledbetter Fair Pay Act

One of the first official acts of the Obama presidency, this legislation was signed with a retroactive date of May 16, 2007, one day prior to the U.S. Supreme Court’s initial ruling against Ledbetter. The new law broadens the types of actions that can be made for gender-based pay discrimination claims. It expands the timeframe within which a person who believes he/she was discriminated against relating to workplace pay can make the allegation.

Health Information Technology for Economic and Clinical Health Act

Tucked into the American Recovery and Investment Act, otherwise known as the Stimulus Package of February, 2009, the HITECH law as it is known has dramatic implications for health care providers, health plans, their “business associates” and others. Designed to expand the Health Insurance Portability and Accountability Act (HIPAA), it mandates notification, by first class mail, of data security breaches of unsecured protected health information of plan participants. If more than 500 persons in any given state are involved in a breach, then public notice (news media) of such breach is necessary, and must be made within 60 days. The HITECH legislation is complex, far-reaching, potentially costly and requires possible adjustments by employers. The effective date is still under debate but will likely begin in February, 2010.

Family and Medical Leave Amendments

The federal Family and Medical leave Act (FMLA) of 1993 mandated employment leave for a wife or husband upon either birth or adoption of a child or family sickness or illness. President George W. Bush signed amendments that became effective Jan. 16, 2009. They include provisions for family leave entitlements for eligible employees who are family members of covered service members, for up to 26 workweeks of leave within a single 12 month period to care for a covered service member with a serious illness or “line of active duty” injury. There are additional provisions that all employers need to understand.

Other Concerns

Not new legislation, but still causing increasing problems for employers, is the Fair Labor Standards Act (FLSA). First enacted in 1938, it addresses minimum wages and maximum hours for younger workers. The Labor Secretary can levy fines for repeat offenses, and even criminal sanctions in extreme cases. It’s the threat of fines that motivates employers to seek insurance coverage, which is generally available for smaller employers, and usually only for defense of litigation.

Insurers are tentative with regard to insurance for FLSA, as well as potential violations of HIPAA. Full insurance coverage for these exposures is typically not available, but several insurers will offer civil money penalties payment for HIPAA violations for insureds, generally under fiduciary liability policies.

EEOC Claims

In addition to being concerned over legislation, employers should be aware that claims filed with the Equal Employment Opportunity Commission (EEOC) are on the upswing. Age discrimination claims have increased from 16,000 in 2000 to more than 24,500 in 2008, while monetary benefits paid by employers have grown from $45 million to almost $83 million in 2008. Religion-based workplace claims have increased from 1,939 in 2000 to more than 3,000 in 2008; benefits paid have gone from $5.5 million to $7.5 million.

The average verdict in an employment-related suit tops $627,000, according to Jury Verdict Research, which also advises that the chance of an employee winning a sex-discrimination suit is about 70 percent, and about 65 percent if disability discrimination is alleged. The statistics tell us that the odds are not on the side of the employer!

The good news is that there is a stable market for Employment Practices Liability (EPL) and Fiduciary Liability insurance. More insurers than ever are willing to write these coverages, and at reasonable premiums and per claim deductible amounts. Further they offer valuable coverage extensions to address emerging exposures – even to the discrimination and harassment allegations brought by non-employees.

Given the legislation, the increasing litigation and the odds of an employer winning an employment practices liability lawsuit, the effective answer for concerned employers has to lie with effective prevention, legal advice and the best possible EPL insurance.

Topics Lawsuits Legislation Commercial Lines Business Insurance