Employment-related disputes are on the rise. With the most recent figures from the Ministry of Justice stating that there were 103,984 claims in 2019/2020, these figures are expected to have risen exponentially throughout the pandemic.

Employment-related claims can present a significant risk to an employer’s organisation and can also severely impact its balance sheet, particularly as, even if an employer successfully defends an Employment Tribunal claim, it is unlikely to be able to recover its legal fees.

When an employment dispute hits, organisations will be very concerned with not only the likely cost in terms of management time and legal fees but also in defending their reputations. However, they may be covered by an insurance policy which could protect the company against the financial impact of a claim.

Employment Practices Liability Insurance (“EPLI”) is an insurance policy issued to an employer to pay for legal costs, settlements and/or any awards of compensation in circumstances where an employee or potential employee claims their employment rights have been breached by the employer.

Insurance solicitor Nilam Sharma and employment solicitor Keely Rushmore outline how companies can determine whether its EPLI policy can provide financial protection when claims hit.

How can you determine if your company has EPLI?

  1. Are you a listed entity?
  2. Do you have companies in jurisdictions which are litigious?
  3. Is your company involved in an industry that has a track record of employment rights being breached?
  4. Does your company have a large human resources department?
  5. Are there external factors which have impacted the industry?

If the answer to one or more of the above questions is yes, then it is very likely that you have purchased EPLI and you should notify your insurers of the employment dispute.

What category of employment rights will EPLI provide insurance cover for?

Not all employment disputes will be covered under the EPLI. The company’s specific EPLI policy should be checked; however, most policies will cover disputes raising:

  • Any form of unlawful discrimination, for example on the grounds of sex, disability or race, including harassment and equal pay;
  • Unfair/wrongful termination of employment, including constructive unfair dismissal;
  • TUPE-related claims;
  • Whistleblowing issues; and
  • Unlawful deductions from wages.

Some organisations will also have pursuit cover, enabling companies to pursue employees who have breached their contract of employment, for example by breaching their restrictive covenants after their employment ends.

Who is covered?

  • Employers
  • Employees against whom it is alleged that employment rights have been breached

What will the EPLI pay?

  • Legal fees of the employer and/or any employee against whom similar allegations are made, including trial counsel/barrister and expert fees;
  • Compensation awarded and settlement sums payable by the employer; and
  • Costs of tribunal and court proceedings.

Is this the same as an Employer’s Liability Insurance which the employer has to display in its reception?

No. Employer’s Liability Insurance is mandated by law and provides insurance for an employee’s illness or injuries caused by their place of work. EPLI is not mandated by law and is a policy that most organisations will purchase to protect their balance sheet.

How can I ensure that the insurers who have issued the EPLI pay the legal costs and/or any compensation?

  1. Ensure that you comply fully with the EPLI terms and conditions (for example, you may be required to take legal advice before dismissing an employee).
  2. Inform your insurers as early as possible of any settlement discussions or tribunal or court proceedings.
  3. Keep insurers informed of the legal fees being incurred and likely to be incurred.
  4. Provide insurers with the advice on chances of success before a tribunal or court proceeding and obtain their agreement to attend.
  5. Obtain insurers’ agreement to any admission of liability and/or settlement/settlement amounts.
  6. Obtain insurers’ consent to disclose existence of EPLI to third parties.

With the turbulence of the pandemic yet to disappear and the return to work for many employees imminent, it is unlikely that employment-related disputes will decline any time soon.

If you require advice on any aspect of Employers’ Practice Liability Insurance, please contact either Nilam Sharma or Keely Rushmore using the below details.

 

For further information please contact:

This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.