Pennsylvania Employment Lawyer & Attorney : Russell Krafft & Gruber Law Firm : Lancaster, York, Harrisburg

Employment Practices Liability Insurance (EPLI) may be a relative bargain in the continued “soft” insurance market and employers should consider adding or increasing insurance coverage to protect against employment claims. EPLI insurance is somewhat quirky and the following are some considerations when evaluating policies:

1. Coverage:  EPLI policies typically cover claims of wrongful discharge, workplace harassment and discrimination. Many offer a more comprehensive list of covered acts, including negligent hiring/supervision/evaluations, invasion of privacy, defamation and intentional infliction of emotional distress.  Coverage typically applies to claims made by full time employees so as to exclude those by part-timers, temporary, seasonal and independent contractors.  In comparing policies, look for one that has the most expansive coverage. 
2. Exclusions.  EPLI policies exclude many claims based on the statute that creates the legal right or the activity that gives rise to the claim. Exclusions apply to the Fair Labor Standards Acts; the National Labor Relations Act; the Worker Adjustment and Retraining Notification Act (WARN); the Consolidated Omnibus Budget Reconciliation Act (COBRA); the Employee Retirement Income Security Act (ERISA); the Occupational Safety and Health Act (OSHA); the costs associated with providing "reasonable accommodation" under the Americans with Disabilities Act (ADA); as well as  claims arising out of downsizing, layoffs, workforce restructurings, plant closures or strikes. Punitive damages are always excluded. Carefully evaluate the excluded claims in light of your business practices. In the case of multi-state operations, be aware that some state laws create substantial employment rights that must also be evaluated under the policy language.
3. Policy Limits and Deductibles: Policy limits and deductibles usually apply on a per claim and aggregate basis. For example, coverage may be limited to $250,000 for each separate claim with an overall aggregate cap of $1 million for all claims. Employers must formulate their insurance goals in setting the appropriate deductibles and limits. Some employers view EPLI insurance as catastrophic coverage and are willing to accept a high deductible that allows them to handle smaller claims themselves.  However, other employers are looking for more blanket coverage.
4. Defense Costs, Selection of Counsel and Settlement: Defense costs are usually included within the EPLI policy’s limits, which has good and bad points. Many times, the legal expense is the largest cost to an employer in dealing with merit less claims. However, including defense costs means that every dollar an employer spends defending a claim reduces the amount available for settlement or to pay a judgment.  Since the existence of insurance coverage must be disclosed as part of discovery in most law suits, a plaintiff’s attorney will factor insurance coverage into his or her case evaluation. The defense cost feature may influence plaintiffs’ counsel to try to settle early, rather than force an employer to incur litigation costs that will only erode the insurance dollars available for potential settlement.  Employment claims often have significant employee relations ramifications making settlement a particularly important issue. Insurers view employment claims the same as any other insurance matter by evaluating only the potential for liability and the amount of damages. The employer and insurer may be at odds over settling a case. EPLI policies address this stalemate by either giving the insurer the right to settle without the employer’s approval or, more frequently, giving  an employer control over settlement, but adding a “hammer clause”. These clauses are designed to limit the insurer’s potential exposure if the policyholder passes up an opportunity to settle a claim recommended by the insurer.  Hammer clauses provide that if there is an offer to settle a claim that the policyholder refuses accept, then the insurer will not be liable for a subsequent settlement or judgment in excess of a rejected settlement amount.  
5. Policy Types and Insurance Company Notification: EPLI policies are typically written on a “claims  made” basis meaning that the claim must be incurred during the coverage period and reported to the insurer during an extended reporting period. Since employment actions may take years to turn into a claims, an employer may be left with no coverage if the policy is dropped or tail coverage isn’t purchased.  Untimely notice to an insurance carrier can void coverage for and employment claim.

* Not intended to be Exhaustive.

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Ford Motor Co., along with two related companies and a national union, will pay $1.6 million and provide other remedial relief to a class of nearly 700 African Americans to settle a major race discrimination lawsuit brought by the U.S. Equal Employment Opportunity Commission (EEOC). The EEOC had charged in the litigation that a written test used by Ford and the UAW, Visteon and Automotive Components Holdings (ACH) to determine the eligibility of hourly employees for a skilled trades apprenticeship program had a disproportionately negative impact on African Americans.

The EEOC in its Press Release  touts two of its initiatives. First, the E-RACE Initiative (Eradicating Racism And Colorism from Employment), a national outreach, education, and enforcement campaign to raise public awareness about new and emerging race and color issues in the 21st century workplace. Further information about the E-RACE Initiative is available on the EEOC’s web site. Second, the EEOC issued a new Employment Testing Fact Sheet which cites the Ford case.   The Fact Sheet is not particularly illuminating from a legal or policy standpoint, but it does highlight the agency’s interest in employer testing practices.

There are general legal restrictions on the use of employment testing (whether pre or post employment) in addition to the general prohibitions on discrimination found in Title VII and the Pennsylvania Human Relations Act. The Uniform Guidelines on Employee Section Procedures prohibit the use of a test or selection process that has an adverse impact on individuals in a protected class unless the test has criterion-related, content and construction validation studies. The validation studies must consist of empirical data demonstrating that the test is (1) predictive of performance of important elements of job performance; (2) contains content which tests important aspects of performance on the job; and (3) consists of procedures that assess identifiable characteristics that have been determined to be important to job performance.

We have previously blogged on the subject of Pre-employment testing at Employment Screening and Background Checks - Part III.

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The so called safe harbor from prosecution/sanction for immigration law violations arising from an employer’s handling of No-Match letter places a heightened burden on employers and may only exacerbate an already growing worker shortage. It is a poor effort to solve the problems created by a lack of consensus on a national immigration policy. It has collateral effect of heightening employer’s liability for immigration-related discrimination and employee relations problems.

Many Commentators believe that No-Match letters are not an effective mechanism for ferreting out illegal immigration, so granting a safe harbor to employers for playing along is meaningless. Some of the facts that lead me to this observation are as follows:

• Estimated 12 million illegal workers.

• The Social Security Administration sent out 138,447 no match letters in 2006.

• The data underlying the no match system contains numerous errors leading to "false positives". There may also be privacy issues limiting the sharing of data.

• There is no reliable data base for employers to check/verify employment status and the existing data base is predicted to be "overwhelmed" when government contractors are forced to use it. There is no safe harbor for using the E-Verify System.

• The I-9 Form process is complicated with  a maze of documents that can be used to authenticate work eligibility and identity . Some are temporary and require re-certification when they expire.

• Employers are also responsible for assessing the genuineness of documents which may be easily forged, altered or fabricated..

• Employers  face liability for actual and constructive knowledge of employment of unauthorized workers. The actual knowledge standard can make HR managers avoid answering employee questions when it comes to immigration status. It can also make HR Managers rumormongers and workplace immigration police when they must reasonably investigate third party comments on immigration status. The constructive knowledge standard is addressed in the safe harbor.

• Placing onuses on employees to resolve no match discrepancies within 90 days is untenable. My limited experience with SSA and Immigration leads me to believe that almost nothing can happen in 90 days.

• Employers must re-examine verification and identity documents for those employees who have no match problems and fire those who cannot comply with the I-9 requirements. Employers cannot rely on mismatched documents for re-certification.

• Office of Special Counsel for Immigration-Related Unfair Employment Practices is  posed to protect employees from immigration-related discrimination.

• The predicted worker shortage will put pressure on employers to run their businesses.

• The economic impact of enforcement may be  concentrated on a few states that have Labor pools that rely on immigrant workforces like Texas, California, New York and Florida.

• Some perceive the No-match program as an employer motivated, government endorsed mechanism to fire immigrant workers.

• Unions and other interest groups will mobilized to protect workers and organize around immigration issues.

My conclusion is that employers will be whipsawed  by worker shortages, immigration sanctions for hiring illegal workers, discrimination claims by fired workers who lack documentation and employee relations issues including unionization. 

I received several questions about  my contrast of the No-Match safe harbor and  a perfect storm. I borrowed the “perfect storm” allusion from my friend Ira Wolfe who has written a book entitled The Perfect Labor Storm which highlights the impact of demographic trends on national employment.

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Anyone who has ever driven by a business when its unionized employees are on strike has undoubtedly observed the "picket line". The image or workers carrying placards with anti-company slogans walking back and forth in front of a gate at their workplace is associated with every labor dispute. But what is the purpose of the picket line?  Is it antiquated or effective?

One of the simplest summaries of "picket line" appears on Howstuffworks which states that "[t]he purpose of picketing is to draw public attention (and sympathy) to their cause, inform the public of the goals and the reasons behind the strike and discourage anyone from violating the strike order and going to work. Anyone who does this literally has to cross the picket lines, and they usually are called scabs."   As you might expect, the National Labor Relations Board (NLRB) has a slightly more complex approach to picketing which can occur in many reasons other than a strike.

Picketing has strong symbolism. Political candidates line up, literally, to garner union support by marching in picket lines. The picket line establishes a boundary between the business and the outside world. It attracts attention (better than a giant inflatable rat). It disseminates information (sometimes).

There is little or no empirical evidence that I could find on the effectiveness of picketing as an economic weapon. Anecdotally, picketing is intimidating to customers and employee's who may be inclined to cross the picket line. It generates media attention which may cast the company in an unfavorable light. The picket line is disruptive to business when sympathy strikers won’t cross the picket line to enter the business. It is a boon to lawyers, security companies and videographers who monitor the picket line shenanigans.

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Harley Davidson workers have approved a new contract, ending the three week strike that included disputes over wages and healthcare premiums. According to WHTM, ABC News of Harrisburg, the new contract provides that "Workers will not pay health insurance premiums, but deductibles and co-pays will increase." This resolution stops short of the trend toward consumer driven healthcare plans. However, increasing out of pocket healthcare expenses for consumers is a step towards making them more aware of the increased cost of healthcare. Insurance analysts hope this will result in consumers taking a more vested interest in their healthcare costs.

Is this an effective approach or will it result in consumers foregoing needed healthcare? There is a fairly comprehensive analysis of consumer driven healthcare at ConsumerDrivenHealthCare.us: Guide to Options in Consumer Driven Health Care. In the coming years, employers will be faced with many difficult decisions as they attempt to slow the rapidly rising cost of healthcare coverage for employees.  A recent report by the Centers for Medicare and Medicaid Services predicts that health care is expected to account for $1 of every $5 spent in the United States in another decade.  Decision makers will need to become educated on the options available and the consequences of the plans they choose.

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