Employment Practices Liability (EPL)
April 01, 2020
The employment landscape is changing dramatically on a daily basis as a result of COVID-19. Today, more than 179 million people in the United States have been urged to stay at home and that number may change tomorrow. A fair portion of these people are working remotely.
As employers seek to transition to remote operations and take employment actions to adjust their workforces during this unprecedented pandemic, they are facing many relatively novel issues for the first time. Currently, the most pressing employment issues include:
- Reductions in force (RIFS) or lay-offs (permanent termination of employment)
- Furloughs (temporary unpaid leaves from employment)
- Reductions in pay and/or work hours
- Forced PTO (paid time off)
- Persons who qualify as “essential” workers
- Maintaining a safe work environment
- Federal and state “leave laws”
- Discrimination based on race/ethnic background/age/disability, including retaliation and hostile work environment, any or all of which results in wrongful termination
- The ability to impose requirements and restrictions and/or discipline employees
All of the aforementioned issues are tied to federal and state laws that are evolving by the minute with executive orders issued on a state-by-state basis. Those companies contemplating RIFS should familiarize themselves with the Worker Adjustment and Retraining Notification Act (WARN), which governs plant closings and massive layoffs and provides that all employees (of companies with 100 or more employees) receive 60 days advance notice of a closing/layoff.
There are three exceptions to WARN: unforeseeable business circumstances, faltering company and natural disasters. Certain states have their own mini-WARN Acts as well. We encourage clients to consult with labor and employment counsel with respect to WARN. Notably, while RIFS are generally eligible for coverage pursuant to most EPL insurance policies, violations of WARN are typically excluded from coverage, except for claims of retaliation against employees for attempting to assert their rights under WARN.
While RIFS and layoffs may be a last resort, reductions in pay or work hours are also being considered by many companies. These actions, along with staggered hours, employees working remotely and self-quarantining, may implicate the Fair Labor Standards Act (FLSA, aka the federal wage and hour law), which regulates minimum wage, overtime, equal pay, recordkeeping and related matters. Generally, EPL insurance policies either have exclusions for violations of the FLSA or limited coverage (a sublimit of coverage for defense costs only, as an example). Given that the likelihood of these types of claims resulting from COVID-19 is high, employers should examine their EPL insurance policies for potential coverage.
Another “top of mind” area for employers in light of COVID-19 is leaves of absence from work, whether it be under the Family and Medical Leave Act (FMLA), the new Families First Coronavirus Response Act (FFCRA), which is effective April 2, 2020, and extends the FMLA to allow employees to take leave for reasons related to COVID-19, such as childcare or care for the sick (this does not include those employees working remotely), or the new state-by-state quarantine leave laws. Leaves of absence may be paid or unpaid. Typically, claims for retaliation in asserting one’s FMLA rights (and local leave laws) are covered by EPL insurance policies, while other more substantive claims involving FMLA and similar laws are not. Again, employers must examine their specific insurance policies.
Aside from leaves of absence, and the state of Washington taking the lead in this area, there are employees who are still working outside the home as they are deemed to be “essential” workers in “essential” businesses. Although many companies seek to qualify as “essential” businesses so as to keep operations going and avoid employment actions, the plaintiffs’ employment bar is scrutinizing those who are deemed “essential” workers. Employees may believe they are not “essential” (consider a file clerk at a hospital) and may refuse to come to work, thereby running the risk of being terminated for failure to appear at work. Notwithstanding the federal Occupational Safety and Health Act (OSHA), which requires that employers provide a safe work environment free of hazards causing death or serious illness, employees may still be fearful under these pandemic conditions, regardless of whether they put their jobs in jeopardy in favor of protecting their health. It is absolutely foreseeable that employees may raise claims of retaliation for asserting their rights under OSHA. While claims alleging OSHA violations are generally excluded from coverage on EPL insurance policies, claims by employees of retaliation (or even whistleblowing about unsafe conditions) for asserting these rights will typically fall within the scope of EPL coverage.
While we anticipate new claims related to the aforementioned issues and laws, employers must recognize that typical discrimination claims will also arise. Certainly, RIFS and furloughs may necessarily have a disparate impact on a certain segment of the population who cannot work remotely, which may prompt legal action. We also expect more lawsuits alleging discrimination based on race, ethnic background, age, disability and any other human characteristic included as a protected class under federal, state and local anti-discrimination laws. Generally, EPL insurance policies are designed to provide coverage for wrongful termination claims based on discriminatory actions/practices expected to result from COVID-19.
We urge our clients to consult with their employment counsel regarding the laws mentioned here. We also recommend that those who have purchased EPL insurance avail themselves of the services that come with the purchase of that insurance policy, including a broad range of loss prevention, online classes, training tools and mitigation resources, as well as a toll-free hotline to access complimentary employment law advice from nationally recognized law firms.
Those clients who have not yet purchased EPL insurance should seriously consider the coverage in view of this worldwide pandemic. NFP is here to stand with our clients as we navigate employment claims and related insurance issues expected to arise from COVID-19.