Posted On: December 31, 2024
Navigating the Evolving Employment Practices Liability Landscape in 2025
As we reflect on the past few years, it's clear that the employment practices liability (EPL) insurance market has faced its share of challenges. However, 2024 brought a glimmer of hope for EPL insurance buyers with good claims history, who saw only modest premium increases. Looking ahead to 2025, experts are cautiously optimistic that these trends will continue. Yet, several factors could introduce volatility into the market.
One significant factor is the increased use of artificial intelligence (AI) in hiring processes. While AI can offer numerous benefits, it also poses potential EPL exposures. AI systems, despite their intention to provide impartial results, may inadvertently contribute to discriminatory employment decisions if the algorithms and data sets are biased. This could lead to a surge in discrimination-based litigation and associated EPL claims.
Beyond AI concerns, new guidance from the Equal Employment Opportunity Commission (EEOC) on workplace harassment, pay transparency considerations, and the enforcement of the Pregnant Workers Fairness Act (PWFA) are poised to significantly impact the EPL insurance market in 2025. Stricter regulations and heightened scrutiny in these areas could increase employers' risks of litigation and regulatory action, potentially leading to a rise in EPL claims.
Key Developments and Trends to Watch
AI Issues
While AI systems can offer various benefits to businesses, they may also pose EPL exposures. AI systems, although intended to provide impartial results, may contribute to discriminatory employment decisions if the algorithms and data sets are biased toward specific groups. Depending on how frequently AI technology is used, biased decisions could occur on a mass scale, presenting multiple avenues for discrimination-based litigation and associated EPL claims.
Workplace Harassment
On April 29, 2024, the EEOC published its final guidance on harassment in the workplace, which went into effect immediately. This guidance, which hadn't been substantially updated in 25 years, explains how the EEOC may enforce equal employment opportunity (EEO) laws against an employer when workplace harassment is alleged or suspected. Notable updates include broadened sexual harassment definitions that protect LGBTQI+ workers, expanded protections for pregnancy-related conditions, and considerations for online harassment and remote work.
Pay Transparency Rules
Pay transparency laws aim to address pay inequality and promote wage transparency by requiring employers to disclose compensation information and increasing employee access to salary data. These laws vary in their requirements but often mandate employers to post salary ranges in job postings or disclose salary information to existing employees and job applicants. The EEOC has included equal pay initiatives in its Strategic Enforcement Plan (SEP) for 2024-28, and some states and municipalities are implementing their own pay transparency and wage discrimination legislation.
Retaliation Claims
Retaliation in the workplace occurs when an employer takes adverse action against an employee for engaging in a legally protected activity, such as filing a harassment claim or participating in a workplace investigation. Retaliation claims can severely damage a company's reputation and bottom line, as well as employee morale, retention rates, and productivity. According to the most recent data from the EEOC, retaliation claims are the most common type of discrimination charge filed by workers. In 2024 alone, the EEOC filed over 40 retaliation lawsuits on behalf of employees.
Best Practices for Employers
To navigate these evolving challenges, employers should:
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Assess and update employee handbooks and related policies to ensure they include language on discrimination, harassment, and retaliation.
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Implement effective sexual harassment prevention measures, such as a zero-tolerance policy and a sexual harassment awareness program, along with reporting methods and response protocols.
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Document all evaluations, employee complaints, and situations that result in employee discipline or termination.
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Avoid retaliation claims by ensuring clear, consistent, and documented procedures for handling employee feedback, complaints, and terminations. Establish transparent policies, train managers regularly on handling complaints, and document performance reviews and complaints in a non punitive and objective manner.
As we move into 2025, staying informed about these developments and proactively addressing potential risks will be crucial for employers. By doing so, they can better protect themselves against EPL claims and foster a fair and inclusive workplace.
Contact us today at info@vgminsurance.com or 866-928-5503 to discuss the latest EPL trends, assess your insurance coverage, and fortify your business against the challenges of an evolving employment practices environment.
VGM Insurance
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