Marketplace Realities 2018: Employment practices liability (EPL)

November 6, 2017

    The one thing

    Beware of state activism in areas where the federal government is pulling back, such as pay equity.
  • Rates have been mostly stable since Q1, with average primary rate increases of up to 5%, unless loss experience, mergers and acquisitions, or changes in exposure dictate a greater increase. California’s rate hikes, for example, continue to fluctuate between 5% and 15%, based on the heightened legal requirements in that state.
  • The EPL market remains competitive, with capacity of over $800 million in the U.S., Bermuda
    and Europe combined.
  • Increased focus on pay practices and classification issues has brought heightened interest in wage and hour insurance. New entrants in the market (particularly for mid-sized companies) and market appetites have risen to meet the demand. Flexibility in retention levels and markets’ willingness to offer blended wage and hour/EPL policies have led more companies to purchase or at least obtain quotes. Markets in Bermuda, London and the U.S. offer defense and indemnity coverage.
  • Price prediction

    Flat to +5%;
    California: +5% to +15%

    Large global companies
    Flat to +3% (primary);
    -5% to flat (excess)

    Mid to large domestic firms
    Flat to +3% (primary);
    -5% to flat (excess)

    Private and nonprofit entities
    Flat to +5%

    Smaller employers (< 200 employees)
    +5% to +10%
  • The Trump administration impact on EPL is evident:
    • Last year the EEOC announced that it would require private employers with 100 or more employees to report detailed salary and pay information on their EEO-1 form. However, the Office of Information Regulatory Affairs recently postponed this change indefinitely. States, however, continue passing their own laws to address pay disparity. Employers should stay focused on this issue and make sure that gender and race (or any other protected class) do not play a role in pay determinations.
    • Last year, the Department of Labor (DOL) promised to more than double the annual
      salary threshold for overtime or minimum wage exemption under the FLSA. After 21 states challenged the proposed rule, a Texas federal district invalidated it. Prior to this decision, the Trump DOL was considering a smaller increase in the salary threshold. We expect a change at some point.
    • Joint employer liability remains a significant area of concern, particularly for companies in the franchise, hospitality and staffing industries. The Trump administration rescinded a 2016 DOL interpretation that favored a very broad standard when determining whether joint employment exists, but the law itself did not change. Recently, the House of Representatives introduced HR 3441 (also known as the Save Local Business Act) in
      an attempt to narrow the definition of joint employment. Whether or not the bill is passed, employers should still expect claimants to allege joint employment.
    • On March 27, 2017, President Trump signed a joint resolution that invalidated President Obama’s Fair Pay and Safe Workplaces Executive Order (Contractor Blacklisting Regulation) that required government contractors to self-report labor law violations and prohibited mandatory arbitrations of Title VII, sexual harassment or assault claims for contracts of over $1 million.
  • Issues to Watch:
    • Courts are having difficulty answering the question of whether Title VII prohibits sexual orientation discrimination as a form of sex discrimination. The EEOC says yes, but the courts are split. The answer may come from the Supreme Court or through legislative action.
    • The validity of class action waivers in employment arbitration agreements is before the Supreme Court. We expect a ruling in 2018.