Temp Employers and Employment Practices Liability Issues

Temp Employers and Employment Practices Liability Issues

Because staffing agencies employ individuals to take up temporary duties at companies that hire them to provide such services, they have exposures associated with employee accusations regarding employment-related claims. Employment Practices Liability (EPL) insurance is a policy intended to cover most employee related lawsuits that a company will no doubt face at sometime during their existence.

The most common accusations are associated with claims of wrongful termination, discrimination, and sexual harassment, but EPL also covers a much broader spectrum of lawsuits, including:

  • Wrongful failure to employ or promote
  • Wrongful deprivation of a career opportunity
  • Wrongful demotion or negligent evaluation
  • Wrongful discipline
  • Employment-related misrepresentation, and
  • Employment-related libel, which includes slander, humiliation, defamation of character or invasion of privacy

Importance of obtaining this vital coverage (EPL)

Employers are vulnerable to an employment-related lawsuit from the moment they begin the pre-hiring process until the exit interview. While many suits that are brought are groundless, defending against them is costly and time-consuming; this is due to the fact that employment law is complex and varies depending on jurisdiction.

As costs for litigation and damage awards continue to climb, experts are predicting that employment law will only become more and more complex. Fortunately, EPL insurance covers both the cost of defense and the resultant damages from an alleged covered claim if the plaintiff is found at fault.

EPL and the staffing industry

It’s important to confirm that any EPL policy purchased for a temporary staffing agency includes temporary employees (under the definition of employees covered by the policy). Temporary staffing agencies face some unique employment-related exposures resulting from the placement of their employees in positions under the direction and control of their clients.

Because the relationship between temporary employees, the staffing agency and their client companies is so complex, typically the temporary staffing agency and the client company are both sued jointly under employment-related lawsuits.

As a temporary staffing agency, your contract with clients will often require that your EPL policy defend or cover damages resulting from employment practices liability lawsuits made against them by your temporary employees. To cover this exposure, your EPL policy would need to be specifically endorsed or extended.