MPR offers Employment Practices Insurance to all types of organisations to protect against the risks and costs associated with employment disputes, as well as discrimination against customers.
The employment landscape is constantly changing. Even if an organisation can keep up with the changes, mistakes may happen or grievances may arise. Employment practices insurance provides protection to all kinds of organisations against the financial risks associated with a wide range of disputes.
Why do your clients need Employment Practices Insurance?
- Employment disputes can cost organisations an enormous amount in management time and resources. However good an organisation’s human resources practices and procedures, the risks cannot be eliminated.
- Good procedures do help, but do not offer enough protection against employment claims and it is difficult to maintain control over all staff at all times.
- If things do go wrong, whether there are any grounds to the allegations or not, a well constructed insurance policy can help to mitigate the impact and disruption associated with these situations.
- The Supreme Court decision in July 2017 on the abolition of the Employment Appeal Tribunal Fees Order 2013, will inevitably lead to an increase in activity at employment tribunals.
What does the policy cover?
The purpose of this policy is to insure organisations and their directors, officers, employees and volunteers for defence costs and legal liability incurred on account of claims and prosecutions against them for wrongful employment practices and also for discrimination against customers or suppliers.
What limits are available?
Up to £10 million for any one claim.
What does an underwriter like to see?
- Financially sound organisations with consistent and experienced management.
- Established businesses that have been operating for more than three years.
- UK or European based companies.
- Organisations with good checks and controls in place, such as:
- HR background checks and reference procedures; and
- written policies on discrimination, harassment, discipline and termination.
Is there anything an underwriter wouldn’t insure?
- Some types of risk exhibit higher hazard characteristics from an employment claims perspective. Greater caution is needed on the following types of organisations:
- professional sports clubs;
- local government and councils;
- NHS Trusts;
- housing associations;
- universities and colleges;
- large law firms;
- call centres; and
- large charities.
Why choose MPR?
- Deep experience over many years in all the products we underwrite
- Simple and clearly stated policy language with the removal of ambiguity
- A straightforward, broker focussed, technical and service based proposition
- Strong financial rating
- No requirement to follow claims advice lines
- A feature of many employment practices policies is a requirement to strictly report matters which might fall for cover and thereafter to adhere precisely to the instructions of the insurers. This may be further incentivised by the promise of removal of an excess if a defence is ‘successful’, which can be more complex than it seems. The policy from MPR acts in a fair, fast and fuss-free way.
- Duty to defend provision
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Employment practices claims can be time critical. Having experts ready to act, on pre-agreed terms at pre-agreed rates delivers many benefits, including:
- hourly rates will be lower than those which could be agreed by the client if appointed directly;
- elimination of conflicts of interest. Often a client’s own solicitors will be dealing with the consequences of advice that they have delivered, creating a potential conflict;
- the lawyer panel is not fixed or hard wired into a policy. This improves the flexibility of panel arrangements in the event of poor performance or events such as acquisition/merger.
- Broad definition of wrongful employment practice
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The policy applies to a wide range of wrongful employment practices, including:
- wrongful or unfair dismissal;
- sexual harassment;
- discrimination;
- negligent evaluation;
- negligent reference;
- invasion of privacy;
- retaliation against employee for whistle-blowing or exercising legal rights;
- false imprisonment; and
- wrongful infliction of emotional distress.
- Broad acquisition cover for new subsidiaries
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Acquisitions demand a lot of time and attention, and insurance can often be overlooked. Some of this risk can be removed by allowing automatic inclusion of acquired or created organisations (subject to some limitations). Reporting is only required if the new organisation:
- increases the total number of employees of the policyholder’s group by more than 20%, or
- has directors, officers, employees or volunteers in the USA.
- Third party liability
- In some circumstances, an employer can be held liable for harassment or discrimination to customers or suppliers, rather than employees. Whilst claims for employment violations from employees will form the bulk of harassment or discrimination based claims, a risk does exist that an organisations activity may impact on parties outside of those in an employment context, such as customers, clients, vendors, and suppliers.
- Free consultation via help line
- The Policyholder may, during the policy period, obtain 15 minutes of free consultation, per each separate employment-related matter (and up to a maximum of 4 separate matters), via a helpline administered by Browne Jacobson LLP, a leading employment law firm.
What can go wrong?
The starting point for litigation in the Employment Tribunal, unlike other courts, has always been that both parties bear their own costs and the losing party is not automatically required to contribute to the winner’s legal expenses. Even in a case where it was stated by the Tribunal Judge that proceedings “should never have been brought”, no costs were awarded and it is very hard to persuade a tribunal that they should be.
Changes to the law in 2013 clarified that costs could be recovered where a tribunal considers that ‘(a) a party (or that party’s representative) has acted vexatiously, abusively, disruptively or otherwise unreasonably in either the bringing of the proceedings (or part) or the way that the proceedings (or part) have been conducted; or (b) any claim or response had no reasonable prospect of success.’
However, the reality is that costs will not be awarded to the winning party against the losing one in the clear majority of Employment Tribunal cases, to a point of almost statistical insignificance (0.003% in 2015/16). Whatever the merits, or otherwise, of an action, it is unlikely that anyone is going to reimburse the costs.
An employee claimed disability discrimination on the grounds of an illness that the employer was not even aware that the employee suffered from. The employee had been dismissed for gross misconduct following allegations of verbal, physical and sexual assault from 2 members of staff. The evidence was corroborated by 5 colleagues, who also confirmed the employee was running another business on company time from his employer’s premises.
Despite a catalogue of confirmed misconduct, a failure to precisely follow procedures reduced the effectiveness of the case for the defence.
It is not simply a case of who is right and who is wrong, it is frequently down to whether fair procedure has been followed. It is also easy for a tribunal to look at the facts after the event and take a view as to what should have been done. In this case, even though the claimant’s demands (in excess of £1,000,000) were reduced, and the belief was that a strong defence existed, the costs to the employer were still well over £250,000.
Employment claims payments typically break down at an average of 35% to 40% expenditure on defence costs, so both aspects of the policy (defence costs and other loss) work to protect the policyholder.
Early Conciliation was introduced as a mandatory process in May 2014 with the intention of attempting to resolve employment disputes before they reached the Employment Tribunal. An employment solicitor can be used during the process but they are not essential and much will depend on the pattern of facts in each case.
ACAS generally send a letter to the Respondent stating that they have been contacted by a Claimant, cite the alleged wrongful act and ask if the Respondent would like to consider settlement. At this stage, however, the ‘claim’ may not be particularised, and may be framed in a way that does not trigger the definition of a claim in an employment practices insurance policy. Whilst not always necessitating appointment of defence counsel, having that option in the policy by recognising Early Conciliation as part of a claim definition (“assertion of a legal right”) removes the potential for any doubt and provides a consistent approach.
