Following years of challenging market conditions and intense underwriting scrutiny, most employment practices liability (EPL) insurance buyers with a good claims history experienced modest premium increases in 2024. Experts cautiously predict that these trends will persist in 2025. However, several factors could contribute to market volatility. For instance, the increasing adoption of artificial intelligence (AI) in hiring scenarios may lead to more claims. Beyond AI concerns, the new Equal Employment Opportunity Commission (EEOC) guidance on workplace harassment, pay transparency considerations, and the enforcement of the Pregnant Workers Fairness Act (PWFA) are anticipated to significantly impact the EPL insurance market in 2025. With stricter regulations and heightened scrutiny in these areas, employers may face heightened risks of litigation and regulatory action, potentially resulting in an increase in EPL claims.
Developments and Trends to Watch
AI and workplace issues—While AI systems can bring numerous benefits to businesses, they also pose potential employment liability exposures. For instance, AI systems, intended to provide impartial results, may inadvertently contribute to discriminatory employment decisions if the algorithms and data sets used within these systems are biased toward specific groups. The frequency of AI technology usage could lead to mass-scale biased decisions, creating multiple avenues for discrimination-based litigation and associated employment liability claims.
Workplace harassment—On April 29, 2024, the EEOC published its final guidance on workplace harassment, which came into effect immediately upon its issuance. This guidance, which hadn’t been significantly updated in 25 years, provides an explanation of how the EEOC may enforce equal employment opportunity (EEO) laws against employers when workplace harassment is alleged or suspected. The EEO laws constitute a collection of federal laws that prohibit covered employers from discriminating against or harassing individuals based on certain characteristics. Notably, the new EEOC guidance includes several notable updates from previous guidance, such as broadened sexual harassment definitions that now include protections for LGBTQI+ workers, expanded protections for pregnancy-related conditions, expanded considerations for online harassment and remote work, and clarified religious expression protections.
Expansion of 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 they often mandate employers to post salary ranges in job postings or disclose salary information to existing employees and job applicants. The EEOC included equal pay initiatives in its SEP for 2024-28. Additionally, some states and municipalities are implementing their own pay transparency and wage discrimination legislation.
Retaliation claims in the workplace involve unlawful discrimination that occurs when an employer takes adverse action against an employee for engaging in legally protected activities, such as filing a harassment claim or participating in a workplace investigation regarding alleged misconduct. These claims can have severe consequences for a company’s reputation and bottom line, as well as damage employee morale, reduce retention rates, and decrease productivity. Moreover, retaliation claims are the most common type of discrimination charge filed by workers with the EEOC and similar state agencies. According to the most recent data from the EEOC, workers filed 46,047 charges of retaliation, accounting for 56.8% of all charges. Furthermore, in 2024 alone, the EEOC filed over 40 retaliation lawsuits under various statutes on behalf of employees. These statistics serve as a strong reminder to employers that they must remain vigilant and take the issue of retaliation seriously as we enter the new year.
Tips for insurance buyers
- Assess your employee handbook and related policies to ensure you have all the necessary policies in place, including those related to discrimination, harassment, and retaliation. Implement effective sexual harassment prevention measures, such as a zero-tolerance policy and a sexual harassment awareness program, along with appropriate reporting methods and response protocols.
- Document all evaluations, employee complaints, and situations that lead to employee discipline or termination.
- To avoid retaliation claims, ensure that your procedures for handling employee feedback, complaints, and terminations are clear, consistent, and well-documented. Additionally, establish transparent policies, regularly train managers on how to handle complaints effectively, and document performance reviews and complaints in a non-punitive and objective manner.