Employment Practices Liability Insurance: Navigating New Risks and Trends

Employment Practices Liability (EPL) insurance continues to be a critical safeguard for businesses navigating the evolving legal landscape of workplace disputes. With notable settlements shaping the industry and emerging risks on the rise, understanding these developments is crucial for employers. This article explores recent EPL settlements, key trends, and how Flow Insurance brokers can help protect clients against employment-related litigation.

Notable EPL Settlements (2023-2025)

Mastercard Settlement (January 2025)

• Allegation: Systematic underpayment of female, Black, and Hispanic employees.
• Settlement Amount: $26 million.
• Details: The lawsuit accused Mastercard of placing women and people of color into lower-paying roles and providing fewer raises and promotions than their white male counterparts. As part of the settlement, Mastercard agreed to conduct an independent audit of its employment practices and implement fair pay measures.

Smithfield Foods Settlement (November 2024)

• Allegation: Child labor violations at a Minnesota meat processing plant.
• Settlement Amount: $2 million.
• Details: An investigation revealed that Smithfield’s subsidiary employed at least 11 minors aged 14-17 in hazardous tasks and beyond permissible hours. The settlement mandates compliance measures to prevent future violations of child labor laws.

Zurich American Insurance Company Verdict (April 2024)

• Allegation: Wrongful termination and defamation.
• Verdict Amount: $80.25 million.
• Details: Three longtime employees were fired and accused of theft. The court ruled in their favor, awarding a substantial verdict for wrongful termination and reputational damage.

EPL has traditionally been a high-frequency and low-severity risk exposure, but with social inflation, we are now seeing courts award settlements higher than ever before. This new reality should be a strong motivation for companies of any size to explore transferring this risk to an insurance product.

Emerging Trends and Risks in EPL Litigation

These cases reflect broader trends reshaping the EPL landscape. Retaliation claims have emerged as a particular concern, with employees increasingly coming forward to report discrimination or harassment. The spotlight on pay equity has intensified, compelling organizations to scrutinize their compensation structures more carefully than ever. Meanwhile, the rise of artificial intelligence in hiring processes has introduced new complexities around bias and discrimination.

1. Religious Imposition in the Workplace

In the case of Equal Employment Opportunity Commission v. United Health Programs of America, the employer mandated participation in a belief system known as "Onionhead" or "Harnessing Happiness." Employees were required to engage in practices such as praying, discussing personal matters, and reading spiritual texts—those who refused faced demotion or termination. The court ruled that this constituted religious discrimination, resulting in a $5.1 million award to the affected employees. 

2. Retaliation for Opposing Alleged Discriminatory Practices

Stephen Kleinschmit, a former University of Illinois Chicago professor, filed a federal lawsuit alleging he was terminated for opposing the university's race-based hiring policies. He criticized programs he believed were discriminatory and unlawful under federal nondiscrimination laws. After voicing his concerns, his contract was not renewed, and a similar position was later advertised prioritizing underrepresented groups. The lawsuit seeks to halt the university's alleged discriminatory hiring practices and seeks financial damages for lost earnings and benefits. 

3. Misclassification and Compensation in Cryptocurrency

Cryptocurrency companies operating virtually with a global workforce face unique EPL challenges. Issues include misclassifying employees as independent contractors and compensating workers with cryptocurrency tokens. These practices can lead to violations of labor laws concerning minimum wage, overtime, and anti-discrimination regulations, as well as potential entanglements with U.S. securities laws. 

4. Counterclaims Using Trade Secrets Law Against Whistleblowers

There has been a rise in employers using trade secrets law to counteract employees who allege discrimination, harassment, or other wrongdoing. For instance, Greg Robillard faced legal battles after his former employer accused him of trade secret violations following his age discrimination lawsuit. This strategy, supported by the Defend Trade Secrets Act, can discourage employees from speaking out about corporate misconduct due to the financial and reputational burdens of defending against such claims. 

These cases illustrate the diverse and complex nature of EPL claims in the U.S., highlighting the importance for employers to maintain fair and lawful employment practices across various scenarios.

The Impact of Recent Executive Orders on EPL Risk

Recent executive orders from the current administration have introduced new challenges for employers, particularly regarding Diversity, Equity, and Inclusion (DEI) initiatives and compliance with anti-discrimination laws. Key concerns include:

1. DEI Program Restrictions

New regulations have curtailed DEI initiatives within federal agencies and government contractors. This shift has led to legal uncertainty and concerns over compliance.

2. Compliance with Anti-Discrimination Laws

Employers must balance compliance with new directives while adhering to existing anti-discrimination laws, such as Title VII of the Civil Rights Act of 1964.

3. False Claims Act (FCA) Liability

Expanded scope for FCA claims increases risks for employers accused of falsely certifying compliance with federal requirements.

4. Affirmative Action Obligations

The revocation of affirmative action mandates for federal contractors has created uncertainty regarding diversity hiring and promotion policies.

5. Heightened Enforcement Actions

Federal agencies may increase investigations into employers’ DEI policies and employment practices, creating additional legal and reputational risks.

6. Legal and Reputational Risks

Failure to comply with evolving regulations can lead to significant legal challenges and reputational damage, especially in light of recent dismissals within the Equal Employment Opportunity Commission (EEOC).

Recommended Actions for Employers

To navigate these challenges, businesses should:

• Conduct Policy Reviews: Regularly audit DEI programs and employment practices to ensure compliance.
• Implement Training Programs: Educate employees on policy changes and reinforce commitments to equal employment opportunities.
• Engage Legal Counsel: Work with legal experts to understand the implications of recent executive orders and mitigate EPL risks.

How Flow Insurance Brokers Can Help Protect Clients

Risk Profile Review

A comprehensive analysis of a business’s workforce structure is essential. Flow Insurance brokers help clients assess:

• Hourly vs. salaried employees.
• Salary thresholds (e.g., over $100K vs. under $100K).
• Industry-specific risk factors.
• State-specific labor law considerations.

Compliance Strategies

Certain states, such as Minnesota, have ramped up enforcement of labor laws. Flow Insurance assists clients in staying informed about regulatory changes and ensuring compliance to mitigate EPL risks.

EPL Policy Optimization

By tailoring EPL insurance policies, brokers ensure that businesses have the right coverage to protect against potential claims. This includes reviewing existing policies, identifying gaps, and recommending enhancements.

Key Coverage Items on Every Deal

To provide comprehensive protection, every EPL insurance deal should include:

• Wage and Hour Coverage: Shields businesses from wage-and-hour disputes, including misclassification and unpaid overtime claims.
• Discrimination/Sexual Harassment Coverage: Essential coverage to protect against allegations of workplace discrimination, harassment, and wrongful termination.
• Retention Mitigation Strategies: Implementing policies and procedures that reduce EPL risk while optimizing policy retention rates.

Conclusion

EPL litigation is evolving rapidly, with increasing claims related to retaliation, pay equity, child labor, AI in hiring, and wage-and-hour disputes. Employers must stay proactive by conducting risk assessments, ensuring compliance, and securing robust EPL insurance coverage. Flow Insurance brokers are equipped to help businesses navigate these challenges, offering tailored insurance solutions to mitigate employment-related risks and safeguard financial stability.

By staying informed and implementing best practices, employers can reduce their exposure to EPL claims and foster a fair and compliant workplace.

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