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Employers Practices Liability

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What is Employment Practices Liability?

In general, the coverage is designed to cover the defence costs and damages resulting from claims for wrongful employment practices brought by past, present or prospective employees against an organisation.

As a result of increased UK employment legislation, the possibilities for employment actions against businesses are multiplying.

Many staff are aware of their rights, and they can be quite prepared to take formal action against their employers if they think these rights have been breached, even if a breach has been unintentional.

Compensation awards are reaching six, even seven figures in the UK, setting precedents and giving employees everywhere a context for their grievances. Of course, outside the UK, companies with any kind of US exposure face the full force of class actions and history of huge settlements (“normal” for domestic US businesses who understand EPLI, but potentially devastating for a growing UK company, with say a small US outlet).

Employees are getting more litigious.

Our experience shows that employment tribunal cases have increased. But we also know that in reality businesses faced a lot more employment actions than that because so many are settled in private without ever getting to the tribunal.

Who should take Employment Practices Liability coverage?

Any company with employees wanting a higher degree of protection against the tide of ever increased UK employment legislation and feel they would benefit from the an experienced partner in defending and advising on employment issues. In many cases coverage can be taken as an extra section under a directors and officers policy. 

Claims Examples

• Two directors of a company which was in liquidation, with a total deficit of £216,000, were held jointly for £75,000 damages (plus interest and costs) arising from wrongful trading whilst the company was insolvent.

• A director who accepted an order at a trade fair but couldn’t recollect the details the following morning found himself being sued by his customer for breach of contract.

• Directors of a construction company were successfully sued for losses incurred by an architect who relied on a director’s repeated assurances that a contract performance bond had been arranged.

• A company is suing the directors of one of its competitors for allegedly breaching trade practices

• Directors were prosecuted after their failure to identify the company correctly on the company notepaper and invoices in breach of the Companies Act.

Types of claims made against Directors

  • Employment claims
  • Breach of duty or trust
  • Negligence
  • Defamation
  • Health and safety or manslaughter claim
  • Wrongful trading under section 214 of the Insolvency Act 1986
  • Pension or employee benefit scheme
  • Pollution