Employment Practices Liability Issues for Staffing Agencies

Because staffing agencies employ individuals to take up temporary duties at companies that hire them to provide required services, there lies the possibility that exposures exist associated with employee accusations regarding claims of unfair treatment. Employment Practices Liability (EPL) insurance is staff insurance purchased to cover many employee-related lawsuits that a company may face at some time during their years of operation.

The most common accusations are associated with claims of wrongful termination, discrimination, and sexual harassment. There is a broader spectrum of lawsuits that could arise, including failure to employ or promote, deprivation of career opportunities, unwarranted demotion or giving a negligent evaluation, as well as wrongful discipline.

An employee could even cite misrepresentation of the facts and employment-related libel, which includes slander, humiliation, and defamation of character or invasion of privacy as the cause of litigation.

Important to obtain this vital coverage

Employers can find themselves vulnerable to an employment-related lawsuit as early as the pre-hiring process, up until the time of an exit interview. While many suits brought against employers are groundless, defending against them is often costly and time-consuming.

You must also consider the costs of litigation and, as damage awards continue to climb and employment law becomes more complex, the need for this coverage continues to be validated. Fortunately, EPL insurance covers the cost of defense and any settlements issued by a court from any alleged covered claim when the plaintiff is found at fault.

Understanding what is covered

It’s important to confirm that any EPL policy purchased by a staffing agency includes temporary employees (under the definition of employees covered by the policy). Staffing agencies face some unique employment-related exposures due to the fact that their business is 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 staffing agency and the client company are usually sued jointly under employment-related lawsuits.

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