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Tough economic times can raise workplace friction

  • Adroit Insurance Group
  • February 17, 2016

The owners and managers of businesses must sometimes wonder about the number of risks they will need to deal with as they begin another working day. No matter how big or small the business, the financial exposures they personally face as a result of something going wrong are vast. Leaving aside the physical risks such as fire or accident, the exposures related to the management of the business itself are an everyday fact of life.

While most managers and business owners insure against property damage and injury, far fewer insure against the financial consequences of setbacks within the company. Yet it’s quite likely that as directors and/or officers of the company, they can be held responsible for whatever goes wrong. The cost could be devastating. That’s where Management Liability Insurance comes in – protecting the company’s directors and officers against a very wide range of threats.

New risks are arising all the time, and policies have to be adapted to keep them in line with emerging business risks. For example, new laws and regulations are constantly being introduced and revised, and threats like cyber risk are developing. Businesses in Australia are infinite in their variety, and Management Liability policies can be tailored to meet clients’ specific needs. It’s a matter of ensuring the underwriter understands the risk, which is one reason you use an insurance risk adviser!

Included in Management Liability policies is the first and last line of defence against a risk that is increasing in significance – that is, actions taken against the company by or on behalf of employees. It’s called Employment Practices Liability Insurance.

Friction within the workforce is becoming more common as workplace laws and regulations change and the Australian economy slows, forcing companies to lay off staff.  It’s also becoming more common to see accusations against the company and its officers spilling out past the courts to be openly discussed on social media, and then in the mainstream news media. The potential consequences for the individual officers and the company’s brand are obvious.

For employers, the time and effort involved in avoiding an employee-related showdown in the first place, then fighting a claim, is an enormous distraction from managing the business. It can involve high legal fees and often ends in a substantial financial settlement.

Who does it cover?

Employment Practices Liability Insurance protects directors, managers and other employees against claims brought by people who are or were employed at the company. Most Employment Practices Liability policies cover all types of employees, including part-timers and casuals, and some also include cover for claims brought by third parties.

What does it cover?

The list of possible claim types is long, but they typically include actions for:

  • wrongful dismissal
  • harassment
  • discrimination
  • defamation
  • breach of privacy
  • misrepresentation of what the job entailed
  • breach of employment contract
  • emotional distress
  • humiliation

Expect Employment Practices Liability policies to cover such costs as defence, damages and compensation, settlements and the claimant’s expenses. Some policies offer much more, including cover for investigations, back pay, punitive damages and civil penalties. It’s not the simplest of policies to tailor to individual companies’ needs, but we’re experienced at working with insurers to get the best possible fit for our clients.

As employers battle to stay profitable in the present difficult economic conditions, friction with individuals and groups of employees are sometimes going to be inevitable, and the cost of getting it wrong in such an environment could be far-reaching. Talk to us about how Employment Practices Liability Insurance can provide companies with greater confidence when hard decisions have to be made.

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