Employment Practices Liability Insurance
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EEOC areas of enforcement

As you would expect, the U.S. Equal Employment Opportunity Commission's (EEOC) areas of enforcement revolve around discrimination. Let's take a look at some key legislation that addresses employer liability for discrimination and other issues.

Title VII of the Civil Rights Act of 1964
Title VII of the Civil Rights Act of 1964 asserts that it is unlawful for an employer to "fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions or privileges of employment" because of race, color, religion, sex, including sexual harassment, national origin, and pregnancy, childbirth, or related medical condition.

Title VII includes (by direct or indirect evidence) intent to discriminate (known as "disparate treatment") and statistical imbalances (known as "disparate impact").

It applies to employers with 15 or more employees. This includes part-time, temporary and leased employees.

The size of the employer determines the maximum damages:
  • 15-100 employees - $50,000 in damages
  • 101-200 employees - $100,000 in damages
  • 201-500 employees - $200,000 in damages
  • 500+ employees - $300,000 in damages

    Remedies under Title VII include the following:
  • Reinstatement or hiring
  • Court orders to eliminate improper actions
  • Lost wages
  • Damages--compensatory and punitive from private employers
  • Attorneys' fees

    A 1998 U.S. Supreme Court ruling for sexual harassment claims that employer efforts at prevention and correction will be key to defense. Additionally, an employer that does NOT have a disseminated sexual harassment policy with a complaint procedure will be automatically liable.

    So an employer that has made efforts at preventing sexual harassment and has disseminated a sexual harassment policy has an affirmative defense, if harassment did not result in "tangible employment action" (fire, demoted, caused to lose benefits, etc.). An employer will be held vicariously liable for acts by supervisors, regardless of existence of policy if sexual harassment results in tangible employment action.

    Actions of non-supervisors will be based on negligence ("knew or should have known").

    The Supreme Court specified that the complaint procedure should provide alternative avenues of complaint so that the victim is not forced to complain first to a supervisor that could be the offender.

    Section 1981 of the Civil Rights Act of 1866
    Section 1981 of the Civil Rights Act of 1866 applies to race discrimination and is often used in conjunction with Title VII of the Civil Rights Act of 1964. It applies to all employers, private or public. There is a disparate impact field under Title VII.

    This law does not require administrative prerequisites, unlike Title VII, with which there is a filing charge with the EEOC.

    Remedies from Section 1981 include the following:
  • Back pay
  • Benefits
  • Reinstatement
  • Injunctive relief
  • Plaintiff's attorneys' fees and costs
  • Compensatory and punitive damages
  • No statutory caps for damages
  • State statute of limitations (typically 2 years) applies to file tort

    Equal Pay Act of 1963
    Another federal law that deals with discrimination is the Equal Pay Act of 1963, which concerns claims involving unlawful differentials in compensation based on sex.

    Executive Order 11246
    Executive Order 11246 has to do with non-discrimination and affirmative action requirements for federal contractors. It prohibits discrimination and requires affirmative action with regard to race, sex, ethnicity, and religion. The order applies to independent contractors in a federal construction contract or with a federally assisted construction or non-construction contract in excess of $10,000.

    Age Discrimination in Employment Act
    The Age Discrimination in Employment Act applies to employees who are 40 years of age and older. This statute makes it unlawful for an employer to "fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age".

    Older Workers' Benefit Protection Act
    Older Workers' Benefit Protection Act (1990) amends the Age Discrimination in Employment Act (1969).

    The threshold requirements to ensure an employee's waiver of the right to sue under the Age Discrimination in Employment Act would be that the waiver of right was "knowing and voluntary".

    The curriculum currently used for a valid waiver of an Age Discrimination in Employment Act claim is as follows:
  • Employee understands the language
  • Specific reference to waiver of Age Discrimination in Employment Act rights
  • Future rights or claims arising after the agreement is signed cannot be waived
  • Additional consideration to what is not already entitled
  • Advice to employee to consult an attorney before signing
  • 21-day waiting period for employee to reconsider
  • 7-day revocation period after signing
  • If using an exit incentive to a group or class of employees the 21-day waiting period is changed to 45 days and other requirements such as age data, eligibility factors, time limited, and related information must be disclosed

    Title I of the Americans with Disabilities Act
    Title I of the Americans with Disabilities Act prohibits employment discrimination against people with disabilities in the private sector and state and local governments.

    This includes physical or mental impairment that substantially limits one or more of the major life activities of the individual. Furthermore, the employee must have a record of such impairment and must be regarded to have such impairment.

    Title I applies to employers with 15 or more employees.

    Claims are initially processed by EEOC. Remedies under Title I include the following:
  • Back pay and benefits
  • Reinstatement
  • Injunctive relief
  • Plaintiff's attorneys' fees and costs
  • Compensatory and punitive damages
  • Different levels apply based on company size, up to a maximum of $300,000

    A charge must be filed within 300 days of the alleged discrimination (though this timeline might be 180 days in some states). It must be filed within 90 days after receipt of the right-to-sue notice.

    Family Medical Leave Act
    The Family Medical Leave Act provides 12 weeks of unpaid, job-protected leave from work per year. In addition, it requires certain group health benefits to be maintained during the leave.

    This law applies to employers with 50 or more employees.

    The act allows for the following types of leave for family medical reasons:
  • Childcare following birth
  • Care for spouse, child, or parent with serious health condition
  • Serious health condition that makes the employee unable to perform an essential job function

    Various other federal acts and laws
    Understandably, there are many acts of legislation that were created to protect employee rights. The following is a sampling of other legislation:
  • Rehabilitation Act of 1973
  • Immigration Reform and Control Act of 1986, which prohibits discrimination based on citizenship
  • Uniformed Services Employment and Reemployment Rights Act of 1994
  • Vietnam Era Veterans' Readjustment Assistance Act of 1974
  • Fair Labor Standards Act
  • National Labor Relations Act
  • Worker Adjustment and Retraining Notification Act, which requires that employers provide 60 days written notice in advance of any "plant closing" or "mass layoff"

    There are, of course, a variety of ambiguous exceptions, exemptions and exclusions that are related to employee rights and employer liability.

    State and local laws
    Most states have various laws governing employer's liability for discrimination and other wrongful acts. In California, state law is broader than federal law; therefore, filings are normally with the Department of Fair Employment and Housing instead of the EEOC.

    It is important to deal with an Employment Practices Liability counsel that is knowledgeable about state employment laws and litigation.

    Fair Credit Reporting Act
    Under the terms of the Fair Credit Reporting Act, the employer must provide an applicant with a written statement disclosing that a report may be obtained and must have written authorization and release.

    Before taking any adverse employment act based on a consumer report, the employer must provide a copy of the consumer report and a written description of the consumer's rights under the Fair Credit Reporting Act.

    After taking an adverse employment act, the employer must provide the applicant with following:
  • Notice of adverse action
  • Name, address, and telephone of the Credit Reporting Agency
  • A statement that the Credit Reporting Agency did not make the adverse action decision and is unable to supply an answer as to the specific reasons for the adverse action
  • Notice of the applicant's right to obtain a free copy of the consumer report within 60 days and dispute the accuracy of the information

    EEOC report on the increase in discrimination charge filings
    The Equal Employment Opportunity Commission reported in a February 6, 2003 statement that discrimination charge filings were up. Charge filings alleging employment discrimination in the private sector increased to 84,442 in Fiscal Year 2002 (which ended September 30, 2002), up 4.5% from the previous year, according to new data issued today by the federal civil rights enforcement agency.

    Of the 84,442 charge filings with the EEOC in FY 2002, the biggest increases from the prior year were in allegations of religious discrimination (up 21%), age bias (14.5%), and national origin discrimination (up 13%).

    The following is the full list of discrimination charge filings (in the order of the number of filings) with the percent increase/decrease from the previous fiscal year:
  • 29,910 alleged race discrimination (up 3.5% from FY 2001)
  • 25,536 alleged sex/gender discrimination (up 1.6% from FY 2001)
  • 22,768 alleged retaliation (up 2% from FY 2001)
  • 19,921 alleged age discrimination (up 14.5% from FY 2001)
  • 15,964 alleged disability discrimination (down 3% from FY 2001)
  • 9,046 alleged national origin discrimination (up 13% from FY 2001)
  • 2,572 alleged religious discrimination (up 21% from FY 2001)
  • 1,256 alleged Equal Pay Act violations (unchanged from FY 2001)


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    Not only are policy forms, clauses, rules and court decisions constantly changing, but forms vary from company to company and state to state. This material is intended as a general guideline and might not apply to a specific situation. The authors, LunchTimeCE, Inc., CEfreedom, and Insurance Skills Center, and any organization for whom this course is administered will have neither liability nor responsibility to any person or entity with respect to any loss or damage alleged to be caused directly or indirectly as a result of information contained in this course.