Employment Practices Liability Insurance

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Contract labor (professional employer organizations) Employee leasing A professional employer organization (PEO) can provide a variety of employee-related services. The PEO becomes the general employer. Both the client and the PEO contractually become joint or co-employers. In many states, however, common law holds that the client will be considered the common law employer, should the contracted party (the PEO) fail in their duties. The "borrowed servant doctrine" under common law contains three criteria: Express or implied contract of hire between employer (PEO) and special employer (client) Employee is engaged primarily in work for the special employer Special employer controls work details This can be modified by statutory law or common law decisions and will vary from state to state. Leased employees are contracted by a firm through the services of a PEO. This usually involves a majority of the personnel provided to the client of the PEO. Who is the insured? The insured could be considered an employer of a temporary or leased worker under federal law. This is an important point, since the insured may not believe they have an exposure to employment law if there are no direct employees are on staff and only temporary or leased workers. Labor contract The labor lease contract needs to be reviewed as to the issue of indemnification under the business contract, which may be required by both parties for contributory and/or sole negligence. The insured needs legal advice as to applicability of federal and state law. Leased employee exposure checklist The following is a checklist of concerns to identity leased employee liability for employers: Discrimination/harassment acts committed against the worker at workplace Discrimination/harassment acts committed against the worker by lease company Discrimination/harassment acts committed by the worker against others at workplace Wrongful termination by either party Compliance with the ADEA (who provides?) Potential damages Economic damages (actual damages) Includes lost back pay and benefits, and possibly lost future pay and benefits, or diminished earning capacity, and past or future medical expenses Non-economic damages (general damages) Compensates for the emotional distress or pain and suffering of the employee The amount is completely discretionary and, depending upon state law, may have no limit Punitive damages Used to punish the defendant(s) for malicious behavior Immediate investigation and aggressive response to charges may defend against punitive damages Note: The amount of punitive damages is based on actual damages, egregiousness of conduct, and wealth of defendant. Punitive damages may be illegal in some states and is often not covered by insurance. Liquidated damages An amount limited by law to the multiple of a fixed damage if employer's conduct is found to be willful Violation of Equal Pay Act (could be double equal pay obligations) Violation of Age Discrimination in Employment Act (ADEA) (could be double award of back wages) Plaintiff attorneys' fees Statutory attorneys' fees are those fees and courts costs mandated by law to be awarded to the prevailing employee Usually prevailing employer does not have the same right Courts may award attorneys' fees to the prevailing employee even if there is no statutory mandate to do so

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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.