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Employment Practices Liability > Overview

The legal and regulatory position of employment law is constantly changing. Employers have to comply with increasingly complex and onerous obligations that represent a legal minefield. Even companies with dedicated human resources staff find it difficult to keep up to date. The situation is more perilous for those organisations with employees working overseas who also need to understand the local legal position and the cultural differences.
Employment Practices Liability Insurance protects employers against this hostile environment.

INCREASED LITIGATION

Companies and partnerships are seeing a substantial rise in the level of litigation in the employment field. Publicity given to a number of sizeable awards in this area has increased employee awareness of their rights and the potential compensation that can be achieved.

Much of the legislation is largely untried and untested and a body of case law does not exist for many of the new rights that have been introduced. This uncertainty will undoubtedly exacerbate the current situation and contribute to the rising tide of employment related claims.
Also, whilst in the past the high cost of bringing such actions was a considerable deterrent, the introduction of contingent and conditional fee arrangements from lawyers has meant that legal support is far more widely available to potential claimants.


WHY INSURE ?

Whilst good human resources management can help limit exposures it can never eradicate the risk completely. The legal cost of defending an employment claim even an unfounded one, can be substantial. There is also the catastrophe potential represented by a multitude of related actions.

Employment Practices Liability Insurance provides protection to employers and their employees against the financial impact of employment related legal actions world-wide. The scope of cover is designed to protect the company, its directors, officers and employees against genuine complaints as well as provide a defence against exaggerated or spurious claims.

DEVELOPMENTS IN EMPLOYMENT LAW

In recent years there has been a rapid increase in the growth of employment related legislation both in the UK and Europe. The implementation of recent EC Directives and the adoption of the Social Chapter have accelerated this process. Employees can already bring civil actions for a host of employment related acts including unfair or wrongful dismissal, sexual harassment, discrimination based on race, sex, or disability and for breach of contract. In the near future these rights will be expanded and reinforced as new laws come into force, particularly in relation to discrimination. Examples of recent legislation include:

• Employment Rights Act 1996
• Data Protection Act 1998
• The Working Time Regulations 1998
• Employment Relations Act 1999
• Public Interest Disclosure Act 1998
• Human Rights Act 1998
• Disability Rights Commission Act 1999
  
• Part Time Workers Regulations 2000
  

Some of the effects of these new provisions are as follows:

• The length of service an employee must have before he can bring a claim for unfair dismissal has been reduced from two years to one, which has contributed to a significant increase in actions brought by employees.
  
• The maximum compensatory award for unfair dismissal has been increased four fold, from £12,000 to £50,000.Consequently, not only has the number of actions increased, so has the size of awards made.
  
• The Data Protection Act 1998 has introduced new requirements for employers in respect of personal data storage and use. Breach of these obligations could lead to a claim for compensation.
  
• The implementation of compulsory Trade Union recognition has increased the influence of Unions in the workplace.
• Part time employees have been given equal rights with full time employees.
  
• The Working Time Regulations require an employer to ensure that none of its employees work more than 48 hours a week, unless specifically agreed otherwise.
  
• The Disability Rights Commission (DRC) was launched in April 2000.Its role involves supporting and advising potential claimants on disability discrimination rights. The DRC operates on a similar basis to the Equal Opportunities Commission and the Commission for Racial Equality.
  
  

The Human Rights Act 1998,which came into force on 2nd October 2000,has enshrined into UK law the provisions of the European convention on Human Rights. This is expected to have a wide-ranging impact on employee rights in general.

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