Among the many risks and exposures associated with owning and operating your staffing agency there exists grave concerns over the possibility of claims resulting from employment-related exposures. This can result from the placement of employees in positions under the direction and control of your clients.
It’s important to ensure that your staff insurance coverage includes an employment practices liability (EPL) policy for your agency, and that policy needs to include temporary employees under the definition of employees covered.
Whenever an employment-related lawsuit is filed, due to the fact that the relationship between your agency, the temporary employee, and your client companies is rather complex, it‘s not at all surprising to see the staffing agency and the client company being sued jointly by the claimant.
Most clients agree that EPL insurance is necessary
As a staffing agency, your contract with clients may state that they require you to have an EPL policy to defend against, or cover damages resulting from employment-related lawsuits made against them by your temp employees. In order to cover your agency against such an exposure, your EPL policy would need to be specifically endorsed or extended. While there is an understanding that many suits of this nature are groundless, with employees often accusing managers, co-workers, or staff from either company of discrimination or harassment, defending against these types of claims can be very costly and time consuming. They may even claim that they were denied a job or position that they felt they were qualified for and EPL coverage would help pay court costs in this case as well.
Employment law can be very complex and varies from one jurisdiction to the next. Lawyers, well versed in all aspects of EPL laws, might be able to prove that a case does not have merit. But still, the costs for litigation can be quite high and when a settlement is made in favor of the plaintiff, damage awards can be excessive. With the likelihood that employment law will only become more complex over time, staff insurance that covers employment practices liability issues is a very important component to have.