When Lawyers Sue Law Firms Over Discrimination

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Some of the nation’s largest employers signed a pledge at the White House this summer agreeing to review their pay practices annually as well as their hiring and promotion policies.

discrimination

CCIG’s Scott Carlson

“We strive every day to create a world where people can belong anywhere, and that starts with creating a workplace where employees of every age, race, sex, ability/disability, religion, culture, sexual orientation and gender identity feel welcome and supported,” Airbnb, one of the signatories, said.

Will these companies’ pledge mean fewer pay equality lawsuits? Perhaps. Will it reduce the need for standalone employment practices liability insurance? Hardly.

The gender pay gap, of course, has gotten plenty of attention over the years, from politicians, the courts and the Equal Employment Opportunity Commission. Yet equal pay barely makes the EEOC’s list of the top 10 types of workplace discrimination charges that it receives, representing just 1.1 percent of those charges.

The top five most frequently filed charges are retaliation, race, disability, sex and age, in that order. The best (or should we say worst?) most recent example of this is the sexual harassment scandal that rocked Fox News mid-year.

To employment experts, this suggests that, despite their best intentions, employers of all sorts are likely to continue to see lawsuits claiming discrimination of all sorts.

That includes law firms large and small.

This summer, for example, a lawyer in a California-based law firm sued her employer for gender discrimination, unequal pay and retaliation. In her suit, the lawyer described being singled out in a meeting by a partner who recommended lowering her pay because she “needed to learn to behave.”

“(The law firm’s) male-dominated culture systematically excludes women from positions of power within the firm, which in turn leads to lower compensation for female attorneys as compared to male attorneys,” the lawsuit says.

The firm, which has more than 300 lawyers, responded by terming the allegations “baseless” and said it would defend itself against the suit.

An employment practices liability policy would help it pay for that defense, because the allegations included discrimination.

In the simplest terms, EPLI covers employers against claims made by workers who have sued the company for violating their legal rights as employees. EPLI policies took off in the 1990s after Anita Hill testified before Congress during the Clarence Thomas Supreme Court confirmation hearings. Sex harassment charges rose dramatically after the hearings – as did EPLI sales.

Today, EPLI is a $2 billion-a-year market, most popular with companies that employ more than 1,000 people, but growing among smaller companies.

Most employers don’t understand that they are at risk from the moment they interview a prospective employee. That’s because merely choosing not to hire the interviewee could open them up to some sort of discrimination allegation. What’s more, smaller firms are often more vulnerable to employment claims because they don’t have an employee handbook detailing the policies and procedures that guide hiring, discipline or termination.

EPLI covers more than cases in which a lawyer might feel underpaid and alleges discrimination. Accusations of wrongful termination and denial of a promotion also are covered.

EPLI also does more than help cover the costs of defending against or settling employment lawsuits. The better policies include coverage to help pay for an outside attorney with expertise in federal and state employment law. In fact, some insurance carriers are reluctant to issue policies to smaller employers because they believe that such employers often use unqualified counsel and take employment actions without legal advice.

It’s important to note that EPLI policies typically exclude coverage for claims involving wage and hour laws. These policies also do not usually cover criminal or civil fines.

While there are exceptions, EPLI policies generally also do not cover penalties or punitive damages. In addition, liability for acts involving intentional wrongdoing is also generally excluded by many EPLI policies, although, again, a few carriers do offer such coverage.

Regardless, given the attention that employee rights cases receive, EPLI policies are fast becoming the norm for a growing number of law firms (and others).

Scott Carlson is an Assistant Vice President at CCIG. Reach him at ScottC@thinkccig.com or 720.330.7925.