What to Expect in 2017
There is no shortage of liability issues hanging over employers these days as the Trump Administration assumes office. Some controversial rules could be rewritten while others could be rolled back or eliminated altogether.
Employer issues at stake include wage and hour, joint employer liability, new overtime rules, Occupational Safety an Health Administration (OSHA) electronic reporting, medical leave and disability concerning maternity, gender issues, retaliation and whistleblowers, religious and national origin, privacy, data protection, and social media.
Which, if any, of these issues could drive change to the employment practices liability landscape is anyone’s guess. Most insurance specialists agree on one thing: there are uncertain times ahead for U.S. employers and employees.
One consensus is that the new administration led by President Donald J. Trump will bring with it a more “pro-business” regulatory environment. This could mean less aggressive enforcement from federal agencies such as the Department of Labor. How that will play out in the employment practices liability market remains to be seen.
“I don’t think anyone’s really sure what’s going to happen next,” says Laura Lapidus, CNA, risk control director. “No one’s really sure what the new president is going to do.”
Experts will be watching to see exactly how and where a “pro-business” environment might affect the employment practices liability market.
Aside from proposing potential carve-outs for small businesses under new overtime rules that went into effect on Dec. 1, 2016, and supporting six weeks of paid maternity leave, Trump has not discussed in significant detail how, if at all, he plans to address issues involving workers’ rights.
Lapidus says the new administration will have an effect on employers and the EPLI market. “We’re all going to be watching pretty carefully.”
Less Regulation, Enforcement
Most agree that the U.S. Department of Labor and other federal agencies are likely to become less active than they were under the Obama administration. That could be good for employers, according to Richard S. Betterley, president of Betterley Risk Consultants Inc. based in Boston. Betterley is the writer and publisher of an annual report, Employment Practices Liability Insurance Market 2016, which was released in December.
“Assuming the new administration and Congress are employer-friendly, you would assume it would be harder to bring employment practices liability actions as a plaintiff. You would assume that the ability to have those actions dismissed would be higher for an employer, and that the actions might move more toward the state and local jurisdiction,” Betterley says.
While that might be good for employers, it might not be good for insurers, he predicts.
“When you are working with a federal agency, you generally have consistency across the country. But when you get into the state and local jurisdiction, you are dealing with lots of different entities, lots of different regulation, different cultures, and courts,” Betterley says. “It’s really a story with two sides.”
In a December article on the possible effect of the change in the presidential administration on the workplace, the National Law Review wrote: “As a result, we are likely to see an increase in state and local activism on wage and hour and worker-protection issues such as minimum wage, pay equity, and paid sick leave. Significantly, wage and hour-related legislation or rulemaking placing further restrictions on businesses is unlikely under his administration, and existing regulations will possibly be repealed or scaled back.”
While there’s a lot of talk and everybody is watching, it’s way too early to tell, says Thomas Hamm, Aon Financial Services Group, managing director, employment practices liability, national practice leader.
“Everybody has some expectations that there will be a huge change,” Hamm says. The Equal Employment Opportunity Commission (EEOC) and the National Labor Relations Board (NLRB) have been the main movers in the employment space, along with the plaintiff’s bar. “They have been very aggressively protecting employees. I think we generally expect that this new administration will be very different in that approach, and they’ll be much more business-friendly.”
As a result, Hamm agrees, the industry may see a number of those employee-related initiatives rolled back. “Even things like white collar exemption changes that are going on, those could be rolled back. We don’t know what will happen for sure, but we expect that it’ll probably be much more employer friendly.”
Results on Employment Practices Liability Market
Peter Taffae, managing director of ExecutivePerils based in Los Angeles, said the new Trump administration could bring significant, positive changes to EPLI.
In his view, one of the first changes to employer law might be directed at the NLRB’s position on joint employers.
The NLRB in August 2015 ruled that a small business franchisee could be considered a “joint-employer” with the franchisor company that lends its brand name and marketing to the small business. This ruling overturned decades-long regulatory and legal precedent for determining whether a joint employer relationship exists under the National Labor Relations Act. Previous law held that a franchisor that did not directly employ or control the franchisee’s workers was exempt from joint liability for employment practices happening at the local franchisee.
‘Assuming the new administration and Congress are employer-friendly, you would assume it would be harder to bring employment practices liability actions as a plaintiff.’
The new NLRB standard now considers a franchisor as a joint employer not only if it exercises direct control of employees’ activities, but also if it has “indirect” or even “potential” control.
The appointment of Andrew Puzder, chief executive of the company that franchises the fast-food outlets Hardee’s and Carl’s, as secretary of the Department of Labor, has the EPL community expecting significant changes that would directly affect the franchise community but will also extend to general contractors, PEOs and most businesses.
Taffae anticipates significant changes to the joint employer ruling under Puzder, who has been an outspoken critic of the worker protections enacted by the Obama administration.
“Andy Puzder has created and boosted the careers of thousands of Americans, and his extensive record fighting for workers makes him the ideal candidate to lead the Department of Labor,” Trump said about his nominee.
Puzder has been a vocal opponent against the new joint employer standard set forth by the NLRB. As labor secretary, there are certain immediate steps he could take to undo some parts of the joint employer standard. “My gut is that this will be one of the first things he will address,” Taffae says.
Puzder also said the Obama administration’s recent rule expanding eligibility for overtime pay diminishes opportunities for workers, and that significant minimum wage increases would hurt small businesses and lead to job losses.
In addition, Puzder has been known to hold what some might call “politically incorrect” views. Puzder’s company, CKE Restaurants, runs advertisements that sometimes feature scantily-dressed women gesturing suggestively. He told the publication, Entrepreneur: “I like our ads. I like beautiful women eating burgers in bikinis. I think it’s very American.”
Political Incorrectness and Employment Practices
While a pro-employer regulatory environment could be good for the insurance industry, Taffae and others in the EPL space see a possible threat stemming from the new Trump administration.
“I’m afraid with the new administration that the tolerance for inappropriate behavior (in the workplace) will lessen,” Taffae says.
‘I think everybody has some expectations that there will be a huge change.’
“We are entering a new era. I see the tolerance on what I think is inappropriate behavior will be lessened, and if that is true, two things will happen,” Taffee says. “One, litigation will go through the roof. Perhaps male middle management will feel they can talk or act in a way that has been unacceptable (toward women) and there will be more violations and more litigation.”
There’s also a possibility that those cases being heard in court could be affected by a new standard of political correctness, he says. “Maybe on jury cases, the juries will have less patience for these types of cases because the threshold of acceptability has been lowered so much.”
Lisa Doherty, president of Windsor, Conn.-based Business Risk Partners, says there was a lot of divisive language used during the 2016 presidential election.
“It will be interesting to watch. As Donald Trump tends to make political correctness less relevant, I do think you will see more political incorrectness. Whether that translates to employees feeling like they are working in a hostile work environment will be interesting to see,” Doherty says. “We haven’t seen this before ,but one person’s first amendment rights could create another person’s hostile work environment. So where is that line?”
Joe Robuck, senior vice president, Financial Services / Executive Liability, Worldwide Facilities in Los Angeles, says it’s been surprising to watch and hear stories of people’s boldness to discriminate. “It seems to be more and more anecdotal. Stories of people deciding that we are now in an environment where people feel more empowered to discriminate.”
But what matters most in the EPLI world is whether that sentiment will translate into claims activity.
“I’m just not sure how that’s going to affect claims activity and what role employers will have,” Robuck notes. “There’s always the possibility of employees behaving badly and employers not handling it well. I guess there’s the possibility of employers deciding they could discriminate, too, and certainly that would be a problem.”
Robuck says that where employers mishandle sensitive situations, whether protected classes such as persons with disabilities or LGBT and various other minorities, could lead to trouble for employers. “Employees may feel discriminated against, and employers could find themselves in situations where they aren’t handling those situations well, and then there could be claims.”
“Discrimination issues, the NLRB, the minimum wage, immigration issues, maternity leave — there’s a number of executive orders that the new president could overturn in his first or second day in office,” Robuck says. “But the question is for the EPLI community: How will all of these things translate into claims activity?”
Robuck says that as long as employers are behaving in a way that is positive for employees or in line with the law, then there is no basis for a claim.
“But it will interesting to see over the next couple of years how these changes play out and how they will translate into claims activity,” he adds. Share this article with a colleague.
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