The Case for Mandatory EPLI Coverage in California
On behalf of California Civil Rights Law Group posted in Employment Law Blog on Sunday, January 18, 2015.
As long as judgments have included economic damages, there have been judgment proof defendants. In personal injury law, for example, this problem has been addressed by the concept of mandatory coverage for those who participate in the activities that typically give rise to such claims. From car and homeowners insurance to workers compensation programs, these initiatives have gone a long way toward ensuring that those who are wrongfully injured are justly compensated.
In employment law, however, considerable shortfalls remain. Although California law requires all employers to participate in workers compensation and unemployment coverage, there remains a considerable gap with respect to the state’s anti-discrimination and anti-harassment laws. While many larger employers are either self-insured or purchase Employment Practices Liability Insurance (EPLI), studies show that less than two percent of small businesses are covered. The same studies show that more than half of all wrongful employment claims are filed against those same employers. This means that each year in California alone, thousands of claims – though not all meritorious – are hopeless before they’re ever filed. As a result, a startling proportion of the employment sector is effectively exempt from the FEHA and other critical employee protections.
To be sure, insurance is an expense, and for many small businesses, mandatory EPLI coverage would not be a minor cost. However, starting a business is a responsibility as much as it is a right. Just as one who purchases a car is expected to operate that car responsibly and pay for the harm caused by its operation, an employer is expected not only to pursue profit, but to provide for the protection and well-being of its employees. Permitting employers to forgo insurance in this vital area of the law allows employers to use the threat of insolvency as a license to discriminate. Employees with righteous claims are left without legal recourse, and the public is left with the bill.
Much like gaps in medical coverage, the lack of an EPLI coverage mandate forces the public to incur considerable costs. For example, when an employee is wrongfully terminated by a judgment proof employer, unemployment, Medicaid, and even state disability funds will be used to cover expenses for which the employer should ultimately be liable. The costs of these programs then rise to compensate for their increased use. Meanwhile, state and federal employment laws are left largely unenforced.
The case for mandatory EPLI coverage in California is not a cynical one. Just as most drivers are responsible, the reality is that most employers treat their employees with the dignity they not only deserve but to which they are legally entitled. But accidents still happen. An employee might harass another employee, and the employer may simply have been negligent in responding to that harassment. An employer might hire a manager who turns out to hold a bias that the employer only discovered when it was too late. Of course, there are also times, like the reckless driver, where the employer has clearly disregarded the rights of the employee. Common to each instance is a damaged individual who is legally entitled to compensation.
What we must ask ourselves, then, is not whether small businesses should be required to insure themselves against such risk as a condition of hiring employees. Instead, we must ask ourselves whether the public should be forced to continue subsidizing that risk.