Employment Practices Liability (“EPL”) is a valuable extension of cover under D&O polices which provide an indemnity to the insured company for some employment related disputes.

Employment tribunal claims have increased significantly over the past year. The Ministry of Justice’s most recently published statistics report a caseload of over 40,000 employment tribunal claims, which is greater than the peak levels experienced in 2009/2010 which followed the 2007/2008 financial crisis and subsequent recession. The Ministry of Justice reports that these figures are linked to the impact of Covid-19 (as well as the resulting impact on court resources) and they are expected to rise further after the Coronavirus Job Retention Scheme (“CJRS”) comes to an end on 30 September 2021.

A number of employment claims against companies and their directors that arise from the impact of Covid-19 may trigger cover under EPL extensions to D&O policies.

Redundancy claims

By October 2021, once the furlough scheme support has been removed, businesses adversely financially impacted by the pandemic will have difficult business decisions to make, notably as regards the matter of staff retention. Some businesses have already commenced restructuring and redundancies given the seismic impact of Covid-19 on their operations. It is expected that redundancies will increase, which will lead to an increase in claims relating to the redundancy process, likely to be unfair dismissal and also discrimination claims arising from redundancy.

Companies must take great care to ensure redundancy consultations and processes are followed and carried out fairly to avoid claims arising from redundancy. A failure to warn or consult individually with an employee in respect of a proposed redundancy could give rise to an unfair dismissal claim.

When employers are proposing to make 20 or more employees redundant within a period of 90 days, this triggers collective consultation requirements. Such consultation must begin “in good time” and at least 30 days before the first redundancy (or 45 days in the event the employer is proposing 100 or more redundancies). A failure to comply with these consultation requirements can result in a protective award of up to 90 days’ pay in addition to likely unfair dismissal claims.

Discrimination claims relating to redundancy

It is expected that claims of discrimination will continue to rise given the increase in redundancies. In particular, decisions being taken about who to retain may be challenged if older workers or those with health conditions are those adversely affected by redundancy. It is likely such claims will trigger an indemnity for EPL cover.

It is also expected that redundancy claims on grounds of sex discrimination will increase, as it has been widely reported that women, and in particular working mothers, have endured the greatest working strains during the pandemic, adversely affecting their careers in the process.

Employers must take great care in the selection process for redundancy insofar as they are not exposing the company to the risk of claims of discrimination on grounds of a protected characteristic under the Equality Act 2010. Employers must be very mindful to avoid consciously or unconsciously discriminating in the selection process and to ensure criteria is used that does not discriminate against certain groups of employees (such as those with underlying medical conditions or disabilities). Staff performance during the pandemic will likely be scrutinised in the selection process. Such otherwise fair criteria may give rise to discrimination claims on the basis certain employees were prevented from performing in accordance with usual standards, due to reasons linked with the pandemic – for example, a requirement to shield or undertake caring responsibilities due to Covid-19.

Whistleblowing claims

Employment Wrongful Act definitions under EPL policies frequently include a limb for claims arising from retaliation against whistle-blowers.

Such claims, particularly for furlough fraud and health and safety shortcomings (notably employees alleging that their workplace is not Covid-19 secure), have increased significantly and it is reported by the charity “Protect” that one in five whistle-blowers have been sacked. Protect has also reported that 2020 was its busiest ever year, with a 20% increase on cases from 2019. Whistle-blowing of furlough fraud was most common in small organisations, with less than 50 staff, which it is thought is connected to the greater financial pressure suffered by SMEs as a result of the pandemic.

According to Protect, the industries most impacted by such claims are: hospitality (20% of cases), manufacturing (12%) and retail (12%), which is unsurprising given these industries were among the greatest users of the CJRS.

Vaccinations

Some companies have already publicly stated their intention to introduce a policy that staff must be vaccinated before returning to work/beginning employment. Under the Public Health (Control of Disease) Act 1984, a person cannot be compelled to undergo medical treatment, which would include vaccinations. Any dismissal or refusal to employ someone for having refused a Covid-19 vaccination will likely be unfair and also potentially fall foul of the Equality Act 2010 and give rise to a discrimination claim if the reason for not being vaccinated is due to religious beliefs or a medical condition preventing vaccination.

Employers will need to consider carefully whether requiring an employee to have a vaccine is necessary – this is potentially reasonable for medical and care home staff (and note the Government is now consulting on this very issue), but not for staff who can effectively undertake their duties working from home or where there are clear Covid-19 secure measures in place which minimise transmission and risk.

What next?

Although over a year has passed since the first lockdown announcement, the above issues remain new and evolving territory and it remains to be seen how the courts and employment tribunals, for example, will respond to claims of such nature. What is inevitable is that claims will increase, which can lead to significant costs and damages liabilities to the companies and their insurers. Employers must ensure proper processes and policies are strictly observed and followed, and advice is sought before taking any action that might give rise to an exposure to such claims.