EPLI - in the News
Often in the U.S. we field questions about whether franchisee business operations have any unique EPLI exposures related to the nature of their operations. We do think young people managing young people presents a potentially significant exposure, something common in fast food franchise operations. And we have seen a franchisor mandate that all franchisees establish specific employee management procedures - which might have been just fine except that it was a multi-state operation and the mandated procedures were based solely on the statutes of the franchisor's home state.
A recent case suggests that the shoe might also be on the other foot. In Patterson v. Domino's Pizza, LLC, a franchisee employee sued the franchisor, alleging it was responsible for a sexual assault allegedly committed by a franchisee assistant manager. The defendant franchisor requested a summary judgment, arguing that it was not the plaintiff’s employer and therefore didn’t have vicarious responsibility for the attack. The trial court agreed. In June, however, a California appeals court overturned the ruling, holding that the degree of control exercised by the franchisor over the franchisee's operation could possibly create liability in certain circumstances. Within the last month the state Supreme Court agreed to hear the franchisor's petition. If it upholds the appellate decision, franchisor risks will become more difficult to underwrite.
Moving to a different issue, a New York Times, October 27 article entitled, "Here's a Memo From the Boss: Vote This Way" discussed the 2010 U.S. Supreme Court Citizen’s United decision that voided a federal law, which had essentially prohibited use of corporate funds for political campaign or endorsement purposes, the result being that employers can now suggest preferred candidates to employees. The same day, the Los Angeles Times published an article entitled, "Time-share mogul tells employees he'll cut jobs if Obama wins." (This article doesn't even need a description.) Regardless of any individual’s personal political preferences or thoughts about the 2010 Supreme Court decision, such activity can only fuel disagreements between co-workers and create, for some, possible dissatisfaction with their employer, increasing the possibility of EPLI claims. There's also an argument that this is a bigger issue for smaller employers, where the employer might think they have more influence over individual employees.
There's even a new wrinkle on our favorite subject, third-party discrimination. When working with companies that are developing new EPLI products, coverage for third-party claims is a common product discussion. Because there is virtually no historical information that provides pricing or coverage scope perspective, our position has been to approach the coverage conservatively. An October 16 article "In Disability Act lawsuits, 'everybody settles'" appearing on lohud.com (owned by The Journal News in Westchester County, New York) discusses a series of claims, brought under the Americans with Disabilities Act (ADA) against local retailers, by a wheelchair-bound person for a lack of access in the form of not having wheel chair ramps and having merchandise counters that are too high. The article suggests these "drive by" claims are the work of a Florida law firm, using a plaintiff who has never been in any of these stores. It goes on to suggest that the retailers find themselves in a situation where their only course is a "low five figures" settlement. If this catches on, third-party discrimination coverage provided under EPLI policies could be at risk.
All liability lines of business are subject to changing exposure and legal environments. EPLI seems to evolve faster than most. Staying on top of new developments is key to a successful product strategy.