We live in litigious times. Employment practices is one type of lawsuit that has significantly increased in recent years and even more so since the start of the Coronavirus pandemic. For accomplished individuals and families, employing household staff such as a nanny, housekeeper, or personal assistant is an integral part of managing their busy lifestyle. However, having a full-time domestic staff increases your liability and risk of being named in an employment practice lawsuit. Employment Practices Liability Insurance (EPLI) can help safeguard high net worth households from lawsuits alleging inappropriate or unfair practices.
What Defines “Full-time Domestic Staff”
Each state has a slightly different definition of what constitutes a full-time employee, however both Massachusetts and Connecticut consider a household employee full-time if they work for you 16 hours per week or more. Many high-net-worth families don’t realize their full-time household employee qualifies them as an “employer” and as such, they’re required to comply with a set of state and federal labor laws or face possible penalties. One such requirement is carrying Workers’ Compensation coverage to help pay medical bills and lost wages if an employee becomes injured while on the job.
Employing domestic help makes your life easier by assisting you with various duties within your household, but it also exposes you to risk including employee lawsuits, that could jeopardize your success.
Risks Involved with Employing Domestic Staff
You may consider your housekeeper, nanny, or personal assistant a member of your family. They take the children to sports practices and school, pick up the dry cleaning, make sure your home is clean or even cook meals, their assistance is essential to your busy life. However, it’s important to remember that your household staff are your employees, and you need to protect yourself from the liabilities that come with being an employer.
Your chauffeur, nanny, housekeeper, personal chef, personal assistant, or gardener has access to your home, knows your finances, may have responsibility for the safety of your children, drives your vehicles, has privileges regarding credit or debit cards, access to your personal computer and more. You trust your employee, but you should prepare yourself for the possibility that one of your employees could steal from you, file a lawsuit against you for wrongful termination or discrimination, tarnish your reputation online, or even steal your identity. No one likes to think that a member of their staff could betray their trust, but it does happen and seems to be increasingly more common.
Recent Rise in Employment Practice Lawsuits
Employers large and small have increasingly been named in lawsuits by employees. If you employ domestic staff, you could fall victim to allegations of discrimination, sexual harassment, wrongful termination, retaliation, and wage gender equality lawsuits. These types of employee lawsuits are becoming more frequent. In fact, National Wholesale insurance broker, Worldwide Facilities, LLC reported that,
“Over the past 20 years, employee lawsuits have risen roughly 400%, with wrongful termination suits jumping up more than 260%.” *
Research suggests that since the Coronavirus Pandemic, the number of class action rulings resulting from workplace lawsuits is expected to soar much higher. Employers are left wondering the reasons behind the increase and how to best prepare.
Consider the following scenarios:
- You terminate your chauffeur for being late to work on numerous occasions, replacing him with someone who happens to be younger. Your original chauffeur files a lawsuit against you for claims of age discrimination.
- You terminate your housekeeper for performance reasons, she files a lawsuit against you claiming she was fired for wrongful termination and posts disparaging remarks about you to several online groups.
Employment-related risks can be financially devastating for any employer. As a successful individual, the cost of defending yourself from allegations and preserving your reputation can be significant, even if you’re found not at fault.
Premium Insurance Products Help Safeguard High-Net-Worth Families from
Premium insurance products such as high value home insurance, valuables & collections insurance and employment practices liability insurance can help protect accomplished individuals and families from employment-related risks. There are real differences between insurance policies issued by standard insurance companies and those provided by premium carriers. Traditional insurance policies are designed to protect from the typical risks faced by the masses. Successful individuals have more to protect and have unique risks, such as multiple homes, vehicles, a boat, valuable art or wine collections, jewelry, a family office, and domestic staff.
Important Coverages for High-Net-Worth Individuals
High value home insurance protects your home and the features that make it distinct, but some also include coverage for kidnap expenses and identity fraud. Premium home insurance also includes higher coverage for medical payments if one of your household employees becomes injured while on the job.
Collections and valuables insurance protects your treasures if they’re lost or broken, but also provides reimbursement for employee theft of these items.
Auto Insurance & Personal Excess Liability Families relying on a chauffeur, nanny or housekeeper to drive children or members of the family with their own car (or the families’ vehicles) need higher limits of auto insurance in addition to adequate personal excess liability (personal umbrella) coverage.
Employment Practices Liability Insurance (EPLI) is one important protection that should not be overlooked by families employing domestic help.
EPLI Guards Against Wrongful Employment Acts
Along with Workers’ Compensation, Employment Practices Liability Insurance (EPLI) is an important component of any comprehensive domestic employee insurance program. EPLI protects you as an employer from claims of inappropriate or unfair acts such as discrimination, or other actual or alleged wrongful employment practices.
EPLI can protect employers from lawsuits alleging:
- Sexual harassment
- Wrongful termination
- Breach of an employment contract
- Failure to employ or promote
- Negligent evaluation
- Negligent compensation
- Wrongful discipline
- Emotional distress or mental anguish
- Invasion of privacy
- Retaliation and more
Covid-19 has resulted in numerous lawsuits where employees allege their employer ignored or violated workplace safety rules concerning the pandemic. EPLI reimburses you for the costs of defending a lawsuit in court, for judgments and settlements, regardless of whether you win or lose the lawsuit. Costs associated with defending a lawsuit can be staggering and pose a significant risk to the success you’ve worked to achieve. In fact,
“The average cost for defending and settling employment law cases is $160,000, according to Hiscox. Also reported is that the average jury award for an employment-related case is $217,000, and the average duration of an employment claim spans more than 300 days.” (2)
EPLI policies typically include reputational injury coverage which pays for a public relations firm to help restore your reputation if your employee makes the allegations against you public. If necessary, an EPLI policy may also cover security expenses to protect your home and your family from the media.
Employment Practices Liability Insurance isn’t all encompassing and usually doesn’t pay for civil or criminal fines or punitive damages. Also, “liabilities covered by other insurance policies such as workers compensation are excluded from EPLI policies.”(3) A professional risk manager can discuss the terms of your individual policy with you and ensure you have the proper levels of coverage.
Premium Protection & Expert Guidance
It’s important for families with substantial portfolios to work with an insurance agent who offers premium insurance. McSweeney & Ricci’s Private Client Group partners with premium carriers such as Chubb, Pure, Cincinatti, Hanover Prestige, Berkley One, and Vault who specialize in protecting successful clientele. These partnerships allow us to deliver custom insurance plans based upon your unique needs. Our professional advisors provide concierge level service and expert advice.
Your household employee helps make your fast-paced life easier, but they also increase your liability. Our Private Client Group can help protect you from risk and help to preserve the lifestyle you’ve worked to achieve. Allow us to perform a complimentary review of your personal insurance program.
For more information on EPLI or premium insurance for high-net-worth individuals contact our Private Client Group at (844) 501-1361 or request a complimentary quote on our website.