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Risk Transfer Options for Evolving Employer Liability

The employment practices liability (EPL) environment is dynamic in both Canada and the U.S. New and changing sources of potential liability continue to arise, requiring employers to better understand and define their risk and strategically address it. EPL coverage has also adapted, offering risk-transfer solutions in response to emerging perils.


The ongoing COVID-19 pandemic represents a unique challenge for employers. Businesses in every industry are facing unprecedented risks including those surrounding staffing, determining whether employees can and should work remotely, duties to accommodate employee childcare and eldercare responsibilities, workplace safety, employee travel, interruptions in business operations and continuity, and managing return-to-work policies. These day-to-day operational questions, along with ongoing employer obligations under various state, provincial, and federal employment laws can be grounds for potential liability and EPL claims. As a best practice, employers should continue to monitor all government and public health announcements pertaining to COVID-19, amend their response and policies as the situation unfolds, regularly communicate with employees, train those employees on evolving risks, and reiterate relevant policies. To assess coverage for any potential claims, EPL policies should be reviewed for Bodily Injury/Property Damage (BI/PD) exclusions and potential carve-backs. Coverage would depend on the language used in the policy.

Cannabis and the workplace

Following the legalization of marijuana in Canada, medical marijuana continues to be a thorny issue in the workplace. Employers must walk a fine line between compliance with human rights laws and their own company drug use and safety policies. EPL policies can provide coverage for a host of accusations that may arise resulting from the intersection of cannabis and the workplace, spanning from discrimination based on a disability to wrongful dismissal allegations.

Sexual harassment and the #MeToo movement

In the midst of continued worldwide focus on sexual harassment allegations in the workplace in the wake of the #MeToo movement, various jurisdictions have created statutory obligations for companies to investigate and address workplace harassment complaints, and to develop and maintain programs and policies that explicitly address sexual harassment. In Ontario for example, this came in the form of amendments to the province’s Occupational Health and Safety Act (OHSA). An employer’s failure to comply can result in a mandated third-party investigation and report at the company’s expense, or a hefty fine. Although most EPL insurance policies exclude violations of the OHSA, and its associated fines and penalties, some EPL insurance programs will respond to provide certain indemnity and defence costs coverage in the event a company is faced with a civil lawsuit alleging harassment or sexual harassment.

Invasion of privacy

Various privacy related torts have been recognized in recent years in Canadian jurisdictions. In Ontario, invasion of privacy was first recognized in the form of “intrusion upon seclusion” in 2012. In 2019, an Ontario court recognized, for the first time in Canada, the new tort of publicly placing a person in a false light. With the broadening of privacy rights, employers must be careful in balancing employees’ reasonable expectations of privacy and, for instance, surveillance and searches or public announcements or statements involving employees. Many EPL insurance policies provide some measure of coverage for invasion of privacy claims, although the extent of coverage varies among carriers and may differ depending on whether the insured is a public or private company.

Evolving grounds of discrimination

Insurance and legal experts expect to see an uptick in litigation involving “new” grounds of discrimination. Traditionally, discrimination claims based on race, ethnicity, and age have been commonly covered under EPL insurance policies. In recent years, human rights legislation has evolved to both recognize expanding rights such as LGBTQ rights and gender identity, as well as realities such as work-life balance. It is vital for EPL policies to respond in the event of discrimination based on sexual orientation, transgender status, or gender dysphoria. Equally important is coverage for other grounds of discrimination such as family status (recently expressly recognized by the Canadian Human Rights Tribunal). EPL policies typically provide broad coverage in this regard, which in most cases will extend to cover claims stemming from these novel bases of discrimination.

Employee termination

Termination of an employee can come with potential risk and litigation if not conducted carefully. Claims for wrongful dismissal are generally accompanied by disputes over the amount of pay-in-lieu of notice to which a terminated employee is entitled. Notably, common law notice periods in Canada have recently increased to an upper-threshold of 26 months. The EPL market now offers coverage by some carriers for some of the wages ultimately awarded by a court that are over and above 1) the statutory minimums required by legislation or 2) the amount that is offered to the employee at or after the time of termination. This is generally subject to terms and conditions, and the entire amount (i.e. vacation pay, bonuses, and other amounts) may not be covered. Aon is continuing to work with markets to expand this coverage for publicly listed organizations.

Dependent contractors

Somewhere on the job classification spectrum between employees and independent contractors lies the dependent contractor. Canadian courts have generally classified a dependent contractor as an individual who works for themselves but provides consistent and regular services to one or a limited number of organizations. As a result, that individual is entitled to many of the same rights as employees. Traditionally, EPL polices did not extend to cover individuals in these positions. However, the Canada insurance market has begun to move in a favourable direction for insureds, with policies now providing coverage for claims involving dependent contractors.

Wage and hour claims

“Wage and hour” claims have increased in both frequency and severity over the past few years These claims are frequently brought as class action lawsuits, with large groups of employees seeking millions of dollars in damages for matters such as unpaid wages, unpaid overtime and job misclassification leading to wages or other benefits owed. To address this exposure, coverage for lawsuits related to employee wages is now being offered through the Bermuda market for larger Canadian policyholders who may face significant losses in a wage and hour class action lawsuit. This is typically priced much higher than traditional EPL insurance. The cost of this coverage has recently decreased, but remains relatively high, as does the retention, due to litigation trends in this area.

*All descriptions, summaries or highlights of coverage are for general informational purposes only and do not amend, alter or modify the actual terms or conditions of any insurance policy. Coverage is governed only by the terms and conditions of the relevant policy.