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Business Protection Bulletin

IS YOUR COMPANY PROTECTED FROM ASSOCIATIONAL DISCRIMINATION CLAIMS?

By October 1, 2009No Comments

Most employers are aware of the employee protections found in Title VII of the Civil Rights Act of 1964. Employers may not discriminate against employees on the basis of race, color, religion, sex, or national origin. Also, they may not retaliate against employees who have protested against an illegal employment practice or who participated in an investigation or other activities against the employer for an illegal practice.

Further, recent court decisions have applied Title VII’s protections to an employee’s association with another person whose characteristics fall under those protections. The U.S. Supreme Court held in 2006 that employers cannot discriminate against someone closely related to or associated with a person who is exercising protections under Title VII. Two federal courts earlier this year ruled that employers violated the law by discriminating based on association. One allegedly fired a white basketball coach because his wife was African-American; the other allegedly fired an employee whose coworker’s fiancé filed a complaint with the Equal Employment Opportunity Commission.

All employers are vulnerable to these types of accusations, even those who strive to obey the law. Employment Practices Liability insurance (EPLI) policies cover many types of losses resulting from employee claims. How will they respond to association discrimination claims?

EPLI policies vary somewhat from one insurance company to another, but most provide coverage for acts such as discrimination, wrongful termination, harassment, retaliation, and inappropriate employment conduct. A typical policy covers discrimination against an employee for termination of the employment relationship, demotion, failure to promote, denial of an employment benefit, or other adverse action based on a number of characteristics such as color, race, sex, ethnicity, age, and religion. It also covers retaliation claims if the employee engaged in a protected activity, the employee suffered an adverse action, and the protected activity caused the adverse action. Because they apply specifically to employees who have these characteristics or who perform protected activities, these policy provisions do not appear to cover actions against employees because of their association with others.

However, the policies usually also cover “inappropriate employment conduct.” Among the acts that might fall within this category are coercion, wrongful demotion, wrongful discipline, retaliatory treatment, and others. The definition of “inappropriate employment conduct” will be different from one policy to another. One insurance company might cover association discrimination while another might not. As such, employers should discuss specific terms of coverage with one of our insurance agents.

The policies might cover the employer, but not the employee alleged to have committed the act, if a court determines the employee deliberately acted illegally or with intent to harm the other employee. For example, if a court ruled that a supervisor was acting maliciously when he fired an employee for marrying someone of a different race, the insurance might pay for the employer’s defense and liability but not for that of the supervisor.

In this era where job cuts and lawsuits are common, employers face a real exposure to actions against them for the decisions they make. Lawsuits can be costly even if they are groundless; the costs of defending them can mount rapidly. EPLI provided by a financially solid company is an important part of every employer’s risk management program. EPLI, coupled with a well-executed loss prevention program, will help any employer survive employee accusations.