What #MeToo Means For Your Business
The #MeToo movement has had a dramatic impact on many industries, from entertainment and news media to government and health care to finance and hospitality. Encouraged by social media to share their stories, countless individuals have come forward with public accusations of sexual harassment and misconduct, shining a light on hostile workplace environments.
While accused individuals have lost their jobs and faced civil litigation and criminal charges, the #MeToo movement could also have significant financial repercussions for employers. It’s vital that you take allegations of harassment and misconduct seriously while also taking steps to protect your organization from potential claims.
Since #MeToo went viral in October 2017, the severity of sexual harassment claims has increased. Plaintiffs’ attorneys have been emboldened to seek larger damages given the often high-profile nature of accusations and defendants’ desire for quick and quiet claims resolutions.
Beyond harassment claims, employers face at least two other litigation risks:
- Wrongful termination suits: In their haste to avoid harassment suits, some employers have rushed to terminate alleged perpetrators without conducting proper investigations.
- Investor actions: Those accused of wrongdoing have included senior corporate leaders, prompting, in some cases, shareholder derivative and securities class action suits alleging that companies were aware of misconduct and failed to take action or disclose it.
Are We Covered?
In most cases, allegations of sexual harassment, wrongful termination, and retaliation are covered under employment practices liability (EPL) insurance policies. Stock-drop claims and other securities litigation are generally covered under directors and officers (D&O) liability policies.
The majority of companies — particularly public ones — purchase D&O coverage. But many employers still do not purchase standalone EPL coverage, despite its wide availability over the last quarter-century. While cost may be a deterrent, some organizations have also been overconfident, believing they can manage harassment and discrimination without buying insurance coverage.
But even organizations with strong policies in place to prevent harassment could become targets. And verdicts against them or settlement costs could stretch into the tens of millions of dollars. For those companies that don’t purchase EPL coverage, the #MeToo movement presents an opportunity to reconsider that choice, especially as the market remains competitive.
Beyond insurance, employers can take other steps to meet the challenges of the #MeToo movement. Among other measures, you should:
- Ensure you have strong anti-harassment and anti-retaliation policies that are regularly updated, supported by senior leaders, and reinforced with mandatory training for all employees.
- Provide clear guidance and multiple channels for reporting workplace misconduct.
- Ensure you have access to competent in-house or outside counsel with expertise in employment law.
- Be prepared to answer EPL and D&O insurers’ questions about your employment policies, including management’s role in enforcing them.
- Be ready to manage EPL and D&O claims, including documenting all actions taken.
Content provided by Kelly Thoerig, SVP Employment Practices Liability Coverage Leader.