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Risk in Context

Room for Improvement: Managing Employment Practices Risks Internationally

Posted by Ann Longmore October 03, 2016

Between the growth of the sharing economy, litigation risk, and a harsh regulatory environment, it’s no surprise that employment practices liability (EPL) risk is high on corporate agendas. But many businesses focus solely on their domestic EPL risk when it’s actually an international concern.

On our recent The New Reality of Risk® webcast, we asked participants whether their organizations had a clear understanding of their employment practices risks outside of the US. Of the nearly 200 risk professionals responding:

  • 27% said yes.
  • 39% said no.
  • 34% said not sure.

There’s clearly room for employers to better assess and manage their international employment practices risks.

International Risks

Outside of the US, employers face many of the same risks they do domestically, including claims of discrimination and wrongful termination. But in many ways, international risks are different. For example, multinational employers must also contend with:

  • Cross-jurisdictional claims, which are increasing as more people work across multiple countries with varying definitions of inappropriate employment practices.
  • The creation of employment claims tribunals, or specialized courts that are dedicated to employment matters. In recent years, these tribunals have made significant awards of damages in cases where employers have violated anti-discrimination and sexual harassment laws.
  • An increase in class or collective redress actions — for example, in the UK and China.
  • Increasing protections for whistleblowers. While these vary by jurisdiction, regulators are generally demanding a high cost from employers that retaliate against individuals who have reported illegal or unethical behavior.

In some countries, the risks go further. For example, Venezuela’s new “forced labor” law essentially allows public and private sector employees to be ordered to work in agriculture, a means to address the country’s food shortages — at the expense of their employers.

Managing Risk

Many multinational employers rely on a single global EPL insurance policy to manage their risk. Similar to the US marketplace, global EPL policies generally offer broad terms and conditions and favorable pricing. Global EPL policies, however, may not pay claims locally.

Other options for employers include:

  • Strategic local placements as part of a global financial and professional insurance program, which are popular with larger employers.
  • Using Lloyd’s licensed facilities for locally admitted coverage in several jurisdictions.
  • Coverage under local directors and officers liability policies, although D&O insurers are increasingly reluctant to cover EPL exposures.
  • Self-insurance.

It’s important to start the insurance purchasing process with an assessment of your global employment practices risks and of the international legal and regulatory environment. Risk professionals should talk to their global human resources and legal teams to make smarter decisions regarding EPL issues and how to manage them.

For more on this topic, listen to a replay of our The New Reality of Risk webcast.

Ann Longmore

Managing Director and Multinational Practice Leader in the Financial and Professional Liability (FINPRO) division