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In many ways employment practices liability (EPL) claims cases follow broader social and economic trends. In 2022 lawsuits brought by employees against their employers related to COVID-19 vaccine requirements, return to work protocols or sexual and racial harassment or discrimination. More recently inflationary pressure and recession worries have led to employee job losses and redundancies that may potentially increase the risk of wrongful termination lawsuits.

In the last few years in Australia we have experienced a spate of legal actions around underpayment of employees' wages. Companies affected have included Qantas, Super Retail Group, NAB, CBA, Coles and Woolworths. In addition the Australian Government Fair Work Ombudsman has advised that underpayment is a focus in 2022/23, and noted that it is investigating about 50 large corporates that have self-reported non-compliance in 2022.

As we move into 2023 new categories of employment lawsuits are emerging, stemming from environmental, social and governance (ESG) and inclusion and diversity initiatives (I&D)— and the political division relating to these movements, which are increasing exposures and influencing the way EPL insurers offer insurance policy coverage.

We have also seen new employee-related legislation introduced in Australia, including the Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Act 2022 (Respect at Work Act 2022) in November 2022. This Act includes key changes such as:

  • a positive duty to eliminate sexual harassment
  • express prohibition on conduct that subjects a person to a hostile workplace environment on the ground of sex
  • lowering the threshold for finding of harassment on grounds of sex
  • clarification that victimising conduct can form the basis of a civil action for unlawful discrimination as well as a criminal complaint.

New employment practices legislation to be aware of

In December 2022 the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 (Secure Jobs Bill) was passed. One of the key amendments provides employees with the express right to discuss pay and puts a ban on secrecy clauses and job ads offering below minimum wages.

The Federal Government has also indicated its intention to deliver further workplace relations reforms in 2023.

While EPL insurance cover remained broad in 2022, some insurers are looking to impose higher retentions on risks for companies in industries deemed higher risk, such as retail, or imposing higher retentions for class action claims.

In terms of cost there may be some EPL premium increases linked to higher employee numbers or businesses making staff cuts, or which have made EPL claims previously.

Emerging EPL trends to be aware of

New trends that began to emerge globally from 2022 and are worth watching in Australia in 2023.

  • A potential backlash to I&D and ESG initiatives is leading to claims alleging discrimination brought by traditionally majority race and age groups. These 'reverse' discrimination claims allege that corporate drive to increase DEI and ESG markers have led dismissals to improve diversity.
  • It's becoming more common to see high-wage-earning complainants bringing allegations of wrongful termination, discrimination and harassment, which leads to more costly settlements and insurance payouts.
  • Inflation continues to increase defence costs and settlements, leading to higher single-claimant payouts, especially if the employee making the allegations is a high earner and the employers is keen to settle quickly to avoid negative publicity.

Tips for retaining adequate EPL protection for businesses going forward

Businesses will benefit from reviewing their employment practices protocols and risk management measures ahead of insurance renewals.

Since the insurance market for directors and officers' liability (D&O) insurance has improved and eased recently, leveraging this cover to improve EPL protection may be a worthwhile strategy.

It's imperative to work with an insurance broker who specialises in this professional risk and insurance for your particular industry or required coverage. Gallagher has a vast network of specialists who understand your industry and business, along with the best solutions in the marketplace for your specific challenges.

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Author Information

Theresa Lewin

Theresa Lewin

Financial Institutions Practice Leader — Professional & Financial Risks, Australia

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This article may contain material provided by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. To the maximum extent permitted by law: no guarantee, representation or warranty is given that the information or advice in this newsletter is complete, accurate, up-to-date or fit for any purpose.

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