In this article, we will review the employment practices liability (“EPL”) market of 2023 and highlight some of the developments we saw this year and will take a look at what can be expected in 2024.
Rates in the EPL market stabilized in 2023, due to strong competition with markets eager to write new business and maintain renewals. With the exception of employers operating in certain states like California, New Jersey, New York, and Florida for example, or certain industries, or with a history of paid losses, rate increases were flat or close to flat and coverage restrictions were few, if any.
In 2023, we were inundated with news concerning the use and impact of artificial intelligence on employment decisions, the future of non-competes, increased regulation and coordination between federal agencies, affirmative action in the college admission process, pay equity and pregnancy law changes and expansions to various state wage and hour laws.
We responded with various articles including venturing into the tech industry wherein there were massive layoffs, to address what were potential implications under an EPL policy. A topic that was top of everyone’s mind was Artificial Intelligence “AI,” and in the summer we asked, is your organization ready for AI? In the fall, we addressed the future of non-compete agreements in light of the current administration’s comments and actions concerning same.
While the gender pay gap has been a long-standing issue in the United States, pay transparency legislation has continued to evolve and has moved to the forefront with many states passing new laws. We took a closer look at what states have been doing. Continuing along the lines of wages, we looked at the coverage available under EPL and wage and hour policies for wage and hour claims, and the best internal policies for companies to consider implementing.
Lastly, we ended the year with an article discussing the implications of a Supreme Court Decision which potentially opens the door for reverse discrimination cases and claims challenging corporate DEI programs.
In Groff v. DeJoy, the Supreme Court sided with a former postal employee who brought Title VII claims against the U.S. Postal Service over its refusal not to schedule him to work on Sundays, his Sabbath day. The Court unanimously held that the undue hardship defense to providing a religious accommodation requires showing that the proposed accommodation would cause a substantial burden in the overall context of the employer’s business. This ruling upended a longstanding standard that had allowed employers to deny a religious accommodation under Title VII as an undue hardship, by claiming it would impose a more than “de minimis” cost.
In Coinbase, Inc. v. Bielski, the Supreme Court held that a district court must stay its proceedings in a case pending an appellate court decision on whether the case belongs in arbitration or district court. The ruling protected many benefits of arbitration including: privacy, cost, and efficiency. This ruling may affect employment lawsuits, as companies continue to use arbitration clauses to steer claims out of court and direct them into private dispute resolution.
To be exempt from overtime pay under the Fair Labor Standards Act’s “white-collar” exemptions, employees must earn at least $684 a week on a salary basis, among other requirements. In the case of Helix Energy Solutions Group, Inc. v. Hewitt., an oil rig worker was paid a guaranteed daily rate of at least $963, which is significantly higher than the weekly salary threshold. The Supreme Court held that the worker was eligible for overtime pay because he was not paid on a salary basis.
With 2024 around the corner, the EPL market continued to stabilize largely due to competition with markets eager to write new business and maintain their renewals. The extent of rate increases will be determined by many factors, particularly industry, loss history and location of employees. Assuming no change in risk profile and no losses, rate increases are more likely to be close to or at flat. California continues to be the most problematic jurisdiction. New Jersey, New York and Florida continue to be challenging as well. Overall capacity in the EPL market is stable; additional capacity has been added in the Bermuda market. Significant loss history and/or significant change in exposure factors will still elicit rate increases on the higher end. Many domestic markets continue to provide lower limits — $5 million to $10 million with some Bermuda markets also looking to cut back to $15 million.
Muldrow v. St. Louis – The Supreme Court will decide whether Title VII of the Civil Rights Act of 1964 prohibits discrimination in transfer decisions absent a separate court determination that the transfer decision caused a significant disadvantage. In Muldrow, a female police officer challenged her involuntary transfer from one division to another. While her compensation and formal rank was not altered. The plaintiff alleged that she was transferred due to her sex. “Muldrow claimed that her transfer led to altered scheduling and responsibilities, thereby constituting discrimination in her “terms, conditions, or privileges of employment.””
In the 2023 fiscal year, the EEOC, with an increased budget, and a 25% increase in public demand, was quite active. Last year, the EEOC was focused on remote work, pay equity, AI integration, fostering diversity, equity, inclusion and accessibility (“DEIA”) and harassment, race and retaliation. On September 29, 2023, the EEOC reported that it filed 143 new employment discrimination lawsuits in 2023, representing a 50% increase over 2022. The EEOC also reported that of the filings, it filed 25 systemic lawsuits, which is almost double the number filed in each of the past three fiscal years. Total recoveries will be published in 2024, but to highlight a few EEOC victories, they include a Nebraska jury award of $36 million against Drivers Management, LLC and Werner Enterprises, Inc. in September 2023, for failure to hire or reasonably accommodate a qualified deaf driver; a $2.4 million settlement with Lilly USA, LLC for age discrimination; a $1 million settlement with Dollar General for ADA and GINA discrimination; and the $365,000 settlement of its first AI age discrimination case brought on behalf of a class of men and women who were not chosen for an interview by an AI screening tool used by iTutorGroup. In September 2023, the EEOC filed its largest systemic case against Tesla, Inc. claiming “pervasive” race harassment and discrimination against Black employees in its Fremont, California factory.
In 2024, we can expect more coordination and information sharing between the EEOC and the DOL and DOJ, and more enforcement actions to prevent and remedy systemic harassment in the workplace, and not based just on sex, but “misgendering” and reproductive choices as well.
As for the world of non-competition agreements, 2023 began with a bang with the Federal Trade Commission, and the NLRB, issuing proposed federal rules and commentary which clearly disfavored the use of non-compete agreements and non-solicitation provisions. This led to a wave of various new or expanded state laws either banning or seeking to restrict the continued use of such agreements. California[1], Minnesota and New York lead the “ban” wagon. Employers must be aware of the ever changing non- compete landscape and avoid blanket non-competes. Employers may find few defenses to their use of such agreements depending upon which state law applies. More to follow as we continue to watch this issue into 2024.
On October 26, 2023, the National Labor Relations Board (“NLRB”) issued a final rule to replace and essentially reverse the joint employer test issued under the Trump Administration.
The NLRB’s new Final Rule for determining joint-employer status under the National Labor Relations Act expands the current standard by reviewing whether an entity has authority to control at least one of the seven essential terms and conditions of employment, notwithstanding whether the entity applied that control. The NLRB published a list of seven categories of terms and conditions that it will consider “essential” for purposes of the joint employer inquiry. We will see how this rule will affect companies in 2024.
On June 27, 2023, the Pregnant Workers Fairness Act (“PWFA”) became law, placing heightened obligations upon employers to accommodate pregnant employees. The Equal Employment Opportunity Commission (“EEOC”) immediately began accepting charges under the PWFA for alleged violations occurring on or after June 27, 2023.
This new law guarantees the affirmative right to receive reasonable accommodations for known limitations related to pregnancy, childbirth, or related medical conditions absent an “undue hardship” on the employer. The EEOC’s final PWFA regulations, will be issued by December 29, 2023. We will see what the potential implications of this law will be in 2024.
Pay equity and transparency dominated headlines in 2023. In addition to banning gender-based discrimination pay, some states have extended that prohibition to all protected classes and recently, state equal pay act laws have expanded to include bans on prohibiting employees from discussing compensation. On the pay transparency front, Colorado leads the way with its Colorado Equal Pay for Equal Work (EPEW) Act, passed in 2021, which bans consideration of an applicant’s salary histories and rules which prohibit employees from discussing their pay. Several states now require that applicants receive pay scales- such states are Colorado, Connecticut, Nevada, Rhode Island, and Washington[2]. We anticipate additional states will follow suit. Depending upon the state, damages can be steep for each violation and therefore this area is likely to result in increased litigation in 2024 and beyond.
As for AI, we saw a surge in the use of AI in employment (Chatbots, for example) and generative AI (ChatGPT, for example), from hiring through separation. With the accelerated use of AI employment tools, the EEOC issued additional guidance and the White House issued an Executive Order[3] in May and October of 2023, warning of the potential discriminatory impact on various protected classes, especially when using AI hiring and screening tools, as well as potential invasion of privacy concerns if using voiceprint and facial geometry scans. Employers continue to be subject to anti-discrimination laws and the various state privacy statutes and, for those in Maryland[4], Illinois[5] and New York City[6], they also must be aware of employment- specific AI laws with their various bias audits and notice and consent requirements. We surely can expect more regulation at the federal and state level and consequently increased litigation as this technology and the law continues to develop and changes the way we live and work.
Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
