The insurance policy covers the business for employment-related actions such as wrongful dismissal or workplace harassment. It covers (most) statutory fines and penalties the business may incur as a result of breaching legislation or regulation.
Management Liability policies vary in the benefits they provide but typically cover (as per the policy terms and conditions):
EPL is designed to assist employers to reduce the cost exposure and business stress associated with employees taking action against them for claims such as alleged discrimination, harassment and unfair dismissal.
Harassment claims are the most frequent with sexual harassment topping the list. Unfair dismissal and discrimination claims are also common.
Regulatory authorities may hold directors and officers personally liable for breaches of legislation.
Creditors may allege that the director or officer allowed the company to trade whilst knowing it could not pay its debts.
An employee was caught accessing inappropriate websites and sending inappropriate emails during office hours. The employee was dismissed for breaching the company’s internet policy. Fair Work Australia found that the decision to dismiss was unfair. They took into account the employee’s previous good behaviour and the fact that the internet policy was regularly breached by other employees without consequence. They also found the employee was not given the opportunity to respond to the allegations before the dismissal. The company was ordered to pay $50,000 compensation and had legal bills amounting to $40,000.