by Gabriel Olano 10 Sep 2020
While the economic and societal fallout of the coronavirus crisis
has yet to be fully determined, legal and insurance experts have warned
businesses to prepare for an incoming wave of insurance lawsuits.
According to Omar Ali-Shamaa (pictured), lawyer at Wolfe Pincavage
in Miami, the pandemic and accompanying restrictions have lasted longer than
expected, forcing many businesses to lay off their employees. This is causing
an increase in employment lawsuits, especially age-related discrimination
claims.
“Under the Age Discrimination in Employment Act (ADEA), employees
who are 40 years or older are protected from age discrimination,” Ali-Shamaa
said. “As such, employers who chose to retain a younger employee over an older
employee based on health concerns may violate the ADEA, even if the employer’s
decision was well-intentioned and made for the purpose of protecting the older
employee due to a higher risk of severe illness from COVID-19.”
He added that wage and overtime employment claims are also on the
rise, and will continue increasing as employers institute pay cuts. In some
instances, perhaps inadvertently, employers may convert exempt employees to
non-exempt and eligible for overtime.
While the Coronavirus Aid, Relief, and Economic Security (CARES)
Act has alleviated some pressure on businesses and employment claims in the US,
Ali-Shamaa predicts that employers will see an increase in employment claims
due to the expiration of the supplemental federal unemployment benefits.
“The situation is likely to worsen with the Senate and House
adjourned until September 08 and 15, respectively,” he said. “Until a decision
is made, millions of unemployed Americans will not receive any federal
unemployment benefits for at least six weeks. While a CARES Act II with
extended unemployment benefits will alleviate the situation, employment
practice claims are nonetheless expected to continue rise.”
This, according to Ali-Shamaa, has greatly impacted many
industries, especially the hospitality sector. Due to restrictions on the number
of customers restaurants can accommodate, revenues are greatly reduced and more
employees are laid off. This is causing a surge in employment claims,
particularly related to whistleblower claims.
“Driven by fear and uncertainty, and in some cases retaliation for
being laid off, there has been an increase in complaints by employees regarding
workplace safety, exposure to COVID-19, and adherence to local and state public
health orders and/or OSHA directives regarding social distancing,” he said.
“Whistleblower claims regarding violations of the Families First Coronavirus
Response Act’s paid-leave requirements are also likely to increase as
restrictions and unemployment continue to impact the hospitality industry.”
According to Luis Gazitua (pictured), principal of JAG Insurance
Group, 2020 has been the ultimate test of agility, as businesses across all
industries pivot their previous business strategies to adapt to the current
climate. Employers are now navigating a ‘new normal” and must re-examine their
insurance policies to ensure their businesses are adequately covered under
local guidelines.
In order to minimize the risk of lawsuits, Gazitua advised
business owners to make sure they are not being unintentionally discriminatory
when bringing back employees after a shutdown.
“For example, if you choose to bring back a younger employee and
do not retain an older employee at the same time, it may open you up to
discrimination litigation,” he said.
Risk managers must also communicate all operational changes to
their carrier as these adjustments may require specific endorsements.
“For example, despite obtaining permission from a neighbouring
business to expand outdoor seating, operators must document this change with
their carrier, as it can alter the premium,” Gazitua said. “Without this,
operators are subjected to grey areas and it is unclear as to which business is
responsible for potential claims.”
With business interruption cases already being dissected in the
courts, Gazitua believes the next wave of litigation will be regarding
employment practices liability insurance.
“Thus, it is imperative to understand and implement the best
policy for your business and connect with your agent to review your current
plan,” he said. “To mitigate risk, employers must cover all their bases,
document everything, and communicate effectively with their agent.
“Also, it’s paramount to follows current CDC guidelines and any
guidelines from your local municipality. This will avoid any missteps that
could prove costly if a customer or employee were to contract COVID-19 while at
your establishment. It is more important than ever to play by the book to
mitigate any potential liability. Eliminate all assumptions.”
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