The Weinstein Effect

April 16, 2018 | Ryan Kagarakis

With all of the changes enacted by the California government this year and the accusations made against Harvey Weinstein I thought it would be a good time to revisit the importance of Employment Practices Liability Insurance (EPLI) as a means to protect your business. The combination of these very public accusations coupled with the new employee-friendly laws we are likely to see higher settlement demands than before.

Although the recently enacted laws were intended to protect employees who are legitimately being mistreated by their employers it will have a profoundly negative impact on businesses who are doing things the right way when an employee tries to “work the system”.

If an employee is truly being mistreated and harassed at work then a legal action can sometimes be the necessary remedy to correct the situation. However, if the employer has done nothing wrong and a current or former employee bring a frivolous lawsuit against them it usually does not materialize the way the employee thinks it will. Typically, the services for an attorney fee are around 50% of the settlement or there is a minimum retainer fee for representing the employee. What a disgruntled employee sometimes does not understand is that the big payout they were promised is not always what they get. For example, if the employee make a harassment claim against their current or former employer for $10,000 they will likely only see half of that. Furthermore, if the employee works in a tight-knit community like construction word can get around quickly of what happened and would likely dissuade other employers from hiring him or her.

Some of the new bills that went in to law in January put further pressure on the employer to settle a case even if there is no substantial proof of any wrongdoing. As an example, Assembly Bill 306 is a new law that can force an employer to reinstate an employee back to the workplace while they are in the process of suing them for retaliation. This legal move is known as “injunctive relief” and the mere threat by the employee’s attorney will likely be enough to get the employer to agree to a settlement. Currently a $10,000 to $20,000 settlement is the approximate average in California with many law firms expecting that number as a byproduct of the recent Hollywood allegations.

As mentioned in previous articles, we are by no means trying to make light of the serious charges against Harvey Weinstein by his victims. We fully understand that the acts that Harvey Weinstein is accused of are despicable and he should be punished to the full extent of the law if he is in fact guilty of what has been reported. With that being said, the settlements and reported settlements are in the tens of millions of dollars. Sexual abuse is a repugnant crime no matter who commits it so it is not just celebrities who would be entitled to some form of recovery. Lawsuits that include an element of sexual abuse do not normally have settlements of $20,000; these lawsuits are usually in the hundreds of thousands to million dollar range. Sexual harassment and/or sexual abuse claims can ruin an employer’s reputation and cost them everything they have so we suggest taking proactive steps:

  1. Consult with an insurance broker about EPLI coverage. Employers should make sure to discuss all endorsements/exclusions on the policy as some carriers will exclude wage and hour claims or limit recourse in the event they disagree on a settlement.
  2. Consult with an attorney who specializes in labor matters. A good labor law attorney will be able to guide an employer through all of the changing laws and also be able to give a best-practices guidance to help prevent employment related claims.



Ryan Kagarakis
Commercial Insurance Broker at Brown & Brown Inc.

Phone: 916.625.4616 | Direct Fax: 800.761.6733