Employment Practices Liability defined:  “Employment Practices Liability (EPL) provides insurance for employers against allegations of unfair dismissal and unfair labour practices (including sexual harassment and discrimination) brought by a past, present or even future employee.”

 

 

Employment Practices Liability Insurance (EPLI) was introduced to the South African insurance landscape in 1998, just two years after the formation of the Commission for Conciliation, Mediation and Arbitration. At the time, most underwriters were reluctant to sign for the cover. This reticence was partially due to the historically poor industrial relations environment and then of course the perception that the post-apartheid closet of South Africa still contained many skeletons - even in the workplace.

 

But by the year 2000, underwriters became more comfortable with what really amounted to “labour dispute insurance” and over time, a few specialised markets gradually introduced the new form of cover. As the CCMA case load grew; the knock on effect was more corporate and large employers sought out this then niche insurance. These employers typically had a workforce exceeding 500 and immediately recognised the benefits of being able to transfer the risk of CCMA and Labour Court awards into the insurance market.

 

A proof point of this must surely be that the maximum amount that can be awarded by the Labour Court for an Automatically Unfair Dismissal is 24 months’ salary. At a middle management salary of R30 000 per month, the award could reach R720 000 – a bitter pill for even a large employer to swallow. Of course the larger employers were also faced with another problem: the frequency of losses due to labour disputes could be likened to the frequency of accidents in the motor fleet. While it may sound ridiculous, the ratio of accidents to motor vehicles on South African roads is actually far lower than the ratio of CCMA cases to employers.