Employment Practices Liability Insurance

Social Media and EPLI in Recruiting and Hiring

The following comes from an article written by Kathleen McCullough, Jill Bisco, Cassandra Cole entitled “Social Media and Employment Practices Liability in Recruiting and Hiring.”

Introduction

The National Association of Insurance Commissioners (NAIC) has defined social media as “a group of Internet-based applications that allow for the creation and exchange of user-generated content” (National Association of Insurance Commissioners, 2012). Over the past decade, social media has changed how individuals interact with each other and how businesses interact with vendors, employees, and customers. The various methods of communication have continued to expand throughout the years. Today, individuals and business can e-mail, instant message, and Tweet. They can communicate via Skype or FaceTime or utilize “blogs” to voice their opinions or share ideas. They can post pictures, videos, and other forms of content. They can “like” or “friend” other individuals and businesses to stay connected over time. Along with these new methods of communication comes the potential for employers to use this material in ways that could lead to employment practices liability (EPL) claims.

Social media is not a stagnant platform, but is ever changing with dominant sites changing and new sites becoming available. As of December 2012, the most popular social networking sites are, in order: Facebook, Twitter, LinkedIn, Wikipedia, MySpace, Digg, YouTube, StumbleUpon, Reddit, and Yelp (SEOMOZ, 2012). For those individuals with a computer or cell phone, it is more likely than not that a person is a member of one or more of these sites. As of June 2012, Facebook alone had just under one billion worldwide users and as of September 2012, LinkedIn had over 187 million users in over 200 countries. With these types of numbers, the impact of social media is clear.

Although the demographics associated with each of the social networking sites varies, the majority of users are between the ages of 18 and 64. For Facebook, this group accounts for 79 percent of its users. For Twitter and LinkedIn this group accounts for 87 and 93 percent, respectively (Bloch, 2010). With so many users in what many consider the “working years,” it should be no surprise that Human Resource (HR) directors are turning to these sites to assist in recruiting and hiring employees. According to a research report by the Society for Human Resource Management, in 2011, 76 percent of companies were using or planning to use social media sites for recruiting and more than half said that social networking sites were an efficient way to recruit candidates (Pickell, 2011).

With the increased use of social media in the recruiting and hiring of employees, there are new and serious concerns for potential EPL claims. This issue is of importance to employers as these claims can be extremely costly. Additionally, for companies that write EPL coverage, this issue brings up concerns regarding the underwriting of risks and highlights the importance of providing loss control measures.

Social Media and Hiring Practices

With the high cost of hiring and training new employees, employers attempt to gather as much information as possible on potential hires in order to ensure that they select the most qualified applicant. Using social media to access information about applicants is easier than ever and because of this, human resource departments may investigate the social networking sites of applicants in order to evaluate the persons being considered for employment.

Publicly available information found on the internet is not considered private information and therefore, an employer’s review of this information is not considered an invasion of privacy (Brown and Vaughn, 2011). As such, employers may use social media sites to obtain information which helps identify an individual’s qualifications to perform a job. However, sites may also contain information that reveals negative traits or characteristics. For example, potential employees could disclose that they were not truthful on their resumes or applications, or provide other disqualifying, embarrassing information (Berkowitz, P., 2009). Additionally, pictures posted on-line could provide recruiters or potential employers with information about employees that they do not want to or do not need to know in the hiring process (Segal, 2012). On-line searches can produce information related to protected group status, even if that was not the original intent. This information includes age, race, color, religion, sex, national origin, and disability status (Brown and Vaughn, 2011). In addition, employers need to be cautious as some social media posts may be protected by law. For instance, some complaints about discrimination or working conditions that a person may post on-line may be protected by Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act or other laws (Segal, 2012). It is important to remember that it is not easy to draw a line between what may be protected and what may not. Therefore, it may be better not to attempt to do so (Segal, 2012). Furthermore, potential employees may assume that any adverse action taken (i.e. no personal interview) was a direct result of protected information found on social media (Segal, 2012). Once an employer reviews a candidate’s on-line profile, the courts will assume that the employer is aware of the candidates protected characteristics (Berkowitz, M., 2013).

Although there are clearly concerns with utilizing social media to obtain information on potential hires, it does not mean that these sites must be avoided completely for recruitment and hiring purposes. For instance, Twitter may be a useful way of advertising an open position. If the message regarding the position is re-Tweeted, it is possible that more qualified individuals become aware of the position. The downside to using Twitter for recruiting is that the posting may go viral in a negative way which would require some form of intervention by the employer (Smith, 2010).

Due to the potential liabilities associated with the use of social media in the hiring process, all searches should be completed by an HR professional, not individual department managers or other hiring personnel. Additionally, searches should only be done on position finalists and only after the equal employment opportunity profile of the individual is known (Segal, 2012). In fact, it may be best to leave any social media reviews until potential candidates are met face-to-face in an interview setting and all searches should be completed at the same point in the process for all candidates (Berkowitz, 2013).

It is important for all employers using social media reviews in recruiting and hiring to document their process. Any guidelines or procedures created should be maintained in print or electronic format and updated on a regular basis. If something is found during a social media review that makes the employer question the professionalism, integrity, or candor of an applicant, the employer should retain a snapshot of the questionable material for the file (Berkowitz, 2013). Of course, if an employer is unsure if their process is appropriate or if they are unsure if the material they found is grounds for adverse action, they should consult with an attorney that is well-versed in legal issues involving social media (Berkowitz, 2013).

According to the Equal Employment Opportunity Commission (EEOC), between 2009 and 2010 there has been a seven percent increase in the number of filed complaints associated with hiring practices. As a result, the EEOC has increased its staff and budget in order to deal with the increased workload (Lacey, 2011). It is possible that some of the increase in claims may result from the use of social media in recruiting and hiring practices, such as those mentioned earlier.

Employment Practices Liability and Underwriting

The International Risk Management Institute (IRMI) defines employment practices liability as “a form of liability insurance covering wrongful acts arising from the employment process. The most frequent types of claims alleged under such policies include: wrongful termination, discrimination, and sexual harassment.” Employment Practices Liability Insurance (EPLI) may be written as a stand-alone policy, which is most often claims-made (IRMI.com, 2012). For private firms and non-profits, Directors and Officers Liability (D&O) and EPL are often incorporated into the same policy (Lacey, 2011; IRMI.com, 2012).

The definition of a wrongful act for EPL can vary from coverage form to coverage form (Lacey, 2011, 2012). Some forms provide coverage only for current or past employees while leaving coverage mute for prospective employees. Purchasers of EPL coverage should be sure to review the definition of wrongful act and employee to ensure that the actions surrounding prospective employees are covered. It is in this area that employers will receive protection for recruiting and hiring practices.

The Insurance Services Office (ISO) produces both standardized stand-alone EPL coverage and an endorsement to provide coverage on their Business Owners Program, both written on a claims-made basis. Both the stand-alone coverage, EP 00 01 11 09, and the ISO Business Owners endorsement, BP 05 89 01 10, provide coverage for prospective employees and specifically indicate that hiring practices are covered. As many insurance companies manuscript their own EPL coverage forms or endorsements, it’s possible that prospective employee coverage may not be provided in all coverage forms. Reviewing coverage forms is critical to the risk manager within the company to make sure the coverage desired is actually in place.

When underwriting EPL coverage for potential clients, insurers may be interested in determining the types of social media reviewed by the HR departments. Although the ISO Application for Employment-Related Practices Liability Insurance asks if the employer utilizes credit reports, genetic testing, criminal record checks, physical examinations, drug/alcohol testing, psychological testing, education/credential checks, reference checks or employment history checks in their pre-hire screening, they are mute on the issue of social media reviews. The ISO application, however, does ask if there is an Internet/Electronic Communications Policy, whether it is written or electronic, and whether it is part of the employee handbook or a separate document.5 It does not, however, ask how often this policy is updated to reflect changing technology or how often the policy is reviewed with personnel.

In order to mitigate EPL-related losses, most insurers offer some type of loss control services. Often, these services are provided through third-party vendors or law firms. These services can include up-to-date information on labor laws and assistance in developing written employment procedures, including insight on how and when it is appropriate to utilize social media in recruiting and hiring. Many times a call line is offered to help mitigate a situation from becoming a claim (Lacey, 2011). Employers should use these services to supplement any internal counsel they receive. With the ever changing aspect of social media, proper legal advice could save an employer from unnecessary litigation.

Conclusion

Social media is no longer cutting edge, it is mainstream and one thing is certain, it will continue to evolve and its use will continue to grow. With the expansion of social media and its use by human resource departments in the recruiting and hiring of employees, the potential for EPL claims will continue to be of concern. Certainly, employers must be aware of the potential liability associated with utilizing social media and look for ways to prevent or reduce the potential for litigation. In addition, insurers need to focus on underwriting processes and loss control measures to better understand and reduce the overall risk potential.

In order to prepare for these potential claims, employers need to establish clear, written or electronic guidelines or procedures—for employees, HR personnel, managers and executives – regarding the proper use of online services (Berkowitz, P., 2009). These procedures should detail the validity of using social media in recruiting and hiring, including what action will be taken if negative material is identified. Along with these procedures, employers should provide ongoing education regarding new trends in social media to personnel responsible for recruiting and hiring. Acknowledging the potential for issues regarding the use of social media in hiring, the EEOC held focused training institutes in late 2011 that specifically focused on the use of social media, credit checks and criminal background investigations to make employment decisions (EEOC, 2013).

In the future, EPL insurance carriers may update applications to include questions about social media searches associated with recruiting and hiring. Also, they may intensify their underwriting and begin to require full explanations to application responses and request conference calls with management to better understand the use of social media in the recruiting and hiring process (Lacey, 2011).

Footnotes

1 See Facebook statistics, http://www.facebook.com/press/info.php?statistics (as of 08/24/2012).  As of this date, 81% of the monthly active users were located outside of the U.S. and Canada.

2 See LinkedIn statistics, http://press.linkedin.com/about (as of 01/05/2013).

3 Age is covered by the Age Discrimination in Employment Act (ADEA) of 1967; national origin is covered under Title VII of the Civil Rights Act of 1964; and disability status is covered by the Americans with Disabilities Act (ADA) of 1990.

4 Specific claim data by year is available on the EEOC Federal Reports, Table B-8.  The 2009 report is accessible at: http://www.eeoc.gov/federal/reports/fsp2009/table_b_8.cfm and the 2010 report is accessible at: http://www.eeoc.gov/federal/reports/fsp2010/table_b_8.cfm

5 Insurance Services Office (ISO) Application, EP AP 00 09 07, titled Application for Employment-Related Practices Liability (EPL) Insurance was reviewed.

References

Berkowitz, Melanie, “Social Media Recruiting: Understand the Legal Guidelines,” Monster.com. Last retrieved Jan. 6, 2013, from http://hiring.monster.com/hr/hr-best-practices/recruiting-hiring-advice/acquiring-job-candidates/social-media-recruiting-guidelines.aspx

Berkowitz, Philip, “Adjusting to New Norms As Social Networking Pervades the Workplace,” New York Law Journal, 2009.

Bloch, E. (2010, April 9) “Social Media Demographics: Who’s Using Which Sites?” Flowtown.com. (Table C-1). Last retrieved Jan. 9, 2012, from www.flowtown.com/blog/social-media-demographics-whos-using-which-sites?

Brown, Victoria R. and E. Daly Vaughn, “The Writing on the (Facebook) Wall: The use of Social Networking Sites in Hiring Decisions,” Journal of Business Psychology, 2011, 26: 219-225.

Equal Employment Opportunity Commission (EEOC). Training Institutes press release July 28, 2011.  Last retrieved Jan. 5, 2013.

International Risk Management Institute (IRMI.com). Definitions. Available at:

http://www.irmi.com/online/insurance-glossary/terms/e/employment-practices-liability-insurance-epli.aspx Accessed on January 8, 2012.

Lacey, Bradley, “Dodge Risking D&O/EPL Claims,” American Agent and Broker, 2011, May.

National Association of Insurance Commissioners, “Use of Social Media in Insurance, Social Media (D) Working Group of the Market Regulation and Consumer Affairs (D) Committee, adopted December 20, 2011.

Pickell, Rob, “Social Media Screening: Navigating the Minefield,” Society for Human Resource Management, 2011.

Segal, Jonathan, “Widening Web of Social Media,” Society for Human Resource Management, June 2012.

SEOMOZ, “Social Media Marketing Guide.” Last retrieved December 16, 2012, from www.seomoz.org/article/social-media-marketing-tactics.

Smith, Allen, “Twitter Recruiting Raises Legal Concerns,” Society for Human Resource Management, February 2010.

Social Media & Employment Practices Liability Insurance

The following comes from an article entitles “Social Media & EPLI: Minimal Impact—So Far” by Chad Hemenway from PropertyCasualty360.com. 

Based on its post-IPO performance, the value of Facebook might have been significantly overstated by its overly optimistic investment bankers.

And based on the assessments of a broker and two major carriers that write the coverage, the predicted massive impact of social media on Employment Practices Liability Insurance (EPLI) claims may also have been overstated.

While some observers expected the industry to be dealing by now with a barrage of claims stemming from social-media misdeeds, the market has not seen much, if any, social media-related EPLI activity.

Phil Norton, head of the Professional Liability practice at broker Arthur J. Gallagher, says EPLI claims generated by the use of social media “might be a blip, but nothing hugely significant.”

Melissa Mattioli, vice president of Employment Practices Liability for Liberty International Underwriters, attended seminars on the subject to prepare for a possible onslaught of claims. But so far, the insurer “has not yet seen any exposure,” Mattioli says. “It hasn’t taken off yet” as many anticipated, she adds.

Chartis, another major underwriter of EPLI coverage, also has not seen this type of claim emerge at any great frequency, according to Joni Mason, senior vice president and Employment Practices Liability product manager.

But Mason says there is no doubt that social-media EPLI claims will surface more frequently in the future.

Social media can create “a blurring of lines between work relationships and social activity,” she says. “It’s uncharted territory for employers, and there is little guidance” about whether a person’s activities on social media can be deemed work-related or simply social, outside-of-work actions.

GOING INTO LABOR

As companies craft their social-media policies—with input from their risk managers, brokers and carriers—it’s important to make sure the rules expressed stay on the right side of the National Labor Relations Board (NLRB)—the federal agency responsible for safeguarding employees’ rights to organize into unions.

The NLRB “is taking a strong, activist position” on policies that might infringe on employees’ right to take collective action.

On May 30 the NLRB issued its latest in a string of reports by its acting general counsel, Lafe Solomon, focusing on social-media-usage sections in employers’ handbooks.

The latest report parses the policies of several unnamed companies in an effort to provide guidance on what types of social-media regulations can potentially violate the rights of employees—and lead to EPLI claims in event of a termination.

In one of the cases highlighted in the report, the NLRB quotes the social-media policy of a motor-vehicle manufacturer: “If you engage in a discussion related to [Employer], in addition to disclosing that you work for [Employer] and that your views are personal, you must also be sure that your posts are completely accurate and not misleading and that they do not reveal nonpublic company information on any public site.”

The NLRB was having none of it. “We found various provisions in the above section to be unlawful,” Solomon writes. “Initially, employees are instructed to be sure that their posts are ‘completely accurate and not misleading and that they do not reveal nonpublic information on any public site.’ The term ‘completely accurate and not misleading’ is overbroad because it would reasonably be interpreted to apply to discussions about, or criticism of, the Employer’s labor policies and its treatment of employees that would be protected so long as they are not maliciously false.”

The NLRB’s influence as a federal agency, says Longmore, does influence the opinions of judges, and since the organization is taking social-media policies so seriously, so should employers—and insurers.

“No one has made an issue of this like the NLRB,” she says. “You need to listen when they speak.” The organization’s reports, she adds, give companies, employees and legislators alike “a prompt to listen and an authorization to act in a concerted manner.”