Following years of challenging market conditions and strict underwriting scrutiny, most employment practices liability (EPL) insurance buyers with good claims history enjoyed modest premium increases in 2024. According to Zywave’s Commercial Property & Casualty Insurance Pricing Survey—which surveyed brokers from across the United States—EPL brokers experienced a less challenging pricing environment in 2024. Many respondents reported price increases of 5% or less. Overall, pricing in the EPL market remained stable in 2024, largely due to increased competition and healthy growth. Capacity is improving, and the EPL insurance market size is projected to reach $4.94 billion by 2031.
Experts are cautiously predicting these trends will continue in 2025; however, several factors could contribute to market volatility. For example, the increased use of artificial intelligence (AI) in hiring scenarios could lead to more claims. A report from the Society for Human Resource Management found that nearly 1 in 4 organizations were using AI or automation to support HR workflows. While many employers feel AI can be used to reduce biases during the hiring process, the U.S. EEOC isn’t convinced. In its Strategic Enforcement Plan (SEP) for 2024-28, the EEOC outlined key priorities for addressing employment discrimination. One area of focus in the SEP was the use of AI, which the EEOC believes can introduce bias and discrimination into HR processes.
Beyond AI concerns, the new EEOC guidance on workplace harassment, pay transparency considerations and the enforcement of the Pregnant Workers Fairness Act (PWFA) are expected to significantly influence the EPL insurance market in 2025. With stricter regulations and heightened scrutiny in these areas, employers could face increased risks of litigation and regulatory action, leading to a rise in EPL claims. As a result, insurers may tighten underwriting guidelines, potentially increasing premiums or limiting coverage for higher-risk industries. Businesses will likely need to enhance their compliance efforts and workplace policies to mitigate risks, making EPL coverage more critical than ever for safeguarding against costly employment-related claims.
Developments and Trends to Watch
AI issues
In an effort to streamline their employment processes, some businesses have turned to AI systems. These systems leverage programmed algorithms and data sets to deliver automated employment decisions, all without the need for human intervention. While these systems can certainly offer various benefits to the businesses that use them, they may also pose EPL exposures. For instance, AI systems—although intended to provide impartial results—may contribute to discriminatory employment decisions if the algorithms and data sets entered within these systems are biased toward specific groups. Depending on how frequently AI technology is used, biased decisions could occur on a mass scale, presenting multiple avenues for discrimination-based litigation and associated EPL claims. In the past few years, several major companies, such as Google and Amazon, have been held responsible for AI system failures that demonstrated gender biases. The EEOC’s first AI-based discrimination settlement took place in 2023, in which a company in New York agreed to pay $365,000 after a lawsuit filed on behalf of more than 200 job applicants alleged that the company’s AI-powered hiring system was set up to reject candidates above a certain age automatically.
Considering these developments, businesses must assess their AI technology for possible biases to mitigate litigation risks and EPL losses. In fact, New York City passed the first law requiring employers to conduct annual bias audits of automated employment decision-making tools in 2023. Since then, comprehensive AI legislation has been passed in Colorado, and additional laws have been introduced in five states, including California, Georgia, Hawaii, Illinois and Washington. In general, such AI legislation regulates employer use of AI tools to make or assist an employer in making employment decisions (such as hiring or termination) and mitigate the risk of “algorithmic discrimination.” This type of discrimination generally occurs when the use of an AI system leads to the differential treatment or impact of individuals based on a protected characteristic (e.g., age, race, disability, religion or sex). In addition to state laws focusing on regulating AI, the White House issued an executive order addressing a range of issues arising from the use of AI in the private sector, including the potential for discrimination. Additionally, the EEOC issued guidance on preventing discrimination against job seekers and workers through the use of AI tools. Further, on Sept. 24, 2024, the United States Department of Labor (DOL) announced the publication of an AI & Inclusive Hiring Framework (the Framework). The Framework, which was developed by the Partnership on Employment & Accessible Technology (PEAT), draws from the National Institute of Standards and Technology’s AI Risk Management Framework and focuses on identifying, measuring and managing AI risk. The Framework includes 10 focus areas employers can use to minimize the risk of algorithmic discrimination.
Considering these various legal developments, in 2025, employers should continue to monitor state and federal restrictions on the use of AI in the employment context. Employers who use AI to make or assist in making employment decisions should ensure that appropriate safeguards are in place to prevent discrimination.
Workplace harassment
On April 29, 2024, the EEOC published its final guidance on harassment in the workplace, which went into effect immediately upon issuance. The guidance, which hadn’t been substantially updated in 25 years, explains how the EEOC may enforce equal employment opportunity (EEO) laws against an employer when workplace harassment is alleged or suspected. The EEO laws are a collection of federal laws prohibiting covered employers from discriminating against or harassing individuals based on certain characteristics. These characteristics, also known as protected traits, include race, color, religion, national origin, sex (including sexual orientation, gender identity, and pregnancy, childbirth and related medical conditions), disability, age (40 and older) and genetic information (including family medical history). The final guidance supersedes and consolidates earlier documents issued by the EEOC to guide agency staff members who investigate claims of harassment. The conduct must involve a protected trait, significantly affect employment terms or create a hostile work environment and establish a basis for employer liability.
In particular, the new EEOC guidance includes a number of notable updates from previous guidance, including:
- Definition of “sexual harassment” broadened to include protections for LGBTQI+ workers—The definition of “sexual harassment” is expanded to include harassment on the basis of sexual orientation and gender identity/transgender status. In its updated guidance, the EEOC highlights examples of unlawful harassment under this expanded definition, including the denial of access to a bathroom consistent with an employee’s gender identity, the intentional and repeated misgendering of an individual, and the disclosure of an individual’s sexual orientation or gender identity without permission (known as outing).
- Expanded protections for pregnancy-related conditions—The definition of sexual harassment is also expanded to include pregnancy, childbirth and other “related medical conditions.” The EEOC explains that such conditions include lactation, the use of contraceptives, and the decision to have or not have an abortion.
- Online harassment and other remote work considerations—The EEOC guidance clarifies that illegal harassment can occur in a virtual work environment, in the same way as a physical environment, through online communication platforms and systems, including an employer’s email system, instant messaging system, electronic bulletin board, instant message system, videoconferencing technology, intranet, public website, social media accounts, and other equivalent services or technologies. The final guidance provides examples of such harassing conduct, including sexist comments made during a video meeting, ageist or ableist comments typed in a group chat, racist imagery that is visible in an employee’s workspace while the employee participates in a video meeting, or sexual comments made during a video meeting about a bed being near an employee in the video image.
- Clarification regarding religious expression protections—The final guidance provides some clarity in balancing religious accommodations and expanded protections for pregnancy-related conditions and LGBTQI+ workers. Specifically, although employers have an obligation to accommodate an employee’s sincerely held religious beliefs in the workplace, the guidance states that employers are not required to accommodate religious expression if such accommodation creates or reasonably could create a hostile work environment.
Expansion of pay transparency rules
Pay transparency laws hope to address pay inequality and promote wage transparency by requiring employers to disclose compensation information and increasing employee access to salary data. These laws vary in their requirements but often require employers to post salary ranges in job postings or disclose salary information to existing employees and job applicants. The EEOC included equal pay initiatives in its SEP for 2024-28. Further, some states and municipalities are implementing pay transparency and wage discrimination legislation of their own.
Colorado started the trend of pay transparency laws when it enacted the first legislation of its kind in 2021. Between 2021 and 2024, additional pay transparency laws took effect in Maryland, Connecticut, Nevada, Rhode Island, Washington, California, New York and several municipalities. More states continued the trend in 2024, with new pay transparency legislation taking effect in Hawaii and the District of Columbia, along with expanded requirements in Maryland. Additional pay transparency laws will take effect on Jan. 1, 2025, in Illinois, Minnesota and Vermont. Employers in these states will need to comply with these new requirements on their effective dates.
PWFA enforcement
On April 15, 2024, the EEOC released a final rule to implement the PWFA. The final rule clarified definitions and limitations under the PWFA and sought to help employers understand their duties under the law. The final regulation became effective on June 18, 2024. Notably, the PWFA requires most employers with 15 or more employees to provide “reasonable accommodations” or changes at work for a worker’s known limitations related to pregnancy, childbirth or related medical conditions (unless the accommodation will cause the employer undue hardship). While the law is still relatively new, the EEOC has already started to file lawsuits related to PWFA enforcement.
Specifically, the EEOC filed its first lawsuit under the PWFA on Sept. 10, 2024, against a nationwide producer of semi-trailers and other commercial trucking equipment, alleging that the company violated the PWFA when it failed to accommodate an employee’s known pregnancy-related limitation and subjected her to an unlawful medical inquiry. The EEOC has made protecting pregnant workers a strategic enforcement priority, and these early lawsuits are a sign that the agency is serious about enforcement. In fact, the EEOC recently said it had received nearly 2,000 charges of potential violations of the PWFA since the law went into effect. Many of these potential violations relate to employers denying basic, “common sense” accommodations. Therefore, employers should prioritize compliance with the PWFA in 2025.
Retaliation claims
Retaliation in the workplace refers to the unlawful discrimination that occurs when an employer takes adverse action against an employee for engaging in a legally protected activity, such as filing a harassment claim or participating in a workplace investigation over alleged misconduct. Retaliation claims can be severe and damaging to a company’s reputation and bottom line. They can also damage employee morale, reduce retention rates and decrease productivity. Moreover, retaliation claims are the most common type of discrimination charge filed by workers with the EEOC and similar state agencies. According to the most recent data from the EEOC, workers filed 46,047 charges of retaliation, representing 56.8% of all charges. What’s more, in 2024 alone, the EEOC filed over 40 retaliation lawsuits under various statutes on behalf of employees. These statistics serve as a reminder to employers that they must continue to take the issue of retaliation seriously going into the new year.
Tips for Insurance Buyers
- Assess your employee handbook and related policies. Ensure you have all appropriate policies in place, including language on discrimination, harassment and retaliation.
- Implement effective sexual harassment prevention measures (e.g., a zero-tolerance policy and a sexual harassment awareness program), reporting methods and response protocols.
- Promote diversity, acceptance and inclusion in the workplace through routine employee training. Be sure to educate staff on emerging discrimination topics (e.g., pregnancy and size discrimination) and related prevention and response measures. Take any reports of discrimination seriously.
- Document all evaluations, employee complaints and situations that result in employee discipline or termination.
- Consult legal counsel for state-specific employee wage and hour guidance, including those regarding pay transparency and wage discrimination laws.
- Evaluate the algorithms for any AI systems utilized within employment processes to prevent discriminatory decisions and ensure compliance with applicable EEOC and state guidance.
- Investigate all claims of harassment in a prompt manner. Furthermore, be familiar with the EEOC’s updated harassment guidance.
- Avoid retaliation claims by ensuring clear, consistent and documented procedures concerning employee feedback, complaint handling and terminations. It’s also important to establish transparent policies, train managers regularly on how to handle complaints, and document performance reviews and complaints in a nonpunitive and objective manner.
- Explicitly address accommodations for pregnancy, childbirth and related medical conditions in organizational policies to avoid PWFA claims. Employees should be made aware of these policies, and HR and managers need to be educated on how to effectively execute requests for accommodations.
- Develop strategies to comply with applicable pay transparency laws. Employers can protect themselves and help ensure compliance with applicable laws by understanding pay transparency requirements, regularly reviewing job postings for accuracy and developing methods for disclosing compensation information.
Read the Complete 2025 Market Outlook Series
- Commercial Property Insurance
- General Liability Insurance
- Commercial Auto Insurance
- Workers’ Compensation Insurance
- Cyber Insurance
- D&O Insurance
- Employment Practices Liability Insurance
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