Harassment in the Workplace Risk Avoidance Transfer May

Harassment in the Workplace: Risk Avoidance & Transfer May 17, 2018 Prepared by Aon Risk Solutions Financial Services Group | Employment Practices Liability Practice

The Speak Out Evolution and Effect of #Me. Too Speak Out Evolution 1977 1975 § Working Women United Rally 1991 1986 Meritor Savings Bank V. Vinson 2006 1998 1991 Title VII Amendment • Jury Trials; compensatory; and punitive damages • Disparate impact 2017 -2018 Faragher. Ellerth Defense … ? #Me. Too § § § Leading up to the recent #Me. Too movement, sexual harassment charges were on the decline. In 2017, 6, 696 sexual harassment charges were filed with the EEOC, a 15% drop from 2010. A 2016 EEOC Report found that 70% of individuals who experienced harassment never reported it. Aon Risk Solutions |Financial Services Group Proprietary & Confidential | February 21, 2017 2

Equal Employment Opportunity Commission Charge Patterns Number of Charges 2017 Total Charge Filings Decreased: 84, 254 u u Following the uptick in charges starting in 2014, the total EEOC charge filings in 2017 decreased to 84, 254 from 91, 503 in 2016, a decrease of approximately 7200 charges. The decrease from the historic high in 2011 continues to reflect the positive economic environment. As evidenced by the chart depicted above, most of the charges stayed relatively stable with age, race, and national origin discrimination showing larger decreases. Aon Risk Solutions |Financial Services Group Proprietary & Confidential | February 21, 2017 Source: EEOC Charge Data System National Database 3

Eastern Region Single Plaintiff Sexual Harassment Claims Sports/Media Company – $11. 6 M Sexual harassment Financial Institution – $18 M Sexual harassment, retaliation, defamation (reduced $5. 7 M) Service Provider – $3. 7 M Sexual harassment, retaliation (2 plts) Media Company – $20 M Sexual harassment & Retaliation Restaurant – $6. 1 Sexual harassment Restaurant – $1. 15 M Sexual harassment Financial Institution – $9. 2 M Sexual harassment Travel Service Company – $9. 1 M Sexual harassment (2 plts) Healthcare Company – $1. 8 M Sexual harassment Aon Risk Solutions |Financial Services Group Proprietary & Confidential | February 21, 2017 -2018 Cases 4

Central Region Single Plaintiff Sexual Harassment Claims Engineering/Consulting Company – $6. 5 M Sexual harassment, gender discrimination, retaliation Retailer – $11. 9 M Sexual harassment, sexual discrimination and retaliation Retailer – 6 M Sexual harassment Hospitality Company – $1. 2 M Sexual harassment, gender discrimination, retaliation (2 plts) Food/Agriculture Company – $2. 4 M Sexual harassment Consumer Goods Company – $1. 5 M Sexual harassment and retaliation Travel Provider – $15. 6 M Sexual harassment Hospitality Company – $1 M Sexual harassment Oil/Gas Service Company – $2. 9 M Sexual Harassment, retaliation 2017 -2018 Cases Aon Risk Solutions |Financial Services Group Proprietary & Confidential | February 21, 2017 5

Western Region Single Plaintiff Sexual Harassment Claims Consumer Goods Retailer – $2. 3 M Sexual harassment, retaliation Governmental/Nonprofit Entity – $1 M Sexual harassment Healthcare Company – $1. 4 M Sexual harassment Aon Risk Solutions |Financial Services Group Proprietary & Confidential | February 21, 2017 6

California Single Plaintiff Sexual Harassment Claims Retailer – $1. 05 M Sexual harassment and retaliation Health Club – $7. 4 M Sexual harassment and retaliation Healthcare Company – $168 M Sexual harassment Healthcare Company – $1. 7 M Sexual harassment and hostile work environment Healthcare Company – $1 M Sexual harassment and retaliation Healthcare Company – $1. 7 M Sexual harassment, constructive discharge Governmental/Nonprofit Entity – $3 M Harassment and workplace bullying Aon Risk Solutions |Financial Services Group Proprietary & Confidential | February 21, 2017 -2018 Cases 7

Gender Pay Gap § Gender pay statistics reflect an improvement in the gap representing the difference between what men and women are paid as reflected in the most recent U. S. Census Bureau, Current Population Survey, 2016 retrieved in September 2017. § Full-time, year-round female workers tend to earn 19. 5% less than what men typically earn, a lessening in the disparity of. 9% since 2015. § Even though there has been improvement, a significant gap still exists prompting state governments like California to pass much more stringent gender pay legislation but federal legislation appears far behind. Source: Institute For Women’s Policy Research Aon Risk Solutions |Financial Services Group Proprietary & Confidential | February 21, 2017 8

An Employer’s Guide to Preventing and Addressing Sexual Harassment in the Workplace

Goals For Today • Understand when an employer can be liable for sexual (and other) legal harassment • Learn tips to proactively mitigate the risks of liability • Know what to expect (and what to insist on) when a claim is filed

What is “Harassment”? • Harassment/Discrimination—Negative action based on “protected class” status or affiliation • “Adverse action”—includes comments, jokes, bullying, undesirable tasks, unfair discipline • “Protected class”—“race, color, religious creed, national origin, sex [gender], gender identity [gender norms, transgender, etc. ], sexual orientation [gay, straight, bisexual], age [40 or over], or ancestry”

What is “Sexual Harassment”? • Sexual Harassment—“Sexual advances, requests for sexual favors, and verbal or physical conduct of a sexual nature” when: • 1. Employment terms based on employee’s submission or rejection of this conduct; or • 2. This is unwelcome, and unreasonably interferes with employee’s work by creating an “intimidating, hostile, humiliating or sexually offensive environment”

Examples of Potential Sexual Harassment • • Kissing Touching/staring Propositioning, flirting, asking for a date, etc. Comments (even compliments) on appearance, beauty, body, dress Discussing anything of a sexual nature Sexual jokes, comments, posters, music, etc. Suggesting sex-related job duties Bullying/insults Including same-sex / transgender

Recent Case Examples Phillips v. Electro-Term-Hollingsworth MCAD May 12, 2017 Female worker entitled to emotional distress damages plus lost wages when she left her job after co-workers repeatedly spoke near her work station in sexual terms about dates and girlfriends. Canton v. Biga Wholesale and Others MCAD May 2, 2017 Female employee entitled to $125, 000. 00 in emotional distress damages and backpay after her supervisor asked her out repeatedly in person and by texts. Even though the employee told him she was not interested, supervisor continually asked if he could drive the employee home and tried to kiss and hug her.

When is An Employer Liable For Harassment? • 1. Employer fails to act reasonably to stop or prevent sexual harassment of non-supervisor— including by non-employees • 2. Sexual harassment is by a manager or other supervisory employee And individuals can be liable if: a) They participate in the harassing conduct. b) They “aid and abet” (incl. failing to report)

Mitigating The Risks Of Liability Three objectives: 1. Prevent harassment by managers/supervisors • Why? Company is automatic liable 2. Identify and correct harassment consistently • Why? Reasonable steps avoid liability 3. Create and follow a fair investigation procedure • Why? Improve trust of employees/victims, and establish reasonable steps to avoid liability

Mitigating The Risks Of Liability Recommended Steps: • Update handbook and policies to condemn harassment, give examples, and provide recourse • Train/re-train managers, and identify • Consistently discipline even borderline conduct • Formalize and follow an investigation procedure

Updating Handbooks • MA law requires written sexual harassment policy • (If nothing else: “model policy” on MA website) • Handbooks can be important evidence, which can make employer look good (or look bad) • Revised handbook announcement—opportunity to reiterate company’s harsh anti-harassment stance • Stay updated (e. g. Pregnant Worker Fairness Act, Domestic Violence Leave Act, gender identity, etc.

Training (And Re-Training Managers) • Every single employer should train their managers • Small cost, if any (free, for some EPLI) • Especially, industries with cultural hazing or historical problems (construction, IT, etc. ) • Managers cause automatic liability, so train them! • They are also in best position to see and stop harassing conduct on the ground • Educate and warn—set expectations • Identify problem managers (cracking jokes? )

Harassment Investigations (Sexual and Otherwise) • Have a procedure (and stick to it!): • Take action immediately to stop harassment • Be careful not to worsen complainant’s situation (e. g. reassign further away) • Consistent investigation (order of witnesses, weight of evidence, past practice) • Weigh evidence/risks, and make a decision • Discipline (better too much than not enough)

Investigations—Tips and Considerations A prompt, empathetic response can prevent claims • Give multiple ways to file complaint • Ask complainant what she/he wants • Consider gender, demeanor, conflict of interest Keep a record • Use two interviewers (to verify/confirm) • Notes should include date, location, attendees • If discipline, put in personnel file Do not retaliate against complainant or witnesses!

Litigation/Claim Considerations Grounds for dismissal? • 1 -year statute of limitations • Must be brought at MCAD/EEOC, etc. EPLI Policy Issues • Self-Insured Retention • Selection of counsel? • Exclusions Don’t be afraid to ask attorney questions, and to discuss strategy and PR

Risk Transfer: Employment Practices Liability Insurance Overview Aon Risk Solutions |Financial Services Group Proprietary & Confidential | February 21, 2017 23

Employment Practices Liability Insurance § Employment Practices Liability Insurance (EPLI) provides companies with protection from workplace harassment allegations. § The growing frequency of sensational harassment examples serves as a call to action for corporate leaders to revisit tools available to mitigate the exposure and to review their insurance program. § Insurance can play a significant role in helping to reduce the monetary impact of harassment scandals and potentially allow for quick resolution of these disputes. Aon Risk Solutions |Financial Services Group Proprietary & Confidential | February 21, 2017 24

Coverage Triggers § Typical Claim triggers – Written demand for monetary and non-monetary relief – Civil proceedings (lawsuits) – Arbitration proceedings – Administrative or regulatory proceedings (i. e. EEOC filings) – Request to toll statute limitations – Note: Union grievances are usually excluded from the definition of Claim but are also typically not the proper avenue for making a harassment complaint § Typical Harassment definition – Harassment (sexual or otherwise, and whether in quid pro quo or hostile work environment situations) – Including but not limited to harassment in the form of workplace bullying, or by way of electronic communication including social networking internet sites Aon Risk Solutions |Financial Services Group Proprietary & Confidential | February 21, 2017 25

Who Are Covered Claimants? § Employees – Past, present and future: – Full-time – Part-time – Seasonal – Leased – Volunteers – Independent Contractors § Third Parties – Customers, clients or vendors – Any non-Employee Aon Risk Solutions |Financial Services Group Proprietary & Confidential | February 21, 2017 26

Who is Insured? § Naming an Insured typically defined as: – Insured organizations; – Employees, directors, officers, shareholders or trustees, but only in their respective capacity(ies) as such, of the Insured Organization – Independent Contractors if indemnified as employees or at the option of the Insured at the time of Claim – Spouses or domestic partners of the foregoing individuals (whether such status is derived by reason of statutory or common law or company policy) solely out of his or her other capacity as the spouse of such person Aon Risk Solutions |Financial Services Group Proprietary & Confidential | February 21, 2017 27

What Loss is Covered? § Loss typically defined as: – Defense Costs – Settlements & Verdicts – Pre and Post – Judgment Interest – Front & Back Pay – Punitive & Exemplary Damages (where insurable) – Plaintiffs’ Counsel Fees Aon Risk Solutions |Financial Services Group Proprietary & Confidential | February 21, 2017 28

Insurability Concerns § Policies typically intend to cover punitive damages & intentional acts – Where insurable by law – Intentional acts and punitive damages are typically expected to be covered but some jurisdiction prohibit insuring such acts • Most policies have favorable venue wording for punitive damages • Policies seldom have intentional acts exclusions but also often do not have favorable venue wording applicable to intentional acts in domestic policies • Off-shore policies often have favorable venue wording even for intentional acts • Off-shore policies can have an intentional acts exclusion applicable to individuals that is waivable by the Insured Organization which could be helpful for true bad actors Aon Risk Solutions |Financial Services Group Proprietary & Confidential | February 21, 2017 29

Sample Insurer Loss Mitigation Services § Domestic EPL carriers provide a wide range of loss mitigation services including on-line training modules, access to HR policies, free consultation with law firms and hotlines: – Loss prevention and risk management services with free access to their website managed by Litter Mendelson – 2 free hours of legal consultation with Jackson Lewis and a toll-free help line for employment questions – Free legal resources including online webinars and alerts – Hotline services – Website including on line training modules – Carrier pays for risk prevention services for approved vendors for 50% of services up to 10% the annual policy premium every year § Carriers are increasing mitigation services related to sexual harassment: – One free hour consultation with Jackson Lewis on the issue of sexual harassment for-profit Insureds with negotiated rates thereafter – Free sexual harassment online training modules Aon Risk Solutions |Financial Services Group Proprietary & Confidential | February 21, 2017 30

Employment Practice Liability Insurance Q 1 Market Update Capacity stable & plentiful § Virtually all management liability markets have EPLI books and are looking to grow them, so competition remains fierce Aon Risk Solutions |Financial Services Group Proprietary & Confidential | February 21, 2017 Coverage Limits Retentions Pricing Coverage remains consistent and broad between most primary markets Limits of $15 million or more available from virtually all markets Generally stable retentions with some exceptions Pricing stable with slight trending increase § Coverage in the EPLI marketplace remains stable with no significant changes • Limits purchasing remains generally flat with some clients purchasing EPLI for the first time due to the expansion of coverage for W&H § Favorable venue language, off-shore wrap facilities, and the use of Bermuda carriers offer solutions to address insurability concerns 31 • Retentions are generally stable for larger employer accounts, but lower split individual/mass class retentions may be available with marketing § Decreases may be harder to obtain in 2018 with the property cat. impact and the sexual harassment claim trend. § Middle market accounts may see increases as a result of higher loss ratios.

Questions? Aon Risk Solutions |Financial Services Group Proprietary & Confidential | February 21, 2017 32