What is a Nuclear Verdict? Employment Practices Loss Example

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Edited August 9th, 2024 by Kyle Langan

Are employers held accountable for their wrongful acts? Upon litigation, businesses have frequently encountered juries that are sympathetic to plaintiffs, making them more susceptible to nuclear verdicts ($10 million or more) [1].

QUESTION: What could have prevented or reduced the severity of this nuclear verdict example?

Example: Microsoft’s unfair employment practices

Location: California

Wrongful acts: Lower monetary bonuses and unfavorable performance reviews resulted in cases of pregnancy, a disability, or other family and medical reasons spanning 2017-2020 [2]

Settlement: $14,425,000 [3]

The settlement also required Microsoft to implement a series of proactive measures to help minimize similar incidents going forward [4]

Covered acts on an EPL policy: Discrimination; Retaliation [5]

ANSWER: Compliance risk mitigation. To ensure compliance, workplace policies should be regularly assessed to maintain compliance with fair employment laws and any other applicable federal, state, and local regulations.

i.e. Compliance with: The Family Leave and Medical Act (FMLA), California Family Rights Act (CFRA) Title VII of the Civil Rights Act of 1964 (Title VII) and the Fair Employment Housing Act (FEHA), The Americans with Disabilities Act (ADA)

Mitigation goals:

  • Purchase Employment Practices Liability Insurance
  • Establishing an employee handbook that includes appropriate policies
  • Encouraging employees to report all instances of discrimination and retaliation
  • Taking all reports of discrimination and retaliation seriously by following documented investigation and response protocols
  • Educating managers and supervisors on what constitutes retaliation and making it clear that such behavior is prohibited
  • Documenting all complaints, evaluations and situations that result in an employee’s termination

Sample policy language: Philadelphia

DEFINITIONS
A. Employment Practice Act means any actual or alleged:
1. wrongful dismissal, discharge, or termination of employment;
2. breach of a written or oral employment contract or implied employment contract;
3. employment related misrepresentation;
4. wrongful failure to promote;
5. violation of employment discrimination laws (including harassment);
6. wrongful deprivation of a career opportunity;
7. employment related wrongful discipline;
8. negligent employee evaluation;
9. employment related invasion of privacy;
10. employment related defamation (including libel and slander);
11. sexual or workplace harassment of any kind;
12. constructive discharge of employment;
13. employment related Retaliation;
14. employment related humiliation;
15. wrongful demotion;
16. negligent reassignment;
17. violation of any federal, state, or local civil rights laws;

Solely with respect to any Claim brought by or on behalf of any Third Party, Employment Practice Act means any actual or alleged wrongful failure to employ, discrimination, sexual harassment or violation of such Third Party’s civil rights in relation to such wrongful failure to employ, discrimination or sexual harassment, whether direct, indirect, or unintentional, committed by an Individual Insured in his/her capacity as an Individual Insured or by the Private Company.

References

[1] — [5]

Civil Rights Department, State of California (n.d.). Civil Rights Department reaches $14.4 million settlement with Microsoft over alleged parental and disability leave discrimination. CRD. https://calcivilrights.ca.gov/2024/07/03/civil-rights-department-reaches-14-4-million-settlement-with-microsoft-over-alleged-parental-and-disability-leave-discrimination/