The employment practices liability (EPL) market remained stable in 2024. Amid increased competition, insurers were eager to write new business and maintain renewals. We expect this competition and a stabilization in rates and retentions to continue into 2025.
The factors that may impact the market in 2025 are a Republican administration, which typically means more protection for employers and less regulatory activity from federal agencies. With unemployment at an all-time low in December, we expect an uptick in unemployment rates, which could lead to an increase in EPL claims activity.
In this article, we’ll look back at 2024 and discuss what employers can expect in 2025.
In 2024, Colorado passed a first-of-its-kind law aimed at regulating the use of AI systems and imposing certain obligations on employers with Illinois not far behind in being the second state to pass broad AI legislation. Meanwhile, legislators in several other states have proposed similar bills aimed at regulating the use of AI systems to help an employer make employment decisions. These bills seek to mitigate the risk of algorithmic discrimination arising from an employer’s use of an AI system. At the federal level, the Equal Employment Opportunity Commission (EEOC) included guidance on the use of AI in its updated Strategic Enforcement Plan.
In 2024, the Department of Labor (DOL) issued a final rule changing the independent contractor classification standard again. This standard regularly changes depending on the political party in office. Under a Democratic administration, the rules to classify a worker as an independent contractor are stricter.
In April 2024, the Federal Trade Commission (FTC) banned non-compete agreements. But later in the year, a Texas federal court said that the FTC likely exceeded its authority when it issued its rule. Though the FTC could appeal this, as of the close of the year, there was no longer a federal ban on the use of non-compete agreements.
With the start of both a Republican presidential administration and Congress, expect more employer-friendly laws and regulations and less litigation from regulatory agencies and more focus on mediation and conciliation efforts from the EEOC. We expect changes within the EEOC, National Labor Relations Board (NLRB) and Department of Labor (DOL), including changes to rules on:
The Supreme Court’s decision in Loper Bright Enterprises also could impact how courts interpret agency rules. Under Loper Bright, federal courts are directed to use traditional rules of statutory construction to find the “best meaning” and not to defer to administrative agency interpretations of ambiguous statutes. This could mean less deference given to DOL, EEOC and NLRB regulations.
The use of AI in the employment context will remain a hot topic in 2025, as more companies use the technology. Given the lack of federal regulation regarding the use of AI in the hiring process, states will likely take a closer look at how employers are using it and whether it leads to unintended discrimination. We don’t expect changes in EPL coverage because any resulting claim would likely be for discrimination, which is a covered wrongful act under an EPL policy.
There are now 14 states and eight municipalities with pay transparency laws. Given the administration change, it’s unlikely that we’ll see any regulations at the federal level. As such, we expect there will be more states and municipalities that will pass pay transparency laws.
Last year, state agencies filed complaints and lawsuits against pay transparency violators. The insurance industry has reported claims activity related to alleged violations of pay transparency laws, and we expect this to continue into 2025. Should a pay transparency complaint be received, it’s important to discuss the coverage options with your WTW team and to examine your pay structures and processes to ensure you are following all applicable laws and regulations.
Overall, we expect the EPL market to remain stable. We also expect less federal regulatory actions and a decrease in EEOC charge filings. Expect to see more restrictions placed on immigration and DEI initiatives and a shift toward employer-friendly regulations as they relate to worker classification. Finally, expect to see more deference given to the states relating to non-compete agreements, AI and pay equity and pay transparency.
WTW hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).