Organizations expect uptick in employment-related claims tied to wage-and-hour, AI practices: QBE survey

By Erin Ayers, Front Page News

The modern workplace continues to evolve, and many organizations worry they will see an uptick in employment-related claims over return-to-office requirements, wage disputes, diversity, equity, and inclusion policies, and the use of artificial intelligence, according to a recent survey from QBE North America.

“As hybrid work arrangements, regulations, and technologies like artificial intelligence, continue to evolve, employers must balance workplace progress with protection,” said Mary Anne Mullin, senior vice president, EPL and fiduciary product leader, QBE North America, in a statement. “Many organizations are adjusting their risk strategies to address new vulnerabilities.”

The survey of 200 legal and human resources professionals revealed that 69% of respondents had faced claims from employees alleging discrimination, harassment, retaliation, and other employment-related issues over the last year. About 42% of respondents expect claim frequency to increase in the next 12 months, while 32% expect levels to remain the same.

“The survey findings affirm that changing workplace dynamics and evolving employee expectations are increasing employment-related legal risks,” said QBE in the report. “Employers are being tested in new ways that were not on the radar a few years ago, creating heightened exposures across multiple fronts.”

Return-to-office policies are already driving an increase in employee claims for 43% of respondents and decreased employee morale/difficulty attracting talent (36%). A majority (84%) said they require employees to work in the office at least three days a week, and more than half (53%) say they are seeing higher operational costs as a result. However, nearly as many (51%) say they benefit from improved collaboration and team communication and increased productivity (49%)

Over half (55%) expect to see wage-and-hour and breach of employment contract claims crop up, while 51% anticipate claims over the use of AI for HR purposes and other discrimination-related cases.

“Wage, hour, and leave-related issues are top exposure areas amid growing state-level legislation on paid leave and stricter enforcement of wage-and-hour laws,” wrote QBE in the report. “Meanwhile, the increased use of AI in HR has raised new legal and ethical questions around bias, transparency and compliance.”

A significant percentage (84%) of respondents say they use AI for screening resumes and performance reviews, while 11% plan to begin doing so in the near-term. However, early three-quarters (72%) are concerned about the risks these practices pose to their organizations.

“Because AI systems are trained on historical data, there’s a risk that algorithmic bias could emerge – leading to claims under Title VII of the Civil Rights Act which prohibits employment discrimination based on race, color, religion, sex and national origin,” QBE said. “These risks are especially pressing in areas that have enacted or are considering AI-related regulations.”

Over half (54%) of respondents felt they would need more employee education and training to prevent and mitigate AI-related claims. Just under half (47%) also felt that employee data privacy claims could be mitigated with more education.

Rating even higher on respondents’ radars is the potential for claims tied to DEI programs – 69% worry they could see claims or litigation in the next 12 months, with 19% “very concerned” about the prospect.

“While the intention of these initiatives is to foster more diverse and inclusive work environments, a number of lawsuits are alleging reverse discrimination – claiming that the hiring or promotion of individuals in minority or underrepresented groups has disadvantaged individuals in majority groups,” said QBE.

Consequences

For employers, the most pressing consequences of employment-related claims are financial costs (63%) and reputational damage (53%). However, QBE advised organizations not to discount other potential effects.

“While financial costs are often the most visible consequence of employment-related claims, the long-term toll that can ripple through the workplace culture – poor morale and increased turnover – can be just as damaging, and is often underestimated,” said the insurer.