KPMG is facing a potential 9,000 person class action lawsuit now that a U.S. District Court has allowed the class to move forward. The lawsuit stems from allegations that women were systematically paid less than men in comparable roles and experience levels.
Initially filed in 2011, the plaintiff lawyer was given authorization from the court to send a letter to 9,000 women who worked at KPMG from 2008 onward. The plaintiff used statistical analysis to show the judge that the lawsuit has merit. The plaintiff showed evidence that suggested that salary differences were statistically different and could only be accounted for by the gender of the employee. KPMG denies wrongdoing and will defend the matter in court. The lawsuit is being brought as a violation of the Equal Pay Act.
Large scale gender discrimination lawsuits are rare and even more infrequent in the accounting space. However, this case does highlight the need for accounting firms to be cognizant of how their actions may impact various groups. Discrimination can take many forms – whether intentional or not. Firms should take all precautions when setting rules and making changes to company policies even if those changes do not deal with salaries. One tool being used by firms is a disparate impact study. This type of study can be performed to address whether a particular action is having an undue effect on a particular class of personnel. If a particular action is bring found to have an adverse effect it can be remedied quickly and often prevents lawsuits from coming later.
Beyond risk management, this case also addresses the need for accounting firms to carry adequate insurance to protect themselves. The insurance policy that would address discrimination and a violation of the Equal Pay Act is called Employment Practices Liability (EPL). EPL insurance specifically protects firms from allegations of a “wrongful employment practice.” A “wrongful employment practice” is commonly defined in the insurance policy as discrimination, retaliation, harassment, wrongful termination, violations of various employment laws and a number of other potential employment related risks. Most EPL policies specifically mention the Equal Pay Act as something that the policy covers or as something the policy excludes.
Since each insurance company offers their own version – and wording – to an accountant’s Employment Practices Liability policy, it is vital to review your coverage and have an experienced broker negotiating coverage on your behalf. Using an inexperienced broker, making assumptions about the coverage you have in place or misreading the policy can be an error that could cost the firm tens of thousands of dollars.
Contact us for a policy review or to discuss whether employment practices liability insurance is right for your firm.