A recent decision from Washington state’s highest court addresses a deceptively simple question: Who qualifies as a “job applicant” under a state pay equity law? The court’s answer means employers operating in or recruiting from Washington have expanded liability under the law — and will likely have implications for insurance coverage.
The ruling
In Branson v. Washington Fine Wine & Spirits, the Washington Supreme Court considered how to interpret the term “job applicant” under the state’s Equal Pay and Opportunities Act (EPOA). Originally passed in 1943, the EPOA is designed to promote pay equality and fairness in the workplace. The law has been updated several times over the last 80 years.
Under amendments that took effect Jan. 1, 2023, the EPOA requires that all job postings for positions to be performed in Washington or that could be performed by Washington residents must include wage scales or salary ranges, a general description of benefits, and all other compensation for the roles. The law allows both “job applicants” and current employees to file civil litigation and recover damages if they believe employers have violated the job posting rules. Importantly, the term “job applicant” is not defined anywhere in the statute.
The employer in the Branson case, doing business as Total Wine & More, argued that anyone seeking relief under the statute should be required to prove they are a “bona fide” or “good faith” applicant who legitimately wanted the job. In contrast, the plaintiffs argued that any person who applies to a job posting should be able to bring a claim for noncompliant postings, regardless of their motive or desire to actually receive an offer.
In a significant decision issued on Sept. 4, the court held that although a plaintiff must apply to a specific job posting, individuals are not otherwise required to prove they are “bona fide” or “good faith” applicants (opens a new window) to obtain remedies under the statute. This means that any employer with 15 or more employees that solicits job applicants based or seeking employment in Washington — either directly or indirectly through a recruiter — is subject to liability under the EPOA, regardless of whether an applicant has any intention of pursuing a position with the employer. This liability is not limited to employers headquartered or located in Washington.
More lawsuits and claims expected
Since the “job applicant” question in Branson was certified to the Washington Supreme Court in August 2024, a number of lawsuits pending in Washington — and settlement discussions for many of these cases — have been held in abeyance as employers have awaited a decision. We expect that stayed litigation and settlement efforts put on pause ahead of the ruling will soon resume in earnest.
The outcome of this case is central to determining the size of a class, which is the number of individuals who can participate and share in any given claim. Class size is almost always multiplied against the dollar amount of statutory damages available to arrive at a judgment or settlement amount. Given the often-direct correlation between class size and amount-per-violation in "technical" violation claims such as these, the cost to resolve a pay transparency claim under the EPOA has now undoubtedly increased.
One positive change to the EPOA: An amendment, which took effect in late July, reduces the statutory damages from a minimum award of $5,000, to a range of $100 to $5,000 based on several factors to be weighed by courts.
The Branson decision will generate renewed interest in a topic that fell from the front page over the last year. Notwithstanding the fact that hundreds of employers have already been sued under Washington's pay transparency law, the ruling is almost certain to result in an increase in claims under employment practices liability (EPL) insurance policies. Historically, Washington pay transparency claims have been filed by a small number of serial plaintiffs and law firms; new players will now likely seek to join the fray.
Diligent employers can take steps to avoid or limit their exposure by complying with the statute’s requirement that they disclose wage scales, salary ranges, and benefits information in all job postings. There are, however, countless examples of employers making good-faith mistakes, as the law’s requirements are highly technical. Moreover, even frivolous claims with no clear liability must still be defended, which can be costly. In addition, outsourcing job posting functions to third parties will not insulate employers from these claims.
Insurance considerations
For employers and EPL insurers alike, this is a newer employment exposure. Before the Branson ruling, EPL carriers were generally reticent to affirmatively cover these types of claims, and in some cases explicitly excluded or at least sublimited the coverage to defense expenses only.
We expect to see underwriters focus on the processes and systems employers have in place to monitor compliance with the EPOA and similar pay transparency laws that have emerged in other states and localities. Carriers will also likely seek to limit or preclude coverage for these claims entirely through new exclusionary wording or amendments to the definition of “loss.”
Some employers’ EPL insurance policies will provide coverage for pay transparency claims under the EPOA. This, however, very much depends on the specific allegations in a complaint or written claim document. Generally, if a claim alleges a discrimination violation, it is sufficient to trigger coverage under an EPL policy. But that would be the case regardless of the alleged EPOA violations.
In light of the ruling, employers should:
Consult with outside counsel about the law’s implications.
Ensure they regularly audit all job postings to stay compliant.
Be prepared to act quickly, as the new version of the law requires a five-day notice and opportunity to correct before a plaintiff can file suit.
Consult with their insurance brokers and review how these claims are addressed (or not) in current EPL programs.
For more information, contact a member of your Lockton Professional & Executive Risk team, or visit the webpage here (opens a new window).
