What is Employment Practices Liability Insurance?

Employment practices liability insurance, known in the trade as EPL insurance or EPLI, provides coverage to employers against claims made by employees alleging:

• Discrimination (based on sex, race, age, or disability, for example)
• Wrongful termination
• Harassment
• Other employment-related issues, such as failure to promote

Large corporations are frequently well-insured against employment practices lawsuits and are equipped to handle almost any one. Small and young enterprises, however, are frequently most exposed to employment-related lawsuits. This is because they frequently do not have an employee handbook or legal department that outlines the policies and procedures for hiring, disciplining, and terminating employees.

How can we reduce Employment Practices Liability?

1. Review potential loss exposures with your insurance agent and purchase adequate employment practices liability insurance.
2. Develop an employee handbook detailing your company’s workplace policies including attendance, discipline and complaints.
3. Create a job description for each position that clearly defines expectations of skills and performance.
4. Conduct periodic performance reviews of employees and carefully note the results in the employee’s file.
5. Develop a screening and hiring program to weed out unsuitable candidates on paper before calling them to interview in person.

What is covered by Employment Practices Liability Insurance?

• Defense costs (court fees, attorney fees, and related costs).
• Payment of settlements or judgments up to the policy's limits.
• Any fines or penalties levied by government agencies.

EPLI policies cover business owners, directors, officers, and managers. Some policies also cover employees. Additionally, you can buy third-party policies to cover claims brought by non-employees, such as clients.

The Importance of Employment Practices Liability Insurance

There has been a rise in U.S. employment dispute claims against businesses of varying sizes and across industries in recent years. Allegations of workplace discrimination and privacy invasion, defamation, and retaliation are being reported by employees who believe their rights have been violated. Even the most innocent business owners with sound business practices and personnel policies are vulnerable to claims of intentional and unintentional infractions.

It's a popular misconception that these lawsuits are covered under Workers' Compensation Insurance, but a distinct type of professional liability insurance provides the necessary coverage. The importance of Employment Practices Liability Insurance (EPLI) extends beyond protecting your business' financial assets if you need to settle a claim or judgment. Still, it is also critical when one is filed.

The question for each company is no more whether it will be subject to an employment practice liability (EPL) claim, but rather when it will, how much it will cost, and what kind of harm it might do to its brand and reputation. Companies are no longer adequately shielded from the high costs of employment litigation by standard rules, processes, and supervisory training.