Employment practices liability insurance, known in the trade as EPL insurance or EPLI, provides coverage to employers (PDF) 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 typically have substantial employment practices insurance coverage in place and are prepared to deal with just about any employment lawsuit. However, small or new businesses are often the most vulnerable to employment claims (PDF). That’s because they usually lack a legal department or employee handbook detailing the policies and procedures that guide hiring, disciplining or terminating employees.

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.

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

EPLI policies cover business owners as well as 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.

There has been a rise in U.S. employment dispute claims against businesses of varying sizes and across industries in recent years. Allegations of everything from workplace discrimination and privacy invasion to 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 separate type of professional liability insurance provides the necessary coverage. The importance of Employment Practices Liability Insurance (EPLI) extends beyond protecting your business’ financial assets in the event that you need to settle a claim or judgment, but it is also critical when one is filed.

The question for any firm is no longer whether it will face an employment practice liability (EPL) claim, but rather, when it will, how much it will cost, and what damage it might cause to reputation and brand image. Standard policies, procedures, and supervisory training are no longer enough to protect companies from the high costs of employment litigation.

Contact us to learn more about the importance of Employment Practices Liability Insurance and additional ways to protect your business today.