Employment practices liability

What you need to know about Employment practices liability insurance

Your business insurance policies provide coverage for your business from a range of losses but may leave you unprotected in the event of an employment lawsuit. Employment practices liability insurance (EPLI) may help fill in that area of coverage.

What is EPLI, and why do I need it?

According to the Insurance Information Institute, EPLI “covers businesses against claims by workers that their legal rights as employees of the company have been violated.” EPLI may reimburse a company for covered legal expenses (depending on the limit, restrictions, and deductible), whether or not the company wins its case.

Given the increase in lawsuits filed against employers by employees, this is important coverage to consider, even for companies that are scrupulous about human resource matters. Smaller companies are particularly vulnerable to these lawsuits.

With this in mind, a growing number of insurers provide this coverage under their Businessowners or General Liability policies, but you should check with your agent.

What protections does EPLI offer?

EPLI covers many kinds of lawsuits, likely including those in the following list, compiled by the Insurance Information Institute (but check with your agent or review your policy to be sure):

  • Sexual harassment
  • Invasion of privacy
  • Slander and libel
  • Unequal compensation practices and unlawful compensation policies
  • Discrimination because of race, sex, age, or other factors
  • Wrongful termination or demotion
  • Breach of employment contract
  • Negligent evaluation
  • Failure to employ or promote
  • Wrongful discipline
  • Deprivation of career opportunity
  • Wrongful infliction of emotional distress
  • Mismanagement of employee benefits programs
  • Violations of the Family and Medical Leave Act (FMLA)

It’s important to note that while EPLI may pay for legal costs, judgment, and settlements, it will not pay for punitive damages or cover civil and criminal fines.

How much will EPLI cost my company?

Policy price will depend on factors such as business type and size, turnover rate, and the business’ history with employment practices litigation. That being said, according to small business insurance aggregator Insureon, the average cost of employment practices liability insurance for a small business is $2,665 a year.

How can I avoid employment practices lawsuits?

  • Try to avoid litigation altogether by rigorously following best employment practices. The first step is education. Make sure your managers and employees are trained to recognize, manage, and minimize problems.
  • Work with your Human Resources team to come up with a solid employment application and design a fair and equitable hiring and screening program that will move good job candidates forward and ensure that discriminatory practices never take root in your company’s culture. Having clear and specific job descriptions for all your company’s positions will help.
  • Establish and maintain a performance review process. Post your company’s policies prominently throughout your offices, make sure they are in any employee handbooks, and send that information virtually to those who work outside the office. Supplying proof that these practices are in place may net your company a lower premium.
  • Make sure that employees know what steps to take if they ever have cause for complaint. Take seriously any complaints that come to your attention, and act on them at once.
  • Have a zero-tolerance policy for harassment and discrimination — and for retaliatory actions against complainants.

The information included here was obtained from sources believed to be reliable, however Grinnell Mutual Reinsurance Company and its employees make no guarantee of results and assume no liability in connection with any training, materials, suggestions, or information provided. It is the user’s responsibility to confirm compliance with any applicable local, state, or federal regulations. Information obtained from or via Grinnell Mutual Reinsurance Company should not be used as the basis for legal advice and should be confirmed with alternative sources.

Sources: Forbes Advisor