What is Employment Practices Liability Insurance? Do I Need It?

Starting from the moment you begin to interview a potential hire, you are at risk of an employment claim from the interviewee. If the individual fails to meet your expectations or lacks the requisite qualification or experience and you choose not to continue the interview, they might allege discrimination on any grounds they see fit.

If you go ahead to hire the candidate and later realize that their performance is below par, firing the individual could cause them to sue for wrongful termination. Another instance focuses on this era of COVID-19, where it may be tough for an employer to defend itself against employment practices that outrightly flout workplace safety recommendations during the pandemic. If employees feel that their workplace safety is threatened, you risk being sued. For reasons like these, employers sign up for a special kind of insurance called Employment Practices Liability Insurance (EPLI).

What is Employment Practices Liability Insurance?

Sometimes, employers genuinely do not know that they've stepped out of line, which could be out of ignorance or oversight. At other times, you could have breached contract terms due to negligence. According to employment laws, embittered employees have the liberty to seek legal recourse and claim damages.

Employment practices liability insurance comes in handy when you need to protect your company against such employment-related claims as wrongful termination, sexual harassment, discrimination relating to age, sexual orientation, and race, and other common claims. A lot of these cases can be settled, but according to statistics, when employers fail to settle and the case reaches the court, employees do win 70 percent of the time.

Many employees never envisioned that they`d one day be caught in a lawsuit filed by an employee or a former employee until they`re proven otherwise. And don`t be surprised that even after you`ve done all that you know to be correct and fair, one or two employees may not be happy. As of 2019, The U.S. Equal Employment Opportunity Commission (EEOC) received 72,675 charges of discrimination filed by employees. In 2020, the commission received 67,448 charges of workplace discrimination.

And by the way, it only takes one employee to allege a claim. So, as long as you have employees working for you, it makes sense to sign up for an employment practices liability insurance policy. One employee is enough to trigger many employment laws, and that's a situation you don't want to be in. However, getting EPLI insurance is not a license to treat your workers unfairly and neither is it a guarantee that you`ll win all employment-related claims, but it will save you the cost of facing any such litigation in case it arises.

Additionally, there are current EPLI trends that you need to keep in mind, as these will help you know how to structure your workplace policies, comply with employment laws, and avoid employment practices-related claims. More on this later in the article. Let's take a closer look at what an EPLI does for you.

The Benefits of Employment Practices Liability Insurance

Throughout your daily interaction with employees, conflicts will arise, some of which you may not notice but might still hunt you regardless. When employees allege claims of harassment, wrongful treatment, discrimination, and so on, it disrupts business, gives your business a bad reputation and leads to financial loss.

In case you`re still undecided about protecting your business from wrongful claims by employees, here are other reasons why you might want to consider insuring your business for EPLI:

1. Coverage for Alleged Acts

EPLI policyholders can be sure of protection from alleged acts. Unlike actual wrongful acts, alleged acts may not be true. With an EPLI, you can shield your organization against claims related to discrimination, harassment, and wrongful termination.

2. Legal Assistance Including Quick Responses to Lawsuits

Sometimes, some lawsuits might cost you so much financially, not to mention that your reputation as a brand is also on the line. EPLI offers you quick access to legal assistance that will possibly end the issue with settlements.

3. You Can Avoid Employment-related Issues

With professional risk management services, you can actually mitigate the occurrence or repetition of claims altogether. To drastically reduce the likelihood of your company getting sued, you can take advantage of the risk management services and training that some insurance companies offer.

Generally, the cost of your EPLI cover depends on the following:

• The number of employees working for you

• The percentage of employee turnover within the company

• The existence of well-established rules and practices

• Whether you've had similar lawsuits lodged against your organization

What Does EPLI Cover?

Note that EPLI does not cover Business Owners Insurance and Small Business Insurance. Below are issues or offenses that EPLI protects you from:

• Claims of wrongful demotion, negative evaluation, and failure to promote,

• Wrongful termination or unjust reassignment

• Sexual harassment

• Violation of employee privacy terms

• Discrimination based on age, race, gender

• Denial of career growth

• Mismanagement of employee benefits

• Employment-related accusations, defamation, and slander

• Bringing emotional distress or mental anguish on employees

Note that EPLI does not cover claims for bodily injuries to employees in the line of work. Your workers’ compensation policy covers that.

Employment Practices Liability Trends in 2021

It is not enough to have an EPLI in place, you need to also pay attention to the challenges and current trends in the industry regarding employment practices liability. These generally might include:

• Familiarizing yourself with both federal and local employment laws

• Observing COVID-19 safety recommendations in your workplace

• Be mindful of social movements like #BlackLiveMatter

• Discrimination relating to age

• Legalization of marijuana

• Leaves and best employee benefits

• Salary expectation and minimum wage

The areas listed above are more often than not the areas where most EPLI offenses originate. As an employer, staying updated in these areas might help you prevent employee claims completely.

Wrapping Up

Employee practices liability insurance (EPLI) saves employers from possible reputational damages and financial loss when employees make employment-related claims or file a lawsuit against your company. The Missions HR provides best-in-class services to both small and medium-sized businesses looking for EPLI coverage, solutions to employee benefits-related issues, and other HR services.

We are a leading partner in the PEO, HR, payroll, and benefits outsourcing marketplace. We provide result-oriented services for small and medium-sized organizations and government contractors, serving as a trusted partner in integrated human resource compliance, risk management, employee benefits, employment practices liability insurance (EPLI), and payroll processing.