Summary
Protect your business from costly employee lawsuits. Learn what Employment Practices Liability Insurance (EPLI) covers, why every business with employees needs it, and how it safeguards against claims like discrimination, wrongful termination, and harassment.
In today’s business environment, managing a team of employees comes with a unique set of challenges and responsibilities. While most employers strive to create a fair and productive workplace, even the most diligent businesses can find themselves facing unexpected claims related to employment practices. This is where Employment Practices Liability Insurance, or EPLI, comes into play.
EPLI is a type of insurance that protects businesses against claims made by employees alleging various forms of wrongful conduct. Think of it as a safety net for your business in the event of lawsuits stemming from employment-related issues.
Here’s what EPLI covers and who should carry it.
What Does EPLI Cover?
Employment Practices Liability Insurance policies generally cover a variety of allegations. These include claims of discrimination, which encompass those based on age, gender, race, religion, disability, national origin, or any other protected characteristic. Wrongful termination lawsuits, alleging an employee was fired illegally or in breach of contract, are also typically covered.
EPLI policies often address claims related to sexual harassment. Retaliation is another common coverage area, addressing allegations that an employer took adverse action against an employee for exercising a legal right, such as reporting harassment or whistleblowing.
Policies may also cover claims of failure to promote, where an employee alleges they were unfairly denied a promotion, and defamation, involving allegations of false statements made by an employer that harm an employee’s reputation. While less common, some EPLI policies may offer limited coverage for certain aspects of mismanaging employee benefit plans.
Who Needs EPLI?
GTM Insurance recommends that any business with employees carry EPLI.
While larger corporations may seem like the primary targets for employment lawsuits, small and medium-sized businesses are equally vulnerable. Often, smaller companies may lack the extensive HR departments and legal resources that larger organizations have, making them potentially more susceptible to missteps or less equipped to handle a claim when it arises.
Consider these scenarios:
- A startup hiring its first few employees: Even with a small team, misunderstandings or disagreements can escalate.
- A growing business expanding its workforce: As your team grows, so does the potential for diverse personalities and situations.
- Any business operating in a regulated industry: Certain industries may have even stricter employment laws to navigate.
From retail stores and restaurants to tech companies and nonprofit organizations, if you have people working for you, EPLI is worth considering.
Why Is EPLI a Good Thing to Think About?
Considering potential lawsuits isn’t a pleasant topic, but being proactive can save your business significant headaches and financial strain in the long run.
Here’s why EPLI is a good thing to have on your radar:
- Defense Costs Alone Can Be Astronomical: Even if a claim is ultimately proven baseless, the legal fees associated with defending against an employment lawsuit can quickly deplete a company’s resources. EPLI can cover these defense costs, regardless of the outcome.
- Protect Your Business Assets: Without EPLI, your business assets, including operating capital and personal assets if you’re a sole proprietor or in certain business structures, may be at risk of covering judgments or settlements.
- The Rise of Employee Awareness: Employees are increasingly aware of their rights, and the legal landscape surrounding employment practices is constantly evolving. This heightened awareness increases the likelihood of claims being filed.
- Peace of Mind: Knowing you have a layer of protection against potential employment-related claims allows you to focus on what you do best – running your business – with greater peace of mind.
- Risk Management Strategy: Incorporating EPLI into your overall risk management strategy demonstrates a proactive approach to protecting your business from unforeseen circumstances.
While no insurance policy can prevent a lawsuit from happening, EPLI provides crucial financial protection and resources to navigate the complexities of employment-related claims. If you have employees, taking the time to understand EPLI and explore your options is a wise investment in the future of your business. Speak to an insurance expert today, call us today at 518-373-4111 , or request a complimentary consultation.
