Employment Practices Liability Insurance policies protect employers against exposure and costs associated with claims and litigation arising out of the employment relationship. EPL Insurance generally covers claims made by current and former employees as well as applicants who were never hired or third-parties claiming the employer engaged in wrongful conduct.
According to The National Law Review, Discrimination, harassment, retaliation, wrongful discharge, and invasion of privacy are the typical claims covered by EPLI. On the other hand, claims that an employer violated the Fair Labor Standards Act (e.g., failure to pay overtime, misclassification as an independent contractor) are typically not covered by EPLI policies, nor are claims under ERISA, COBRA, or the National Labor Relations Act, although it may be possible to purchase limited coverage for defense costs.
Small & Mid-Size Businesses should consider EPLI
Large corporations generally have considerable Employment Practice Liability Insurance (EPLI) in place and can deal with most employment lawsuits. But, what about the small to mid-size businesses. Small to mid-size as well new businesses are often most vulnerable to employment claims. In fact, according to Facts & Figures put out by Nationwide, a business is more likely to have an employment claim that experience a fire.
According to the 2017 Hiscox Guide to Employee Lawsuits, U.S. companies have a 10.5% chance of being on the receiving end of an employment-related charge. On average, small-to-medium size companies facing such claims battle for 318 days before resolution and leave the arena with a $160,000 bruise.
Small businesses are sued every day. Can you afford to defend yourself against an EPL Claim? The average costs to defend even a small claim is approximately $10,000 and those costs increase if the claim goes to court. Most EPLI claims that end up in court average $50,000 to $70,000.
Most businesses should consider getting Employment Practices Liability Insurance (EPLI) to protect themselves against potential employee lawsuits related to employment practices. Even with the best intentions and policies in place, businesses can still face legal action from employees for various reasons such as discrimination, harassment, wrongful termination, or retaliation. The cost of defending against such claims can be high and can potentially bankrupt some business.
EPLI policies can cover legal fees, settlements, and judgments resulting from employee claims against the business. They can also provide access to legal support and resources to help prevent and address potential employment issues. By having EPLI coverage, small businesses can have peace of mind and protect their assets in case of a lawsuit.
Some business owners believe that their current Business Liability Insurance policies cover them for EPLI. In fact, insurers often have strong EPL exclusions in business owner’s policies and general liability policies.
It is important to note that EPLI policies typically have specific exclusions and limitations, and it's essential for business owners to carefully review the policy details and understand what is covered and what is not. It is also advisable to work with an experienced insurance agent, such as the professionals at Arrowhead Automotive Insurance, who can help identify the appropriate coverage for the specific needs of the business.
Employment Practices Liability Insurance (EPLI) can protect a business against a range of employee-related claims, including:
- Discrimination: EPLI can provide coverage for claims of discrimination based on age, race, gender, religion, disability, or other protected characteristics.
- Harassment: EPLI can provide coverage for claims of sexual harassment or other forms of harassment in the workplace.
- Wrongful Termination: EPLI can protect a business against claims of wrongful termination, including those based on retaliation, breach of contract, or violation of public policy.
- Failure to Promote or Hire: EPLI can provide coverage for claims of discrimination or retaliation related to hiring or promotion decisions.
- Wage and Hour Claims: EPLI can protect against claims related to violations of wage and hour laws, including failure to pay overtime or provide meal and rest breaks.
- Breach of Employment Contract: EPLI can provide coverage for claims related to breach of employment contracts, such as wrongful termination or failure to pay agreed-upon compensation.
- Invasion of Privacy: EPLI can protect against claims related to invasion of privacy, such as unauthorized access to an employee's personal information.
- Defamation: EPLI can provide coverage for claims of defamation, such as libel or slander, related to an employee's employment.
How to lower your risk of sustaining an EPL Claim
Employment Practices Liability (EPL) claims can be costly and time-consuming for businesses. Here are some ways to lower the risk of sustaining an EPL claim:
- Develop and Implement Effective Policies: Businesses should have clear and comprehensive policies on issues like discrimination, harassment, and retaliation. These policies should be communicated to all employees and should be regularly updated to reflect changes in the law.
- Provide Training: Employees should be trained on EPL issues, including recognizing and reporting discrimination, harassment, and retaliation. Managers and supervisors should receive additional training on how to respond to complaints and how to prevent EPL issues from arising.
- Document Everything: Businesses should keep detailed records of all employment-related decisions, including hiring, promotions, and terminations. Documentation can help defend against claims of discrimination or retaliation.
- Consistently Enforce Policies: Businesses should consistently enforce their policies and act when necessary. Failure to enforce policies can lead to a perception that discrimination, harassment, or retaliation is tolerated, which can increase the risk of a claim.
- Conduct Regular Audits: Businesses should conduct regular audits of their employment practices to identify and address potential EPL issues.
- Consult with an Employment Attorney: It's a good idea for businesses to consult with an experienced employment attorney to review their policies, procedures, and practices. An attorney can help identify potential issues and provide guidance on how to mitigate risk.
By implementing these steps, businesses can lower their risk of sustaining an EPL claim and create a workplace culture that promotes respect, fairness, and inclusion.
If you have questions about Employment Practices Liability Insurance or are not sure if you are properly covered by your current business insurance policy, contact the professionals at Arrowhead Automotive Insurance. We are a leading national insurance agency providing products and services to businesses operating in the automotive industry. Our team is dedicated to this industry and has the unique experience and knowledge to thoroughly evaluate the needs of your business. Our influential relationships with top insurance companies and industry organizations allow our agency to provide unrivaled, personalized solutions.