Employment Practices Liability
What is employment practices liability insurance?
If a business is sued by an employee over wrongful termination or another violation of employee rights, employment practices liability insurance (EPLI can pay for legal costs).
When does a business need employment practices liability insurance?
Employment practices liability insurance (EPLI protects your business when a worker sues over employment-related issues. This policy covers your legal costs when an employee or group of employees claim their civil rights were violated or they were unable to complete their work in a fair environment.
EPLI is usually a claims-made policy
In a claims-made policy, a claim is covered only if your policy is active both when the incident occurred and when the claim is filed. For example, your house painting business is forced to close, so you cancel your EPLI coverage. A few months later, a former employee sues you for discrimination, but since you no longer have an EPLI policy, the insurer likely won’t pay for lawsuit costs. Note that in some situations, you may be able to extend a policy beyond its original end date.
EPLI coverage can have deductibles and exclusions
Most EPLI policies include a deductible, which is an amount that you pay out of pocket toward legal costs before an insurer contributes. Some policies limit coverage during acquisitions or major staff reductions. Employment dispute lawsuits can be expensive, so keep that in mind when choosing what an EPLI policy covers.
Your insurance company may choose an attorney for you
Some EPLI policies stipulate that the insurance company will choose your attorney if a claim is filed, usually because the insurer wants a lawyer who has expertise with relevant cases.
Businesses can bundle EPLI with D&O insurance
Small businesses can often bundle employment practices liability insurance with directors and officers insurance. D&O protects a business’s board members and officers against lawsuits over decisions they made on behalf of the company that resulted in financial loss.
What does EPLI cover?
If an employee sues over wrongful termination, sexual harassment, or another violation of employee rights, employment practices liability insurance helps pay for your legal costs.
EPLI provides coverage for:
Mismanagement of employee benefits
EPLI protects your business if you improperly manage employee benefits, including health insurance, paid time off, and sick leave.
Sexual harassment
EPLI provides protection if your business is sued over sexual harassment in the workplace.
Wrongful termination or demotion
Adding EPLI coverage will help protect you if an employee alleges wrongful termination or demotion. It protects against accusations of negligence related to hiring and promotion, as well.
Slander or libel
While slander or libel charges coming from non-employees are covered by general liability policies, EPLI coverage offers additional protection.
Discrimination
Employment laws prevent businesses from discriminating against workers based on age, gender, religion, race, or other protected classes. Companies that violate these rules might face a lawsuit.
Breach of employment contract
When your company makes a candidate a job offer or hires a contractor, it is obligated to adhere to the terms of the agreement that both parties signed. Failing to do so could result in a lawsuit.
Privacy invasion
When monitoring your business, take care not to cross the line into violating employee privacy or you risk a lawsuit.
Emotional or mental distress
If an employee at your business behaves in a way that causes another worker to suffer and you take no action, you could be held liable.
