Employment Practices Liability Insurance, or “EPLI,” falls under the “management liability” category of business insurance along with D&O insurance. The two are usually paired together in one complete policy. Here’s what you need to know about EPLI.
What is Employment Practices Liability Insurance?
EPLI is designed to cover companies for employment practices-related claims (duh). This means anything related to the hiring/firing process and employees’ behavior in the workplace. Allegations of discriminatory hiring practices, sexual harassment, wrongful termination, and more fall under the EPLI blanket of coverage.
Why do I need it?
EPLI-related law suits are particularly common because of the regulatory structure in the area. There are several different statutes that have created different sets of broad (and sometimes overlapping) rules, including Title VII, the Americans with Disabilities Act (“ADA”), and the Age Discrimination in Employment Act (“ADEA”). And these are just the federal statutes! Many states have even more stringent rules than those outlined by their federal counterparts.
The US government has created the Equal Employment Opportunity Commission (“EEOC”) to advocate and provide recourse for individuals who feel they’ve been victimized by their employers. Basically, this means it’s relatively easy to bring a cause of action against an employer. The government designed the system that way! It’s a mechanized, systematic approach to recover money from employers. And again, states usually have their own commission that escalates claims as well.
Startups need Employment Practices Liability Insurance for a couple reasons. First of all, the claims in this area are only getting more frequent. In fact, employers paid out over $455 million for employment-related lawsuits in 2013 and the EEOC received close to 100,000 complaints. 40% of these claims were made against companies with 15-100 employees.
Second, companies become liable under the employment statutes once they hit 10-15 employees. If all goes well, it’s not uncommon for a startup to hire 10+ employees within the first year of closing a decent size series A round. That’s why we usually recommend including EPLI coverage in the D&O policy your investors inevitably require when closing that round. You don’t want to be caught by surprise when your explosive growth throws you into Employment Practices Liability territory. You might as well lock in a full management liability policy before you cross that threshold to lock in a good price and give yourself some peace of mind.
How do I protect my company and myself?
Want to read more on the subject? Check out our blog posts on Employment Practices Liability Insurance.
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