Why do you need Employment Practices Liability Insurance?

Employment practices liability insurance, or “EPLI,” is a type of management liability insurance. If you hire employees or independent contractors, you take the risk that a dispute will develop between you and them.

You hear about cases like this all the time:

  • A prospective employee who says he wasn’t hired because of his race, religion, or sexual orientation.
  • Or a current employee who sues her employer alleging inappropriate advances or other forms of harassment from her supervisor. Or a former employee who alleges wrongful termination and unpaid bonuses.

Basically, this means it’s relatively easy to bring a cause of action against an employer. This is by design. The federal government created a mechanized, systematic approach to recover money from employers who they determine have behaved badly. And, again, states usually have their own commission that takes a look at these claims as well.

Frequency

These disputes are surprisingly common and the legal and regulatory frameworks of our federal and state governments give employees several ways to take action against their employers.

Legislation

There are several different statutes that have created varied sets of broad (and sometimes overlapping) rules. These include Title VII, the Americans with Disabilities Act (ADA), and the Age Discrimination in Employment Act (ADEA). And those are just the federal statutes! Many states have even more stringent rules than those outlined by their federal counterparts.

Enforcement

In terms of enforcement, 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.

What is Employment Practices Liability Insurance?

EPLI policies protect the company and its management by paying the costs of defending against certain suits from employees or investigations from government agencies. Common claims include allegations of:

  • Harassment
  • Discrimination
  • Retaliation
  • Wrongful Termination

If you (as a manager) or the company itself is named in such a claim, the insurance company would defend you and pay the judgment or settlement against you. Keep in mind how easy it is for an employee to start an action that requires you to mount a legal defense. Even if an allegation is baseless, you still have to pay to defend yourself and have the suit dismissed. Your EPLI carrier will take this job off your plate.

Carriers are unique in what they want their policies to cover. Certain carriers are willing to offer protections that others might not but the right EPLI policy can be tailored to your specific needs. For instance, wage and hour claims (e.g. unpaid overtime) are one of the most common types of employment disputes…they are also one of the matters most commonly excluded from coverage in EPLI policies. Same goes with investigations related to immigration status, suits from non-employees that allege harassment and the loss or theft of employees’ personally identifiable information.

The key is having a partner on your side who can work with you to identify potential exposures and find the underwriter who can offer a policy that meets your specific needs.

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What does Employment Practices Liability insurance cover?

You will have to consult your policy documents to confirm exactly what coverage your Employment Practices Liability insurance provides but here are a few scenarios that typically would and would not be covered. You can read more about what employment practices liability insurance covers here.

Wrongful termination
occurs when an employee’s termination breachers one or more terms of a contract of breaks a rule of employment law
Discrimination
unfavourable treatment of an employee, such as failure to promote, based upon sex, race, age, or disability.
Sexual misconduct or harassment
involves unwanted sexual advances or obscene remarks to an employee.
Defamation of character
this happens when a false statement is written or spoken about an employee with the intention of harming their reputation.
Invasion of privacy
An employee alleges that an employer unreasonably searches their private space , or conducts surveillance in areas where employees expect privacy, such as a dressing room or bathroom.

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Who needs Employment Practices Liability insurance?

No employer plans to have to defend their employment practices in court, but any company with employees is at risk for an employment practices suit. All it takes is one disgruntled employee, bitter applicant, or mishandled firing reported to land your business in court. No industry is immune from employment-related risks. However, some industries are more litigious than others, here are some industries where EPL claims are most prevalent:

Retail

Restaurant / Entertainment

Professional Services

Manufacturing

Healthcare

Finance

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