Employment practices liability insurance (EPL insurance or EPLI) offers coverage for employers against any claims that are made against them by employees.
Typically, large companies have a significant amount of employment practices liability insurance coverage. It ensures that they are prepared for any costs that may arise should an employee files a claim.
Given the fact that larger companies usually have a large employee base, having this coverage makes sense. However, it’s not just big corporations that should have this type of insurance; smaller businesses and startups should have it, too.
In fact, it might be even more beneficial for small businesses and startups to have employment practices insurance coverage, as they tend to be more vulnerable to employee-filed claims. Why? – Because often, these types of organizations don’t have a legal department or an employee handbook that details their procedures and policies regarding hiring, terminating, and managing their employees.
Employment Practices Liability Coverage provides broad insurance protection from employment-related claims and lawsuits brought against a company, its managers and its directors and officers. It covers such things as age and gender discrimination, sexual harassment, wrongful discipline, termination, and negligent decisions involving hiring, promotion and compensation. It also applies to breach of employment contract, emotional distress, and mental anguish, invasion of privacy, libel, slander and mismanagement of employee benefits.
The exposures presented by a given employer can vary substantially, depending on the particular factors involved. This includes the number of employees, the location of the risk, the specific industry, employment practices, unique characteristics of the operation and loss experience.
Allegations are made by employees who claim to have suffered various types of financial loss or emotional injury because of their employers’ acts (or failure to act). The list of allegations involves wrongful termination, demoting an employee without justification, failure to hire or promote a worthy employee, unwarranted discipline or abuse (particularly sexual harassment). Many of these offenses are said to be the result of illegal discrimination on the basis of age, gender, religion, race, nationality, or sexual orientation.
Other offenses are claimed to be a violation of the individual’s civil rights, or the failure to accommodate a mental or physical limitation or disability. Sexual harassment by the employer’s management or supervisory staff, or by fellow employees, has grown to include allegations of same-sex harassment. In addition to injuries involving sexual abuse, physical, mental or emotional abuses are also being claimed with more frequency.
Employers must take great care to have firm, written policies and procedures in place to prevent such abuses and injuries. Various laws and government agencies hold employers responsible for the training and implementation of programs to protect their employees from supervisors and fellow employees. Modern trends toward “downsizing,” business failures, relocations, outsourcing, and companies phasing out or selling-off products or services increase the level of employee claims.
Often, employees deemed most expendable by the company become the most disgruntled and in the frame of mind to sue. In many other cases, employees are becoming more aware of their rights and are gaining the will to seek to have unacceptable actions and work environments addressed.
The current level of workplace morale, the state of the economy, and legislation such as the Americans with Disabilities Act and the Family Medical Leave Act have all led to a marked increase in employment-related practices claims and lawsuits. Because these legislative and other legal changes have provided significant incentives for employees to file employment-related claims, employers such as you should be more aware of your susceptibility to such actions.
Claims can come from both current and former employees and even from job applicants you didn’t hire. The procedures that you use or don’t use in hiring, firing and managing your employees can translate into huge defense costs and legal awards to plaintiffs for your errors or oversights even if they were unintentional.
Any business owner – from a large corporation to a small brick and mortar operation – is at risk of having a claim filed against them by an employee the minute they begin interviewing possible employees. For instance, should the company decide that they don’t want to hire a candidate, he or she could allege discrimination and file a claim against the business.
If the business does end up hiring the person that was interviewed and ends up firing him or her later on as a result of poor attendance, for example, that person could claim he or she was wrongfully terminated.
Whether the allegations are founded or not, whenever an employee files a claim against an employer, the company could face serious financial upheaval. This is where employment practices liability insurance can help.
For example, a judge could find the company guilty and a settlement would have to be paid. And, even if the claim ends in favor of the business owner, the company will still have to pay legal fees and deal with any repercussions that surround a claim, such as a tarnished reputation.
Most employment practices liability policies protect any claims that are brought against a business owner, the business itself, management, and in some cases, other employees. This insurance covers any claims that are filed against the above-mentioned by the following individuals:
Employment practices liability insurance provides coverage for the costs that are associated with various types of employee claims. Examples of claims include:
Employment practices liability insurance typically does not cover:
How much does employment practices liability insurance cost? The costs that are associated with a legal claim filed by an employee, customers or vendors can be astronomical. These costs can include legal fees, court fees, settlement fees, public relations, and anything else that occurs as a result of a lawsuit. Trying to cover those costs out of pocket could potentially ruin a business. Being covered by employment practices liability insurance will help to soften the financial blow that comes when and if an employee files a claim.
The cost of this insurance varies. There are a number of factors that are taken into consideration when determining the cost, such as the type of business that is being covered, the number of people the business employees, any claims that may have been filed against the business in the past, and the net-worth of the business.
To help prevent employee lawsuits, educate your managers and employees about your guidelines and acceptable behavior so that eliminate problems before they start. Following are some ideas you can implement in your business right away:
If you are a business owner and you hire employees, it is in your best interest to invest in an EPLI policy. A reputable commercial insurance agent will be able to help you find the best policy to suit your specific needs and protect you and your business.
If you are looking for state specific Employment Practices Liability Insurance quotes, costs and information:
