Does My Business Need Employment Practices Liability Insurance? 

As a business, you must account for many risks and exposures that could potentially inflict financial and reputational harm. Even isolated errors could have dire consequences. Furthermore, some organizations may make the mistake of only looking outward when considering things that could go wrong. In fact, many of the most serious incidents impacting your company could come from within. That’s why employment practices liability insurance (EPLI) may be essential.

What is EPLI?

EPLI is a specialized form of liability insurance that can establish robust financial protection in the aftermath of accusations against your company and its employees alleging improper workplace practices.

As an employer, you’re beholden to certain laws and expectations regarding the treatment of your employees.

For example, Title VII of the Civil Rights Act of 1964 prohibits U.S. employers from discriminating against prospective or current employees based on protected characteristics (e.g., race, religion, gender and national origin).

If your company or its employees were accused of violating this or similar laws, it can result in an employment practices liability lawsuit. These lawsuits can be time-consuming, costly and damaging, even if the accusations are baseless.

EPLI provides coverage to help your business respond to such claims effectively.

How Can My Policy Help?

By having a suitable EPLI policy, your company may be able to access financial resources to assist with legal costs arising from workplace-related lawsuits. This includes expenses such as attorney fees, settlements, judgments and other legal costs.

Although the exact details of EPLI coverage may vary, EPLI policies may often be able to help respond to the following types of claims:

• Harassment

• Wrongful termination

• Discrimination

• Retaliation

• Failure to promote

• Improper hiring practices

• Mismanagement of employee benefits

• Invasion of privacy

• Negligent evaluation

• Breach of employment contract

For example, if an employee accuses your business of discrimination after being passed over for a promotion, an EPLI policy could cover the legal defense and any resulting settlement.

Even if the claim is unfounded, proving your innocence could impose devastating financial losses without adequate coverage.

Who Needs EPLI?

EPLI is an advisable form of coverage for any business with employees, regardless of the size. While larger businesses may face more frequent claims, smaller businesses are often more vulnerable to financial instability from a single lawsuit due to limited resources.

EPLI may be particularly important if:

• Your business lacks a dedicated HR or legal department.

• You’ve recently hired or terminated employees.

• You do not have a formal employee handbook or workplace policy.

• You operate in an industry with high employee turnover.

We’re Here to Help

Contact James L. Smith Insurance Agency today to learn more about EPLI or compare personalized quotes.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.