NYC Insurance Blog

Employment Practices Liability Insurance (EPLI) & it’s Important to Your Business

Running your own business or company might be a dream come true. However, when it comes to protecting your business, employers should protect themselves against employee lawsuits. It is important to understand that employee lawsuits can affect any type or size of business. Employment Practices Liability Insurance (EPLI) is an insurance policy that protects businesses from potential employment practice claims such as sexual harassment, discrimination, and wrongful termination. Typically, some insurers provide EPLI coverage as an endorsement to their Business Owners Policy (BOP), thus changing the Terms and Conditions of the policy. On the other hand, other insurers offer EPLI as stand-alone coverage.

Current or former employees can sue employers for violating work-related laws that protect workers from exploitation. Usually, as your company or business grows, the risk of work-related lawsuits increases. Therefore, even if you are a small business owner, it is crucial to have a basic understanding of EPLI because you are not immune from legal risks. Employment Practices Liability Insurance covers the following:

• Discrimination 
• Wrongful termination
• Retaliation
• Misrepresentation
• Sexual harassment
• Libel or defamation
• Failure to promote
• Privacy invasion 
• Breach of employment contract 
• Negligent evaluation
• Violating leave laws

It is important to talk to your insurer to understand the extent of your coverage. Depending on the specifics of your insurance policy, EPLI can provide financial protection to numerous claims, including negligent evaluations, discrimination, sexual harassment, and retaliation. Buying Employment Practices Liability Insurance (EPLI) as a stand-alone policy offers higher financial protection, unlike adding it as an endorsement to your BOP. Give us a Call Today, to see if Your Business Will Benefit From EPLI Coverage

Thorough research is required to choose the right insurer and know the extent of coverage. Here are common exclusions in Employment Practices Liability Insurance (EPLI):

• Contract disputes
• Bodily injury
• Property damage
• Unpaid wages
• Intentional acts
• Unemployment benefits
• Consolidated Omnibus Budget Reconciliation Act (COBRA)
• Rest and mealtimes
• Wage and hour violations

How Does Employment Practices Liability Insurance (EPLI) Work?

Like most business insurance policies, factors that affect the cost of Employment Practices Liability Insurance (EPLI) differ. Factors affecting the cost of EPLI include the type of business and the number of employees. Also, risk factors, for example, whether your company has been sued for similar lawsuits in the past, affect your plan's total cost. 

Ideally, EPLI reimburses employers for the costs of a lawsuit, including settlements and judgment fees incurred throughout the lawsuit. However, most policies do not cover punitive damages, criminal fines, and civil fines. It is also crucial to note that EPLI does not cover risks covered by other insurance policies, for example, workers' compensation. We Can Get You a FREE Quote today, Give us a Call!

Top Trends in Employment-Related Claims

As employment-related claims become common, employers should take the following trends into account to avoid exposure and financial losses:

• Sexual harassment – more employees are suing their employers for sexual harassment after the #MeToo movement.
• Retaliation – both employees and employers tend to retaliate after being sued. 
• Pay equity – typically, men earn higher than women. However, in recent years, pay equity laws have been enacted to prevent wage discrimination. 
• Legalization of marijuana – as more states legalize recreational and medical marijuana use, employers who test drugs might find it difficult. However, adapting fast can help employers avoid potential lawsuits. 
• Classification of workers – worker classification is crucial nowadays. Employers may face lawsuits for denying overtime to an employee by misclassifying them. 
• Website accessibility – all companies selling products or services online should ensure their websites comply with the Americans with Disabilities Act (ADA). 
• Pregnancy and lactation accommodation – most States have laws that protect pregnant and lactating workers. In some cases, employers should accommodate lactation for some time for employees who just gave birth. 

Following the Best Human Resource Practices

Since an employee can sue you at any given time, the only way to protect your company is through precise employee and management policies. Luckily, most insurers help companies improve their human resource practices and manage risks. To achieve this, insurers often provide additional services to their clients, for example, ethics training classes, sexual harassment classes, help lines, and legal services. Here are essential practices to manage risks:

• Have a well-written job description for your employees with responsibilities and performance expectations
• Have well-written hiring guidelines adhering to State and Federal requirements. For example, employers should have detailed guidelines for terminating a contract or employee.
• Have an employee handbook
• Establish high standards and discipline processes. Orient new employees to help them understand how the company operates.
• Encourage employees to communicate issues affecting their performance or workplace.
• Keep employee records, including underperformance and bad employee behavior.
• Avoid verbal warnings and discipline because they constitute hearsay in a lawsuit.
• Communicate clearly to your employees how you enforce requirements at work. 
• Be proactive. Hire a competent HR administrator instead of dealing with employees now and then

Although it is impossible for employers to avoid a lawsuit threat entirely, they can minimize vulnerability. Effective communication and enhancing strong policies and practices are critical. Besides adhering to employment laws, clear documentation is crucial. For example, always document everything whenever you have a dispute because the paper trail can come in handy when facing a lawsuit. Documenting all your processes and decisions is vital even if both parties move on from the dispute. The hiring and firing processes should be airtight to avoid retaliation, discrimination, contract breach, or unpaid wage lawsuits. 

Finally, employers should ensure that the procedures and policies for filing and handling complaints are available to all employees. The procedures and policies should be clearly outlined in an employee handbook, posters, or website to ensure the employees know and understand them. Get a Free Quote Today!

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