What Is Employment Practices Liability Insurance (EPLI) and Who Needs It?
Workplace lawsuits are becoming increasingly common. According to the Equal Employment Opportunity Commission, more than 73,000 workplace discrimination charges were filed in 2022 alone. For business owners, these statistics highlight a critical risk that many overlook: employment practices liability claims.
What is Employment Practices Liability Insurance?
Employment practices liability insurance (EPLI) provides essential protection against claims related to wrongful workplace actions. This specialized coverage protects businesses when employees or former employees allege discrimination, harassment, wrongful termination, or other employment-related violations.
Unlike general liability insurance, which covers bodily injury and property damage, EPLI specifically addresses the unique risks that arise from employer-employee relationships. This coverage is typically not included in a general liability policy, leaving companies that assume otherwise vulnerable to potentially devastating legal costs and settlements.
What Types of Claims Does EPLI Cover?
Employment practices liability insurance provides coverage for legal costs, settlements, and judgments arising from various workplace-related allegations, such as the following:
- Discrimination claims based on age, race, gender, religion, disability, or other protected characteristics
- Sexual harassment and hostile work environment allegations
- Wrongful termination, including constructive discharge and retaliatory firing
- Breach of employment contract disputes
- Failure to employ or promote qualified candidates
- Wrongful discipline or demotion actions
- Mismanagement of employee benefits programs
- Defamation or invasion of privacy claims
- Violation of family and medical leave laws
- Infliction of emotional distress or mental anguish
What EPLI Doesn’t Cover
While employment practices liability insurance offers broad protection, certain exclusions apply:
- Criminal fines and penalties imposed by government agencies
- Unpaid wages, overtime, or benefits owed to employees
- Workers’ compensation claims and related injuries
- Unemployment benefits disputes
- Acts of intentional criminal wrongdoing by company executives
- Claims arising from union activities or labor disputes
- Employment practices in other countries (unless specifically included)
It’s important to consult with your insurance provider about what is covered and what limitations apply so that when crises come, you are never caught off guard by major expenses you weren’t expecting.
Who Needs Employment Practices Liability Insurance?
Employment practices liability coverage is essential for virtually any business with employees. Companies particularly at risk include the following:
- Small and medium-sized businesses often lack the HR resources and legal expertise that larger corporations possess, making them vulnerable to employment practices claims. Even with proper training and policies in place, allegations can still arise.
- Growing companies face increased risk as they hire more employees, promote staff, and navigate complex employment situations. Rapid growth can sometimes lead to inconsistent management practices or overlooked HR procedures.
- Service-based businesses with frequent employee interactions, such as restaurants, retail stores, and professional services firms, may face higher exposure to harassment or discrimination claims.
- Companies in high-turnover industries regularly hire and terminate employees, creating more opportunities for wrongful termination or discrimination allegations.
Even businesses with excellent management practices and comprehensive HR policies should consider EPLI. Employees can file claims regardless of whether wrongdoing actually occurred, and defending against even frivolous lawsuits requires significant legal resources.
Ready to Protect Your Business?
Don’t let employment practices liability claims threaten your business’s financial stability and reputation. Contact Bethany Insurance Agency today to learn more about EPLI coverage options tailored to your business’s needs. Our experienced team can help you understand your risks and find the right protection at a competitive price.
Give us a call or request a quote online to get started.
