Employer's guide to employment practices liability insurance (EPLI)

What is employment practices liability insurance (EPLI)?

EPLI, is designed to protect your business from claims by employees, former employees, or applicants for serious issues such as harassment, retaliation, mismanagement of employee benefits, discrimination, breach of employment contract, and wrongful termination. Employment claims are on the rise, and they can be costly to defend. This professional liability insurance can reduce the liability risk of your overall employment practices.

EPLI benefits

EPLI has some significant benefits, such as the following:

• Protection against employment claims: If you have employees, your business has liabilities. As employment claims rise in the workplace, EPLI can protect your business against many expensive claims and lawsuits
• Financial and reputational safeguards: You can safeguard your business’s reputation and your balance sheet with EPLI. You may think everything is going great, but that doesn’t mean the previous business owner dotted every i and crossed every t. Former employees can also institute costly lawsuits
• Legal compliance and risk management: Today, risk management is the name of the game for businesses of all sizes. Simply put, EPLI will help you remain in compliance and reduce the risks that come with a headline-making lawsuit

If your business is faced with a lawsuit from a current or former employee or job applicant, it helps to have the expertise of an EPLI insurer on your side.

Common claims covered by EPLI

The most common employment practice claims covered by EPLI are as follows:

• Discrimination: This can include discrimination based on age, gender, race, and other factors and attributes
• Harassment: If an employee brings a sexual harassment or bullying suit against your organization, EPLI will cover the costs of defending that suit
• Retaliation: This category covers employees who feel they were harassed in response to exercising their legal rights in the workplace. This is the most frequent claim that businesses face
• Wrongful termination: This category encompasses wrongful demotion and discipline, as well as claims from employees who feel that they were unfairly terminated
• Wage and hour disputes: If employees feel like they were paid unfairly, they may choose to bring a lawsuit against your business

EPLI typically excludes claims related to property damage or bodily injury, workers’ compensation issues, criminal and civil disputes, and unemployment insurance, among others. Before you acquire a policy, take the time to understand what it covers.

Factors influencing EPLI premiums

The key factors that influence the cost of EPLI premiums are as follows:

• Business size and industry: The bigger your business, the greater the risk. Likewise, certain industries experience more lawsuits, including healthcare, restaurants, retail, professional services, software development companies, and manufacturing
• Claims history: If your business has a history of multiple claims,  your insurance premiums will cost more
• Employee turnover rates: If your business has a high turnover rate, that might indicate that employees are unhappy or unsatisfied. This, in turn, can increase your annual EPLI premiums
• Risk management practices: Does your company have organized and accessible risk management policies and procedures in place? Your organization’s risk management practices can also play a role in determining EPLI premiums. If you have limited human resources policies and training, you will pay more

If your business is located in California or New York, you will also likely pay more, since these states pride themselves on going above and beyond with employee legal protections. Of course, your policy limit and terms will also factor into the price of your annual EPLI premiums, which depends on a variety of factors.

If you want to reduce your employment practices liability insurance premiums, your business should invest in solid human resources and employment practices.

How to choose the right EPLI policy

As with any insurance policy, it pays to do your research before you sign on the dotted line. Here are some other tips for choosing the best EPLI policy and coverage for your business:

• Determine what your business needs: Your coverage limits and deductible can make a big difference in your overall premium, so it is smart to determine upfront what type of coverage you need
• Get multiple insurance quotes: Make sure you review multiple quotes so that you can compare pricing and features side by side. You might want to use an insurance broker to help you find the right EPLI policy
• Consider bundling EPLI with directors’ and officers’ insurance: Directors’ and officers’ insurance will protect your board members and officers from getting sued based on their board or management work. If you bundle these two policies, you may find notable savings
• Read the fine print: Make sure that you are aware of all exclusions, terms, and conditions of what your EPLI policy will and won’t cover

Finally, take the time to make sure that your team members have the proper education and training when it comes to positive workplace practices. If you have not already established clear policies and educated employees to support a safe workplace, now is the time. Skipping EPLI might seem like savings in the short term, but it could cost your business significantly more in the long run.