What Is EPLI, and Why Is It Important to Your Business?
Work-related lawsuits are on the rise. A single claim against your company can be financially devastating if you’re not adequately insured.
If you are faced with an employment practices claim, you’ll have to cover your legal fees and the investigation. This may include audits, data collection and record production, which can rack up bills. If the complaint involves sexual harassment or discrimination, you may also need a PR team to handle media response and reputational damage.
Employment practices liability insurance (EPLI) can protect you from these costs if you’re accused of wrongful acts arising from the employment process. These allegations can include discrimination, sexual harassment, and hiring or firing actions. You can purchase EPLI as a stand-alone policy or as an endorsement to your business owners policy (BOP).
EPLI offers lawsuit protection
EPLI typically covers:
- Wrongful termination
- Discrimination
- Sexual harassment
- Retaliation
- Defamation or libel
- Invasion of privacy
- Misrepresentations
- Failure to promote
- Breach of employment contracts
- Negligent evaluations
- Mismanagement of benefits
- Leave law violations
Despite its relatively low premium, many employers don’t buy EPLI because they mistakenly believe other types of insurance cover such complaints. In fact, most employers with fewer than 50 employees pass up EPLI.
EPLI is generally separate from your BOP, but talk to us about adding it as an endorsement. Alternatively, you may prefer a stand-alone policy. This can offer higher financial protection than what you would get by combining it with a BOP.
Know that EPLI policies have exclusions. Most do not cover:
- Bodily injuries
- Property damage
- Contract disputes
- Intentional acts
- Unpaid wages
- Rest and meal times
- Unemployment benefits
- Consolidated Omnibus Budget Reconciliation Act (COBRA) or Employee Retirement Income Security Act (ERISA) violations
- Wage and hour violations
- Punitive damages
Also, EPLI is a claims-made coverage. This means claims are covered only when the incident and the claim occur while the policy is in force. If you’re sued after the policy has lapsed, you won’t be covered.
Choose the right coverage
We can design a policy tailored to your needs. Your coverage and premiums will be determined by the type of business you are in, the number of employees you have, your HR practices and claims experience, and the limits and deductibles you choose.
Most EPLI policies provide defense coverage, but you may be required to use an insurer-approved attorney. So inquire about carriers’ litigation records when deciding which one to place your business with. Also ask if your coverage applies beginning with the first dollar you have to spend on your legal response. Finally, find out if costs associated with regulatory inquiries about employment practices complaints are included.
Coordinate your EPLI coverage with other types of coverage you have. These include directors and officers liability, cyber liability, crime and fidelity, and fiduciary insurance.
Follow HR best practices
During the underwriting process, the insurer will review your employment policies and procedures. Most insurance companies will work with you to help you manage your risks and improve your HR practices. Many provide additional client services designed to prevent claims. These include help lines, sexual harassment and ethics training classes, legal services, and employee handbook assistance.
Among the employment safeguards you should have in place are:
- Written hiring procedures that meet federal and state requirements
- An employee handbook
- Orientation for new employees, including antidiscrimination and antiharassment policies
- Regular, consistent and fair performance reviews, with policies for addressing and documenting unacceptable performance
- Safe, confidential reporting procedures for employee feedback
- Guidelines for terminating employees, with consideration given to whether they are a member of a protected class or under contract
Protect yourself by being proactive in your employment practices. Hire an HR administrator and consider retaining outside counsel familiar with labor law to keep your company in compliance.
For example, does your employee handbook clearly explain prohibited employee conduct? Do you have procedures for investigating and promptly acting on complaints? Do you have policies for email, social media, privacy and sexual orientation?
Top trends in employment-related claims
Employers face many risks in the workplace today. Staying on top of EPLI claims trends can help reduce your exposure to wrongful acts. Here are seven trends to consider when designing your insurance coverage:
- Sexual harassment: The #MeToo movement has spurred an increase in harassment claims, including LGBTQ-based sexual harassment charges.
- Retaliation: Retaliation is the most common employment practices claim, says the Equal Employment Opportunity Commission. And employers can be on the hook for retaliation even if there was no underlying harassment or discrimination.
- Pay equity: The Bureau of Labor Statistics reports that women continue to trail men in earnings, making about 81% of what men do. In the past few years, several states have enacted pay equity laws that impose stricter standards on employers and lessen the legal burden for employees alleging wage discrimination.
- Marijuana legalization: Many now allow recreational marijuana use, and even more allow medical marijuana use. This has created legal complications for employers who test for drugs, especially those with zero tolerance policies.
- Worker classification: The gig economy has made it imperative to properly classify employees. If an independent contractor or unpaid intern is performing the duties of a regular employee, you may be in violation of the Fair Labor Standards Act and corresponding state law. You could also be in violation if you’ve denied overtime to employees by misclassifying them as exempt.
- Website accessibility: Plaintiffs’ attorneys continue to sue businesses with public-facing websites. These suits allege that a company’s website is a “public accommodation” under Title III of the Americans with Disabilities Act (ADA). If you conduct commerce online, make sure your site is compliant with the ADA.
- Pregnancy and lactation accommodation: Many states have passed laws requiring employers to provide reasonable accommodations for pregnant workers. Some of these laws also require employers to accommodate lactation for a certain period after an employee gives birth.
Following HR best practices and having the right insurance are the best ways to defend against employment claims. Talk to us about the risk management and crisis response services available under some EPLI policies. You’ll have peace of mind knowing you’re protected against the high costs of an employment practices complaint.