The Essential Guide to Employment Practices Liability Insurance (EPLI) for Business Owners
In today’s complex business environment, safeguarding your company against potential legal disputes related to employment practices is crucial. Employment Practices Liability Insurance (EPLI) is a critical tool in your risk management arsenal, designed to protect businesses from the financial fallout of legal claims by employees. This guide will explore what EPLI covers, why it’s essential for businesses of all sizes, and how to choose the right policy for your needs.
Understanding Employment Practices Liability Insurance (EPLI)
EPLI is a type of liability insurance that helps protect businesses against claims made by employees alleging discrimination (based on sex, race, age, or disability, for example), wrongful termination, harassment, and other employment-related issues. As a business owner, it’s vital to understand that no matter how ethically you conduct your operations, the risk of facing such claims is always present, making EPLI an essential component of your business insurance portfolio.
Why Your Business Needs EPLI
The landscape of employment law is ever-changing, and even the most well-intentioned employers can find themselves on the wrong side of a legal dispute. Legal fees, settlements, and judgments can be financially devastating for businesses, especially small and medium-sized enterprises (SMEs). EPLI provides peace of mind, knowing that your business is protected against the financial implications of these claims.
- Protection Against a Range of Claims: EPLI covers a wide array of employment-related claims, including sexual harassment, discrimination, wrongful termination, breach of employment contract, negligent evaluation, failure to employ or promote, wrongful discipline, deprivation of career opportunity, wrongful infliction of emotional distress, and mismanagement of employee benefit plans.
- Cost-Effective Risk Management: The cost of defending against employment claims can quickly escalate. EPLI policies typically cover legal fees, settlements, and judgments associated with these claims, making it a cost-effective solution for risk management.
- Adaptability to Your Business Needs: EPLI policies can be tailored to fit the specific needs and risks of your business, taking into account your industry, the size of your workforce, and the legal landscape of the jurisdictions in which you operate.
How to Choose the Right EPLI Policy
Selecting the right EPLI policy involves several key considerations:
- Assess Your Risk Exposure: Consider the nature of your business, your employee turnover rate, and any past incidents of employment disputes. This assessment will help you determine the level of coverage you need.
- Understand the Policy Terms: EPLI policies can vary significantly. It’s essential to understand what is covered and what is excluded. Pay close attention to the policy’s limit, deductible, and whether it covers defense costs inside or outside the limit of liability.
- Compare Quotes and Insurers: Get quotes from multiple insurers to compare coverage options and premiums. Look for insurers with a strong track record of handling EPLI claims.
- Consider Additional Features: Some policies offer risk management resources, such as training programs for managers and employees on preventing workplace harassment and discrimination. These resources can be invaluable in mitigating risks.
Conclusion
Employment Practices Liability Insurance (EPLI) is an indispensable part of a comprehensive business insurance strategy, offering protection against the financial risks associated with employment-related legal claims. By understanding what EPLI covers, recognizing the importance of this insurance, and knowing how to choose the right policy, business owners can safeguard their operations against potential legal challenges, ensuring their company’s long-term resilience and success.
Remember, investing in EPLI is not just about protecting your bottom line; it’s also about fostering a safe, respectful, and equitable workplace for all your employees.
Video Transcript
Understanding Employment Practices Liability Insurance (EPLI)
How does Employment Practices Liability Insurance work?
This is sometimes called EPLI or EPL insurance. One of my clients recently asked, “How does this work?” Well, first off, EPLI is an insurance policy that covers employment claims. These might be claims for wrongful termination, racism, sexual misconduct, or any sort of improper handling of employment claims can be covered by an EPLI policy.
The Coverage Process and Its Importance
So if you, as a company, have EPLI, that is an insurance policy that covers these sorts of claims. Then, as you grow, it is statistically likely that employees will either sue or bring a claim, and then you will have insurance coverage for this. When you look at getting EPLI, one thing to consider is whether you have the option to use your regular attorney or have the insurance company assign an attorney to you.
Choosing Your Legal Representation
Usually, you need to pay extra for the policy to allow you to use your attorney of choice. So, as you grow, it is statistically likely that employees or ex-employees will claim you did something wrong. These employees or ex-employees typically go to an employment attorney who takes the case or considers taking the case on a contingency basis. That means the attorney only gets paid if the attorney recovers money.
The Reality of Employment Claims
As a result, it is fairly easy for employees to reach out and find an attorney who at least initially takes their case. But I can tell you from employees reaching out to me that about one of every 20 people who contact me has a good claim.
Most of the time, employees say, “Oh, it was wrongful termination.” But when we look at it, it was proper termination. They were not terminated for a discriminatory purpose. I have other videos on this channel that cover other areas of employment law what is wrongful termination and what is not.
The Value of EPLI for Businesses
But today, the takeaway is if you are running a business, rather than paying the legal fees associated with claims from employees or ex-employees, you might want to consider EPLI.
It is an annual insurance policy that covers the attorney’s fees for your defense as well as any payout that is needed. Companies generally find this is a worthwhile insurance policy as they grow because, statistically, they are bound to run into claims of improper employment practices.
