Employee Practices Liablitiy
What is employment practices liability insurance (EPLI)?
Employment practices liability insurance, known in the trade as EPL insurance or EPLI, provides coverage to employers (PDF) against claims made by employees alleging:
- Discrimination (based on sex, race, age or disability, for example)
- Wrongful termination
- Other employment-related issues, such as failure to promote
Large corporations typically have substantial employment practices insurance coverage in place and are prepared to deal with just about any employment lawsuit. However, small or new businesses are often the most vulnerable to employment claims (PDF). That’s because they usually lack a legal department or employee handbook detailing the policies and procedures that guide hiring, disciplining or terminating employees.
New hires pose an employment practices liability risk
You're at risk of an employment claim from the moment you interview a prospective employee. For example, if you choose not to hire the interviewee, that individual could allege some sort of discrimination.
Or, if you hire that person and later fire them due to poor attendance, that discharged employee could claim wrongful termination.
To significantly lower your employment practices liability risk (PDF), consider the following:
- Review potential loss exposures with your insurance agent and purchase adequate employment practices liability insurance.
- Develop an employee handbook detailing your company's workplace policies and procedures, including attendance, discipline and complaints. The employee handbook should also contain an employment at-will statement and an equal employment opportunity statement.
- Create a job description for each position that clearly defines expectations of skills and performance.
- Conduct periodic performance reviews of employees and carefully note the results in the employee's file.
- Develop a screening and hiring program to weed out unsuitable candidates on paper before calling them to interview in person.
- Use an employment application that contains an equal employment opportunity statement along with a statement, that if hired, employment will be "at-will." This means their employment can be terminated at any time, for any reason or for no reason at all, with or without notice. Also ensure that your employment application does not contain any age indicators, such as date graduated high school, as this could increase your risk for age discrimination claims.
- Conduct background checks on all possible candidates.
- Institute a zero-tolerance policy regarding discrimination, substance abuse and any form of harassment. Make sure you have an "open door" policy in which employees can report infractions without fear of retribution.
- Create an effective record-keeping system to document employee issues as they arise, and what the company did to resolve those issues.
More about employment practices liability insurance
The cost of insuring your business for EPLI coverage depends on a variety of factors, such as:
- The number of people you employ
- Whether you've had prior suits lodged against your company
- The percentage of employee turnover
- Whether you have established rules and practices in place
Depending on the size of your company, EPLI can be offered as an endorsement to a Businessowners policy (BOP) or a general liability policy. Also, a specific stand-alone policy can be written in conjunction with a BOP.
Insurance terms, definitions and explanations are intended for informational purposes only and do not in any way replace or modify the definitions and information contained in individual insurance contracts, policies or declaration pages, which are controlling. Such terms and availability may vary by state and exclusions may apply. Discounts may not be applied to all policy coverages.