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Return To: Employment Practices Liability Insurance (EPLI) – The Ultimate Guide
If you think that your business will not need EPLI (Employment Practices Liability Insurance) — think again.
You believe that there’s no way that your employees will file a claim or sue you for negligence, as you’ve always shown professionalism towards them and towards the business. However, believe it or not, small businesses have higher risks of getting sued by employee allegations. Unfortunately, only a number of them are covered by EPLI.
To protect yourself and the reputation of your business, keep reading for an in-depth understanding of how the EPLI policy works.
What is EPLI or Employment Practices Liability Insurance?
EPLI Coverage is an insurance policy that protects you and your business from employment related claims. Lawsuits can be time-consuming and costly to resolve, so getting the employment practices liability insurance as a fall-back will ease the lawsuit process. This insurance can help cover investigation costs and legal fees that range from $1 million and above — depending on the policy you will choose. Always consider the worst-case scenario that could happen in your business when you are looking for the right EPLI policy.
It’s important to take note that EPLI is on a claims-made basis. This means that you will only be covered by the benefits of your policy if it covers the time frames when the incident happened and once the claim has been filed. That is why precautionary measures and having a back-up plan in advance are crucial when you’re in business.
The Difference Detween Workers Compensation And EPLI
Similar to EPLI, getting workers’ compensation insurance is important for small businesses that have at least three employees. The difference is in how the two forms of insurance work. When an employee gets injured or unfortunately gets sick while he’s on the job, the workers’ compensation insurance will take care of his medical bills, lost wages, and other benefits.
Now, if that employee sues you for wrongful termination because you fired him because of his illness, the Employment Practices Liability Insurance will help cover all the settlements and legality fees.
How Much Does An EPLI Policy Cost?
The average premium of EPLI is $20 per employee, and for small businesses with less than 20 employees, the estimated cost of the insurance is $800 to $3,000 annually. This varies depending on several factors such as your business type, the number of employees you have, your coverage limits, the deductibles, and if you have a third-party EPLI. You can also add the EPLI policy along with your Business Owner’s Insurance, or you can choose to have it alone.
Employment Practices Liability Insurance Coverage
Employee practice lawsuits can happen anytime. Even if you’re running a small company, don’t be too confident that this won’t happen to you. From the moment you interview a potential candidate, you are already at risk of being sued for various reasons. They can sue you for not hiring them based on their sex, age, or race.
There are many other reasons your business could be sued. As an example, the COVID-19 pandemic layoffs contributed to the many cases of wrongful termination against companies. Studies show that about 40% of businesses fail when these kinds of events happen.
You should also take note that those filing a claim against you are not exclusive to your employees only. They could be an independent contractor or a part-timer you might have hired several months ago. Here are some other employee allegations covered by EPLI.
- Discrimination: It is when a certain employee is treated unfairly based on their race, gender, or religion by you or anyone in the company.
- Retaliation: This is when you have taken a negative action towards an employee who’s exercising his or her rights.
- Harassment (both sexual and workplace): This is the most common lawsuit filed against employers relates to sexual harassment. This happens when an employee experiences unwanted sexual advances from another employee or employer. Workplace harassment involves any of the following: power tripping, physical, and psychological.
- Defamation: This is when you publish or fabricate false statements that can possibly damage the reputation of your employee.
- Wrongful termination: When an employee is terminated from work with the terms that violate his contract and the company’s policy, he or she may file a lawsuit for wrongful termination.
EPLI has exclusions that include claims under workers’ compensation laws, claims that resulted in criminal acts, and privacy violations from a cyber breach, among others. If you want to know more information, this page has a full list of all charges covered and not covered by the EPLI.
To give you an idea of the number of cases with the corresponding percentages filed last 2020, here’s a table from the EEOC, or Equal Employment Opportunity Commission, that gives the top five charges filed against companies.
Based on the table above, retaliation is consistently leading in the number of cases, as it has been since 2015. Next to that are the discrimination charges.
Protect Your Business From EPLI Claims
Having a lawsuit filed against you can be financially draining, not to mention its negative effect when it comes to your company’s morale and reputation. You cannot guarantee that your company will be ‘claim proof’. The best thing to do is to prevent it from happening. Here are some tips on how you can protect your business from EPLI claims.
- Exercise professionalism at all times. Be strict and consistent with the employer/employee work relationship.
- Create a handbook that records the performance evaluation of your employees.
- Carry out a zero-tolerance policy for discrimination and any kind of harassment at work.
- Be transparent and approachable. Your employees must feel safe to confide with you in case there are issues that need to be addressed.
- Ensure that company policies comply with the state laws.
- Clearly define your employees’ job descriptions.
- When interviewing candidates, do a background check first, and ensure privacy on their personal information.
- Get business insurance and employment practices liability insurance.
With the Employment Practices Liability Insurance, you can have peace of mind knowing that your business, as well as your employees, are protected. Fill out this form to get an estimated insurance quote!