Employment Practice Liability Insurance, or EPLI, covers businesses against claims by workers that their legal rights as employees of the company have been violated.
Most commonly, employment practices liability deals with laws and protections brought under Title VII of the Civil Rights Act of 1964, the ADA (Americans with Disabilities Act) of 1990, the Civil Rights Act of 1991, ADEA (Age Discrimination in Employment Act) of 1967, the Family and Medical Leave Act (FMLA), and The Equal Employment Opportunity Commission (EEOC).
What Does it Cover?
Essentially, Employment Practices Liability Insurance provides coverage when the following claims are made against an employer:
- Sexual harassment
- Wrongful termination
- Breach of employment contract
- Negligent evaluation
- Failure to employ or promote
- Wrongful discipline
- Deprivation of career opportunity
- Wrongful infliction of emotional distress
Why You Need This Coverage
The number of lawsuits filed by employees against their employers has been rising. While most suits are filed against large corporations, no company is immune to such claims. Analysis of annual claims totals suggests that EPL claims rates correspond to unemployment rates. This trend is being studied carefully, to ascertain if there is a correlation between the number of claims from employees fear of being let go by an employer, or the actions of an employer to curtail costs and their profit bottom line.
The cost of EPLI coverage depends on your type of business, the number of employees you have and various risk factors such as whether your company has been sued over employment practices in the past. The policies will reimburse your company against the costs of defending a lawsuit in court, settlements, and damages. The policy covers legal costs, whether your company wins or loses the suit. Policies also typically do not pay for punitive damages or civil or criminal fines.
How to Manage Your Risk
To prevent employee lawsuits, a business organization should educate their managers and employees so that work relations issues can minimize problems in the first place:
- Create effective hiring and screening programs to avoid discrimination in hiring.
- Post corporate policies throughout the workplace and place them in employee handbooks so policies are clear to everyone.
- Show employees what steps to take if they are the object of sexual harassment or discrimination by a supervisor. Make sure supervisors know where the company stands on what behaviors are not permissible.
- Document everything that occurs and the steps your company is taking to prevent employee disputes.
There are different federal and state statutes that govern an employer’s liability to its employees. The state laws differ from state to state.