Does My Business Need EPLI Insurance?

On any given day, there are dozens of employment liability risks business owners face. Small businesses can be particularly vulnerable to employment claims, which can be potentially costly. In fact, according to a 2015 Hiscox study, the average total cost of claims that resulted in a defense and settlement payment was a whopping $125,000.

Employing people is a risky business, with liabilities that entrepreneurs likely never considered when they started growing their company. In this post, we’ll give you a quick overview of EPLI Insurance and help you assess whether it’s the right fit for your company.

Psst... Looking for additional tips around what policies and processes to create for your business? Download your free copy of The Big Book for Developing Your Company Policies for a complete guide.

What is EPLI?

Employment Practices Liability Insurance (EPLI) provides coverage for claims made by employees, former employees, and potential employees alleging discrimination, harassment, wrongful termination, and other employment-related issues.

What Does EPLI Cover?

EPLI coverage varies but generally covers claims alleging:

• Wrongful termination

• Discrimination

• Harassment (including sexual harassment)

• Retaliation

EPLI policies may provide coverage for other employment-related claims, such as breach of employment contracts, defamation, and invasion of privacy.

EPLI policies commonly exclude from coverage claims of bodily injury and property damage, contract-based claims, as well as claims under the following:

• Fair Labor Standards Act (FLSA) and comparable state wage and hour laws

• National Labor Relations Act (NLRA)

• Worker Adjustment and Retraining Notification Act (WARN)

• Occupational Safety and Health Act (OSHA)

• Consolidated Omnibus Budget Reconciliation Act (COBRA)

• State unemployment insurance

• Workers’ compensation statutes

Is EPLI Right for My Business?

Although it’s not a legal requirement for a company to have EPLI insurance, it may be a good idea given the rising volume and costs of employment practices litigation.

According to a study conducted by Hiscox in 2015, “U.S. based companies had at least an 11.7% chance of having an employment charge filed against them.” The number of discrimination charges filed with the Equal Employment Opportunity Commission (EEOC) increased from 89,385 in 2015 to 91,503 in 2016.

For small- and medium-sized businesses, the costs of defending employment claims can be cost-prohibitive. Even if the allegations against your company have no merit, defense costs, along with verdicts and settlements, in discrimination, harassment, and retaliation cases can often reach six or seven figures.

According to the Hiscox 2015 survey, one in five business under 500 employees will face employment charges with an average cost to defend of $125,000, including expenses such as attorneys’ fees and settlement costs.

Take a look at your company’s finances and ask yourself: Could we afford a $125,000 lawsuit without insurance coverage? What about a $250,000 lawsuit? It may be best to consult with an attorney to discuss this issue, and determine whether or not EPLI is right for your business.

What Can I Do to Better Protect My Company?

There is no guarantee your company will never face an employment lawsuit. While larger companies often have access to legal counsel, small businesses without these resources can be particularly vulnerable to employment claims. However, you can take steps to protect your company and the employees who work for you in order to reduce risk.

Create Clear, Robust Policies

Do you have clearly written company-wide policies? Here are just a few you should have:

• Equal employment opportunity* Anti-discrimination* Anti-harassment* Anti-retaliation

As a best practice, these policies should be included in an employee handbook, and your company’s complaint procedure should be outlined in these policies. Encourage employees to report discrimination, harassment, retaliation, or other wrongful conduct as soon as possible so that any incident can be promptly investigated and addressed. Be sure to confirm these policies are consistent with applicable federal, state, and local law.

Communicate Policies Throughout the Company

Once you’ve created your rock-solid company policies, communicate them clearly and effectively to your team.

During the onboarding process, it’s a good idea to have employees provide signed acknowledgments that they received, reviewed, and understand the policies. The policies should be redistributed to all employees any time they’re updated. However you decide to approach it, make sure that company policies are easily accessible for everyone within your organization.

Train and Refresh Your Management and Employees

Train your team on your policies and procedures. Educate your managers on policies and how they should uphold them, so they can reinforce the policies with their team members.

Note that some jurisdictions require employers to conduct sexual harassment prevention training on an annual or other required regular basis. Employers should review applicable state and local requirements may govern the details of sexual harassment prevention training.

You can approach training in several ways, like a lunch and learn that focuses on one topic at a time, or immersive management training sessions at a company retreat.

Additionally, create opportunities for managers to relay the information to their employees and train new team members as they onboard as well. As a best practice, you should document employees who receive training by sign-in sheets or other written acknowledgment.

Regardless of your approach, both the management and employees will benefit from understand company policies and expectations.

How Can Justworks Help?

Justworks requires EPLI coverage for all its customers because of the sometimes costly nature of wrongful employment practices lawsuits. When you start with Justworks, you’re enrolled in coverage under our EPLI policy that covers up to $1 million per claim (subject to an aggregate limit of $5 million).

In addition, Justworks members can also store employee handbooks in their docs center, and make the document accessible to all team members. This helps employers to easily communicate their policies throughout the organization.