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Employment Practice

3 Out of 5 Businesses
Will be Sued by an Employee

A relatively new form of liability insurance, Employment Practices Liability (EPL) is needed as soon as you start to hire employees. And, most investors and directors will require that you carry this type of coverage as part of your Directors and Offices Liability Insurance since they can be held liable in suits related to employment practices.

What is EPLI?

EPLI provides protection against many kinds of employee lawsuits (including current, former and potential employees), including claims of:

  • 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
  • Mismanagement of employee benefit plans

Why do you need EPLI?
The number of employment practice related lawsuits filed has been rising with some estimate showing that 3 out of 5 businesses will be sued by an employee. Businesses are very vulnerable to these types of lawsuits starting with the pre-hiring interview through the exit interview, even if an employee wasn’t hired or was with your company a year or only for a few days.

No company is immune from employment practice related lawsuits and today, employers must comply with a myriad of federal, state and local laws and regulations when making employment decisions.

The bottom line is: employers face significant liability when making personal decisions. Even if a lawsuit is groundless, the cost to defend it is expensive.

What does EPL Cost and Cover?
The cost of EPLI coverage depends on your type of business, the number of employees you have and the various risk factors such as whether your company has ever been sued relating to employment practices. The policies will reimburse your company for the costs of defending a lawsuit in court and for any judgments and settlements, whether your company wins or loses the suit. Policies typically do not pay for punitive damages or civil or criminal fines and liabilities covered by other insurance policies such as workers’ compensation are excluded from EPLI policies.

Prevention is Key
To prevent employee lawsuits, educate your managers and employees so that you minimize problems in the first place. You should:

  • Create effective hiring and screening programs to avoid hiring discrimination
  • Post corporate policies throughout the workplace and place them in employee handbooks so policies are clear
  • 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 and solve employee disputes

To discuss solution for Employment Practice Liability best suited for your organization, contact us now.

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