Running a business means more than managing daily operations, it also involves managing people. From hiring new employees to handling promotions, terminations, or workplace policies, every decision comes with potential legal risks. Employment-related claims are more common than many business owners realize, and even a small dispute can result in costly litigation. That’s where Employment Practices Liability Insurance (EPLI) comes in.
EPLI is designed to protect businesses against claims made by employees, former employees, and sometimes even job applicants. Let’s take a closer look at what EPLI covers, why it matters, and whether your business should consider this type of coverage.
What Is EPLI?
Employment Practices Liability Insurance provides coverage for claims that employees bring against a business alleging improper or unlawful workplace practices. These claims can include issues such as discrimination, harassment, wrongful termination, or retaliation.
The policy typically covers legal defense costs, settlements, and judgments, which can be substantial, even if the claim is unfounded. Without EPLI, businesses may have to pay these expenses out of pocket, creating significant financial strain.
What Does EPLI Cover?
EPLI policies generally protect businesses against claims related to:
- Discrimination: Allegations of unfair treatment based on race, gender, age, religion, disability, or other protected categories.
- Harassment: Claims involving inappropriate conduct or hostile work environments, including sexual harassment.
- Wrongful Termination: When an employee claims they were fired without proper cause or in violation of the law.
- Retaliation: Allegations that an employer punished an employee for reporting misconduct or exercising their rights.
- Failure to Promote or Hire: Claims related to hiring decisions, denied promotions, or unfair treatment in advancement opportunities.
- Breach of Employment Contract: Disputes over written or implied agreements between employers and employees.
Coverage usually extends to legal costs, court fees, and any settlements or judgments. This can be critical, as employment lawsuits can quickly escalate into six-figure expenses.
Why EPLI Matters
1. Employment Claims Are on the Rise
Workplace laws and regulations are constantly evolving, and employees are increasingly aware of their rights. Even with strong policies in place, your business could still face a claim. EPLI ensures you’re prepared to handle these challenges without financial devastation.
2. Small Businesses Are Not Immune
Many small business owners assume employment-related lawsuits only affect large corporations. In reality, small and mid-sized businesses often face higher risks because they may lack dedicated HR departments or legal teams. A single claim could severely disrupt operations.
3. Legal Costs Add Up Quickly
Even if your business is not found liable, the cost of defending a lawsuit can be overwhelming. Attorney fees, court expenses, and time spent away from running your company can drain resources. EPLI provides the financial backing to navigate these situations.
What EPLI Doesn’t Cover
Like all insurance policies, EPLI has exclusions. It typically does not cover:
- Criminal or fraudulent acts
- Wage and hour claims (such as unpaid overtime or misclassification of employees)
- Worker’s compensation or employee injury claims
- Contract disputes unrelated to employment
For comprehensive protection, EPLI should be paired with other policies like general liability, workers’ compensation, and directors and officers (D&O) insurance.
Do You Need EPLI?
Nearly every business with employees can benefit from EPLI coverage, but some industries face greater exposure than others. If your business has a large staff, frequent hiring, or operates in a regulated industry, your risk of employment-related claims may be higher.
Signs your business should consider EPLI include:
- Rapid growth and frequent new hires
- High employee turnover rates
- Lack of formal HR policies or training programs
- Prior claims or disputes with employees
Even if your company fosters a positive workplace culture, misunderstandings and disputes can still occur. EPLI provides peace of mind that you’re protected when the unexpected happens.
EPLI with Garrett Insurance
EPLI is an important safeguard for modern businesses. It helps cover the legal and financial challenges of employment-related claims, giving you the confidence to focus on growing your business instead of worrying about potential lawsuits.
At Garrett Insurance, we work with businesses of all sizes to identify risks and create tailored insurance solutions, including EPLI coverage. Contact us today to learn how we can help protect your company, your employees, and your future.