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Your employees are probably the biggest asset you have as a business. However they can also be an overlooked source of liability. While many businesses focus on protecting their physical assets and intellectual property, one crucial aspect often overlooked is the protection against employee-related lawsuits. This is where Employer Practices Liability Insurance (EPLI) steps in, offering a vital safety net for businesses of all sizes.

If you have employee(s), or are even in the process of hiring an employee, you need EPLI.

EPLI is designed to cover legal costs and potential damages arising from claims made by employees alleging wrongful employment practices. These claims can range from discrimination and harassment to wrongful termination and breach of contract. Often, business owners assume that they are covered under General Liability or protected by Workers’ Compensation.

However, General Liability provides coverage for the insured arising out of the business – think for their customers and visitors, and instead typically excludes coverage for damages arising out of employment practices. Workers’ Compensation addresses physical injuries on the job.

Although EPLI is more narrow in scope than other liability policies, it can address a litany of causes. The workplace and employment-related issues can arise from various situations. Common claims covered by EPLI include:

• Discrimination: Allegations based on race, gender, age, religion, disability, or sexual orientation.

• Harassment: Claims of sexual harassment, bullying, or other forms of workplace harassment.

• Wrongful Termination: Lawsuits alleging unfair dismissal, retaliation, or breach of employment contracts.

• Breach of Contract: Disputes over employment terms, compensation, or benefits.

• Failure to Promote: Claims of unfair denial of career advancement opportunities.

• Wage and Hour Disputes: Allegations of unpaid overtime, minimum wage violations, or misclassification of employees.

• Retaliation: Lawsuits stemming from employees who claim they were punished for reporting illegal activity or exercising their rights.

These claims can arise from ANY stage of the employment process, from hiring and promotion to discipline and termination. Even with the best intentions and robust HR policies, businesses can still face allegations of wrongdoing.

Many small business owners believe that EPLI is only necessary for large corporations or once they get over X number of employees. However, the reality is that smaller businesses are often more vulnerable to employee lawsuits. They typically have fewer resources to handle legal expenses and may be operating without an HR professional on staff, or may have an overworked one at that.

Here’s why EPLI is crucial:

• Financial Protection: Legal defense costs can quickly escalate, even if the allegations are unfounded. EPLI helps cover these costs, as well as any settlements or judgments.

• Reputation Management: Lawsuits can damage a company's reputation, affecting its ability to attract and retain talent and customers. EPLI can provide resources to help manage the public relations aspect of a lawsuit.

• Third Party Coverage: If available, consider adding coverage for claims related to discrimination and harassment by a third party.

• Expert Legal Guidance: Many EPLI policies include access to legal experts who can provide advice and guidance on employment law matters, helping businesses prevent potential claims.

• Peace of Mind: Knowing that your business is protected can provide peace of mind, allowing you to focus on running your company.

While EPLI is the option needed in case of a lawsuit and defense, it's also crucial to implement proactive measures to minimize the risk of employee lawsuits. This includes:

• Developing Clear HR Policies: Establish comprehensive policies on discrimination, harassment, and other employment-related matters.

• Proper Documentation: Maintain accurate and thorough records of employee performance, disciplinary actions, and termination decisions.

• Employee Training: Conduct regular training sessions for managers and employees on workplace conduct, diversity, and legal compliance. Everyone who is employee facing needs to understand what they say and do can help prevent a possible dispute.

• Consistent Application of Policies: Ensure that all policies are applied consistently and fairly across the workforce.

• Prompt and Thorough Investigations: Address employee complaints promptly and conduct thorough investigations.

When selecting an EPLI policy, consider the following factors:

• Coverage Limits: Ensure that the policy provides adequate coverage for potential legal expenses and damages.

• Deductibles: Understand the deductible amount and how it will impact your out-of-pocket expenses.

• Policy Exclusions: Review the policy carefully to understand any exclusions or limitations. EPLI policies typically do not cover punitive damages, civil, or criminal fines. Labor disputes are not likely to be covered, and violations of wage and hour laws could be excluded.

• Legal Representation: Inquire about the insurer's network of legal professionals and their expertise in employment law.

• Prior Acts Coverage: If your business has a history of employment-related claims, consider a policy that includes prior acts coverage.

• Reputation Management and Expert Resources: Review what additional benefits are included with the policy.

EPLI is an important piece of your business insurance puzzle, regardless of the size of your company. At Starr Mathews Agency, we have solutions to address this financial risk for most organizations and are ready to discuss your needs.