Why Employment Practices Liability Insurance (EPLI) Is Critical for All Businesses

By: Patti Maluchnik, CIC, CBIA

Georgetown Insurance Service, Inc.

Frederick, MD


Accusations and harassment cases have been steadily rising over the past couple of years. In 2018, the United States Equal Employment Opportunity Commission (EEOC) received more than 7,600 sexual harassment charges and complaints, an increase of nearly 14 percent from last year. In today’s litigious world, it’s critical for all businesses to have employment practices liability insurance (EPLI).

An Explanation of EPLI

Employment practices liability insurance (EPLI) is coverage that protects businesses against employee lawsuits including sexual harassment, discrimination, wrongful termination, invasion of privacy, wage and hour disputes, illegal background checks, pregnancy, and more. Most businesses have general liability insurance and workers’ compensation. However, these policies typically exclude employee lawsuits and discrimination allegations. An EPLI policy should be purchased completely separate from your other policies.

Why You Need It

Did you know 60 percent of all businesses will be sued by an employee at some point in time? Yet most don’t have the proper coverage in place help to protect themselves in these situations. Employee lawsuits are continuing to rise. And the moment a potential employee walks into your office for an interview, your risk begins.

Employees and potential employees can sue an employer for numerous reasons. Even if a claim turns out to be unjustified, your business still needs to defend itself – and a good defense often comes at a hefty price. Claims of discrimination can also open your company up to irreparable reputational damage and could negatively affect recruiting, hiring, and a variety of business relationships.

Staying Proactive

Even if you have top-notch procedures and policies in place, your company is still open to liability. And rapidly changing technology and expanding communication channels have made it even more difficult for employers to protect themselves. Social media, email, texting, and even drones are blurring professional lines and making claims more complicated than ever.

Businesses of all sizes need an EPLI policy in place to truly protect themselves from the financial consequences of a claim. From employees making casual jokes on the job to claims of sexual harassment to age discrimination, EPLI helps to keep your business safe. With changes in minimum wage and an expanding job market, claims are likely to continue increasing.  Don’t wait until it’s too late! Your business should acquire EPLI coverage now.

Taking Additional Steps

As the saying goes, your best offense is a good defense. Having solid human resources procedures in place can help minimize your business’ risk of employment practices exposure. Here are some steps you can take:

  • Conduct background checks
  • Ensure consistency in your hiring practices for every single candidate.
  • Establish defined roles, responsibilities, and progress/performance expectations for all positions and employees.
  • Make sure your company handbook outlines employment policies and procedures for reprimanding and/or terminating an employee.
  • Adopt a zero-tolerance policy towards discrimination, harassment, and substance abuse.
  • Conduct regular performance reviews and properly document them in an employee’s file.
  • Implement an open-door policy to help employees feel comfortable reporting harassment or other infractions without fear of retaliation or retribution.
  • Institute a screening program that allows you to eliminate unsuitable candidates prior to conducing an in-person interview.
  • Require all employees to sign a formal statement acknowledging that they have reviewed the company’s policies and fully understand them.
  • Accurately document every violation or incident and store this information in each employee’s file.
  • Create a social media, email, and communication policy to clearly outlines the type of content that employees can share. In addition, important to spell out what employees can/cannot say online regarding their colleagues, the company, and its clients.

As a business owner, you always want to stay one step ahead. The cost of a good legal defense or reputational damage could, in some cases, be enough to cripple your business. And even if you are never sued, many insurance companies also provide EPLI policyholders with helpful resources such as access to information about employee manuals and professionals to help answer a variety of HR-related questions.

If your business does not currently have an EPLI policy in place, it’s time to talk with your insurance agent about acquiring this coverage as soon as possible.

Have questions? Contact us to speak with a licensed insurance professional.

Disclaimer: All data, information, and opinions provided on this article, newsletter, or blog is for informational and educational purposes only. While every caution has been taken to provide readers with the most accurate information and honest analysis, please use individual discretion before making any decisions based on the information in this article, newsletter, or blog. Georgetown Insurance Service, Inc. is not responsible if its readers happen to experience loss, injury, or damage resulting from its display or use. All information is provided on an as-is basis. This article, newsletter, or blog does not represent the thoughts, intentions, plans, or strategies of any specific Insurance Carrier, Georgetown Insurance Service, Inc. partner or affiliate.
Have questions? Contact Us to speak with a licensed insurance professional.

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