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Employment Practices Liability Insurance

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What is employment practices liability insurance?

Employment Practices Liability Insurance

Employment Practices Liability Insurance

Employment practices liability insurance frequently referred to as EPL or EPLI insurance, provides specialized business insurance coverage for employers to protect against claims made by employees for things like:

  • Discrimination (based on sex, race, age, or disability)
  • Wrongful termination
  • Harassment (including sexual harassment)
  • Other employment-related issues, such as failure to promote

Who needs employment practices liability insurance?

If you have employees, you likely need employment practices liability insurance. For some employers, there is a feeling that an employment practices claim simply won’t happen in their business … think again. EPLI claims happen in businesses of all sizes, industries, or management philosophies. These types of claims are highly disruptive and can damage reputations and hurt employee morale. Not to mention, they’re costly to defend.

For small businesses with employees, EPLI provides coverage when an employee sues the employer over matters related to their employment. For covered claims, the employer can rely on this coverage to provide for legal costs and claims payments when an employee has a valid claim.

EPL Insurance

What is an EPLI claim?

There are many things that can happen during your employee’s tenure with your company.  Some of those things can create a bad work experience, and even create an EPLI claim. Here are a few things that can cause an employment practices claim:

  • Sexual harassment
  • Wrongful termination or discipline
  • Wrongful demotions
  • Unfair practices for promotions
  • Racial, gender, or age discrimination
  • Employer’s mismanagement of benefits
  • Employment contract issues
  • General unfair employment practices

Understanding employment practices liability insurance

Like professional liability insurance, employment practices liability insurance is usually offered on a claims-made basis. What does this mean? When a policy is issued on a claims-made basis, it means the act which results in a covered claim being reported when coverage is active, and you would have had to have coverage at the time when the act occurred.

What does this mean for the employer?

Because an EPLI claim frequently arises months, even years after the alleged incident, your company might be vulnerable if your insurance coverage was dropped or if tail coverage (liability insurance that extends beyond the end of the policy period) wasn’t purchased.

Employment practices liability insurance costs

The way you purchase EPLI coverage can impact the premium and coverage you receive. If you have a small business, you may be able to buy employment practices liability insurance as an endorsement to a business owner’s policy or a monoline general liability policy. For larger businesses or companies with more employees, a stand-alone policy may be written as part of a package, or along with your BOP.

Employment Practices Liability Insurance Cost

There are many sites that like to exhibit average costs for EPLI policies. However, if you’re not the average company your costs can be significantly different. That said, an EPLI policy can be affordable for most small businesses. Here are some factors that can influence the premium you can expect to pay:

  • Number of employees
  • Revenue
  • Industry 
  • Hiring and termination practices
  • Employee turnover rate
  • Risk profile
  • Past EPLI claims history

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Understanding employment law

Below is a set of federal laws that you should become familiar with before you start hiring employees. For a full set of laws, you can visit the U.S. Equal Opportunity Employment Commission.

Each state will have its own laws. Frequently, state laws may expand upon these protections. Consult your state labor department to make sure you fully understand all the laws and regulations that apply to your small business.

The Equal Pay Act of 1963

Prohibits employers from paying different wages to men and women who perform the same work under similar working conditions

Title VII of the Civil Rights Act of 1964

Prohibits discrimination on the basis of race, color, religion, national origin, and sex. The Civil Rights act also prohibits sex discrimination, which includes pregnancy and sexual harassment.

Age Discrimination in Employment Act 1967

Prohibits discrimination against individuals who are age 40 or older.

Equal Employment Opportunity Act of 1972

Prohibits discrimination against minorities based on poor credit ratings.

The Immigration Reform and Control Act of 1986

If a person is authorized to work in the U.S., it prohibits discrimination on the basis of national origin or citizenship.

Americans with Disabilities Act of 1990

Prohibits employers from discriminating against persons with disabilities

The Bankruptcy Code

Protects those who have filed for bankruptcy protection from employment discrimination on the basis of that act.