If you’re a small business owner with employees, you’re likely to buy worker’s compensations insurance . That’s an easy call. Why not, it helps protect you from the worry of financial loss when work-related accidents happen to members of your staff. Additionally, it’s required by law in most states. Yes, that decision is pretty easy for the business owners to make. But what if an employee sues your business for sexual harassment, discrimination, or wrongful termination? Worker’s compensation doesn’t cover that. You need employment practices liability insurance to help defend those type of claims and lawsuits.
Unfortunately, many small business owners don’t buy EPLI coverage. Many business owners make one of the following errors in judgement:
Regardless of the rationale, not having EPLI can be costly for your business. This doesn’t have to be the case, however. You do have options. It can be added as endorsement to your worker’s compensation, in some instances to a BOP, or you can purchase it as a stand-alone coverage. It all depends on your budget and needs.
Let’s dig in and first understand what is employment practices liability insurance.
In many instances, the small business owner assumes their worker’s compensation will help cover all employee matters. But that’s not the case. Worker’s Compensation is primarily for employee medical bills and lost wages related to a work injury or illness. Now, there is part of the worker’s comp policy that will pay for employer liability, but that is related to defending claims where the the injuries sustained by the employee or the employers negligence is at issue or in dispute.
Simply because the worker’s compensation policy uses the term, employer’s liability, doesn’t mean it covers all matters related to employee or employment disputes.
Alternatively, employment practices liability insurance fills a gap between your general liability and worker’s compensation insurance. It’s designed for the businesses exposure to lawsuits over allegations of things like:
Think of is this way, worker’s compensation helps covers physical injuries and illnesses for employees related to their employment. EPLI helps pay for claims that you violated an employee’s rights as part of your organization practices, and general liability is for persons outside the organization who may be injured or suffered property damage by your businesses negligence. These coverages work together to provide liability protection, but are intended for a different, and specific forms of liability.
In a small business it’s easy to begin to view your employees as friends – even part of the family. You may even refer to your team as “family” or part of the “family” when communicating to customers – even if euphemistically. Regardless of how close you believe you are with your employees, you need to always remember that you have a employer-employee relationship, and that has legal implications. Thinking otherwise will get you into trouble.
In fact, behavior that is totally acceptable between friends is actually extremely problematic in the workplace. This is compounded when the behavior comes from management or the ownership. Moreover, friendships can get prickly and emotional, this can lead to complications for the employer-employee relationship. Remember, your discrimination, harassment, or mismanagement doesn’t have to be intentional to be considered a liability or negligence.
Moreover, you don’t actually have to be negligent to be accused. If accused, it could still cost a you financially in legal fees and investigation costs to get a favorable judgement or dismissal. EPLI insurance helps to ease this burden.
EPLI cannot prevent a lawsuit, and it won’t fix any bad practices in your hiring or management practices. The goal of the small business is to avoid employment practices claims. Be aware, employment practices lawsuits can happen any time during the employer-employee relationship, including:
Employment practices that don’t conform with applicable employment or civil rights laws are areas of concern for a small business. You need to develop an employment policy that protects your business. Here are a few recommendations:
If you do all these things, you may minimize your risk, but it won’t eliminate it. As a best practice, if you have employees, you should consider EPLI.
As an employer you want to be friends with your staff. Well, it’s fine to be friendly. But you always need to be aware that you are engaged in an employer-employee relationship. Employment practices liability can erupt anytime, for reasons you don’t understand for behavior you may not be guilty of. Don’t take unnecessary risks with your business, create equitable and legally compliant employment policies and procedures, and apply them consistently.
If you don’t have EPLI, consider buying it. Contact your insurance agent and discuss the merits and get a quote. If you don’t have an agent, you can call us at (877) 334-7646 and we’ll be happy to help.
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