What is Employment Practices Liability Insurance (EPLI)?
From the moment that you start the pre-hiring process, you are vulnerable to an employment-related lawsuit. As a result, your business should take a hard look at whether it can afford to defend itself against alleged wrongful employment practice accusations. If not, there is an insurance solution called employment practices liability that protects against wrongful termination, discrimination, or sexual harassment suit from your current, prospective, or former employees. This coverage applies to the directors, officers, and employees, and can sometimes extend to third party liabilities.
To best understand how to cover your employment practices liability risks, it is important to know the potential sources:
- Recruitment practices
- Annual conduct reviews
- Employment applications
- Enforcing performance policies
- Employment offers
- Employee orientation process
- Improper documentation of the items listed above
How are small businesses at risk?
Small businesses are particularly at risk for employment-related claims for the following reasons:
- Many have a minimal staff and lack of in-house counsel and/or full human resources department to rely on.
- Overall lack of extensive record keeping on employee performance.
- More intimate working environments may cause personal riffs during layoffs.
Fortunately, with employment-based lawsuits on the rise and the economy’s sluggish upward climb, EPL coverage is becoming more affordable. More insurers are beginning to offer EPL insurance policies with comprehensive coverage to smaller businesses to protect them in tough times. With the average cost of an employment lawsuit exceeding $270,000, the potential return dwarfs the initial cost of EPL coverage.