If a business is sued by an employee over wrongful termination or another violation of employee rights, employment practices liability insurance (EPLI) can pay for legal costs. EPLI can be added as an endorsement to a general liability or business owner's policy.
Employment practices liability insurance (EPLI) protects your small business when a worker sues over employment-related issues.
Sometimes referred to as “EPL insurance,” this policy covers your legal defense costs when an employee or group of employees claim their civil rights were violated or they were unable to complete their work in a fair environment.
Even when you've done nothing wrong, a frivolous lawsuit can still prove costly, which is why all businesses with employees should consider this coverage.
If an employee sues over wrongful termination, sexual harassment, equal pay, or another violation of employee rights, employment practices liability insurance helps pay for your legal costs.
This includes the risk exposures you might face if an employee files a complaint with the Equal Employment Opportunity Commission (EEOC), or a lawsuit involving the Family and Medical Leave Act (FMLA).
Specifically, your EPLI policy provides coverage for:
Employment practices liability insurance protects your business if you improperly manage employee benefits, including health insurance, paid time off, and sick leave.
EPLI provides protection if your business is sued over sexual harassment in the workplace. For example, if an employee complains to HR about a manager's suggestive remarks but no action is taken, your business could face a lawsuit.
EPLI coverage will help protect you if an employee alleges wrongful discipline, demotion, or termination. It protects against accusations of negligence related to hiring and promotion, as well.
While slander or libel charges coming from non-employees are covered by general liability policies, EPLI coverage offers protection for employee claims of defamation.
Employment laws prevent businesses from discriminating against workers based on age, gender, religion, race, or other protected classes. Companies that violate these rules might face a lawsuit.
When your company makes a candidate a job offer or hires a contractor, it is obligated to adhere to the terms of the agreement that both parties signed. Failing to do so could result in a lawsuit.
When monitoring your business, take care not to cross the line into violating employee privacy or you risk a lawsuit.
If an employee at your business behaves in a way that causes another worker to suffer and you take no action, you could be held liable.
The average EPLI premium is $222 per month for Insureon customers. The cost of an EPLI policy depends on:
While EPLI is not mandatory by law, every business with employees should consider carrying this policy. Even at a small business, an employee conflict could lead to a costly lawsuit.
Regardless of whether you win in court, you'll still be responsible for costly legal fees, which is why employment practices liability insurance is so important.
Good candidates for EPLI coverage include the following types of businesses:
A computer and electronics store fails to pay unused vacation time when a technician accepts a new job, and the worker decides to sue.
A manager at a fast food restaurant regularly makes suggestive remarks to a cashier and follows up with unwanted advances. The employee complains to HR, but no action is taken. The cashier files a lawsuit against the restaurant for failing to prevent the harassment.
A manager at a medical billing agency accuses a subordinate of stealing money in front of other employees. The employee denies wrongdoing and sues the business for slander.
An older employee who has worked on the assembly line at a beverage manufacturing plant for over a decade is passed over for a promotion, which is awarded to a new, younger employee. The worker sues the factory for age discrimination.
A doctor makes crass jokes in the office, usually at the expense of a receptionist. When the HR department does not take their complaint seriously, the receptionist sues the business for sexual harassment.
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Get QuotesWhile EPLI is an important part of risk management when you have employees, it does not provide all the protection you might need. For instance, your policy does not include coverage for:
Workers' compensation insurance covers work-related injuries and illnesses. It helps pay for medical bills and provides disability benefits while an employee recovers.
Employer's liability insurance, typically included in a workers' compensation policy, covers legal costs if an employee sues over a work injury or illness.
General liability insurance covers legal costs if someone outside your business accuses you or an employee of slander, libel, or another advertising injury.
Professional liability insurance, also called errors and omissions insurance (E&O), covers legal costs if your business is accused of professional negligence. It also covers missed deadlines and work mistakes.
While EPLI covers negligence in terms of hiring and other employment practices, professional liability covers negligence related to the work performed by your business. Another difference in employment practices liability vs. professional liability is that the lawsuits come from employees, not clients.
Employment practices liability insurance offers protection for when an employee sues your business over their rights, but it doesn’t provide coverage for other common risks.
Small business owners should also consider:
General liability insurance: This policy can pay for expenses related to client injury and property damage, along with accusations of slander. EPLI can be added to a general liability policy as an endorsement in most locations, often up to $25,000 in coverage.
Business owner's policy: A BOP bundles general liability insurance with commercial property insurance, usually at a lower rate than if the policies were purchased separately. EPLI coverage can often be added to the liability insurance portion of a BOP.
Professional liability insurance: Also known as errors and omissions insurance, this policy can help cover legal expenses if a business is sued for unsatisfactory or negligent work.
Directors and officers insurance: D&O insurance protects board members and officers if they are sued for a decision they made on behalf of your business that led to financial loss. Both D&O and EPLI are types of management liability insurance.
Workers’ compensation insurance: This coverage is required in nearly every state for businesses with one or more employees, and can help cover medical costs for work-related injuries and illnesses.
