Why Do I Need Employment Practices Liability Insurance?
The moment you interview your first employee you have opened your business up to lawsuit risk. If you choose not to hire that employee, he/she may decide you discriminated against them based on reasons like age, sex or race. Alternatively, if you hired that employee and then terminated them, no matter what your stated reason, that employee can still claim wrong termination. In both scenarios the employee can file suit regardless of proof or documentation, leaving you stuck with court costs when you may have done nothing wrong.
There were close to 100,000 equal employment opportunity charges in 2016. The greatest percentage of lawsuits were in Texas, Florida and California, respectively. The number one allegation, with approximately 5,000 charges, was for retaliation, followed closely by race with about 3,500 charges1. Retaliation is the treating of an applicant or employee less favorably because he or she has filed complaints (either within your organization or with another), filed discrimination charges, participated in a discrimination investigation (for example, as a witness), or opposed discrimination openly (for example, threatened to file a charge of discrimination). All types of retaliation are illegal, but not every employer has the resources to educate their employees about it. Frequent training and written policies are both proven ways of reducing retaliation claims, as well as other discrimination charges that can be filed against you or your company.
1As reported by U.S. Equal Employment Opportunity Commission 2017
What Does Employment Practices Liability Insurance Cost?
The cost for EPLI coverage varies based on the following factors:
- Number of employees.
- Claims history.
- Employee turnover rate.
- Risk mitigation systems in place.
EPLI can often be endorsed onto a BOP or CPP, depending upon the size and type of business. Coverage can also be added to a general liability policy or bought as stand-alone coverage. Keep in mind that insurance companies prefer to write multiple lines at one time. Doing so greatly benefits the policyholder, as bundling offers discounts and credits.
What are Common Employment Practices Liability Claims?
The first step to take when you think you have a claim is to call your agent. Your agent will help you organize your information and guide you through calling the insurance carrier who will process your claim. The most frequent types of claims covered under EPLI policies include:
- Wrong termination.
- Sexual harassment.
Additionally, EPLI can cover other types of inappropriate workplace conduct including employment-related:
- Invasion of privacy.
- Failure to promote.
- Deprivation of career opportunity.
- Negligent evaluation.
How Can I Reduce my Risk?
Reducing EPLI risks is not easy, but there are some steps to take which can help minimize the risk to your company. There are many laws in place to protect the rights of people you hire or consider to hire. Knowing these laws and making sure your employees know these laws is the first step in risk mitigation. In order to assure these laws and other human resource policies are followed at your business we recommend doing the following:
- Develop an employee handbook, outline every workplace policy and expectation. This should include everything from attendance and discipline policies to complaint processes and legal disclosures. It is also a good idea to add a zero-tolerance policy to the handbook, regarding any misconduct or discrimination in the workplace.
- Web-based or third-party training on subjects such as sexual harassment for all employees.
- Write complete job descriptions for every position in your business, include expectations, responsibilities and required skills.
- Conduct scheduled performance reviews, carefully documenting each one.
- Make sure you have an effective record keeping system in place, the best defense in a lawsuit is documentation.
- When developing your job application make sure to exclude any language asking candidates to identify their sex, age, religion or any other protected class. Be sure to include equal opportunity employment statements and “at-will” employment policies.
The Equal Employment Opportunity Commission provides resources to small businesses to help them understand EEOC and how to reduce the risk of claims.
Frequently Asked Questions
- Do the federal employment discrimination laws apply to my business?
Yes, essentially, if you have at least one employee then you are subject to discrimination laws. There may also be state and local government laws that apply to your business. Speaking with an EPLI expert at The Insurance Shop can help clear up any confusion. Our specialists undergo hundreds of hours of training and have many years of experience in employment law.