What Is EPLI And Does My Business Need It?

Jun 3, 2022 | Business Insurance

Do I need EPLI for my business? As a business owner, your goal is to grow and be known for your own branding. However, as you strive to reach your goals, certain problems arise, and you can’t handle them alone. One of these problems is employment liability and complaints that need sudden attention and surprisingly give you headaches in the long run.

Small businesses, particularly, are very vulnerable to these cases of employment liability claims which can cost you a fortune. There’s a risk in employing people, but running your business is necessary. It’s a must to consider the need to purchase Employment Practices Liability Insurance to protect you from financial loss and damage to your company brand that employment claims may bring.

What is EPLI?

EPLI or Employment Practices Liability Insurance is an insurance that protects your business from wrongful acts coming up from the process of employing people. Simply put, EPLI works when one of your employees complains that they had been violated at your hands or by another co-employee. It can cover your legal costs and settlements caused by events from the past and in the present.  Also, aside from the fact that you can purchase it alone, EPLI can be bundled with a business owner’s policy. 

What does it cover?

Research statistics show that out of five US employers, three will be sued by a prospective, current, or former employee. While most lawsuits don’t have any grounds, a lot of time and money is wasted on them. This is where EPLI comes into play. It protects from the following wrongful employment practices:

  • Sexual harassment. This wrongful act involves violating a person through unwanted sexual advances. Common types, such as quid pro quo and hostile working environments, are some of the claims of sexual harassment.
  • Discrimination. Wrong or unfavorable treatment of employees, such as failure to promote because management based promotions on sex, race, disability, and age.
  • Actual or alleged wrongful dismissal, discharge, or termination. An early dismissal or wrongful termination of an employee’s contract breaks the employment rule.
  • Employment-related libel, slander, humiliation, and defamation. This happens when the employee is humiliated by a written or spoken false statement intending to harm his or her reputation.
  • Invasion of privacy. This pertains to the employer that unreasonably searches and surveys employees’ private spaces such as a dressing room or bathroom.

What else?

  • Employment-related misrepresentation. It happens when employers make promises and representations to employees, such as possible promotions. The employee then will anticipate but later realize that the promise is untrue. This will cause the employee to sue the company.
  • Wrongful failure to employ or promote. It happens when a worker has been disregarded for promotion violating state or federal law. Also, an employee that protects his character will be eligible for damages if he is discriminated against resulting from a wrongful failure to employ. 
  • Wrongful demotion, incorrect evaluation, or wrongful deprivation of career opportunity. An alleged claim of failure to conduct a training series for self-advancement or progress of an employee’s career.
  • Wrongful discipline. It’s an alleged claim when an employee was disciplined due to a violation that didn’t happen. Or, it happened, but the discipline executed is excessive.
  • Vicarious liability for intentional acts.  An employee who committed negligent acts towards others that might cause injury is a vicarious liability of the employer, provided that the acts happened within the employment period.
  • Punitive damages. It refers to settlements given to the complainant for the damage or injury a defendant had caused him. 
  • Coercion. It is an act where one forces another to do something out of his will. An example is when an employee’s rights were violated when the employer threatened to fire the employee if he didn’t follow what the employer wanted.

Does my business need EPLI?

YES. EPLI is a great tool to secure your business from unexpected lawsuits you’ll never know when to come. Consider these reasons to help you decide why you need to purchase this type of insurance.

  1. General liability coverage or business liability insurance excludes lawsuits and discrimination allegations made by your prospective, past, and existing employees. Without EPLI to cover you, you risk your business with a big problem.
  2. Good employment practices don’t guarantee your safety from lawsuits and claim your employee might file against you. To win a legal case, you’ll be needing a big sum of money that amounts to more than $500,000, causing you a lot to lose.
  3. Litigations are rampant in our society, so every business, no matter how big or small, is susceptible to legal actions from its employees, whether from the past or present. It is very easy for them to file a case at no cost. A small business might face a financial downfall due to defending expenditures in court.
  4. If the case goes to legal action, the defense and court fees are of high amount. The time, money, and effort might cause your business a big loss. Statistics show hundreds and hundreds of dollars are about to be awarded if the lawsuit wins against the defendant.

How much does it cost?

Employment Practices Liability Insurance cost is worth the price of the benefits you can avail of in the event of a lawsuit or claim. There are some factors that EPLI considers in estimating costs, such as:

  • Number of employees
  • Type of industry or business
  • Claims history
  • Company protocols on employee behavior and training
  • Company financial capacity
  • Length of service
  • Hiring/firing procedures

EPLI commonly costs between $800-$5,000 annually. Small businesses can seek insurance coverage as low as $1,200 annually.  You can also purchase EPLI coverage at $300 annually if you bundle it into your business owner’s policy. EPLI has been lowering its price since more insurance companies are rising and promoting reduced prices to compete with other companies. 

Growing your business and employing people has never been easy because of everything you need to fix and consider, from employment to proper management. Educating your employees and implementing the procedures are needed to avoid improper practices that will cause complaints and claims. 

Employment Practices Liability Insurance not just covers you but the overall performance of your company. One lawsuit may jeopardize the name of your business just because of a false accusation. Groundless claims are damaging and can take away your hard-earned business and branding. Acquiring insurance that will back you up once a claim comes out and fires you with a lawsuit is a good investment you will appreciate with your life.

Contact us today at Team AIS in Denver, CO, and we’ll help you find insurance that best suits your needs. 

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