Employment Practices Liability Insurance (EPLI)

The "#Metoo movement" in conjunction with the efforts of the Equal Employment Opportunity Commission (EEOC) and other bodies, has created awareness among employees across industries. Now, the litigious atmosphere in today's society necessitates Employment Practices Liability Insurance (EPLI) for businesses with employees, or anyone at their direction (ie, volunteers and sub contractors).

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This coverage is designed to protect your business from employee allegations such as sexual harassments, discrimination, breach of contract, wrongful termination, and other employment related claims.

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EPLI provides coverage for businesses against workplace allegations involving the violation of employees' legal rights. The Title VII of the Civil Rights Act of 1964 with its amendments allow employees to sue businesses on a wide range of incidents which encompasses recruitment, job termination, and workplace discrimination among others. A 2018 report puts the amount secured for more than 67,000 victims of workplace discrimination at over $500 million. This fact alongside thousands of other workplace cases filed each year makes it important for businesses to take advantage of the EPLI.

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Today, there are over 180 employment related laws cited by the Department of Labor in addition to laws set by local city, county, and state authorities. Understanding each is a challenge, so having an EPLI policy in place will protect your business from claims by workers.

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The employment practices liability entails discrimination against age, sex, religion, origin. It also includes disputes on hourly wage or salary, wrongful job termination, and delayed promotion. With this in view, businesses both big and small need coverage to deal with any of these cases. Added to protecting a business from costly defense expenses, businesses can regulate inevitable risks associated with having employees and mitigate exposure to the ever-growing settlement trends.

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EPLI coverage caters to the costs of defending lawsuits, settlements, and judgments. Regardless of the outcome of a case, the insurance covers the cost for the company. Below are a few common examples of cases covered:

• Promotion Cases: these claims arise for several reasons. It could be age-related or due to disability. Deaf, diabetic, or blind persons may allege they are not promoted by the employer because of their disability. Disability claims are not limited to promotion, it's likewise associated with failure to hire.

• Harassment: these cases are broad but sexual claims are the most common. In 2019 alone, the EEOC reported close to 12,ooo workplace sexual harassment complaints. Sexual harassment can be verbal or physical. In a workplace, unwanted sexual advances or acts can take the form of an employee offering promotions or other work benefits in exchange for sex.

• Retaliation: the allegation in a retaliation claim is often about employees who feel they are being punished for speaking out about certain issues at work. These claims are based on pay cut or demotion without any drop in the performance of an employee especially after pointing out or revealing an issue in the workplace.

• Defamation: these claims involve employers accused of false statements that ruin the reputation of an employee at work.

• Privacy Invasion: it's all too common in recent times to have complaints about a workplace fitted with excessive cameras and surveillance tools to monitor employees. In a privacy invasion claim, employees infer that their right to privacy is violated by certain computer surveillance programs and through security cameras.

• Unlawful Background Check: a company that carries out unlawful background checks during a screening process can be charged. A background check is allowed when written consent is obtained.  

• Wrongful Job Termination: in a wrongful job termination claim, an employee alleges that the job termination is not based on violation of the employment contracts or performance-related. A company can be sued if an employee claims the job termination is unlawful and unfounded.

• Discrimination: workplace discrimination cases involve several allegations by employees who believe they are being treated unjustly due to their race, color, gender, national origin, and age.

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ADVISOR TIP: different insurers have different coverages and "sub limits", which can limit the scenarios covered. Review your policy with an advisor to ensure it has the correct coverage.

EPLI doesn't provide coverage for illegal or criminal acts. Certain cases are also exempted from EPLI such as penalties, violating employment laws, civil fines, claims related to unpaid wages, and intentional or dishonest wrongdoing. Last, there are other employee-related insurance policies that are not covered under an EPLI policy. The most common examples are:

• Your employee is injured during work: If an employee or other person at your businesses direction is physically injured, an EPLI policy will not cover their medical bills. Learn more about Workers Compensation and Employers Liability here.
• Your employee steals company funds: If an employee decides to steal funds, commit fraud, or forge financials documents, your EPLI will not cover this. Learn more about Crime insurance here.
• An employee accuses their employee benefits were miscalculated: If an employee accuses you of miscalculating their benefits, retirement plan, or other employment benefits, an EPLI will not cover this. Learn more about Fiduciary Liability here.

EPLI is for any business with employees or people working at the companies direction (ie, sub-contractors). If a business hires, fires, promotes, and trains employees, then EPLI is necessary to deal with legal issues that may arise. Generally speaking, the more employees the greater a chance for an employment-related lawsuit.

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Right from the interview process, businesses are liable to lawsuits because applicants can sue if questions related to criminal history are asked at the initial stages. Managers and supervisors may take wrong steps or actions that may prompt employees to sue the establishment. With the rise in the number of claims by employees in recent times, any business can face charges for even unintentional actions. Hence, it's best to obtain the EPLI to manage legal issues that may occur.  The fact is, even when the business wins a case, the legal costs which are sometimes high are still incurred.

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Here are a few of the most common industries that will find value in an EPLI policy:

• Healthcare Services
• Professional Services
• Retail Operations
• Manufacturing
• Hospitality & Restaurant

Over the years Employment Practices Liability Insurance rates have been on the rise due to employee-sided laws, frequent claims, and a lack of insurer offering coverage. Our team of analysts anticipate premiums may continue to increase until employers provide better workplaces, so claims decrease.

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EPLI cost is dependent on several factors such as company size, human resources protocols, and workplace policy determines the cost of EPLI for each business. A few are explained below:

• Operations: the type of business and it's operations will be factored into the underwriting process.
• Human Resources Protocols: the quality and commitment of the human resource of an organization influences cost. Strong HR departments are less prone to risk while an HR with little commitment & investment is a lot prone to legal issues. In this case, the latter will have to pay more than the former.
• Size: the size of an organization is solely about the number of employees and not the physical space.  Businesses with more employees are prone to have more cases of lawsuits. If a business has many employees, this influences the cost of EPLI.
• History: history of claims also affects the cost of EPLI. An organization with little or no claims in the past 3-5 years will pay less than another with multiple claims in the same period.
• State of Business: each state has it's own rates and history of claims. For example, California has gone through some tough years with employment related claims and have higher rates than the rest of the US.

Startups with 5-20 employees should expect to pay anywhere from $1,500 to $5,000 a year for Employment Practices Liability Insurance. Larger organization with 25-100 employees should expect to pay $20,000 to $50,000 a year. If you are in a new industry, or don't qualify for an EPLI package to be included on your Business Owners Policy, then premiums may be higher. These numbers go up or down based on the number of workers, size of the business, prior claims, and HR practices.

ADVISOR TIP: the cost of an EPLI policy can be part of a Business Owners Policy or other Commercial Insurance Package. If this option is available, it may be the most cost effective scenario.

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