What Is Employment Practices Liability Insurance (EPLI) & Who Needs It?

If you hire employees, you want their employment to be a positive experience. However, an applicant, or current or former employee may take legal action against your company that could put the company at risk. To help mitigate your exposure from costly claims, employment practices liability insurance can offer some protection. Learn more about EPL insurance, how it compares to other common types of business insurance policies, costs associated with such a policy, and how EPLI can help protect your business.

What Is EPLI?

Employment practices liability insurance, commonly referred to as EPLI or EPL insurance, is a type of business insurance policy that helps cover company losses associated with certain employment claims alleging violations of the rights of an employee or applicant for employment. If a job applicant, or current or former employee takes legal action against your business, EPLI may help cover defense costs and damages, regardless of the outcome of the action. Learn more about what may be covered under EPLI policies.

EPLI may be purchased as a standalone business policy. It's also common to bundle this coverage as part of a Business Owner's Policy or general liability policy.

What Is the Difference Between EPLI and Workers' Compensation Insurance?

EPLI and workers' compensation insurance are separate types of coverage. EPLI helps protect the company against certain employment-related claims including wrongful employment practices. Although there is no legal requirement to carry this coverage, it may be a good business decision for any company hiring employees. Workers' compensation insurance policies, on the other hand, cover medical expenses and lost wages for employees who experience a work-related injury or illness. Workers' compensation insurance is mandatory for most employers in most states.

Is EPLI the Same As Errors and Omissions Coverage?

No, EPLI and Errors and Omissions (E&O) insurance are distinct coverages. Generally, EPLI provides protection from certain employment-related claims, while E&O covers liabilities stemming from customer or client claims. For example, errors and omissions would help cover court costs and settlements if a customer were to file a lawsuit alleging negligent actions in your professional services. A common claim errors and omissions might cover is a suit for breach of contract. E&O policies often cover the business owner and employees.

What Is the Difference Between EPLI and Directors and Officers (D&O) coverage?

D&O coverage is a form of professional liability insurance that protects the personal assets of company executives, officers, and board members in the event they are sued for alleged wrongful acts in managing a company. It can provide coverage for employment issues (but only for covered individuals, i.e., directors and officers) and can also cover things like breaches of fiduciary duty. Additionally, any business with a board of directors, including small companies, can have a D&O insurance policy. While EPLI can also be beneficial for businesses of any size, the policy’s aim is to protect the company from allegations from applicants and current or former employees. Whereas D&O insurance provides liability protection for claims brought by people outside of a company, such as dissatisfied clients or investors.

EPLI Claims Examples

Employment-related claims can result in significant negative impacts to a business's bottom line, reputation, and productivity. Common EPLI claims may include:

• Wrongful termination: While many employees are employed at-will (meaning that the employee or employer can terminate the employment relationship for any reason or no reason at any time except where prohibited by state law or public policy), employees may claim that they were wrongfully terminated.
• Charges of workplace harassment: An alleged harasser can be the victim's supervisor, a supervisor in another area, a co-worker, a subcontractor, or someone outside the company, such as a delivery person or vendor. Harassment victims may include any individuals affected by the offensive conduct, not just the person targeted by the harasser.

Who Needs Employment Practices Liability Insurance Coverage?

With the number of employment-related claims filed with the EEOC, given the steep costs associated with employment related claims, nearly any business with a workforce can benefit from EPLI coverage and mitigate their financial exposure. While no industry is immune from employment-related risk, a few examples of industries that could particularly benefit from EPLI coverage include:

• Retail, an industry known for high turnover rates, may be susceptible to claims alleging age discrimination, harassment, or wrongful termination.
• Hospitality, which could experience claims of harassment.
• Professional services, in which businesses may have to handle claims around issues such as harassment, gender and age discrimination, failure to promote, and wrongful termination.
• Manufacturing and construction, where ebbs and flows in the amount of work a business has can lead to layoffs which increases the chances that employees will claim they were wrongfully terminated.
• Healthcare, where employees may allege experiencing harassment.

How Much Does EPLI Cost?

The cost of EPLI insurance policies will vary, and depend on your industry, employee count, the jurisdiction where you operate, whether your business has any history of similar employment-related litigation, and if you have established and consistently enforced employment policies, often documented in an employee handbook, in place. Often, an EPLI policy covers legal defense fees and settlement costs or damages (up to your policy's limit), whether you win, settle, or lose a case.

EPL Insurance Can Help Protect Your Business

Employment practice claims have become one of the fastest-growing sources of litigation. Make sure your business is prepared to mitigate the cost of these claims with protection through employment practices liability insurance. You may also want to learn more about how you can manage overall risk with our comprehensive guide on business insurance basics.