Employment Practices Liability Insurance Basics

Employment Practices Liability Insurance, also referred to as EPL or EPLI is becoming more of a necessity for businesses rather than simply a nice coverage to have. A standard EPL policy protects business owners from claims by employees for discrimination, harassment, wrongful termination, failure to promote and other employment-related issues. 

The cost of defending employment-related claims can be more expensive than the cost to settle in many cases. Employers face numerous employment practices liability exposures in their day-to-day business and interactions with staff. The Equal Employment Opportunity Commission (EEOC) is taking a much more aggressive stance in investigating EPL claims and filing lawsuits for potential violations. 

There are nearly 90,000 EPL claims reported to the EEOC annually. The average verdict in EPL cases now exceeds $450,000. Employment issues now make up 30% of all civil litigations in the U.S.

It is becoming apparent that employers are more likely to have an employment claim than a property or general liability claim.

• 67% of all employment cases that litigate result in a judgment for the plaintiff.

• 41% of all EPLI claims are brought against small employers with 15 to 100 employees.

• The average amount paid for out of court settlement is $40,000.

There’s no question that EPL claims can have a serious financial impact on small to midsized companies. As an employer, you do everything you can to treat your employees fairly. Even if you do everything right and comply with all federal, state and local regulations, you can still be held liable for the actions of your employees, vendors or customers. You could also be the subject of a discrimination suit if someone you interview but fail to hire feels that he or she was treated unfairly.

Employment practices liability insurance (EPLI) can protect your business against claims made by potential hires, employees currently on your payroll and terminated employees. With EPLI coverage, your company is protected against claims of:

• Wrongful termination

• Employment-related emotional distress and invasion of privacy

• Defamation

• Retaliatory/constructive discharge

• Sexual harassment and discrimination

• Workplace torts such as slander

Employment Practices Liability Insurance (EPLI) coverage generally includes the cost to defend against the charges plus any damages you are ordered to pay. However, not all insurance policies are built the same. EPL is still considered a somewhat new insurance coverage and many carriers offer their own policy forms, coverages and exclusions. This makes navigating EPL very difficult, especially for extremely busy restaurateurs. There are a couple of major coverages to consider that are oftentimes not included on an Employment Practices Liability policy:

Hour and wage defense is typically excluded on most policies. Claims by employees for lack of overtime pay, lack of breaks, lack of meals and minimum wage violations are examples of why this coverage are important. Policies that do offer this coverage usually offer only as a sub-limit. $100,000 is the most typical sub-limit available. Hour and wage employment issues are criminal offenses, therefore carriers cannot offer settlements or damages. The coverage is solely to defend claims, which can be very costly not to mention daunting to try to do alone.  

Third-party harassment is also a big consideration for restaurants to consider. Title VII of the Civil Rights Act of 1964, requires an employer to prevent known sexual harassment created by other employees or customers, regardless of the status of the harasser. 

Immigration related defense. Immigration employment violations carry serious penalties and fines. The cost to defend these cases can be high as well. Some carriers offer defense sub-limit for immigration, for restaurants this can be a much needed option. 

Some big name carriers are now offering EPLI as an endorsement on their package policies (general liability and property packages). This is okay, but the coverage is usually very basic, lower limits, and does not cover the options mentioned above. They also have low limits available of typically $25,000 to $100,000. We recommend a separate stand-alone EPLI policy with broad coverage, and separate limits that will be high enough to protect your business. 

Employment Practices Liability Insurance in California has gotten more difficult to place especially post-covid19. We have assisted small businesses with a hand full of employees to multi-location operations with their EPLI needs. Please contact us with any questions relating to Employment Practices Liability or any other insurance questions.