Employment Practices Liability Insurance

Employment practices liability insurance, known in the trade as EPL insurance or EPLI, provides coverage to employers against claims made by employees alleging discrimination (based on sex, race, age or disability, for example), wrongful termination, harassment and other employment-related issues, such as failure to promote. 

Large corporations typically have substantial employment practices insurance coverage in place and are prepared to deal with just about any employment lawsuit. However, small or new businesses are often the most vulnerable to employment claims. That’s because they usually lack a legal department or employee handbook detailing the policies and procedures that guide hiring, disciplining or terminating employees. 

Employment practices liability risk

You're at risk of an employment claim from the moment you interview a prospective employee. For example, if you choose not to hire the interviewee, that individual could allege some sort of discrimination.

Or, if you hire that person and later fire them due to poor attendance, that discharged employee could claim wrongful termination. 

To significantly lower your employment practices liability risk, do the following:

• Review potential loss exposures with your insurance agent and purchase adequate employment practices liability insurance.
• Develop an employee handbook detailing your company's workplace policies and procedures, including attendance, discipline, and complaints. The employee handbook should also contain an employment at-will statement and an equal employment opportunity statement.
• Create a job description for each position that clearly defines expectations of skills and performance.
• Conduct periodic performance reviews of employees and carefully note the results in the employee's file.
• Develop a screening and hiring program to weed out unsuitable candidates on paper before calling them to interview in person.
• Use an employment application that contains an equal employment opportunity statement along with a statement, that if hired, employment will be "at-will," meaning their employment can be terminated at any time – for any reason or for no reason at all – with or without notice. Also ensure that your employment application does not contain any age indicators, such as date graduated high school, as this could increase your risk for age discrimination claims.
• Conduct background checks on all possible candidates.
• Institute a zero tolerance policy regarding discrimination, substance abuse and any form of harassment. Make sure you have an "open door" policy in which employees can report infractions without fear of retribution.
• Create an effective record-keeping system to document employee issues as they arise, and what the company did to resolve those issues.