Running a business is hard, and there are so many things to worry about, including your employees. Are they happy? Are they productive? Are you following the various laws and regulations that deal with having employees? What may happen if you fire someone? What happens if they sue you? Questions abound.
Having employment practices liability (EPL) insurance can help alleviate some of the mental and financial stress related to having employees.
What, exactly, is EPL insurance? EPL insurance is insurance available to most employers to protect them if a current or former employee decides to bring an EPL claim against them.
What is an EPL claim?
An EPL claim is an administrative or court action started by a current or former employee where the employee alleges that the employer did something wrong or treated them differently or unfairly in violation of some rule or law relating to their employment.
Examples of an EPL claim include:
- Discriminating against an employee because of their race;
- Not allowing an employee to take leave (disability, maternity, paternity, family, etc.) that is allowed under law;
- Lowering the employee’s pay because they complained to a government agency about how they were being treated at work;
- Firing an employee because of their gender; and
- Failing to pay an employee the minimum wage or all wages they are owed.
It is important to note that some claims that may arise out of an employment relationship may not be considered EPL claims (for example, breach of contract), and therefore, would not be covered under an EPL policy.
EPL insurance typically covers the employer’s legal costs associated with litigating and resolving an EPL claim, including attorneys’ fees and expenses and costs of settlement or court/agency awards. In most instances, the EPL insurance carrier will appoint legal counsel to represent the employer in the claim and will pay their fees after the employer has satisfied the applicable insurance deductible.
Keep in mind that the insurance carrier generally gets to decide whether or not a claim is covered by the EPL insurance policy. (Not all insurance carriers or policies cover all types of EPL claims.) If there is coverage, great! You’ve got help. If not, you are on your own to find legal counsel and pay all costs associated with the claim.
EPL claims can be expensive, and the risk that you will face one as an employer is present every day. Having EPL insurance affords you and your business with a level of protection should such a claim be brought against you. You should talk to your insurance broker to see if EPL insurance is right for you.
Disclaimer: This blog and all information in it is provided for general informational purposes only. It does not, and is not intended to, constitute legal or tax advice. You should consult with a qualified legal or tax professional for advice regarding any legal or tax matter and prior to acting (or refraining from acting) on the basis of any information provided on this website.
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