EPLI provides protection for your business against claims made by employees regarding their rights in the workplace. Let’s dive into what EPLI covers, what it may exclude and why it’s essential (or not) for businesses.
What Does EPLI Typically Cover?
EPLI policies generally cover claims made by current employees, former employees and even job applicants. While specific coverages may vary depending on your insurer and state, most EPLI policies offer protection in the following areas:
- Wrongful Termination: If an employee claims they were unfairly or illegally fired.
- Discrimination: Allegations of discrimination based on race, gender, age, religion, national origin, disability or other protected classes.
- Harassment: This can include sexual harassment or a hostile work environment claim.
- Retaliation: If an employee believes they were punished for filing a complaint or claim, such as whistleblowing or reporting illegal activity.
- Wage and Hour Law Violations: Claims related to misclassification of employees, unpaid overtime or minimum wage violations (though this is sometimes limited or excluded, depending on the policy).
In essence, EPLI can shield your business from the financial fallout of employment-related lawsuits, which can include legal fees, settlements and court-ordered compensation.
What EPLI Policies Exclude
EPLI policies do not cover every potential employment claim. In Massachusetts, Connecticut and Vermont, EPLI policies may exclude:
- Punitive Damages: These are damages intended to punish a business beyond compensatory damages, and many policies won’t cover them.
- Criminal Acts: If there are allegations of criminal activity like fraud or theft, those claims typically fall outside EPLI coverage.
- Workers’ Compensation Claims: EPLI does not replace or overlap with workers’ compensation insurance, which covers on-the-job injuries and illnesses.
- Wage and Hour Claims: While some wage claims may be covered, many EPLI policies exclude them entirely, or cover only a small portion. That’s why it’s important to understand your coverage up front.
- Intentional Acts: If your business is found to have intentionally violated laws or employee rights, EPLI coverage may not apply.
Should All Businesses Have EPLI Coverage?
While every business faces some level of risk, whether or not you should have EPLI depends on several key factors.
- Business Size: Smaller businesses often mistakenly believe they are less likely to face employment-related claims. However, they may be more financially vulnerable, as they typically have fewer resources to handle lawsuits. On the other hand, larger businesses are at increased risk due to the sheer number of employees and the complexity of their HR processes. EPLI becomes particularly important as a business grows.
- Industry: Certain industries are more prone to employment-related claims—such as hospitality, healthcare and retail—where employee turnover is high, and wages are often a point of contention. If your industry is prone to employee-related claims, or your company has a history of claims, EPLI becomes a more urgent need.
- Geographic Considerations: States like Massachusetts, Connecticut and Vermont have their own labor laws, which can be stricter than federal regulations. Employers in these states face heightened scrutiny, and this increases the likelihood of claims.
The Stakes Are High
A robust HR policy, strong management training and proper documentation can significantly reduce the likelihood of claims. However, even the best-prepared businesses can face lawsuits, and the cost of defending against employment claims can be steep. Whether you run a small business or a larger organization, having an EPLI policy can help mitigate financial risks, making it a critical safeguard.
Our business insurance experts can provide more detailed guidance based on your company’s specific circumstances, size, industry and location. Contact us to schedule an appointment to talk about employment practices liability insurance or other types of business liability coverage.