What You Don’t Know About Employment Practices Liability Insurance Could Hurt You

Insurance is extremely important for business owners, especially if you’re new in the game. Without it, you could lose precious cash to malpractices and many other undesirable and unexpected phenomena. One of the most important insurances is employment practices liability insurance (EPLI). This provides coverage to employers against claims made by their employees. Let’s take a closer look at what this insurance cover can protect you against.

Employment Practices Liability Insurance

Say an ex-employee files a case against you seeking damages for harassment. Or if they feel they were discriminated against based on their race, age, or a specific disability. This policy would preserve you against such claims. You’d also be safeguarded against claims related to wrongful termination, harassment, and other employment-related issues. While larger corporations have substantial employment practice insurance policies in place, smaller businesses are also vulnerable to employment claims. That could be because they lack a legal department, and an employee handbook containing the pertinent policies and processes related to disciplining and terminating employees.

New Hires Can Pose an Employment Practices Liability Risk

Sad but true -when you hire a new employee, you’re automatically putting yourself at risk. But when you decide not to hire a certain person too, they could allege some kind of discrimination just for that. If you hire that person and terminate them later due to any reason, that individual could still claim wrongful termination. There are many ways you could get into trouble even with people you don’t know from Adam! That’s why it’s so important to ensure you have this protection in place.

How To Lower Your Employment Practices Liability Risk

  • Read and review potential losses with your insurance agent. Buy adequate employment practices liability insurance.
  • Develop an employee handbook and detail your company’s workplace processes and policies. That must include attendance, complaints, disciplinary action taken, and more. The handbook must contain an employment-at-will statement, as well as an equal opportunity statement.
  • Craft a job description for each position that defines expectations clearly.
  • Have performance reviews regularly and note down the results of these in each employee’s file.
  • Create a screening and hiring program to ensure you don’t hire morally corrupt individuals.
  • Use employment applications that consist of an equal opportunity statement along with other statements. That would ensure that if hired, their employment can be terminated at any time, without any reason or notice.
  • Conduct thorough background checks.
  • Put in place a zero-tolerance policy with regards to discrimination, substance abuse, and harassment in any form. Ensure you have an ‘open door’ policy in which employees can report their infractions without fear.
  • Make an effective record-keeping system to document employee issues whenever they arise.

Some More Tips About Employment Practices Liability Insurance

The cost of insuring your business for EPLI coverage depends on the number of people you employ, whether you’ve had previous suits lodged against your company, the percentage of employee turnover, and if you’ve established rules and practices in place. The cost of insuring your business will include factors such as the number of people you hire, whether you’ve had prior suits lodged against your company, the percentage of employee turnover, and whether you’ve established rules and practices in place.

There are also points to note with regards to the size of your company. EPLI can be an endorsement of a Business Owner’s Policy or a general liability policy. A specific stand-alone policy can also be written in conjunction with a BOP. EPLI coverage is usually written on a claims-made basis. That means if there’s an incident, it’s only insurable if it had occurred during the coverage period. You can also get a specific stand-alone policy written with a BOP.

Remember that EPLI coverage is written on a claims-made basis. Since employment claims come months or even years after the alleged incidents, your company will be vulnerable if your insurance coverage was dropped or if the tail coverage wasn’t purchased.

Understanding Employment Law

Here are some laws put in place to protect the rights of the people you’re hiring.

  • Title VII of the Civil Rights Act of 1964, bans discrimination on account of race, color, religion, national origin, and sex. It also forbids discrimination based on pregnancy and sexual harassment.
  • The Equal Pay Act of 1963, prohibits employers from paying different wages to men and women for doing the same work under similar working conditions.
  • The Civil Rights Act of 1966, prohibits discrimination based on race or ethnicity.
  • The Immigration Reform and Control Act of 1986, prohibits discrimination based on national origin or citizenship of those who’re authorized to work in the US.
  • The Americans with Disabilities Act of 1990, bans discrimination against people with disabilities.
  • The Bankruptcy Code bars discrimination against someone who has declared bankruptcy.
  • Equal Employment Opportunity Act of 1972, bans discrimination against minorities based on poor credit ratings
  • The Age Discrimination in Employment Act prohibits discrimination against people who are over the age of 40.

Stay up to date with your EPLI as well as related laws to ensure you have a smooth time with your employees. Otherwise, you could land up in hot water. If you need help, reach out to seasoned professionals like us.