Many US business owners misunderstand EPLI coverage. Learn the facts about Employment Practices Liability Insurance and avoid costly assumptions.
For companies sued by their employees, EPLI—that is, Employment Practices Liability Insurance—provides protection. These are charges of discrimination, retaliation against, wrongful dismissal, or harassment. Though many American business owners view EPLI as an optional cover, it is among those that many others think about. That error typically proves to be costly.
Every company with workers runs legal claim risks. Defending even one complaint can run tens of thousands of dollars. EPLI supports the absorption of those expenses so that your company maintains its financial stability.
Why EPLI Deserves Attention
Most companies’ owners don’t understand how often conflicts happen. The Equal Employment Opportunity Commission (EEOC), in its 2024 report, mentions that it has been flooded with 73,000 complaints of different forms of discrimination in the workplace. These lawsuits include harassment, retaliation, and unjust termination.
Defending and settling an employment case, the average expenses are around $75,000 (with pre-trial defense expenses that can potentially surpass $125,000!) You still pay your lawyers even if you win. Coverage under EPLI helps to control those expenses.
10 EPLI Myths That Put Your Business at Risk
Myth 1: “EPLI Is Optional”
Fact: EPLI is essential coverage for any US business with employees.
Many business owners assume their company is too small or too fair-minded to face a lawsuit. Yet legal claims happen in every industry and at every size.
Common claim sources include:
- Miscommunication about job performance
- Promotion disputes
- Allegations of bias or unfair treatment
- Accusations of retaliation after complaints
Employment law does not care how small your company is. Once you hire even one employee, the risk exists. EPLI ensures that risk does not destroy your finances.
Myth 2: “EPLI Only Covers Firing or Termination Claims”
Fact: EPLI covers a wide range of employment issues, not only firings.
The coverage extends to discrimination, harassment, retaliation, and emotional distress.
| EPLI Coverage Area | What It Covers | Example |
| Discrimination | Age, race, gender, disability, or religion | A candidate claims they were not hired due to age |
| Sexual Harassment | Hostile environment or unwanted advances | An employee reports offensive behavior by a manager |
| Retaliation | Punishing employees for reporting misconduct | A worker claims demotion after filing a complaint |
| Wrongful Discipline | Unfair disciplinary actions | An employee alleges excessive punishment for minor errors |
| Failure to Promote | Discrimination in advancement | A worker says a promotion was denied due to gender |
| Emotional Distress | Psychological harm from unfair treatment | A worker reports anxiety from workplace bullying |
EPLI supports both defense and settlement costs for these claims.
Myth 3: “Small Businesses Don’t Get Sued”
Fact: Small businesses face high risks of employee claims.
The United States economy, after all, is dependent upon small businesses. Under the regulations of the Small Business Administration, a company is a small business if it has not more than 500 employees, and 99.9% of all the companies in the US are small. Out of the approximately 33 million small businesses, about 6 million carry a payroll; each one is a potential source of litigation.
Why smaller firms are more vulnerable:
- Fewer HR resources and less training
- Informal procedures for hiring or discipline
- Lack of written documentation for employment actions
Example: A former employee who said he was fired wrongfully after raising safety issues sued a small Florida bakery with 60 employees. Though the case was dropped, legal costs for representation exceeded $20,000. EPLI would have paid for those costs.
Myth 4: “General Liability Insurance Covers Employee Lawsuits”
Fact: General liability insurance does not cover employee-related disputes.
General liability covers physical injuries, property damage, or advertising harm. It excludes internal employment claims.
| Coverage Type | Covers | Excludes |
| General Liability | Customer injuries, property damage | Employee discrimination or harassment |
| EPLI | Wrongful termination, harassment, discrimination | Customer injuries or product issues |
Myth 5: “My Employees Would Never Sue Me”
Fact: Even trusted employees can file claims when they feel mistreated.
Good ties never get rid of risk, but do help to lower it. Employment disagreements often come from misunderstanding or different perceptions.
Examples:
- A worker overlooked for promotion assumes discrimination
- A manager’s feedback is perceived as harassment
- A change in schedule is interpreted as retaliation
EPLI protects you from financial fallout, even if the claim is false.
Myth 6: “EPLI Only Helps If I Lose the Case”
Fact: EPLI pays for legal defense whether you win or lose.
Defense against claims of work incurs expenses prior to ruling. Average lawyer fees run between $75,000 and $125,000. Usually, more than $200,000 in costs result from a trial.
Even a dismissed case drains time and resources. EPLI covers attorney fees, court costs, and settlements from day one.
Myth 7: “EPLI Is Too Expensive”
Fact: EPLI costs less than one employment claim.
Your sector, number of employees, and past claim record all help to define your EPLI premium. Small American companies (less than 50 employees) are spending from $1,000 to $3,000 on average.
That amount is small compared to the potential cost of a single lawsuit. EPLI acts as a predictable expense instead of an unexpected financial disaster.
Myth 8: “EPLI Is Only for Big Companies”
Fact: Every business with employees needs EPLI.
Lawsuits do not target company size. They target actions and policies. Even a family-run business can face a claim from one unhappy worker.
Examples of small-company risk:
- A restaurant server files a harassment claim
- A part-time worker alleges discrimination after being passed over for a shift
- A startup faces a retaliation claim after a firing
EPLI provides stability when these disputes arise.
Myth 9: “We Have a Great Culture. We’re Safe.”
Fact: Good culture helps prevent claims but does not guarantee immunity.
Even well-intentioned workplaces experience conflict. What matters is how issues are handled and documented.
Protect your business by:
- Keeping written employee policies
- Conducting annual harassment and bias training
- Recording all hiring, promotion, and disciplinary decisions
- Reviewing employment practices with legal or insurance advisors
These actions reduce exposure but do not replace EPLI coverage.
Myth 10: “EPLI Doesn’t Apply to Emotional Distress Claims”
Fact: EPLI often covers emotional distress tied to workplace behavior.
Claims of stress, anxiety, or mental anguish connected to workplace conditions fall under EPLI. Such claims are increasing as awareness of mental health grows in the US workforce.
An employee who alleges bullying or humiliation might seek damages for emotional distress. Even if your business acted responsibly, you must defend the claim. EPLI pays those legal fees.
The Real Cost of Skipping EPLI
Employment-related claims drain time, money, and focus. Without coverage, you bear all expenses yourself.
Example: A small tech startup in California faced a gender discrimination claim. Though the court ruled in the company’s favor, the case consumed six months and over $50,000 in legal fees. The business had no EPLI policy and took on debt to cover the costs.
EPLI converts unpredictable risks into planned expenses. It protects cash flow and reputation.
Building Safer Work Practices
EPLI works best with strong HR foundations. Insurance handles costs, while policy and training reduce the likelihood of claims.
Practical steps to strengthen your defense:
- Maintain updated employee handbooks
- Provide written acknowledgment of policies
- Conduct training for harassment prevention
- Document every HR decision
- Enforce policies evenly across all staff
- Review EPLI coverage yearly with your provider
These measures demonstrate fairness and support your case if a claim occurs.
Why Gonzalez Insurance Recommends EPLI
At Gonzalez Insurance, we help US businesses prepare for employment risks before they become lawsuits. Our team advises clients on both policy design and prevention measures.
We recommend a two-part approach:
- Create strong company policies that define fair employee treatment
- Secure an EPLI policy to handle legal defense and settlement costs
Even if a lawsuit against you fails, you remain responsible for your legal fees. EPLI ensures those costs do not threaten your business operations.
We also help clients review internal procedures such as:
- Employee training on workplace conduct
- Reporting channels for complaints
- Documentation standards for disciplinary actions
These small steps make a large difference in defending against claims.
Contact Gonzalez Insurance to learn how EPLI can protect your company from expensive legal disputes. Stay compliant, prepared, and financially secure.
FAQs
1. Is EPLI mandatory for US businesses?
No, but it’s strongly recommended because employment-related claims are common and expensive to defend.
2. Does general liability insurance cover employee lawsuits?
No, general liability policies exclude claims related to discrimination, harassment, or wrongful termination.
3. What kind of claims does EPLI protect against?
EPLI covers claims such as wrongful termination, retaliation, discrimination, harassment, and emotional distress.