The Case for Employment Practices Liability Insurance

The case for employment practices liability insurance (EPLI) has never been stronger. Businesses are operating in a rapidly changing environment that keeps producing unprecedented, previously unimaginable challenges. COVID-19, #MeToo, gig workers, remote workers, medical marijuana, CDC guidance, quarantines, vaccines, Zoom meetings—the list goes on. Every business with employees is at risk. Yet, far too many businesses go without EPLI. Sure, they have their reasons, but most of them are actually myths. Let’s look at a few.

None of my employees would ever sue me. Let’s assume this is true (even though it’s not). Equal employment opportunity laws, like Title VII of the Civil Rights Act, protect applicants. They also protect new employees starting day one. How do you know what they will do? It’s also hard to predict what a desperate employee might do, regardless of how long they’ve been employed. Relying on the charity of others is not an effective risk management strategy.

Our organization complies with all employment laws. Virtually all businesses make a good faith effort to comply with applicable employment laws, but this isn’t always enough. Mistakes happen.

We are too small to worry about employee lawsuits.  Every business with employees is at risk, regardless of size. In fact, smaller businesses tend to operate casually and informally, which may increase the likelihood of a claim. And, smaller businesses often lack the resources to have HR professionals or legal counsel on staff to prevent or respond to employment-related claims.

We have an excellent HR department. That’s great! Large businesses have them too, and they get sued all the time. This reason also ignores the fact that HR policies and directives do not always filter down to the entire workforce.

EPLI is too expensive. This can be a legitimate reason, but it’s usually not. Instead of focusing on the policy premium, businesses need to consider the cost of not having EPLI. If you think the premium is expensive, just wait until that first bill from your attorney arrives. Remember, defense lawyers don’t accept contingency fees; they are paid by the hour. It’s also worth noting that EPLI policies are competitively priced, so the premiums are relatively low.

None of these reasons will protect against employment-related claims like an employment practices liability insurance policy. There is a world of difference between dealing with (and paying for) the defense of an employment practices lawsuit and filing a claim under an EPLI policy. One option is not only cheaper, but it provides a peace-of-mind that allows the organization’s focus to remain on the continued successful operation of the business. Needless to say, the alternative is much, much worse.

The Human Equation prepares all risk management and insurance content with the professional guidance of Setnor Byer Insurance & Risk.