Introduction to Employment Practices Liability Insurance (EPLI)

Employment Practices Liability Insurance, often shortened to EPLI ("ep-lee"), covers lawsuits made against a business for employment-related wrongful acts. EPLI policy language is highly variable, but all function in the same manner. EPLI policies can be written for almost any business, as long as it has at least one employee.

Employment Practices Liability Insurance covers businesses for allegations of wrongful acts arising from any part of the employment process—from interviewing to post-firing. The term ‘wrongful acts’ is a catch-all for actions that have been made illegal by various employment laws, such as the Federal Whistleblower Protection Act, the Family and Medical Leave Act, the Civil Rights Act of 1991, and the Americans with Disabilities Act. There are seemingly endless possibilities for an employment-related lawsuit, but the following list outlines a few basic examples:

  • During the application process, a prospective employee may sue if they don’t get the job, claiming discrimination due to their physical handicaps, race, religion, gender, or sexual identity.
  • During their employment, an employee might file suit claiming that they were sexually harassed.
  • An employee may sue for invasion of privacy by their employer.
  • An employee could claim that they were discriminated against because they weren’t selected for a career-advancing assignment or opportunity.
  • An employee can sue if they feel like they aren’t being paid a fair wage, or if they haven’t been promoted.
  • After the firing of an employee, the business could be sued for wrongful termination.
  • A former employee could sue if they believe they were fired because they were a ‘whistle blower’, claiming that they were fired in retaliation.
  • A former employee could sue for slander or defamation if they believe their former employer is giving an unjust review of them to other employers.

How does the EPLI policy work?

The EPLI policy was designed to defend businesses that make employment-related mistakes. So when an employment-related suit is brought against a business, the EPLI steps in and covers the defense costs. It will also pay the settlement if the business is deemed guilty. Note that some carriers’ policies will provide the legal defense themselves, and other carriers’ policies will only reimburse the insured for the defense and settlement costs. Also, many policies exclude certain scenarios and specific claims. Careful policy selection is critical, and consulting your agent is highly recommended.

Who needs an EPLI policy?

Potentially any employer could be sued for an employment related offense, even if they only have a single employee. However, the larger and more diverse the employee base is, the more likely an employment practices claim will arise. Also, publicly traded companies will pay more than private companies. 

The premium for an EPLI policy is determined by the number of employees, the HR practices and precautions taken by the business, and the industry the business is in. Businesses can control their premium by managing their employee turnover rate and effectively handling complaints and accommodation requests.