Does Your Business Need Employment Practices Liability Insurance?

By Chase Helwig, Assistant Vice President

In 2016, the Equal Employment Opportunity Commission (EEOC) received 97,443 charges of workplace discrimination in private, federal, state, and local government workplaces. The EEOC responded to over 585,000 calls to their toll-free number and more than 160,000 inquiries in field offices.

Since the financial crisis of 2007–2008, employee liability claims filed against employers have skyrocketed to nearly 100,000 annually, which is up 30 percent from the lows of the mid-2000s. If an employee files a claim against you and you are taken to court, or if you settle outside of court and you don’t carry Employment Practices Liability Insurance (EPLI), the cost could put you out of business.

General liability insurance does not include EPLI, so talk to your insurance agent about what coverage you do have and consider the risk involved of not carrying EPLI coverage. Wrongful termination lawsuits have risen 260 percent in the past 20 years, and 75 percent of EEOC claims are made against small businesses with 50 or fewer employees.

Employment practices liability insurance protects a business from lawsuits that are related to the Landmark Acts of Regulation. It covers employment discrimination, harassment, defamation, and retaliation. It provides protection against claims for the failure to hire, failure to promote, and wrongful termination. EPLI may also cover leased, seasonal, and independent contractors.

The Landmark Acts of Regulation

  • Title VII of the Civil Rights Act of 1964
  • Age Discrimination in Employment Act of 1967 (ADEA)
  • Americans with Disabilities Act of 1990 (ADA)
  • Family and Medical Leave Act of 1993 (FMLA)
  • Genetic Information Nondiscrimination Act of 2008 (GINA)
  • Claims That Do Not Fall Under EPLI
  • Worker Adjustment and Retraining Notification Act (WARN)
  • Fair Labor Standards Act (FLSA)
  • Claims that fall under the National Labor Relations Act (NLRA)
  • Employee Retirement Income Security Act (ERISA)
  • Occupational Safety and Health Administration (OSHA)
  • Matters related to the continuation of benefits under COBRA

How to Prevent Possible EPLI Claims

No employee should be the victim of discrimination and ridicule. The executive leadership of any company or organization is responsible for fostering a culture of tolerance in their workplace. Conducting sensitivity training classes and responding promptly and courteously to all employee complaints is essential for the good health and future of your business.

Consider the top six reasons employees sue their employer:

  1. Not giving a clear reason for firing an employee (this includes at-will employees)
  2. Firing an employee for bad performance when they have had good performance reviews. A poor-performance paper trail needs to be presented in court.
  3. Poor timing – firing an employee who has just filed an internal complaint against the employer or a supervisor
  4. Improper response to an EEOC charge – always respond promptly and courteously
  5. Failure to follow your own policies – make sure your HR and legal teams are providing the proper protection and training for management

Don’t ever assume an employee is aware of and understands senior management’s policies. When an employee acts surprised and outraged at being terminated, it is because management did not clearly communicate with the employee.

Employment attorneys are in general agreement that employees don’t always sue because the employer violated a law. Rather, they often sue because they were humiliated in the termination process and were not treated with respect and dignity.


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