Sadly, employment-related lawsuits are becoming more and more common, especially in California.
Even if your company is not guilty, the cost and time allocated to these lawsuits can be detrimental to your business.
That is why it is important to have EPLI coverage, to protect your company against these claims and help cover the legal fees that come with them.
Employment Practices Liability Insurance (EPLI) is an insurance policy that protects your business against employment-related lawsuits made by potential hires, current employees, and former employees. These claims can vary from discrimination, sexual harrasment, or even wrongful termination.
Typically, EPLI is sold as additional coverage that can be added on to an existing business owners policy. Although EPLI is not a mandatory policy for businesses to have, it is highly recommended.
The unjust or prejudicial treatment of different categories of people or things, especially on the grounds of race, age, sex, religion, etc.
The Equal Employment Opportunity Commision definition of “harassment” is unwelcome conduct that is severe or pervasive enough to create a work environment that is intimidating, hostile, or abusive.
Harassment can come from managers, supervisors, coworkers, and even non-employees.
A negative action that a company takes against an employee for engaging in legally protected activity. For example, firing or demoting an employee after filing a lawsuit against the company. According to the EEOC, retaliation is the most common claim against employers making up 53.8% of charges filed against employers in 2019.
Firing an employee for an illegal reason such as a disability, pregnancy, gender, race, etc.
Committing libel or slander against a person.
Most EPLI claims are filed due to an employee getting fired or let go from a company. Typically, high-level managers and supervisors are the people cutting ties with employees for whatever reason they may have. Since they are the final decision maker, they are held accountable for their actions and can be charged directly. Not only can this take a toll on a manager or supervisor mentally, but financially as well.
Employment Practices Liability Coverage helps protect employees financially and mentally throughout this difficult process.
Other factors that affect the cost of an EPLI Policy Include:
Whether your company is in the wrong or false allegations are being made, these lawsuits are not cheap. If they escalate to court, the process can drag on for much longer increasing the cost for attorneys. The average employment claims lasts 300 days before it is resolved.
Employee related lawsuits and allegations are typically excluded from standard liability coverage and policies. Without an EPLI policy, you take on 100% of the risk and costs if a claim is filed against your company.
The average cost of defending an employment law case is $160,000. This cost can drain small businesses funds quickly and possibly sink the business altogether. An Employment Practices Liability Insurance policy can cover these costs and more, allowing you to focus on growing your business.
Why EPL Insurance is Important for Small Businesses
These costs can be crippling to a small business with a tight budget. Surprisingly, 40% of EPLI lawsuits are filed against companies with less than 100 employees.
Nobody expects this to happen at their company in the early stages, but it does. The only thing you can do as a small business is to be prepared.
Why EPL Insurance is Important for Big Businesses
In big business, there are a lot more factors that are out of your control on a daily basis. There are more employees which increases the risk of unethical behavior at the workplace.
An EPLI lawsuit can break a company just because of the negative publicity these lawsuits attract. In order for a big business to operate smoothly, employees need to feel comfortable at work. This can be much harder when you have thousands of employees to manage.
It does not matter how big or small your company is, you are at risk. An EPLI policy protects your business against these charges no matter the result.
Silicon Valley has helped transform California into the business capital of the United States. Entrepreneurs are flooding to the Golden State to be a part of this movement. Small businesses make up 99.98% of businesses in California. This is why Employment Practices Liability Insurance is so important to have. It is a recipe for disaster, combining small businesses barely maintaining financial stability with California’s constantly changing laws and regulations for businesses.
California's complex regulation system makes an EPLI policy that much more vital for businesses. With an Employment Practices Liability Insurance policy you can sleep knowing your company is covered and focus on increasing profits.
In order to reduce your average number of EPLI claims, follow these steps.
Establish Workplace Policies
Ensure that employees are aware of the zero tolerance policy when it comes to harassment, discrimination, and unprofessional behaviors. Establishing this during the hiring process will instill its importance in the workplace. Providing employees with a handbook or guide that explains the policies that they can refer back to when necessary is a great way to remind employees of the company’s policies and expectations.
Educate Management and Employees
Set aside time to train all managers, supervisors, and employees on ethical workplace behavior. Focus on relative topics like workplace discrimination and harassment and the negative effects they can have on people.
Periodic Performance Reviews
Performing routine performance reviews show employees how they are doing and what they can do to improve. These meetings are also a great opportunity for employees to voice any concerns they are having at the office.
Every company should have a filing system for employee issues and how each situation was resolved. These records can be useful to know when a problem has been brought or more than once and needs to be immediately addressed.
In-depth Job Descriptions
Provide employees with an in-depth job description that clearly states the task at hand, the skills required, and expectations. This can protect your company if a worker is not achieving the desired results and needs to be terminated.
Screening and Hiring Procedures
Implementing a vigorous screening and hiring process can help find the best candidates for your job openings.
This policy provides additional coverage to your company to help save thousands in legal and attorney fees.
If you are not currently covered or are looking to improve your company’s coverage and you need more information, consult with a CoverWallet advisor.