Protecting your business

Employment Practices Liability Insurance (EPLI) covers your business against claims that are made by workers alleging that their legal rights as employees have been violated. No company is immune to lawsuits of this type. It is important to review this with your agent and make sure that you have the right protections against these types of claims.

What claims would this cover me against? EPLI coverage will protect you against claims made by current or previous employees alleging things such as discrimination, wrongful termination, harassment and other employment-related issues such as failure to advance or promote. Smaller or new businesses often are most susceptible to these types of claims because they lack the legal department or employee handbook that details the policies and procedures for hiring, discipline and termination of employees.

What is the difference in claims made vs. occurrence-based policies? Most EPLI policies are claims made — this means that the policy must be in force both when the event took place and when a lawsuit is filed for a claim to be paid. Another important thing to understand is most policies require you to alert the carrier and turn in a claim as soon as you are made aware of a potential suit. This does not necessarily mean when the lawsuit paper arrives on your doorstep. This could be as simple as receiving a letter from an attorney who is representing your previous employee asking for information about your employee handbook or arbitration policy.

What should I do if I receive a letter from an attorney representing a past employee? When you receive any letter from an attorney, the Equal Employment Opportunity Commission (EEOC) or the employee themselves, make sure that you get this to your agent or insurance broker. This is important so that they can get it to the correct party with the carrier. It is best to err on the side of caution when it comes to reporting these types of claims.

What can I do to protect myself? According to the III.org website there are some helpful steps to take to limit employment liability risk. Purchasing EPLI is an important way to manage employment risk, but in a perfect world, your business will never face an employment practices lawsuit. Taking the following steps can help minimize the risk of such a lawsuit arising in the first place:

• Establish clear workplace policies — Create written workplace policies on employment practices; post them and include in employee handbooks. Establish a policy for employees to report concerns and for management to respond.
• Educate management and employees — Train management, supervisors and employees about ethical and legal workplace practices. You may want to include diversity and sensitivity training as part of your employee education program.
• Hire carefully — Screen employees thoroughly, avoiding any discriminatory practices.
• Provide job descriptions — Clearly define job expectations for all employees.
• Perform regular employee reviews — Review employee performance and keep a written record of reviews.
• Keep documentation — Maintain written records of all employment related practices, complaints, investigations, responses and so on.