Employment Practices Liability Insurance is an automatic purchase for large corporations, but tends to be a low priority for small businesses and Mom and Pop operations. This is the coverage that responds on your behalf if you are accused of wrongdoing by an employee. It’s important to point out that over half of employment practices liability claims are filed against small businesses. If this is not motivation enough to check out this coverage, let’s state the three top reasons to consider this valuable coverage:
- You have at least one employee.
- You have interviewed at least one person for employment.
- Number one and number two can sue you.
Hiring employees are a good thing. Typically it indicates that your business is growing, and there is more work to be done than you can handle. When you hire an employee or even an independent contractor, you instantly create an employer-employee relationship that can be wonderful, good, okay, or really bad. Having just one employee, even if it’s a family member, instantly creates a risk for employment practices claims. If you make a statement within earshot of an employee that is perceived as racist, sexist or any other “ist,” a lawsuit could easily follow. Even though over 70% of lawsuits filed against employers are later found to be groundless, it takes a skilled attorney to make this argument on your behalf, and skilled attorneys can be expensive.
Who can bring an Action?
Any current employee, former employee, independent contractor, or person you have interviewed can bring an action against you and your business for a variety of reasons. Consider this scenario:
You are not advertising for an employee, but an individual walks into your business and inquires about employment. Since you may need someone to work part-time in the near future, you agree to interview this walk-in applicant. After a twenty minute interview, you decide to pass on hiring the individual and thank them for stopping in. Two weeks later you are served a subpoena to answer charges of discrimination for not hiring the individual.
What do you do? Do you respond to the subpoena without the benefit of counsel? Absolutely not. You hire an attorney; you can’t really afford to make this frivolous claim against you disappear. Six months and $5,000 later, you are finally extricated from this situation. So then, what if this scenario repeats itself over the next two years? You could be out $10,000 that could easily make the difference of whether your business stays open or closes.
The Top 5 Accusations
There are many different accusations that can be made against you and your business, but the most popular are:
- Wrongful termination
- Harassment, including sexual harassment
- Discrimination that may be based on race, age, religious affiliation, sexual orientation, disability, or ethnicity
- Failure to promote or employ
What the EPLI Covers
The good news is that a typical employment practices liability policy provides coverage for all the accusations listed above and many more. The most important benefit of the policy, however, is the insurance company’s duty to defend you if an action is brought against the business. Even though most employment practice cases prove to be groundless, it will cost you significant money to defend yourself, but with an EPLI policy in place, the insurance company will pay for defense costs, settlement costs, and judgments awarded by the court.
Invest some time into speaking with an experienced insurance agent or broker to get the latest information about Employment Practices Liability Insurance and discover how best to protect you and your business.