Businesses need insurance to help them cover potential liabilities that, if they become realized, could be so expensive they may shut the companies down. A job applicant, current or former employee, could accuse you (rightly or wrongly) of illegal employment practices and according to a corporate transaction lawyer, they can file a complaint with a government agency or a lawsuit. Do you have the cash to hire an attorney and meet all the costs this may entail?
What Does Employment Practices Liability Insurance Do?
Employment practices liability insurance (EPLI) is probably part of the bundle of coverage you buy for your business. If it’s not, you should buy it as a separate coverage. Your risks go up as the number of hirings, firings, and employees increases.
If you face possible liability covered by the policy, the most important thing coverage will do is pay for your legal defense as our friends at Focus Law LA can share. Depending on your location and the issue, since this is a specialized area of law, you could face several hundred dollars an hour in attorney costs if you retain an attorney.
EPLI would also cover related costs, a settlement, and a jury verdict against you (assuming coverage of the issue isn’t excluded, up to the policy limits). It probably won’t pay for punitive damages or criminal fines.
A valuable service your EPLI carrier may provide is educating you on human resources best practices so you can prevent employment-related legal lawsuits, or if they happen, you’ll be better prepared to defend yourself.
What Types Of Employment Claims And Lawsuits Might My Business Face?
The number of lawsuits and related claims filed by plaintiffs against employers, former employers, and potential employers has been rising. Defendants are businesses and organizations large and small. The bases for these claims could be local ordinances, state or federal statutes, and (judge-made) common law.
Your EPLI coverage could include the following types of issues:
- Illegal harassment based on sex, race, color, national origin, disability, sexual orientation, and other protected bases
- Discrimination in hiring, firing, or conditions or employment based on color, sex, disability, age, and other protected bases
- Retaliation for prior protected activity, including discrimination complaints, participating in an investigation or litigation of a discrimination issue, filing for unemployment benefits, seeking family medical leave, asking for a disability accommodation, or whistleblowing
- Wrongful termination in violation of a contract, statute, or public policy
- Employment contract violations
- Wage and hour disputes
- Infliction of emotional distress
- Mismanagement of employee benefit plans
These cases could be frivolous and untrue or expose your wrongdoing. Depending on the allegations, you may lose your money, reputation, customers, and employees.
Insurance Is An Important Part Of Managing Your Legal Risks
When you think of business insurance, you probably think of protection against lawsuits claiming your product injured someone or a customer slips and falls at your location. You also want coverage if a fire or weather event damages your property. These are just some of the risks you face. A lawsuit by a current or former employee could be just as, if not more, damaging. EPLI helps you manage this risk. Contact a lawyer near you for help.