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Employment Practices Liability (EPL) It’s more important than you realize

Risk management is a hot topic of conversation these days as lawsuits are becoming more and more of a concern for employers of all sizes, even home-based businesses. Thankfully, there are business insurance policies to cover most of the risks.

Employment practices liability is one of those important risk management policies that every business, no matter what size, should consider purchasing. Cost for litigation and damage awards have climbed over the years and experts are predicting that employment liability will only become more complex and costly. Because of this, it is critical that business owners understand their exposures and option for managing risks.

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The U. S. Equal Employment Opportunity Commission (EEOC) reported that almost 100,000 charges were filed in 2011. And, in 2012, the EEOC reported that 99,412 charges were filed for harassment resulting in receipts filed and resolved to the tune of $365.4 million. These amounts and figures are staggering and could easily do irreversible harm to a business that isn’t protected – this is where EPL policies become worth their weight in gold.


So what exactly is employment practices liability? Literally it’s a business insurance policy that covers your risks due to the most common employment-related lawsuits. It includes:

–          Wrongful termination – the discharge of an employee for invalid reasons

–          Discrimination – the denial of equal treatment to employees

–          Sexual harassment – the failure to stop or subject an employee to unwelcome sexual advances and obscene or offensive remarks.

EPL insurance works hand-in-hand with your internal employment practices to provide the necessary resources to defend your company against a suit or to pay a claim.

Employment law is complex. The first step towards protection is to have well-organized and credible employment documents. These can demonstrate that you, the business owner, have taken the needed steps to deter litigation, ensure employee honesty and practice fair treatment. This type of evidence of employee practices and policies may be required for an EPL policy. Regardless, this type of organization and preparedness will help in the event of a lawsuit.

To best understand how to cover your EPL risk, it’s worth the time to go over the potential sources, such as:

–          Recruitment practices

–          Employment applications

–          Employment offers

–          Employee orientation

–          Annual conduct reviews

–          Enforcing performance policies

–          Termination

–          Improper documentation of any or all of the above items

As your local independent insurance agency, we advise you to always engage in solid human resource practices. A good way to be pro-active is to conduct a thorough HR audit. Verify that the Employee Handbook outlines all of your policies and terms of employment clearly and concisely. Require employees to sign an acknowledgement form upon receipt of the Handbook and develop training for your supervisors that includes interviewing skills, performance reviews and zero-tolerance policy.

Consult your local independent insurance agent for expanded advice on the above items and to review your EPL business insurance policy. And, if you don’t already have an EPL policy in place, make that a priority in your conversation! We are always here to help you and there’s no better way to help than to discuss your EPL coverage.