Employees are what keep businesses running, but what would happen if one of your employees brought an employment-related claim against your business – allegations of discrimination or wrongful termination? Would you have the resources to legally defend your business against a claim or lawsuit of that sort? It’s important to consider employment practices liability insurance, or EPLI, to protect your business from this often-overlooked risk. We’ll go over what EPLI does and how it can help your small business.
What does employment practices liability insurance cover?
Employment practices liability insurance can protect your business against claims of discrimination and wrongful termination (among many other employment-related suits.) Any prospective, current, or past employee can bring a lawsuit against your business, and many small businesses can’t afford to pay the high costs of defending themselves legally. Whether or not the claim is true or valid, the price tag of a lawsuit can be exorbitant. And that’s where employment practices liability can help. EPLI helps to give you the resources you need to defend your business against a lawsuit or pay for a claim.
If you have general liability insurance, you may think you’re good to go. But the truth is that general liability typically does not protect against employment claims. Having EPLI allows small businesses to manage and transfer their employment-related risks so that they’re not shouldering it all on their own.
What are sources of employment practices risk?
There are many different areas of potential employment practices issues. Here are some of them:
- Hiring and recruitment
- Offers of employment
- Training and orientation of new employees
- Performance reviews
- How company policies are enforced
To help prevent lawsuits, your business needs to avoid employment risks while you’re hiring – a candidate could claim that you discriminated against them if the interview and hiring process isn’t handled carefully and properly. You also have to take steps towards preventing sexual harassment at your business and take all allegations seriously, as your business could be in legal trouble if you’re aware of the harassment and do nothing to stop it.
Why it’s important to keep thorough employment-related documents and policies
It’s also very important that you keep organized, detailed employment documents. This will show that you treat all of your employees fairly and equally. It can help lessen the chance of a lawsuit by deterring someone from bringing a claim against you and keeping everyone honest. It also shows your actions and those of your employees if you ever face litigation, and this can help you make your case. It’s important to keep everything in writing and to go about every employment-related situation by the book.
Having workplace policies about topics like harassment and discrimination might be required by the underwriter for you to get EPLI – they might even want to see copies of your policies. You might want to get some legal counsel to help you assemble an employee handbook if you don’t already have one. That way you establish that your business is committed to treating everyone equally and giving all employees the same opportunity. You also establish that you’re committed to creating a safe, welcoming workplace for all employees, and all of this can only help you if you face a lawsuit.
Why are small businesses at risk?
Small businesses might be especially at risk of employment-related lawsuits because they have a smaller staff with either limited or no HR department or counsel to turn to for assistance with thorny employment issues. It’s possible that they don’t have detailed records of employee performance. And since there’s a smaller, closer-knit staff, there may be emotional feelings of personal betrayal at a layoff or termination.
No one ever expects an employee to come after their business legally, but it’s important to be prepared nonetheless. You may believe that you have the most loyal staff in the world, but you still need to manage your employment-practices risks. There are many, many reasons that an employee might bring a lawsuit against your business, and lawsuits can be financially draining for businesses large and small. Take some time to think about whether EPLI is right for you.
If you’re interested in learning more about employment practices liability insurance and whether it’s a good idea for your business, we’d love to talk to you about it. Every business is different, so every business needs a unique insurance plan. We can even get you some quotes for employment practices liability insurance. All you have to do to get EPLI quotes is fill out our online form or give us a call today.