EPLI is a type of business insurance that specifically protects businesses from issues relating to potential employees, employees, and third parties. It does not replace another insurance type, but it does form part of any risk management package where several types of insurance provide sufficient business protection.
What is EPLI?
EPLI is short for employment practice liability insurance. It’s a bit of a mouthful, which is why insurers use an acronym for it. The risks when dealing with people in a business setting are broad and wide-ranging. Just meeting someone for an interview and deciding not to hire them can lead to a meritless claim because they’re disgruntled about being passed over in favor of another candidate. Therefore, for companies looking to hire, the risks are everywhere and not only with current employees.
A current employee can have an issue with a breach of contract where the business is at fault. Or they may take issue at feeling disadvantaged when other team members received workplace training or were sent on a course, and they were not. They might even allege they are being discriminated against on the basis of gender, sexual orientation, or race.
HR Mistakes Coming Back to Haunt the Business
A poorly written contract of employment, including a boilerplate one, can become an issue. Should an employee find that the company is in breach of its contractual obligations, this can create problems going forward. In this instance, they may wish to challenge it legally, pursue compensation, or take other measures.
Another unusual situation is where a bad hire by the Human Resources team leads to complications for other people. For instance, when someone is given preferential treatment as a new employee, which disadvantages long-standing ones, that can be seen as unfair. Also, should a new worker create liability issues including safety concerns for other employees, they may feel the company put them at undue risk. If their raised concerns were ignored, that also further complicates matters. EPLI can protect the company from these types of mistakes.
Training Not Provided
On-the-job training or being sent on external courses allows employees to perform better in their roles. Given that almost all full-time roles are subject to an annual performance review, the lack of training can impact ongoing employment due to lower scoring in their reviews. Employees can complain about not being provided adequate training. They may also feel aggravated that other staff members were given places on advanced training courses whereas they were left out. This can cause resentment and lead to further pursuit of the matter. Given how competitive some employment sectors are now employees know that they must take every opportunity to advance themselves, so these issues leave a sting.
EPLI Cover for Third Parties
Businesses are outsourcing work to third-parties more and more. This can create issues where someone who is not nor was ever an employee feels aggrieved and looks for legal redress. Most business insurance doesn’t cover third-party activities from this perspective; they’re more focused on the potential for employee accidents at work, etc. Therefore, when the business is outsourcing to individuals, agencies, or an outsourcing partner, EPLI can cover for instances where the third party is put out by the actions (or inactions) of the company.
It is illegal to discriminate against an employee on the basis of race, gender, age, sexuality, or disability. Doing so opens the door to a potential lawsuit. Unfortunately, not all employers are enlightened and some still think it’s acceptable to fire female employees for falling pregnant or sidelining employees because of their race, even when they are more qualified than a colleague.
While an EPLI insurance policy will protect the business against claims of this nature, it is essential to put systems in place that prevent such discrimination from occurring in the first place. Not only are discrimination lawsuits expensive for the company but they are also disastrous for public relations. Any whiff of discrimination in the workplace will have an adverse impact on a brand, and in the age of social media, such claims can cause a lot of damage.
Harassment can be an issue in some workplaces. An overbearing manager or a toxic mix of personalities may lead to a workplace harassment claim. Ideally, the human resources department or management should nip this one in the bud before it gets out of hand, but this doesn’t always happen, especially if weak management is part of the problem. Issues can also be avoided by a more thorough employee screening process, where potentially disruptive candidates are filtered out during the hiring phase.
Not all insurance is mandatory for businesses. However, as part of a risk management package, taking out EPLI is worthwhile because it covers issues that companies don’t think about until it’s too late.