Discover the importance of EPLI for your business. Protect yourself from the financial risks of work-related lawsuits with employment practices liability insurance.

Work-related lawsuits are on the rise, and a single claim against your company could be financially devastating if you’re not adequately insured.

Legal fees are not the only cost to your company. You may have to cover the expenses of investigating an allegation — audits, data collection and record production — which can rack up big bills. If the complaint involves sexual harassment or discrimination, you will also need (or may wish to have) help paying for a media response and reputational damage control.

Employment practices liability insurance (EPLI) protects employers from the costs of allegations of wrongful acts arising from the employment process. These allegations can include discrimination, sexual harassment, and hiring or firing actions. It can be purchased as a stand-alone policy or as an endorsement to your business owners policy (BOP).

EPLI offers lawsuit protection

Acts typically covered by EPLI include:

Despite EPLI coverage’s relatively low premium, many employers don’t buy it because they mistakenly believe other types of insurance cover such complaints. In fact, most employers with fewer than 50 employees pass up this important protection.

EPLI is generally a separate coverage from your BOP, but talk to your insurance broker about the possibility of adding it to your insurance program as an endorsement. Alternatively, you may prefer a stand-alone policy with higher financial protections than are offered when the coverage is combined in a BOP.

Keep in mind that EPLI policies have exclusions. Most do not cover:

Also, EPLI is a claims-made coverage, meaning claims are covered only when both the incident in question and the claims related to it occur while the policy is in force. If you’re sued after the policy has lapsed, you won’t be covered.

Choose the right coverage

It’s best to work with an insurance broker who has experience in the employment practices area and who can design a policy tailored to your needs. Your coverage and premiums will be determined by the type of business you are in, the number of employees you have, your human resources (HR) practices and claims experience, and the limits and deductibles you choose.

Most EPLI policies provide defense coverage, but you may be required to use an insurer-approved attorney. So inquire about carriers’ litigation records when deciding which one to place your business with. Also ask if your coverage applies beginning with the first dollar you have to spend on legal response and if costs associated with regulatory inquiries about an employment practices complaint are included.

Your EPLI coverage should be coordinated with other types of coverage you may have. These include directors and officers liability, cyber liability, crime and fidelity, and fiduciary insurance.

Follow HR best practices

During the underwriting process, the insurer will review your employment policies and procedures. Most insurance companies will work with policyholders to help them manage risks and improve their HR practices. Many provide additional client services designed to prevent claims. These include help lines, sexual harassment and ethics training classes, legal services, and employee handbook assistance.

Among the employment safeguards you should have in place are:

Protect yourself by being proactive in your employment practices. Hire a good HR administrator and consider retaining outside counsel familiar with labor law to keep your company in compliance.

For example, does your employee handbook clearly explain the types of employee conduct that are prohibited? Do you have procedures in place to investigate and promptly act on complaints? Do you have policies for email, social media, privacy and sexual orientation?

Employers face many risks in the workplace today. Staying on top of EPLI claims trends can help reduce your exposure to wrongful acts. Here are seven trends you should take into account when designing your insurance coverage:

  1. Sexual harassment — The #MeToo movement has spurred an increase in harassment claims, including LGBTQ-based sexual harassment charges.
  2. Retaliation — Employers can be on the hook for retaliation even if it turns out there was no underlying harassment or discrimination.
  3. Pay equity — A 2020 survey from ADP Canada and Leger reports that women continue to trail men in earnings, making 23% less in total income than men. In the past few years, a number of provinces, such as Ontario and Quebec, have enacted pay equity laws that impose stricter standards on employers and lessen the legal burden for employees alleging wage discrimination.
  4. Marijuana legalization — Canada legalized marijuana in all provinces in 2018, creating legal complications for employers who test for drugs (especially those with zero tolerance policies), as there is no Canadian law permitting or regulating mandatory drug testing for employees. To properly administer employee drug testing, a business must have a drug and alcohol policy in place.
  5. Worker classification — The gig economy has made it imperative to properly classify employees. If an independent contractor or unpaid intern is performing the duties of a regular employee, you may be in violation of the Canada Labour Code and corresponding provincial law. You could also be in violation if you’ve denied overtime to employees by misclassifying them as exempt.
  6. Website accessibility — If you conduct commerce online, make sure your site is compliant with federal and provincial laws. In Ontario, for example, the Accessibility for Ontarians with Disabilities Act mandates all public, private and nonprofit organizations of more than 50 employees make their websites and web content accessible following the Web Content Accessibility Guidelines. A failure to do so could result in fines of up to $100,000 for each day of violation.
  7. Pregnancy and lactation accommodation — Employers have a duty to accommodate because of pregnancy-related needs, as stated by the Canadian Human Rights Commission. Some provinces such as Ontario and British Columbia also require employers to accommodate lactation for a certain period of time after an employee gives birth.

Following HR best practices and having the right insurance coverage are the best ways to defend against employment claims. Talk to your insurance broker about the risk management and crisis response services available under some EPLI policies. You’ll have the peace of mind that comes with knowing you’re protected against the high costs of an employment practices complaint.