How Employment Practices Liability Insurance Protects Your Company From Discrimination Lawsuits
The laws regarding employee discrimination are lengthy and complex. Small business owners and companies can easily run afoul of laws like the Americans with Disabilities Act (ADA), even if they do everything with what they feel is the best of intentions. On top of that, the risk of bad actors and impropriety within your business can open you up to a host of liability, including prosecution for sexual harassment, discrimination, inappropriate conduct, wrongful termination and more.
The best way to protect your company against these risks is to educate yourself on laws like the ADA and establish consistent, documented practices and policies that prevent unethical behavior from happening — or that at very least enable people to report it safely.
In addition to these practices, employers can consider getting additional insurance coverage to compensate them for their losses related to legal action and some associated legal fees. These products are called “employment practices liability insurance policies,” or EPL insurance for short.
How an Employment Practices Liability Insurance Policy Works
EPL policies are designed to respond to claims or allegations of misconduct against the business or its officers/managers. In the event that your company is considered potentially liable for an incident — or a series of incidents — an EPLpolicy may be available to fund the legal defense expense that may otherwise be out of pocket.
This policy will not cover any fines leveraged against your company, but it will pay for the costs of defense up to the coverage limit. Premiums are charged based on the size and scope of the company, with particular emphasis on the number of employees. A history of past misconduct or lawsuits can also raise premiums.
Why EPL Insurance Is Perfect for Small Business Owners
Large companies generally account for EPL coverage in their Management Liability or Executive Protection insurance program or as part of a series of financial products designed to hedge against risk.
Unfortunately, the smaller companies that do not have EPL coverage are also typically more likely to create an incident where they would need it. Whereas large companies have established practices, designated HR processes and a documented handbook outlining all policies and actions to be taken, small companies rarely provide all of these materials.
They may also lack education on what, exactly, constitutes discrimination, which can cause them to openly disclose a transgression of the law. For instance, openly disclosing that you hired a younger employee over an older one with equivalent qualifications “because the young guy can learn the tech faster” is blatant grounds for a age-based discrimination lawsuit. You may also be discriminating against an employee with a disability if you fail to make “reasonable accommodations” for their impairment, per the ADA.
Even when purchasing EPL insurance, business owners should still take efforts to research these laws and familiarize themselves with practices that discriminate against others or perpetuate systemic oppression. Document all your company’s guiding principles and policies that reduce the likelihood of discrimination in an accessible handbook and have this handbook reviewed by an employment law professional.
If you are interested in exploring what an EPL insurance policy can offer either as a stand-alone product or in addition to your business insurance program you can inquire about specialty commercial insurance policies in Las Vegas today.