Employment Practices Liability (EPLI), Should I Buy It for My Business?

No matter how much you enforce policies at work or how friendly and open your workplace environment is, there’s always a chance of conflict among employees. Your employees may feel they’re being subjected to discrimination on the basis of gender, race and ethnicity, nationality, or any other reason whatsoever. Your employees may also feel that they aren’t receiving the growth and promotions that they rightly deserve. In the worst-case scenario, your employee – prospective, current, or ex, may decide to file a lawsuit against you.

Employees suing their employers for discrimination and harassment isn’t uncommon. In fact, more than 90,000 discrimination cases were filed with the Equal Employment Opportunity Commission in 2018 alone. And the worst part of workplace discrimination and harassment lawsuits is that they’re among the most expensive lawsuits to settle. An employer may have to pay hundreds and thousands of dollars to settle a lawsuit if they’re proven guilty. For a small business owner who’s already struggling to stay afloat during its early stages, paying such hefty amounts in settlements may cost them their business. This is where Employment Practices Liability Insurance comes into play. 

What is EPLI?

The business owner is liable and accountable for the actions and practices of its managers, supervisors, and employees. So if any individual working for you has a complaint against anyone on your work premises, you’ll have to take the heat. 

Employment Practices Liability Insurance is insurance that covers harassment and discrimination claims made against an employer by an employee. This insurance is especially beneficial for small businesses that have less than 50 employees. An EPLI covers the cost in full that it takes to either settle a case out of court or the defense costs in case the employee is adamant about taking the case to court. 

An ideal EPLI policy will cover the costs in full, but every EPLI policy is different. It’s on a business to choose the one that fits their requirements and budget the best. 

What Does EPLI Cover?

Every EPLI is different. However, some of the basic claims that every EPLI covers include:

• Sexual harassment
• Claims against discrimination on gender, age, race, religion, nationality, or disability
• Unfair termination
• Any form of retaliation against an employee who reported and complained about discriminatory practices
• Defamation of employee
• Failure to award rightful promotions
• Invasion of privacy
• Keeping an employee deprived of a well-deserved career opportunity
•  Negligent or unfair performance evaluation
• Failure to provide lactation and pregnancy accommodations
• Lack of support or cooperation in the documentation for immigration
• Wage-related claims

Employment laws keep changing. Some EPLI policies are flexible and can accommodate these frequently changing employment laws. These EPLI policies are more expensive than the others, though.

What Does an EPLI Not Cover?

While an EPLI has got your back in most situations, there are certain employment-related claims that an EPLI doesn’t cover. 

• An EPLI won’t compensate for the expenses to cover an employee’s illness or injury that occurs while they’re at the job. 
• It won’t cover your losses in case an employee does a theft. In case of employee dishonesty or theft, you’ll need to purchase commercial crime insurance.

• You can’t expect the insurance company to cover the losses under EPLI in case your business has to suffer losses at the hand of incorrect management decisions. If the management or board of directors of your company uses the company funds incorrectly, you’ll have to bear the loss and consequences. However, you can invest in directors and office insurance if you want this area to be covered.

• Union disputes are quite common, especially at manufacturing facilities where there’s an active labor union. EPLI coverage won’t cover you in instances where the labor union makes collective bargaining demands, or there’s a serious dispute among the labor.

• If an employee files a lawsuit in response to a professional error made by anyone in your company, the EPLI won’t come to your rescue. In this case, professional or malpractice liability insurance would help. 

• Unemployment benefit claims aren’t covered under EPLI.

Why is it Better for Small Businesses to Invest in an EPLI

If you’re still not sure if you should buy Employment Practices Liability Insurance for your small businesses, the reasons listed below will convince you for good.

• Employee lawsuits are very common. You’re always at the risk of getting into one, regardless of how closely you manage your employees. Employees are very well aware of their rights today. You breach a right today, and you’ll find yourself in the court the next. An Employment Practices Liability Insurance will keep you covered in case you fail to reach a settlement with the employee in person. 

• An employee can sue you for reasons you never imagined and get away with it. Some examples include termination due to excessive absences when an employee was unwell, termination based on poor performance when the terminated employee was aged, and the list can go on. 

• You, as a business owner, are fully responsible for anything and everything your employees do, including the managers and supervisors. If anyone, either from the management level or junior level, harasses someone or discriminates on any basis whatsoever, you’ll have to bear the consequences. Having an EPLI will ensure that you or businesses don’t have to suffer the financial blow if the employment-related lawsuit goes to court.



Small businesses are at the highest risk of getting sued by employees for reasons you never imagined were likely to get you sued. The answer to your question of whether you should buy Employment Practices Liability Insurance for your small business, the answer is a definite yes!