Employment Practices Liability

Are We Insured for Discrimination and Wrongful Termination?

With a strong national focus on salary transparency and protecting people against discrimination and harassment, businesses should be questioning if their insurance covers them for such an occurrence. The answer to this question is likely yes if you have purchased Employment Practices Liability Insurance and the allegation comes from an employee or employee candidate. You also may have coverage if the allegation comes from a customer or vendor if your Employment Practices Liability Insurance also covers third party occurrences. However, according to the Insurance
Journal only one fourth of companies found to need such coverage don’t have it. (1) This could be because there is a false assumption of coverage under a straight General Liability policy, or Workers Compensation Policy.

Employment practices liability insurance, known in the trade as EPL insurance or EPLI, provides coverage to employers against claims made by employees alleging:

  • Discrimination (based on sex, race, age, or disability, for example)
  • Wrongful termination
  • Harassment
  • Other employment-related issues, such as failure to promote

Large corporations typically have substantial employment practices insurance coverage in place and are prepared to deal with just about any employment lawsuit. However, small or new businesses are often the most vulnerable to employment claims . That’s because they usually lack a legal department or employee handbook detailing the policies
and procedures that guide hiring, disciplining, or terminating employees. (2)

According to QuickBooks, the following areas can be cause for discrimination (3):

  • Age: The EEOC only regulates discrimination against people who are over age 40, although some states do have laws that protect younger workers.
  • Disability: Includes mental and physical disabilities, as well as current and past illnesses, as long as the employee would be able to adequately perform their job duties with reasonable accommodations.
  • Genetic Information: Includes family medical history and risk of potential diseases.
  • Pregnancy: Must be treated the same way as any other temporarily disabled employee.
  • Race/Color: Can also include discrimination against a person married to or connected with another person of a
    certain race or color or because of a person’s connection to a race-based organization or group.
  • National Origin: Can also include discrimination against a person married to or connected with another person
    of a certain nationality or because of a person’s connection to an ethnic organization or group.
  • Religion: Includes traditional organized religions as well as other sincerely held personal beliefs.
  • Sex: Includes gender identity, transgender status and sexual orientation.
    Military Service or Affiliation.
    Bankruptcy or Debts.
  • Retaliation: All EEOC-enforced laws make it illegal to fire, harass, demote or otherwise retaliate against people who have filed a discrimination suit or complained about discrimination on the job.

Quickbooks has a useful guide to understanding employment discrimination laws
To ensure you are covered for this important exposure check with your insurance agent to confirm you have both 1st and 3rd party Employment Practices Liability Insurance. If not, please contact me to discuss how to obtain coverage.

(1) https://honigconte.com/blog/business-insurance/signs-business-needs-employment-practices-liability-coverage/
(2) https://www.nationwide.com/business/insurance/employment-practices-liability/
(3) https://quickbooks.intuit.com/r/uncategorized/the-ultimate-guide-to-employee-discrimination-laws/

Donald Soss, President
Soss & Associates, Inc.
Insurance and Financial Services

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