Even when a company has relatively few employees, it needs to consider the possibility of liability for a claim related to employment practices. In order to protect itself, a company needs to take care to ensure compliance with all applicable employment laws. In addition, it needs to carry insurance coverage that will address potential claims made by its employees.
Employment practices liability insurance covers wrongful acts in which an employer knowingly breaks federal law or fails to adhere to established company policies. Examples may include claims related to discrimination, retaliation, or creating a hostile working environment.
Federal or state labor law violations related to wages and hours are typically excluded from EPLI policies. In addition, claims based on breach of contract are excluded unless they are connected to other claims which are included within the scope of coverage. If a court awards claimant punitive damages, it typically won’t be covered by an EPLI policy unless a company has a separate endorsement.
Instead of paying a deductible, companies pay their insurance carrier a Self-Insured Retention fee. A SIR is a set amount that goes towards a claim’s legal fees.
A small business should consult with an experienced insurance provider for help evaluating EPLI needs. They can supply detailed information about coverage limits and available policy endorsements.