Why Every Business Needs Employment Practices Liability Insurance (EPLI)

Jul 8

In today’s workplace, no business is immune to employee lawsuits. Claims of wrongful termination, harassment, discrimination, retaliation, and more can hit companies of every size and industry, often when they least expect it.

As your business grows, so does your exposure. A single claim, even if unfounded, can lead to six-figure legal bills, settlements, and reputational damage that can take years to recover from.

The Rising Risk of Employment Claims

Over the past decade, employment-related lawsuits have steadily increased. Several factors are driving this trend:

Increased awareness of employee rights: Social movements and evolving cultural expectations have empowered employees to speak up about workplace issues—leading to more claims than ever.
Complex, ever-changing employment laws: Federal, state, and local rules on hiring, pay, leave, and harassment change frequently. Companies unaware of these changes can accidentally violate laws, opening themselves to costly litigation.
High potential payouts: Employment claims can result in significant settlements or jury awards—often well into six figures. Even if you win, defending a claim can cost $150,000 or more.
Third-party exposure: Businesses increasingly face claims from customers, vendors, or contractors alleging harassment or discrimination by your employees—a risk many companies overlook.

What Does EPLI Cover?

Employment Practices Liability Insurance helps pay for legal defense costs, settlements, and judgments if an employee sues your business over violations of their rights. Coverage typically includes:

Mismanagement of employee benefits: Protects your business if you improperly administer employee benefits like health insurance, paid time off, or sick leave.
Sexual harassment: Covers legal costs if an employee sues over harassment claims, such as when a manager makes suggestive remarks and HR fails to address it.
Wrongful discipline, demotion, or termination: Provides protection if an employee alleges they were wrongfully disciplined, demoted, or fired—or if they claim negligent hiring or promotion practices.
Slander or libel: Covers employee claims of defamation within your organization, like an unfounded accusation made in front of coworkers.
Discrimination: Protects against claims that your business discriminated based on age, gender, religion, race, disability, or other protected classes.
Breach of employment contract: Covers lawsuits if you fail to adhere to the terms of an employment contract or job offer agreement.
Invasion of privacy: Provides coverage if your business is accused of overstepping while monitoring employees or handling personal information.
Mental or emotional distress: Covers situations where an employee alleges mental or emotional suffering due to inaction on workplace bullying, intimidation, or other harmful conduct.
Complaints filed with regulatory agencies: EPLI also helps cover your defense costs if an employee files a complaint with agencies like the Equal Employment Opportunity Commission (EEOC) or related to violations of the Family and Medical Leave Act (FMLA).

Why Every Business Needs EPLI

Whether you operate a small startup, a growing mid-sized company, or a large corporation, EPLI is a critical layer of protection. Even well-run businesses with strong cultures and fair policies can face allegations that spiral into expensive legal battles.

Remember: an employee doesn’t need to win a lawsuit for you to face major costs. Legal fees alone can disrupt cash flow and threaten your financial stability.

Who Needs EPLI Coverage?

While EPLI isn’t legally required, every business with employees should strongly consider carrying it. Even a single conflict can lead to a lawsuit that threatens your finances and reputation.

Here’s how EPLI applies across industries:

Retail
A computer or electronics store fails to pay unused vacation time when a technician resigns, and the employee sues over wage and hour violations.
Food Services
A fast-food manager makes suggestive comments and advances toward a cashier. When the employee complains and HR doesn’t act, a lawsuit follows for failing to stop harassment.
Professional Services
A manager at a consulting firm falsely accuses an employee of misconduct in front of others. The employee denies it and sues for slander.
Manufacturing
An experienced employee at a factory is passed over for a promotion given to a younger hire. They sue the company for age discrimination.
Healthcare
A doctor repeatedly makes inappropriate jokes at the expense of an office staff member. When HR fails to address it, the employee sues for harassment.

EPLI: A Critical Risk Management Tool

Modern EPLI policies offer more than just insurance. They often include proactive resources such as:

Access to HR hotlines and employment law experts to get advice before problems escalate
Employee handbook reviews to keep your policies up to date with current laws
Online training modules for employees and managers
Documentation templates for performance reviews and disciplinary actions

These resources don’t just protect your business—they show insurers you’re serious about reducing risk, which can help you negotiate better premiums.

Final Thoughts

Employment-related lawsuits are among the most common and expensive risks businesses face today. Whether you have 2 employees or 2,000, EPLI is an essential safeguard.

At Starisks, we’ve helped businesses across industries secure customized EPLI coverage for over 25 years. We don’t just sell policies—we help you build strategies to prevent lawsuits and protect what you’ve worked so hard to build.

Ready to safeguard your business? Contact us today or schedule your free EPLI consultation below.

Schedule a FREE Consultation