Why Employment Practices Liability Insurance Matters for HR Professionals

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Employment Practices Liability Insurance (EPLI) works as a shield for organizations and their HR departments. EPLI may be particularly important for new and small businesses. According to a Forbes article, this is because larger businesses have “robust human resource offices and practices”, and a small business, “such as a doctor's office, retail shop, restaurant or contractor” may face expensive employment liability claims.

Cost implications and ROI
HR professionals should consider EPLI as a strategic investment that protects the organization's finances and its reputation. EPLI premiums may represent a significant investment but the potential costs of litigation can far outweigh the insurance expense. Like most insurance coverages, the cost of EPLI varies depending on the company, so depending on the type of business you run, your company's headcount, your claim's history, and your policies, it may be more affordable than predicted. EPLI protects organizations from various claims, including those related to deprivation of career opportunity, mismanagement of benefits, and privacy invasion. Coverage from Next Insurance can help pay for legal fees if your company is accused of discrimination, wrongful termination, wrongful discipline, or harassment.

Quick basics
EPLI safeguards organizations against claims filed by employees, former workers, and job candidates alleging misconduct or violation of their legal rights. HR leaders should understand that EPLI serves as both a financial safety net and a risk management tool, helping their organizations navigate complex legal challenges.

Key areas of protection
Modern EPLI provides comprehensive coverage against multiple aspects of employment practices. Common claims involve age discrimination, gender bias, racial discrimination, and disability-related issues. As workplace dynamics evolve and employment-related claims rise, EPLI provides important protection against a wide range of employment-related risks. In the fiscal year 2024 alone, “88,531 new charges of discrimination” in the US were reported by the Equal Employment Opportunity Commission. It may be a particularly important type of insurance for HR staff working in industries with high employee turnover.

In the UK, changes to employment law will be enforced by 2026, with a new Fair Work Agency. The FWA will be responsible for statutory sick pay, holiday pay, employment agency rules, failure to pay compensation orders/settlement sums by a tribunal, and the national minimum wage. According to some reports, EPLI will be more important than ever in protecting organizations from claims.

It should be noted that there are certain types of incidents not covered by EPLI, including intentional or dishonest acts, physical injuries, and property damage. EPLI does not cover claims that are made when an organization does not have an active policy, even if they did when the incident occurred. EPLI is a separate type of coverage from workers' compensation: this mainly helps to protect businesses from injuries and illnesses that occur at work.

Other types of business insurance include general liability insurance, which protects against accidents, and professional liability insurance, protecting against losses after a professional mistake.

Risk management
EPLI providers often offer useful risk management resources that HR professionals can use to strengthen their employment practices. These can include training materials, policy templates, consulting services, and legal helplines. By using these tools in existing HR processes, organizations can guard themselves against risks and potentially reduce their premiums by demonstrating a commitment to risk reduction.

Industry-specific considerations
Different industries face different levels of employment practices risk, meaning there are tailored EPLI coverages. Healthcare organizations, for example, might need specific coverage for patient care-related employment issues; technology companies might require protection against intellectual property (IP) related disputes. HR professionals must evaluate their industry's unique profile when selecting and managing their EPLI coverage.

Global coverage
For organizations operating across multiple jurisdictions, EPLI becomes more complex. Employment laws vary significantly between countries (and even between states in the same country). HR professionals in multinational organizations must ensure their coverage addresses the requirements and risks associated with each jurisdiction where they operate.

Future-proofing coverage
As workplace dynamics change, not least with the widespread adoption of remote working, HR professionals must regularly review their coverage to ensure it remains relevant and comprehensive. They may wish to consider coverage for emerging risks like AI-related employment decisions and gig economy workers. Regular policy reviews and updates can help ensure adequate protection against new employment practice risks.

Safeguarding against claims
HR professionals can reduce the risk of claims if they implement thorough prevention strategies. Organizations should have clear employment policies, maintain consistent documentation, and provide regular training for managers and employees. Documentation can prove important when defending against a claim, as contemporary EPLI claims can hinge on the quality and completeness of employment records.

Looking forward
The importance of EPLI may grow as employment-related risks become more complex and potentially costly. HR professionals have an important role in managing risks and ensuring their organizations maintain appropriate coverage. With careful attention to policy details and proactive risk management, HR professionals can help their organizations with the challenges of employment practices.