How Can EPLI Protect Productivity?

By Cara Whedbee, Ph.D.

According to CCH Incorporated, Employment Practices Liability Insurance (EPLI) is a type of insurance created in the early 1990s designed to cover a company’s liability resulting from actual or alleged sexual harassment, wrongful termination or discrimination against employees. Such claims are typically not covered by a company’s comprehensive general liability policy, which will often specifically exclude these types of claims. A company’s directors and officers policy may offer a limited form of insurance coverage for these types of claims, but will probably not extend coverage to the entity itself—which is where the greatest exposure lies.

What and Who are Covered by EPLI?

CCH Incorporated also reports EPLI policies usually cover the cost of defense, indemnity (for liability) and often administrative hearings and actions related to such allegations. Most EPLI policies cover suits brought against the employer, directors, officers and supervisory employees, with some excluding coverage for non-supervisory employees and most excluding independent contractors and volunteers. However, there has been a widening of the definition to include some of the non-traditional employment arrangements.

What Can EPLI Do to Protect Productivity?

Simply put, EPLI can help protect you from the potential financial and productivity losses that can be incurred fighting an EEO claim or employee lawsuit filed against your business. If you have ever had to endure one of these claims before, you know how high these losses can be (sometimes tens or hundreds of thousands of dollars) and what a distraction the whole process is to your employees (fear of job loss, fear of company failure due to financial loss, etc).

To further support the idea the question above poses regarding a need for protection, you should know some recent employment survey facts. According to a Gallup poll report by Dennis Jacobe entitled “U.S. Employee-Reported Layoffs Highest in Five Years,” 30 percent of Americans report their employers have laid off employees during the past six months—up from 22 percent in 2007, and the highest level since August 2003, when 34 percent of employees said this was the case.

The survey also showed the percentage of Americans reporting job layoffs at their companies does not vary significantly by income—so this increase is affecting everyone. Additionally, 75 percent of Americans believe now is a bad time to find a quality job—a percentage that has remained essentially unchanged since April 2008. The last few months, according to the survey, have seen the highest level of job market pessimism since 2003.

Finally, this Gallup poll report states that recently the government’s four-week moving average of first-time claims for unemployment increased to its highest level since April 2002. So what do these statistics mean other than the job market is slowing?

According to the U.S. Equal Employment Opportunity Commission (EEOC) Charge Statistics FY 1997 Through FY 2007 report, in 2007 the number of employee charges filed to the EEOC against their employers was 82, 792. Why is this significant? Because the last time we had an economy and a slowing job market like the one we have now (2001 to 2002), the EEOC charge filings on this report showed a 4.5 percent rise. It would seem that if you could project this rise to occur again due to the current soft economy, then the rate of EEO claims could be likely to increase in a statistically significant way this year.

What Does All This Mean for You?

As was mentioned previously, EPLI can help protect you and your employees from the loss of money and productivity that comes along with fighting an EEO claim or employee lawsuit against your company. If you do not already have an EPLI policy, the statistics above could be a good motivator for you to check into getting one for your company. Sometimes these policies can be combined with your Workers’ Compensation insurance, or they can be purchased separately. For more information, contact your insurance provider or talk with your HR professional and/or employment law counsel.

Employment Practices Liability Insurance (EPLI) is a type of insurance created in the early 1990s designed to cover a company’s liability resulting from actual or alleged sexual harassment, wrongful termination or discrimination against employees.