Employment Practices Liability Insurance (EPLI)
What Is Employment Practices Liability Insurance (EPLI)?
Employment Practices Liability Insurance, also known as EPLI, is an insurance policy that protects employers against claims and suits like discrimination, harassment, wrongful termination, and failure to promote. It can cover legal costs and potential settlements.
What Does EPLI Cover?
EPLI covers employment-related claims involving things like harassment, discrimination, and retaliation. It typically pays attorney fees, settlements, or judgments up to your policy limit.
Examples of the most common types of EPLI claims small businesses see include:
- Wrongful termination (fired for an unfair or illegal reason)
- Harassment (including sexual harassment)
- Discrimination (hiring, pay, or promotion decisions tied to protected employee traits)
- Retaliation after someone reports a concern or uses a legal right
- Failure to hire or promote, or negligent evaluations
- Failure to accommodate for things like religious needs, pregnancy, or disability
- Violations of ADA (Americans with Disabilities Act) and FMLA (Family and Medical Leave Act) regulations
- Defamation or invasion of privacy
What a real-world EPLI claim could look like:
The owner of a six-person salon fires a stylist, who then files a claim for wrongful termination. The salon’s EPLI provider assigns defense counsel and covers legal fees. If needed, it also pays any settlement, up to the policy’s limit, minus any retention fees or deductible.
What Does EPLI Not Cover?
EPLI typically does not cover:
- Injuries to customers
- Wage or pay disputes
- Hour-related disputes (overtime, breaks, and similar issues)
- Workplace injuries or illnesses to staff (that’s what workers compensation is for)
- Claims you knew about before purchasing your EPLI policy
Some policies may cover defense costs only for wage and hour disputes. They may also have an option to specifically add coverage for wage disputes, but most EPLI policies exclude coverage for these claims.
EPLI vs General Liability vs Workers Comp: What’s the Difference?
The primary differences are tied to who is making a claim, and why.
- EPLI is coverage for employers when an employee accuses you, their employer, of a wrongful action.
- General liability is for you and your business when others, who are not you or your staff, make injury or property damage claims against you.
- Workers compensation is for employers when an employee experiences an injury or illness at work or because of work.
| EPLI | General Liability (GL) | Workers Compensation | |
|---|---|---|---|
|
Primary focus |
Wrongful acts of an employer |
Bodily injury or property damage to others |
Employee injuries or illnesses caused by the work or workplace |
|
Who makes the claim |
Employees, job applicants |
Customers, visitors, landlords, or other third parties |
Your employees (no lawsuit needed) |
|
Typical examples |
Wrongful termination, harassment, discrimination, retaliation |
Slip-and-falls, customer property damage, false advertising |
Medical bills, lost wages, rehab for injured staff |
|
Commonly not covered |
Wage and hour pay disputes, employee injuries, third-party property damage or injury claims |
Employee injuries, employment practices claims |
Employment-related claims, injuries, or property damage to others |
|
Policy type |
Typically claims-made |
Typically occurrence-based |
Varies by state |
|
Required by law? |
No |
No, but often contractually required |
Yes, in most states, if you have one or more employees |
Primary focus
EPLI: Wrongful acts of an employer
General Liability (GL): Bodily injury or property damage to others
Workers Compensation: Employee injuries or illnesses caused by the work or workplace
Who makes the claim
EPLI: Employees, job applicants
General Liability (GL): Customers, visitors, landlords, or other third parties
Workers Compensation: Your employees (no lawsuit needed)
Typical examples
EPLI: Wrongful termination, harassment, discrimination, retaliation
General Liability (GL): Slip-and-falls, customer property damage, false advertising
Workers Compensation: Medical bills, lost wages, rehab for injured staff
Commonly not covered
EPLI: Wage and hour pay disputes, employee injuries, third-party property damage or injury claims
General Liability (GL): Employee injuries, employment practices claims
Workers Compensation: Employment-related claims, injuries, or property damage to others
Policy type
EPLI: Typically claims-made
General Liability (GL): Typically occurrence-based
Workers Compensation: Varies by state
Required by law?
EPLI: No
General Liability (GL): No, but often contractually required
Workers Compensation: Yes, in most states, if you have one or more employees
Do Small Businesses Need Employment Practices Liability Coverage?
Does your small business need EPLI? Short answer: Probably.
Even small teams face employment claims related to hiring, firing, harassment, discrimination, or retaliation. EPLI can pay for a lawyer and settlements, so one harsh accusation doesn’t drain your cash or focus.
Is EPLI Required by Law if I Have Employees?
No, EPLI isn’t a legal requirement, unlike workers comp. However, it is strongly recommended if you have any number of employees, and investors and partner contracts often require it. Plus, EPLI fills a gap that general liability insurance doesn’t cover.
Can My Professional Liability Insurance Cover Hiring or HR Mistakes?
No, a professional liability or errors and omissions policy does not protect your business from employment-related mistakes.
Professional liability covers mistakes in the services you provide to clients, not how you hire, fire, or manage staff. If you serve customers and have employees, you likely need both coverages.
Professional liability = protects the work or business from claims made by clients or customers.
EPLI = protects the workplace or business from claims made by employees.
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