You’ve started a new business. Congratulations! You’ve gotten through the nitty-gritty details of securing a workplace. Now it’s time for the fun part. Hiring employees.
You put an ad online detailing all the qualifications you’d like to see in your ideal candidate. Soon, the resumes start rolling in. That’s the moment you put yourself at risk of an employment liability claim.
Say you choose not to interview a particular applicant. Or perhaps you do conduct an interview but choose not to hire that person. They could claim discrimination. Let’s say you do hire them, but later fire them.
You might have had a good (and legal) reason to do so. Even still, they could claim that you wrongfully terminated them.
These claims may not hold up in court. Hopefully, you are conducting business and managing personnel in a non-discriminatory fashion. But that doesn’t mean that these issues won’t be difficult and expensive to deal with.
For these reasons, we recommend that every employer purchase employment practices liability insurance.
What Is Employment Practices Liability Insurance?
Employment practices liability insurance (also known as EPLI or EPL) covers you against claims made by your employees. These claims might allege any one of the following:
- Discrimination based on sex, race, age, disability, or any other protected class
- Harassment (sexual or otherwise)
- Wrongful termination
- Other employment-related issues.
We get it. You already have to purchase workers’ compensation, product liability, and cybersecurity insurance. Maybe even a few more depending on your industry. You might wonder if the employment practices liability insurance cost is worth it.
You might be thinking, “I own a small business. My employees wouldn’t sue me.” But EPLI claims statistics show that employers are more likely to be sued by an employee than by a customer.
Large corporations often have a lot of insurance. But small businesses are the most vulnerable to employment claims. Why? You don’t have a fancy legal department to defend you. And many small businesses fail to create employee handbooks to guide personnel practices. This puts them at even greater risk.
How to Reduce Your Risk of a Claim
EPLI insurance carriers collect a lot of risk data. And lucky for you, we’ve studied those data extensively. Here are our best tips for reducing your risk of an employment practices claim.
- If you’ve read this far, we hope this point has become obvious by now. You must buy employment practices liability insurance. The protection is well worth your premiums.
- Create a detailed employee handbook. Write out all personnel policies and procedures. Be sure to include your hiring practices, disciplinary procedures, and termination practices, as well as any other rules that are important to your business. Other essential elements:
- An employment at will statement
- An equal employment opportunity/non-discrimination statement
- An anti-harassment policy
- Write detailed job descriptions for every employee.
- Conduct performance reviews at least once per year.
- Screen out unqualified applicants on paper before bringing them in for interviews.
- Ensure that your employment application and job interview questions do not ask for any information related to:
- Age
- Sex or gender
- Race, color, or ethnicity
- Religion
- National origin or birthplace
- Disability
- Marital or family status or pregnancy
- Do a background check on every candidate.
- Do not tolerate discrimination or harassment in any form. Both are illegal whether they come from supervisors, co-workers, or customers.
- Keep written records of all personnel issues, including the steps you took to address them. And be sure to always follow the policies you created in your employee handbook.
No business owner wants to believe that their employees might sue them. But the truth is that these claims are brought against employers every day. Follow these steps to help reduce your risk of a claim. And be sure to buy employment practices liability insurance.
