Employment Practices Liability Insurance (EPLI): What Business Owners Need to Know

If you own a business, protecting your company from potential lawsuits is crucial. Employment practices liability insurance (EPLI) is a type of coverage that shields employers from claims related to discrimination, harassment, wrongful termination, and other employment-related issues. In this guide, our insurance experts explain what employment practices liability insurance is, who needs it, what it covers, and how much it costs, along with strategies to reduce your liability risk.

Read on to learn from our insurance experts what EPLI is, who needs it, what it covers, and how much it costs. We also share strategies to help mitigate employment practices liability risk.

What Is Employment Practices Liability Insurance (EPLI)?

Also known as EPL insurance, EPLI is coverage that protects employers against claims made by employees alleging:

• Discrimination
• Wrongful termination
• Harassment
• Failure to promote
• Other employment-related issues

EPLI can be purchased as a stand-alone policy alongside a business owners policy (BOP) or added as an endorsement to a BOP or commercial general liability policy. Stand-alone policies generally provide broader coverage, but the right option depends on the size and needs of your company.

Who Needs Employment Practices Liability Insurance?

All types and sizes of businesses should consider EPLI, from large corporations to small nonprofits, whether private or public.

Small businesses may be particularly vulnerable, as they often lack legal departments, employee handbooks, or structured plans for handling harassment, discrimination, disciplinary action, and termination.

Employment-related claims can disrupt operations, damage morale, harm your reputation, and impose significant financial burdens. Winning such cases in court is challenging—roughly half of plaintiffs succeed when EPL claims go to trial.

How Much Does Employment Practices Liability Insurance Cost?

For small businesses, EPLI typically costs around $222 per month. Rates vary based on factors such as:

• Number of employees
• History of employment-related lawsuits
• Employee turnover rate
• Existence of established policies on hiring, discipline, complaints, and termination

While EPLI adds an expense, it protects your business from the potentially devastating costs of a lawsuit.

What Does Employment Practices Liability Insurance Cover?

EPLI covers defense costs, settlements, and damages for claims related to allegations such as:

• Sexual harassment and other forms of harassment
• Discrimination
• Wrongful termination
• Breach of employment contract
• Negligent evaluation
• Failure to employ or promote
• Wrongful discipline
• Deprivation of career opportunity
• Wrongful infliction of emotional distress
• Mismanagement of employee benefit plans

Some policies also cover claims filed by the Equal Employment Opportunity Commission (EEOC).

Covered losses include:

• Back pay and front pay
• Compensatory damages (e.g., emotional distress)
• Settlements
• Defense costs

Since claims can arise months or even years after an incident, you can purchase tail coverage to extend protection beyond the policy period.

What EPLI Doesn’t Cover

EPLI generally does not cover:

• Bodily injury or property damage (covered by workers’ compensation or general liability)
• Claims under the Fair Labor Standards Act (FLSA) or state wage and hour laws, such as:
  • Unpaid overtime
  • Minimum wage violations
  • Misclassification of employees or independent contractors
  • Unpaid meal or rest breaks

EPLI typically applies only to claims made by full-time or part-time employees, not contractors, and does not cover fines or penalties incurred in court.

How to Lower Employment Practices Liability Risk

Preventing employment claims is the most effective way to reduce risk. Consider these best practices:

• Clearly define expectations: Create detailed job descriptions that outline responsibilities and required skills.
• Avoid discrimination in applications: Include equal employment opportunity and at-will statements; avoid questions that reveal age or other protected characteristics.
• Screen applicants: Conduct background checks to identify potential issues before interviews.
• Develop an employee handbook: Include policies on attendance, discipline, and complaints, along with at-will and equal opportunity statements.
• Distribute handbooks and display policies: Ensure all employees receive a copy and display policies in the workplace.
• Educate employees: Train staff on reporting harassment or discrimination and clarify unacceptable behaviors to supervisors.
• Conduct performance reviews: Regularly meet with employees to discuss performance and maintain written documentation.
• Enforce a zero-tolerance policy: Apply strict policies against discrimination, harassment, and substance abuse.
• Maintain an open-door policy: Allow employees to report issues without fear of retaliation and document resolutions.
• Understand employment law: Familiarize yourself with federal and state laws protecting workers’ rights.

Even with these strategies, claims can still occur. That’s why EPLI coverage is essential.

Key Employment Laws Business Owners Should Know

Familiarity with federal and state employment laws helps protect your business. Key laws include:

• Civil Rights Act of 1964: Prohibits discrimination based on race, color, religion, national origin, or sex, including pregnancy and sexual harassment.
• Equal Pay Act of 1963: Requires equal pay for men and women performing the same work under similar conditions.
• Immigration Reform and Control Act of 1986: Prohibits discrimination based on national origin or citizenship status.
• Americans with Disabilities Act of 1990: Prohibits discrimination against people with disabilities.
• Bankruptcy Code: Prohibits discrimination against individuals who have declared bankruptcy.
• Equal Employment Opportunity Act of 1972: Expands protections against workplace discrimination and grants the EEOC enforcement powers.
• Age Discrimination in Employment Act: Protects employees aged 40 and older from age-based discrimination.

Purchase Employment Practices Liability Insurance Today

Have questions about EPLI? Our experts at C&S Insurance can help you decide whether to purchase a stand-alone policy or add an endorsement to your BOP or commercial liability insurance. Protect your business and employees, speak with an agent today.