Employee Disputes: Why Your Business Needs Employment Practices Liability Insurance
Employee disputes have become a serious threat to today’s companies, with lawsuits involving discrimination, wrongful termination, and harassment on the rise. The Equal Employment Opportunity Commission reports that, in fiscal year 2023 alone, the number of discrimination or harassment lawsuits was 50% higher than the previous year.
Without employment practices liability insurance (EPLI), even a single claim can result in exorbitant legal fees. EPLI provides a crucial shield, covering these legal costs and helping businesses navigate the often complex and costly world of employee litigation.
What Is Employment Practices Liability Insurance?
Employment practices liability insurance is a policy designed to protect businesses from employee-related claims. This insurance covers legal expenses, settlements, and judgments, which can be devastating to a company’s financial stability.
EPLI is critical because it covers risks that general liability policies do not. While general liability insurance typically covers third-party claims like property damage or bodily injury, it doesn’t address employee-related issues.
Rather, claims such as sexual harassment, racial discrimination, or failure to promote fall under the scope of EPLI. Even if a company is not found at fault, defending these claims often leads to significant legal expenses and settlements. Without EPLI, a business may struggle to cover these costs.
Why Employee-Related Claims Are on the Rise
Over the past few years, several factors have contributed to a surge in employee-related claims, putting businesses of all sizes at risk.
Tech Layoffs
Massive tech layoffs have led to growing tensions between employers and employees. Consequently, there’s been a rise in lawsuits, with claims ranging from wrongful termination to age discrimination. Some employees argue that layoffs targeted older or higher-paid workers, while others dispute the handling of severance packages. Still others may allege violations of the Worker Adjustment and Retraining Notification (WARN) Act, which requires employers to provide 60 days’ notice before mass layoffs or facility closures.
Return-to-Work Mandates
The rollback of remote work policies is also leading to litigation, as employees who have become accustomed to flexible work arrangements push back against mandates to return to the office.
Many have cited issues like health concerns, caregiver responsibilities, or breaches of prior agreements on remote work as grounds for legal action. In some cases, workers have filed lawsuits alleging wrongful termination or discrimination after refusing to comply with return-to-office mandates, further straining employer-employee relations.
Social Movements
Social movements like “Me Too” have created heightened awareness around issues such as sexual harassment, leading to more claims and higher settlement values. Moreover, evolving labor laws and expanded protections for new and existing classes of workers — such as those related to gender identity, race, and age — have resulted in more frequent litigation.
Wage and Hour Practices
Businesses are facing increasing scrutiny over wage and hour practices, particularly in industries like hospitality and retail, where hourly workers may claim they’ve been undercompensated.
Benefits of Employment Practices Liability Insurance
The key benefit of employment practices liability insurance is its ability to mitigate the financial damage of employment-related disputes. Many business owners mistakenly believe that only large corporations are at risk of such claims, but smaller companies are often the most vulnerable. Smaller businesses may not have dedicated HR teams to navigate complex labor laws, making EPLI even more critical.
Beyond the financial protection, EPLI can also help preserve a company’s reputation by enabling businesses to resolve disputes quickly and confidentially. This is especially crucial in industries where public trust is essential, such as finance and healthcare. Negative publicity stemming from employee lawsuits can have long-lasting consequences, and EPLI helps companies navigate these sensitive situations with minimal disruption to their operations.
Another important benefit of EPLI is that it provides access to legal resources and support for businesses facing these claims. Many policies include risk-management services, such as employee training and legal consultations, which can help businesses prevent claims before they occur and handle them effectively when they do arise.
Protect Your Business for the Long Haul With EPLI
As employee disputes continue to rise, the need for employment practices liability insurance becomes more apparent. By incorporating EPLI into your company’s risk-management strategy, you can safeguard against the unpredictable nature of employee litigation. Regularly reviewing your coverage and staying informed of the latest trends in employment law ensures your business remains protected from evolving risks.
It’s essential to act proactively, especially in today’s climate where employee claims can come unexpectedly. Don’t wait until a costly dispute threatens your business. Contact Oakwood Risk today to review your EPLI coverage and protect your company from the financial and legal fallout of employee disputes.
Oakwood Risk
Oakwood Risk provides industry-leading insurance services, solutions, and counsel to our clients. Our professionals are valued for their ability to provide outstanding customer service, with a commitment to the relentless pursuit of value-added solutions, results, and comprehensive coverage.
