Is EPLI worth it for your business?
The risk of employee lawsuits has grown. The U.S. Equal Employment Opportunity Commission’s (EEOC) data shows a 44% surge in workplace discrimination charges between 2021 and 2024.
Here are some examples of lawsuits that could be covered by EPLI:
- A former employee files a lawsuit against your business alleging they were fired because of age discrimination.**
- A job candidate feels you didn’t hire them because of their race or religion.
- A visually-impaired customer sues you because your website does not accommodate screen reader software.
Here’s why EPLI can be worth the cost:
- Legal defense is expensive. Claims can come from a single individual and quickly escalate into a significant expense — even if your business wins. It can cost an average of $75,000 to work with a lawyer to settle a claim pre-trial. And legal costs only go up if a case reaches the courts. EPLI can help cover some legal fees for business owners if they’re personally named in a lawsuit.
- Settlements can be significant. Many businesses settle to avoid the stress and cost of litigation. EPLI can help manage those costs.
- Small businesses are vulnerable. Many solo business owners or small businesses don’t have HR departments or legal teams to offer sound practices and procedures. It’s possible to make mistakes while hiring, firing or handling complaints.
- Employment laws are complex. Staying compliant with federal and state employment laws (like FMLA, ADA, and EEOC regulations) is challenging. Your blindspot could lead to costly lawsuits.
- You’re busy running your business. EPLI coverage can help you focus on running your business if you know you have protection against some legal fees and complaints.
At NEXT, you can get EPLI as an add-on to general liability insurance.
When EPLI may not be necessary for your profession
EPLI isn’t a necessity for every business. Here are a few instances when EPLI coverage might not be essential for your line of work:
- You don’t hire workers. If you’re a solo operator or run a family business, your risk of facing lawsuits from employees or job candidates is lower. However, you’re still vulnerable to accusations and claims from customers or prospects.
- You have a small, low-turnover team. Businesses with long-standing employees, clear policies and minimal disputes may face fewer risks.
- You’re in a low-risk industry. While no business is entirely risk-free, some industries (like solo consulting or freelancing) tend to have fewer EPLI claims than others (like food and restaurants, retail, or financial services).
- You have strong HR systems in place. If your business has strong employee documentation, training programs, regular performance reviews and legal reviews of hiring/firing practices, you may lower your vulnerability to workplace lawsuits.
- Your budget is tight. Cost matters — especially for early stage small businesses. You may need to prioritize other types of insurance (like general liability insurance, workers’ compensation insurance or commercial property coverage) for licensing or operational requirements. EPLI might not make the cut right away. However, it’s worth reassessing your business needs as your business and your business risks grow.
5 tips to help lower EPLI policy premiums
EPLI coverage can offer protection from some high-cost events that could dramatically affect the financial health of your business. Just one claim — founded or not — can lead to legal costs that far exceed the price of a policy.
The cost of an EPLI premium depends on several factors, including:
- The type of work you do
- The number of employees you have
- Your claims history
- Your work experience
- Your location, and more
And, there are things most business owners can do to help reduce their EPLI cost.
1. Bundle EPLI with other insurance policies
Many insurers offer discounts when you bundle insurance policies. At NEXT, EPLI is offered as an add-on to general liability coverage. And if you bundle EPLI and general liability insurance with an additional policy, such as workers’ compensation insurance, you could save up to 10%.
Bundling can simplify your insurance management and help you save money.
2. Create strong HR policies and employee documentation
Clear policies and up to date employee handbooks demonstrate to insurers that your business takes workplace policies seriously. Accessible and understandable policies that outline expectations around behavior, discipline, harassment, discrimination and reporting procedures could help you get a better rate.
3. Practice transparent and fair hiring and firing procedures
Standardizing how you hire and terminate employees can help reduce misunderstandings and prevent discrimination or wrongful dismissal claims. Make sure decisions are based on documented performance. And evaluate and track candidate and employee performance consistently. Seek legal advice to help establish proper processes.
4. Offer regular employee training
Conduct ongoing anti-discrimination and harassment prevention training to help reduce your risk of claims. The practice may show insurers that you’re actively working to maintain a respectful and compliant work environment.
5. Document key employee interactions
Keep detailed records of candidate interviews, employee performance reviews, disciplinary actions and terminations to help protect your business in the event of a dispute. Substantial documentation provides evidence that decisions were made fairly and within legal guidelines.
