EPLI Explained: What Businesses Need To Know

In this article, you can discover…

• What EPLI is and what it does. 
• Which factors determine the cost of a policy.
• How EPLI can benefit small businesses. 

What Is Employment Practices Liability Insurance?

Employment Practices Liability Insurance (EPLI) is insurance you can buy as an employer to offer protection against employee lawsuits. EPLI can be extremely helpful, but the protections offered are only as good as the wording on your policy. 

Be sure to review policy details with your attorney, as many EPLI policies have important exclusions. If the policy you are considering excludes certain common and damaging cases that might be brought against you, it is not worth buying. 

Why Is EPLI Important For Businesses?

EPLI is important for your business because the number one type of lawsuits that employers face in California are employee actions against them. Wrongful termination, wage and hour complaints, and discrimination complaints are quite common in California and having insurance that covers you for those kinds of lawsuits can be of real benefit.

How Can Having EPLI Benefit Small Businesses Specifically?

Employment Practices Liability Insurance is especially important if you run a small business, as a single lawsuit can easily ruin smaller enterprises. Large companies with tens of thousands of employees have the resources to handle settlements, but a small business is more likely to operate with smaller reserves have fewer assets available to weather such a lawsuit. 

California law allows employees to group together and bring cases not only for themselves but on behalf of their coworkers going back several years. These types of cases are class action cases or cases known as PAGA (Private Attorneys General Act), and those type of cases can result in businesses being forced to pay employees awards worth hundreds of thousands or even millions of dollars. Even smaller actions can easily climb into the tens of thousands. 

Attorney Jeannette Witten is an experienced business and employment law attorney serving California. For over 20 years, she’s helped clients just like you choose quality EPLI plans and helped protect their small and mid-size business from employee suits.

Have questions about EPLI policies and best practices? Reach out to Hudson Martin PC at (831) 480-6608 for an initial consultation today. 

What Factors Determine The Cost Of An EPLI Policy?

The cost of an Employment Practices Liability Insurance (EPLI) policy is primarily determined by risk. Insurance companies will first assess your risk by asking you to disclose any prior claims that have been brought against you. They will also inquire about your best practices to minimize the likelihood of employees taking legal action. These risk factors will significantly influence the cost of the EPLI policy.

Another key factor in determining cost is the coverage provided by the policy. Lower-cost policies, may offer limited coverage and provide false peace of mind. Such policies if the protection is not intact are not worth the investment. It is important to thoroughly evaluate the protections offered. A robust policy should cover wage and hour claims, discrimination claims, and wrongful termination claims.

The final factor affecting the price of the policy is the deductible. The amount your business can afford to pay in deductibles will influence how low your premiums are. Businesses with more resources to cover deductibles and a lower risk profile due to strong best practices will generally enjoy lower premiums. Because EPLI policies are expensive, having a higher deductible is a way to leverage risk against future serious claims while keeping the annual policy cost as low as possible.

What Should I Look For When Choosing An EPLI Policy?

When choosing an EPLI policy, it is essential to consider both the cost and the comprehensiveness of the coverage. Ensure the policy protects you against the types of claims you are most likely to face; if it does not, the policy may not be worth the investment.

Additionally, it is important to research the insurer, especially if they are a provider you are not familiar with. Look into how long they have been in business and their financial stability. You want to be confident that the insurer can actually deliver the protection they promise.

Parting Thoughts

Many small businesses overlook the importance of providing proof of employee meal periods and rest breaks. I have overseen numerous cases over the years and continue to see this issue arise. It is crucial to document that you are providing your employees with timely breaks. Without this proof, employees can sue you under California law, and an insurance company may not cover cases where you cannot demonstrate compliance. While it might feel like micromanaging to require employees to log every meal break, these records are essential for your protection.

California law is written and interpreted in favor of the employee, not the employer. Seeking legal assistance in selecting an EPLI policy and reviewing your best practices with an attorney can be invaluable in safeguarding both your business and the work you have put into building it.

Still Have Questions? Ready To Get Started?

For more information on EPLI Explained: What Businesses Need To Know, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (831) 480-6608 today.