EPLI Vs. Workers’ Comp: What’s the Difference?
In today’s workplace, employment-related lawsuits are on the rise. In fiscal year 2024, the U.S. Equal Employment Opportunity Commission (EEOC) received 88,531 new discrimination charges, marking a 9.2% increase from the previous year. This uptick underscores the importance of understanding how different insurance policies protect businesses. Specifically, it’s crucial to distinguish between employment practices liability insurance (EPLI) and workers’ compensation insurance. While both are essential, they serve distinct purposes in safeguarding your company.
What Is Employment Practices Liability Insurance?
Employment practices liability insurance protects businesses against claims made by employees alleging discrimination, wrongful termination, harassment, and other employment-related issues. Unlike workers’ compensation, which covers physical injuries sustained on the job, EPLI addresses legal actions stemming from employment practices.
EPLI typically covers:
- Wrongful termination
- Discrimination (based on age, gender, race, etc.)
- Sexual harassment
- Retaliation
- Defamation related to employment
It’s important to note that EPLI does not cover bodily injury claims — that’s the domain of workers’ compensation. Additionally, EPLI protects the company itself, not the personal assets of business owners; for that, directors and officers insurance is appropriate.
Common Workplace Risks Covered by EPLI
EPLI is designed to shield businesses from a variety of employment-related claims, including:
- Wrongful termination: Claims where an employee alleges they were fired without just cause or due process
- Discrimination: Allegations of unfair treatment based on protected characteristics such as age, gender, race, or disability
- Harassment: Claims of a hostile work environment, including sexual harassment
- Retaliation: Accusations that an employer took adverse action against an employee for engaging in legally protected activity, like filing a complaint.
- Defamation: Situations where an employee alleges that false statements were made about them, harming their reputation
These types of claims can arise from current, former, or even prospective employees.
Why Even Small Businesses Need EPLI
There’s a common misconception that only large corporations face employment-related lawsuits. In reality, small and midsize businesses are equally vulnerable. A single claim can result from something as seemingly innocuous as a poorly handled interview or an unintentional comment.
For instance, let’s say a small business faces a lawsuit after a job applicant alleges age discrimination during the interview process. Without EPLI, the legal fees and potential settlement could be financially devastating.
Moreover, the EEOC’s 2024 report indicates a continued focus on enforcing anti-discrimination laws, with 110 employment discrimination lawsuits filed that year. This trend highlights the increasing risk for businesses of all sizes.
Reduce Risk With the Right Insurance Coverage
To proactively protect your business, it’s essential to have the appropriate insurance coverage in place. EPLI serves as a critical component of a comprehensive risk-management strategy, filling gaps not covered by general liability or workers’ compensation insurance.
In addition to securing EPLI, fostering a workplace safety culture can further minimize risks. Implementing clear policies, providing regular training, and encouraging open communication can help prevent issues before they escalate.
At Oakwood Risk, we specialize in providing tailored insurance solutions to protect your business from employment-related risks. Our team is committed to delivering exceptional service and comprehensive coverage options.
To explore how EPLI can safeguard your company, contact us or request a quote today.
Oakwood
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.
