However, you have an option when it comes to employment practices liability insurance (EPLI). It can pay legal costs if you do not uphold your responsibility to be fair in your employer-employee relationships.

Unfortunately, many small business owners opt out of EPLI coverage because they mistakenly think:

• Workers comp can cover employment practices lawsuits
• Employees would never sue them

Both myths can cost your business a lot of money. Let’s dig into each one to set the record straight.

What is the difference between EPLI and workers comp?

Many small business owners assume that workers’ compensation can cover all employee issues. But it is not so.

The confusion probably stems from the fact that there are two parts to workers comp. The former usually pays for an employee’s medical bills and lost wages after a work-related injury or illness. The second can help pay for legal costs when employees sue the business for work injuries that were either ineligible for benefits or were caused by the employer’s negligence.

It’s the name of this second part that causes confusion: employer’s liability insurance.

In contrast, employment practices liability insurance is actually a type of professional liability insurance. It can cover lawsuits over employee claims of:

• Sexual harassment
• Differentiate
• Defamation
• Revenge
• Wrongful termination or termination
• Mismanagement of benefits

Workers’ compensation generally covers bodily injury and illness. EPLI is for claims that you have breached an employee’s rights.

Why your business could face an EPLI claim

This second myth is a little more difficult to dispel because so many small business owners want to see their staff members as friends or even family. Unfortunately, that attitude can get them into trouble.

Certain types of behavior may be perfectly acceptable between friends but are problematic in a professional setting – especially when it comes from a manager or business owner. According to Dr. Steven Lindner, talent acquisition expert and executive partner with The Workplace Group“Discrimination, whether intentional or not, is still discrimination.”

Remember that you do not necessarily have to be guilty to face a charge. Lindner tells the story of a recent case where he served as an expert witness for a defendant accused of negligent supervision by 29 plaintiffs. The judge rejected all claims, finding them to be without merit, but it took years and considerable resources to get to that point.

According to Lindner, employment practices lawsuits can be emotionally draining and costly to resolve. EPLI helps ease the burden by paying legal fees, investigative costs, and judgments or settlements.

How to protect your business from EPLI claims

Employment practices lawsuits can end at any time during the employer-employee relationship, including:

• Hiring
• Employment
• Promotions
• Terminations

According to Lindner, any practices that do not comply with relevant laws can cause trouble. It recommends protecting your business by:

• Ensure current policies and procedures comply with relevant federal, state and local laws
• Write job descriptions and advertisements that only list requirements relevant to the job
• Evaluating candidates with a consistent and standardized methodology that focuses on successful job performance
• Treat all employees professionally
• Consistently apply your company’s policies and procedures

Being consistent in your treatment of workers helps reduce your risk, but does not negate the need for insurance. Consider protecting your business with EPLI as well.