Employment Practices Liability

Example

“When three former employees sued the company for age discrimination after being laid off, the employment practices liability insurance covered the legal defense costs and settlement payments.”

Memory Tip

Remember 'EPL = Employee Problems Lawsuits' - it covers legal problems arising from how you treat employees, not physical workplace injuries.

Why It Matters

Employment-related lawsuits are increasingly common and expensive, with average settlements often exceeding $100,000 plus legal fees. Even small businesses with good intentions can face these claims, and defending them can cost tens of thousands of dollars regardless of the outcome.

Common Misconception

Many employers think they're safe from employment lawsuits if they treat employees fairly, but claims can arise from misunderstandings, former employees' perspectives, or situations beyond the employer's control. Some also believe general liability insurance covers these claims, but it typically doesn't.

In Practice

Small Tech Company with 25 employees faces a lawsuit when a female programmer claims she was passed over for promotion due to gender bias and subjected to a hostile work environment. Even though the company believes the claims are unfounded, legal defense costs reach $75,000, and they ultimately settle for $125,000 to avoid a lengthy trial. Their EPL policy has a $10,000 deductible and $1 million limit, so the company pays $10,000 out-of-pocket while insurance covers the remaining $190,000 in legal fees and settlement costs.

Etymology

Combines "employment" from French "employer," "practices" from Greek "praktikos" meaning "concerned with action," and "liability" from Latin "ligare" meaning "to bind" or be legally responsible.

Common Misspellings

Related Terms

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