New York businesses operate in one of the most legally complex employment climates in the country. With evolving workplace legislation and an increase in employee-related lawsuits, protecting your company from employment-related claims isn’t an option anymore—it’s a requirement.
That is where Employment Practices Liability Insurance (EPLI) comes in. Designed to protect businesses against employee claims, EPLI helps cover the legal defense fees, settlements, and judgments associated with employment-related lawsuits. Regardless of whether you are a small business or a large corporation, understanding the importance of EPLI and how it applies to your company can save you from costly lawsuits.
What Is EPLI and Why Do Businesses Require It?
Employment Practices Liability Insurance provides monetary protection against claims of employee rights violations. While most business owners believe their general liability policy will be enough, EPLI explicitly defends against those problems stemming from employment disputes, which are not typically covered by general liability insurance.
Businesses of any size are vulnerable to employment-related lawsuits, and some of the most stringent employment laws in the country exist in New York. New York workers have strong protections against discrimination in the workplace, wage and hour problems, and retaliation, which makes it even more necessary for businesses to carry EPLI.
Some of the most common claims defended by EPLI include:
- Discrimination: Claims based on race, gender, age, religion, disability, or sexual orientation.
- Wrongful Termination: Complaints of employees being fired without just cause or in violation of labor laws.
- Sexual Harassment: Complaints of unwelcome behavior, harassment, or provision of a hostile workplace.
- Retaliation: Complaints by employees that they were retaliated against for whistleblowing, reporting misconduct, or assisting with an investigation.
- Failure to Promote: Employees who complain they were unfairly passed over for promotion based on discrimination.
- Wage and Hour Claims: Complaints of unpaid overtime, wage theft, or violation of minimum wage laws.
EPLI policies protect companies from the financial consequence of such claims by funding legal defense expenses, settlements, and judgments. Without proper coverage, a single lawsuit could endanger a company’s economic survival.
The Increasing Risk of Employee Lawsuits in New York
New York’s legal landscape is particularly employee-friendly, with laws that often exceed federal protections. Several factors contribute to the increased risk of employee lawsuits in the state:
- New York State Human Rights Law (NYSHRL): This law applies to all businesses, regardless of size, and offers greater protections against discrimination than federal laws.
- Expanded Protections Against Sexual Harassment: New York has lowered the threshold for proving harassment in the workplace, which will make it easier for employees to pursue claims.
- Ban on Mandatory Arbitration for Harassment Claims: Employers cannot require arbitration agreements for sexual harassment or discrimination claims and therefore more lawsuits will be filed in court.
- Wage Theft Prevention Act: Employers must maintain very detailed payroll records, and not doing so can lead to lawsuits.
As legal costs alone can reach hundreds of thousands of dollars, businesses without EPLI face extreme financial vulnerability.
Primary Features of EPLI Coverage
Although EPLI policies vary by provider, they typically cover the following:
- Legal Defense Costs: Payment of attorney fees, court costs, and settlements.
- Judgments and Settlements: Monetary coverage for damages rendered by the court.
- Third-Party Claims: Offers defense to claims by customers, vendors, or contractors alleging harassment or discrimination.
- Regulatory Complaints: Assistance with handling investigations or complaints filed with governmental agencies like the EEOC (Equal Employment Opportunity Commission) or the New York Division of Human Rights.
Companies should carefully review their EPLI policy to ensure it covers their specific risks because policies do not automatically cover wage and hour claims unless added as an endorsement.
Proactive Steps to Reduce Liability Risks
While EPLI provides financial coverage, businesses also need to take proactive steps to minimize the possibility of employment-related claims. Some useful steps are:
- Develop Clear Anti-Discrimination Policies
Firm policies stating zero-tolerance for discrimination and workplace harassment can nip problems in the bud.
- Provide Regular Employee Training
New York law requires annual sexual harassment prevention training for businesses of all sizes. Training in discrimination, workplace ethics, and conflict resolution can also protect employers.
- Maintain Thorough Documentation
Documenting employee performance reviews, complaints, and disciplinary actions can be priceless in defending wrongful termination claims. Documentation needs to be consistent and objective.
- Promote Open Communication
Having reporting policies for workplace problems helps resolve problems internally before they become lawsuits. Employees should feel free to report problems without reprisal.
- Work With an Experienced Insurance Provider
Every business is unique in its risks, thus working with an experienced provider ensures customized coverage according to the company’s industry, size, and legal needs.
Taking the Next Step
For New York companies, the risk of employment-related lawsuits is too significant to ignore. Purchasing a proper Employment Practices Liability Insurance policy is an essential component of shielding your company from the financial burden of employee lawsuits.
With the combination of proactive workplace policies and comprehensive EPLI coverage, companies can protect against legal exposures while fostering a fair and compliant workplace.
Contact the team at Kaplan Insurance today to get started.