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From hiring employees to simple interactions in the workplace, you're trusting all of your employees to act in a professional manner. But even the most trusted employees can let us down. When you're looking to protect your small business, you'll want to make sure that you're properly protected from that first hire to the last meeting.
Employment Practices Liability Insurance, or EPLI, is often used to protect an organization against someone's bad actions. This could mean allegations of certain improprieties at the beginning, such as hiring discrimination or during the course of business, such as sexual harassment or at the end of a relationship, such as wrongful termination.
Generally, the most expensive part of fighting these types of claims comes when a lawsuit is involved. EPLI helps to put a limit on the amount of financial exposure that a business faces. Especially with the tight budgets of the average small businesses, a prolonged legal battle could turn your lights out for good.
Another advantage of EPLI that benefits smaller businesses is the ability to limit the financial risk or exposure in the case of a lawsuit. Some policies allow the employer to cap its exposure at a pre-agreed amount for each type of allegation.
"These limits might be as low as $100,000 per employee, $100,000 per incident, and $500,000 per policy," notes Adam Haynes at Investopedia.
While that may still seem like a great deal of money, it's far less than the full price of legal action, especially if a judgment does not go in the company's favor.
Sexual harassment lawsuits make the headlines nearly every day with celebrities and big corporations, but they happen with small businesses as well. While EPLI can cover legal actions in this category, many small businesses still don't carry enough coverage to protect themselves.
"Insurance industry experts — lawyers, brokers and consultants — are warning businesses of all sizes to review their insurance policies, bolster coverage, if necessary and limit risk," writes Sam Wood at the Philadelphia Inquirer. "They are also advising companies to take a long, careful look at their corporate culture to address potential problems before they erupt into a courtroom or an expensive settlement."
Don't wait until you're in a courtroom or negotiating a settlement to see where you went wrong, however. Even a small business of two employees can cultivate a culture of respect and encouragement. Reevaluating (or simply creating) your employee handbook and addressing company policy in a way that lays out what's expected (and what won't be tolerated) from the beginning is a great way to not only communicate to your employees that you care, but to clearly spell out where your priorities are, as well.
Sometimes bundled with other policies, EPLI can be added for a few thousand dollars a year. When compared to the average court costs in the case of a lawsuit — around $100,000 it's an affordable protection for your business.
And while the larger corporations and businesses have made headlines with bad practices, and paid with big settlements, judgments and premiums, smaller businesses still find EPL insurance affordable.
"Premiums for small and mid-sized companies have not risen substantially despite the increased number of claims making the news, according to a report issued by the Council on Insurance Brokers and Agents," notes Wood.