The good news is you can purchase affordable quality insurance protection. The bad news is your own risk to employment related claims are increasing every day. The EPLI claim ball is starting to roll down the hill and is picking up speed quickly. Every day someone reads about an employee wining a substantial award from an employment claim. As more employees win substantial awards more plaintiff attorneys view employment claims as a good revenue source. Therefore, more employees and plaintiff attorneys see employment claims as a means to make money and seek litigation against businesses, school boards, municipalities, non-profit organizations, clubs, and even the President of the United States!

Any business or organization with employees is eligible to purchase employment practices liability insurance (EPLI). An employee is any worker employed by your business whether part time or full time. Businesses with 0 to 20 employees have the same harassment exposure as larger businesses, but have a limited exposure to labor and discrimination claims because they do not fall within certain federal guidelines. Businesses with 20 to 50 employees have a significantly higher risk than companies who employ 20 employees or less, as entities with 20 to 50 employees must comply with civil rights and labor laws. Any business with over 50 employees is subject to the massive range of federal and state civil rights and labor laws.

EPLI covers defense costs, judgments and settlements (up to the policy limits) for the corporate entity, former and current employees, directors, and officers. It covers a variety of workplace-related legal actions, including:

• Discrimination
• Sexual harassment
• Wrongful termination
• Breach of employment contract
• Negligent evaluation
• Failure to employ or promote
• Wrongful discipline
• Deprivation of career opportunity
• Wrongful infliction of emotional distress
• Mismanagement of employee-benefits plans

EPLI policies do not cover workers' compensation, bodily injury or property-damage cases, nor do they cover cases that another insurance policy specifically covers.

EPLI Premiums

EPLI rates vary from state to state and from company to company. Generally an insurer calculates premiums by determining the amount of coverage a business needs and its perceived risk. An insurer will base rates on several risk factors, including the number of employees at a company, the turnover ratio, whether or not the business has a human resources department, and any past harassment or bias suits against the company. Businesses with 10 to 20 employees that have good HR practices and a clean record can expect to pay approximately $1,500 a year for EPLI coverage.

Employers can lower their company's liability exposure and keep insurance rates down by taking certain precautions:

• Don't hire workers with histories of drug or alcohol abuse.

• Institute zero-tolerance policies toward workplace harassment, discrimination, and alcohol and drug abuse.

• Develop an employee-standards handbook that defines the skills and performance you expect for each position.

• Measure your employees' performance on a regular basis.

• Discuss workplace liability with your insurer to see if your company should consider an EPLI policy.

Businesses that purchase EPLI coverage may actually reduce the likelihood of workplace harassment and discrimination. Insurers generally review a company to check for workplace liability before they issue a policy. And since insurers hate risk, they'll usually recommend changes that reduce a business's exposure to lawsuits. Many of the steps you can take to ward off harassment claims and meet the demands of insurers begin with basic education and setting up the right environment.

Evan A. Swan PEO Consultant Diversified Human Resource