The Facts About Employment Practices Liability Insurance: And Why You Need It

The Facts About Employment Practices Liability Insurance: And Why You Need It
October 16, 2017 Andrew Riordan

Employment ethics are playing an ever-increasing role in society, which means that businesses need to ensure that the atmosphere inside the workplace is as professional and impartial as possible. However, employees today have the power to raise their voices legally against employers who potentially display unfair and inappropriate practices with them.

Whether you run a new or used car dealership, motorcycle dealership, auto repair shop, auto body shop or any other business in the automotive industry, it is imperative you guard yourself against these incidents.

This is where EPLI (Employment Practices Liability Insurance) comes into play. This article will identify all you need to know about this particular employment insurance.

What Does It Cover?

EPLI is a form of insurance that is used by a business in the event that a member of the organization is charged with allegations of wrongful termination, discrimination, workplace harassment and retaliation – that can have a hugely negative impact on your business.

How to Utilize EPLI Insurance in the Automotive Industry?

Large franchise dealerships should have substantial employment practices insurance coverage in place and are prepared to deal with just about any employment lawsuit. However, small or independent automotive businesses are often the most vulnerable to employment claims. That’s because they usually lack a legal department or an employment protocol detailing the policies and procedures that guide hiring, disciplining or terminating employees.

Many people do not realize, but you’re at risk of an employment claim from the moment you interview a potential candidate. For example, if you choose not to hire the candidate, that person could allege some sort of discrimination.

Or, if you hire that person and later fire them due to poor attendance or other issues, the former employee may claim wrongful termination.

How to Lower Your Employment Practices Liability Risk?

  • Review potential loss exposures with a trusted insurance advisor and obtain proper EPLI insurance.
  • Your business must have a zero tolerance policy regarding discrimination, substance abuse and any form of harassment. Make sure employees can report incidents without any fear of retribution.
  • Keep effective documentation of employee issues as they arise, and what your company did to resolve those issues.
  • Create job descriptions for each position that clearly defines expectations of the role and performance
  • Create and deliver (to each employee) an employee handbook detailing your company’s workplace policies and procedures. This handbook should contain an employment at-will statement and an equal employment opportunity statement
  • Perform performance reviews of employees and be sure to note the results in the employee’s file.
  • Develop an in-depth screening and background checks for potential job candidates.
  • Provide an employment application that contains an equal employment opportunity statement along with a statement, that if hired, employment will be “at-will,” meaning their employment can be terminated at any time – for any reason or for no reason at all – with or without notice. Also ensure that your employment application does not contain any age indicators, such as date graduated high school, as this could increase your risk for age discrimination claims.

 Important Employment Laws and Regulations for You to Know

  • Title VII of the Civil Rights Act of 1964, which prohibits discrimination on the basis of race, color, religion, national origin and sex. It also prohibits sex discrimination on the basis of pregnancy and sexual harassment.
  • The Equal Pay Act of 1963, which prohibits employers from paying different wages to men and women who perform essentially the same work under similar working conditions.
  • The Civil Rights Act of 1966, which prohibits discrimination based on race or ethnic origin.
  • The Immigration Reform and Control Act of 1986, which prohibits discrimination on the basis of national origin or citizenship of persons who are authorized to work in the United States.
  • The Americans with Disabilities Act of 1990, which prohibits discrimination against persons with disabilities.
  • The Bankruptcy Code, which prohibits discrimination against anyone who has declared bankruptcy.
  • Equal Employment Opportunity Act of 1972, which prohibits discrimination against minorities based on poor credit ratings.
  • The Age Discrimination in Employment Act, which prohibits discrimination against individuals who are age 40 or older.

What’s the Cost of Employment Practices Liability Insurance?

The cost of insuring your business for EPLI coverage depends on several different factors. Examples are:

  • The size of your company
  • The number of employees
  • The rate of employee turnover
  • If you’ve had prior employees claims against your company
  • If you have an employee handbook and employment protocol in place.

EPLI coverage is usually written on a claims-made basis. This means the incident resulting in the claim had to occur during the coverage period. Because employment claims often come months or even years after the alleged incident, an employer might be vulnerable if the insurance coverage was dropped or if tail coverage (liability insurance that extends beyond the end of the policy period) wasn’t purchased.

As you can tell, EPLI (Employment Practices Liability Insurance) is a crucial safeguard for any business in the auto industry. However, perhaps even more important, is to create a friendly and compassionate work environment that the employees feel more secure and comfortable while in the workplace.


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