Employment Practices Liability Insurance

Defending yourself against an accusation of discrimination, unfair dismissal, harassment, breach of contract, defamation, invasion of privacy, or any other alleged wrongful act, can be an expensive business.

Solicitors’ fees, expert witnesses, additional working hours for employees who are helping you to prepare your defence… it all adds up. Then, to top it all, if the complainant wins the case, you may have a large amount of money to pay out in damages and costs.

Employment practices liability (EPL) insurance protects individuals and companies in the event of employment-related litigation.

Acts of Parliament: protection for employees

The rights of employees are protected by a substantial body of legislation. And that’s great. But employees’ rights are often based on an individual’s perception of, and emotional response to, the attitudes and behaviours of others.

The Employment Act 2002 and the Equality Act 2010 establish the rights of employees to be treated fairly when it comes to things like paid maternity, paternity, holiday, and sickness leave; personal data protection; flexible work schedules; disciplinary and dismissal processes; and equal opportunities regardless of gender, race, age etc.

And, while your HR department, or an external consultant, can help you stay up-to-date with changing regulations, they won’t be able to help cover the cost of an employment tribunal or compensation award if you do find yourself in court.

Luckily, EPL insurance exists to cover legal costs and expenses, including award payments, if an employee brings a case against you.

Employment practices liability insurance: real-world examples

The following are real-world examples where EPL insurance helped.

Discrimination: A company was forced to downsize and had to make redundancies. One of the people claimed she was the victim of discrimination as the company had made her redundant because she was female. The case went to an Employment Tribunal where the company had to explain and defend itself. The company ultimately settled with the employee.

Constructive Dismissal: Following a company merger, a group of employees resigned. They took their new employer to an Employment Tribunal on the grounds that they would face additional travel time to get to their new workplace. The tribunal found the employees had suffered constructive dismissal as their new workplace had not been on the list of work locations as defined by their original contracts.

Harassment: An employee brought a case against her employer, saying she had been bullied and ignored by managers after becoming pregnant. The Employment Tribunal ruled in her favour, finding that she had suffered bullying, harassment, and discrimination in the workplace.

Failure to Promote: An employer was taken to court by an employee who had unsuccessfully applied for a promotion. They claimed that they were the best person for the job as they were the most qualified and experienced, but the company had failed to promote them. While the court found in favour of the company, they still had to pay a large legal bill for having to prepare their defence.

Employment practices liability insurance: protection for employers

Having an employment practices liability policy in place provides you with the means to defend claims made against you.

Employment practices liability insurance is usually purchased with Directors’ & Officers’ (D&O) insurance (which protects company directors and officers in the event of an employment-related claim) and entity insurance (which provides the same protection for a company), as part of a wider management liability insurance package.