Does Your Construction Business Need Employment Practices Liability Insurance?

The United States Equal Employment Opportunity Commission received 84,254 discriminatory employment practices complaints last year. In addition to lawsuits filed by private citizens, claims filed by federal, state and city regulators are causing more businesses to purchase Employment Practices Liability Insurance (EPLI).

What is EPLI?

Employment practices liability insurance protects an employer from an employee’s claim alleging discrimination, wrongful termination, emotional distress or harassment, including sexual harassment. While these are the more common exposures, there are additional defined wrongful employment acts. General liability insurance and workers’ compensation both exclude EPLI related claims. EPLI coverage must be purchased separately.

An EPLI policy can also be purchased including coverage for immigration defense. However, there are only a few carriers offering the coverage, and it may or may not be insurable in all jurisdictions. This policy will cover your construction company if you are investigated for employing undocumented workers. Optional wage hour defense is also available in some cases if an employee makes a claim involving overtime, exempt or non-exempt status.  

EPLI will pay for attorney’s fees, court costs, settlements and judgments due to charges brought by current and former full-time, part-time, temporary and seasonal employees, recognized volunteers and applicants for employment.

Even if a claim is found to be without merit, legal fees add up quickly for a construction company on the receiving end of an employment practices complaint. EPLI coverage will transfer employment risk to an insurance product whether or not your construction firm is found to be at fault.

The EEOC secures more than $400 million from employers as a result of claims annually. An average out-of-court settlement totals approximately $40,000, while 10 percent of wrongful termination and discrimination cases result in a $1,000,000 settlement against the employer.

How can your construction company avoid charges of unfair or unlawful employment practices? The best place to start is to take time to learn and adhere to rules laid out by the Equal Employment Opportunity Commission (EEOC). If your construction company were a sports team, the EEOC would be the league office.

• Establish, publish and disseminate consistent employment practices and policies, clearly defining your construction company’s expectations regarding workplace interactions and communications. Detail policies and procedures guiding hiring, disciplining or terminating employees.
• Schedule awareness training workshops for employees and managers.
• Monitor your workplace for potential violations.
• Let managers, employees and contractors know employment practices violations will not be tolerated and will result in dismissal. Maintain an “open door” policy for employees who feel they have been subject to unfair employment practices.

Run; Don’t Walk

Small construction companies—with limited resources for communications, training and monitoring—are often most vulnerable to employment practices breakdowns, which could lead to potentially ruinous claims. According to a survey by insurance analytics company Advisen, only 32 percent of all firms with 50 to 200 employees and 20 percent of all firms with fewer than 50 employees have stand-alone EPLI coverage. If your construction business does not have EPLI coverage, transfer your employment practices risk to insurance coverage by contacting your trusted insurance broker. He or she should understand your unique business needs and present coverages and have significant access to the insurance marketplace.